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Southern Copper Corporation

Southern Copper Corporation's Guidance and Outlook

Copper Production

  • 2023:

    • Expected production: 918,000 tons.
    • Key factors: Higher production at Peruvian operations, offset by lower production at Mexican operations, particularly Buenavista due to water supply issues.

  • 2024:

    • Revised guidance: 975,000 tons (previously 946,700 tons).
    • Key drivers: Full-speed contributions from the Pilares project, the Buenavista Zinc concentrator, and improved ore grades at Toquepala and Cuajone mines.

  • 2025:

    • Expected production: 978,300 tons.
    • Factors: Slight reduction in production from Buenavista and open-pit operations in Peru due to lower ore grades, partially offset by contributions from ongoing projects.

  • 2026:

    • Expected production: 985,400 tons.
    • Factors: Continued contributions from existing projects and potential improvements in ore grades.

  • 2027:

    • Expected production: 1,000,000+ tons.
    • Factors: Full production from Tia Maria project, which is expected to add significant copper production.

By-Products

  • Molybdenum:

    • 2024: Expected production of 28,200 tons, a 5% increase over 2023.
    • 2025: Expected production of 26,200 tons, slightly lower due to lower ore grades.

  • Silver:

    • 2024: Expected production of 20.8 million ounces, a 13% increase over 2023.
    • 2025: Expected production of 22.9 million ounces, driven by higher production from the new zinc concentrator.

  • Zinc:

    • 2024: Expected production of 120,300 tons, an 84% increase over 2023.
    • 2025: Expected production of 154,600 tons, driven by the full ramp-up of the Buenavista Zinc concentrator.

Cost Structure

  • Operating Cash Cost:
    • Before By-Product Credits: Expected to remain around $2.00 per pound in 2024 and 2025, with slight improvements as new projects come online.
    • After By-Product Credits: Expected to be around $0.76 per pound in 2024, with potential improvements as by-product production increases.
  • CapEx:
    • 2024: Expected CapEx of $1.3 billion.
    • 2025: Expected CapEx of $1.7 billion.
    • 2026: Expected CapEx of $2.1 billion.
    • 2027: Expected CapEx of $2.6 billion.
    • Key projects: Tia Maria, Los Chancas, Michiquillay, Buenavista Zinc, Pilares, El Pilar, and El Arco.

Market Dynamics

  • Copper Price:
    • Short-term: Prices are expected to fluctuate due to macroeconomic uncertainties, including China's economic recovery, European recession risks, and U.S. economic conditions.
    • Long-term: Strong demand from decarbonization technologies, artificial intelligence, and clean energy initiatives is expected to support copper prices.
  • Supply and Demand:
    • Short-term: Market expectations have shifted from surplus to potential deficits due to production cuts by some producers and low inventory levels.
    • Long-term: The company expects strong demand driven by the global shift to clean energy and electric vehicles.

Projects and Expansion

  • Tia Maria:

    • Expected to begin construction in the near future, with a focus on hiring local labor for the 9,000 jobs expected during construction.
    • Expected to produce 120,000 tons of SX-EW copper cathodes annually.
    • Capital budget: Initially estimated at $1.4 billion, but under review for potential adjustments.

  • Los Chancas:

    • Efforts continue to eradicate illegal mining activities, followed by environmental impact assessments and hydrogeological/geotechnical studies.

  • Michiquillay:

    • Exploration activities ongoing, with drilling and core sample collection for further evaluation.
    • Hydrogeological and geotechnical studies to begin shortly.

  • El Arco:

    • Environmental baseline studies completed, with plans to submit an environmental impact statement to SEMARNAT.
    • Additional studies for port, power line, town site, and auxiliary services are in progress.

Dividends

  • Policy: The company maintains a policy of reviewing its cash position, expected cash flow, capital investment plans, and financial needs before declaring dividends.
  • Recent Dividends:
    • Q3 2024: Quarterly cash dividend of $0.70 per share and a stock dividend of 0.0062 shares per share.
    • Q4 2023: Cash dividend of $1 per share.
  • Future Dividends: Decisions will be made by the Board, balancing capital investment needs and cash flow generation. The company historically avoids holding excessive cash and is expected to continue distributing dividends while maintaining a prudent cash position.

Water Supply and Environmental Initiatives

  • Buenavista Water Issues:
    • Water supply challenges have been addressed by transporting water via trucks and securing additional water sources.
    • The company is working on obtaining permits for a pipeline to ensure long-term water supply stability.
  • ESG Initiatives:
    • Significant progress in water recovery and efficiency, with a focus on sustainable development and community engagement.
    • Continued investment in social infrastructure and educational programs in regions where the company operates.

Capital Allocation and M&A

  • Focus: The company remains focused on organic growth through its pipeline of greenfield projects.
  • M&A: While the company is open to reviewing opportunities, it prioritizes organic growth. Potential acquisitions would need to align with the company's strategic goals and provide value to shareholders.

Summary

Southern Copper Corporation is optimistic about its production outlook, driven by the ramp-up of new projects like Buenavista Zinc and Tia Maria. The company expects steady growth in copper and by-product production, with a focus on maintaining cost discipline and capital efficiency. Despite short-term market uncertainties, the long-term outlook for copper demand remains robust, supported by global trends in clean energy and decarbonization. The company will continue to balance its capital allocation between project development and shareholder returns through dividends.

Last updated on 01/14/2025 05:14 AM

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