Southern Copper Corporation

Good morning and welcome to Southern Copper Corporation's third quarter and nine months 2025. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance, Treasurer, and CFO, who will discuss the results of the company for the third quarter and nine months 2025, as well as answer any questions that you may have. The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risk and uncertainties. Actual results may differ materially from the company cautions not to place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. All results are expressed in full U.S. GAAP. Now I will pass the call to Mr. Raul Jacob.

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's third quarter 2025 results conference call. At today's conference, I'm accompanied by Mr. Oscar González Rocha, CEO of Southern Copper and board member, as well as Mr. Leonardo Contrera, who is also a board member. In today's call, we will begin with an update on our view of the copper market and then review Southern Copper's key results related to production, sales, operating costs, financial results, expansion projects, and ESP. After this, we will open the session for questions. Our performance in the third quarter delivered new company records for net sales, adjusted EBITDA, and net income. These milestones are a testament to the strength of our strategy, execution, and commitment to sustainable growth. This strong performance was primarily driven by a rise in by-product production and improved metal prices across all our products. Zinc production rose 46%, mainly on the back of significant production at our Buenavista zinc concentrators. silver and molybdenum output grew 16% and 8% respectively. The combination of higher production volumes and better copper and byproduct prices enabled us to achieve a cash cost of 42 cents per crown of copper in the third quarter of this year, one of the industry's lowest. We remain firmly committed to enhancing productivity and cost efficiencies, driven by a strategy anchored in discipline and focus on achieving a long-term goal to produce 1.6 million tons of copper at the lowest possible, most competitive cost per pound. Looking into the copper market, the LME copper price increased 7% from an average of $4.17 per pound in the first quarter of 2024 up to $4.44 since this past quarter. For the COMEX market, we saw a 14% increase. Based on current supply and demand dynamics, which include the negative production effects that we're seeing in Indonesia and Chile, we're currently estimating a copper market deficit of almost 400,000 tons. Copper inventories worldwide, which is the sum of the London Metal Exchange, COMEX and Shanghai warehouses as well as other bonded warehouses. This inventory, the sum of these different inventories, at the end of September were 609,000 tons. We estimate that this inventory currently covers approximately eight days of global demand. The recent U.S. policy changes have thus far had a limited impact on our results. As such, we're confident now that the long-term fundamentals of prices for copper and other metals will remain very positive. Now let's look at Southern Copper's production for the past quarter. Copper represented 73% of our sales in the third quarter of this year. Copper production registered a decrease of 7% compared to the third quarter of 2024, and it's pushed at 234,892 tons this past quarter. Our quarterly results reflect a 7% drop in production in Peru, which was triggered by a decrease in production at our Toquetada and Coajone mines. Production at our Mexican operations fell 7% quarter on quarter, driven by a decrease in production in our Buenavista mines, due to lower ore rates and by the fact that the new Buena Vista concentrator was fully dedicated to maximizing zinc and silver production to leverage the favorable ore rates identified in an important segment of the mine. On a year-to-date basis, Copper production fell 3% in 2025 to stand at 714,098 tons, mainly driven by a decrease in production at our Mexican and Peruvian operations due to lower ore grades. For this year, 2025, we expect to produce 960,000 tons of copper. This is slightly lower, less than 1% than the plan, and a decrease of 2% over 2024's finance plan. Molybdenum represented 13% of the company's face value in the third quarter of 2025, and is currently our first byproduct. Molybdenum prices averaged $24.30 per pound in the quarter, compared to $21.68 per pound in the third quarter of 2024. This represents an increase of 12%. Molybdenum production raised an increase of 8% in the third quarter of this year compared to the same period of 2024. This was mainly driven by a higher production at our La Caridata and Toquepala mines, which were partially upset by lower production at our Buena Vista and Coahone operations. In 2025, we expect to produce 30,000 tons of molybdenum, which represents an increase of 4% for our 2024 production level. For silver, it represented 7% of our safe value in the third quarter of 2025, with an average price of $39.56 per ounce for the quarter. This reflected an increase of 34%. Silver is currently our second byproduct. Mined silver production increased 16% in the third quarter of 2025, which is the same quarter of 2024, after production growth in our Mexican operations, and this was partially upset by lower production in the Peruvian mine. Refined silver production increased 2% quarter over quarter. This evolution was mainly driven by higher production in our ILO refinery, which was partially offset by a drop in production in La Caridad refinery. In 2025, we expect to produce 23 million ounces of silver, an increase of 10% compared to last year. Zinc represented 4% of our safe value in the third quarter of 2025, with an average price of $1.28 per pound in the quarter. This represents a 2% increase compared to the third quarter of 2024. Think is currently our third by quarter. Mines in production increased 46% quarter-on-quarter and totaled 45,482 tons. This was mainly driven by an increase in production at the Buena Vista sink of 108%. This Buena Vista sink concentrator has been processing high ore grade material that we found in a segment of the Buena Vista mine that, well, it was reviewed and decided on the date of the value that this additional production is contributing to this year's results. For the year 2025, we expect to produce 174,700 tons of zinc, which represents an increase of 34% over our 2024 production level. This growth will be driven by the production of our Buena Vista Zinc Concentrator, which I already mentioned is operating at full capacity dedicated to zinc production. For the third quarter, Of this year's sales were $3.4 billion. This figure was $446 million, or 15%, above the third quarter of 2024 trend. The copper safe value increased. The volume dropped 4% in a scenario of better prices. The London Metal Exchange price increased 7%, and the COMEX price increased 14%. Regarding our main byproducts, we register an increase in sales of molybdenum by 46% due to growth in volume. Volume of molybdenum sales increased 8% and better price. Sink sales increased 12% due to an uptick in volume of 7% and better prices for this material sink. Finally, filler sales increased 65% due to higher volume 22%, and better prices for utilities. Our total operating costs and expenses were up to $128 million, or 9%, compared to the third quarter of 2024. The main cost increments were in purchased copper concentrates, workers, participation, labor, operations contractors, and services, energy, and sales These cost increments were partially offset by a drop in inventory consumption and other factors. The third quarter of 2025 EBITDA, adjusted EBITDA, was $1,975 million. This represented an increase of 17% with regard to the $1,685 million registered in the third quarter of 2024. The adjusted EBITDA margin in the third quarter of this year stood at 59% versus 58% in the third quarter of 2024. Adjusted EBITDA year-to-date was $5,512 million, which is 13% than the mark for the nine months of 2024. The adjusted EBITDA margin in the nine months of this year stood at 58% versus 57% in the nine months of 2024. Operating cash cost per pound of copper before by product credit was $2.23 per pound in the third quarter of 2025. This is 12 cents higher than the value for the second quarter of 2025, which was $2.11. This 5% increase in operating cash costs is a result of higher cost per pound from production costs, administrative expenses, and lower premium, and was offset by lower treatment and refining costs. Southern Copper's operating cash costs, including the benefit of by-product credit, was 42 cents per pound this past quarter. its cash cost was 21 cents lower or 34% lower than the cash cost of 63 cents that we had in the second quarter of 2025. Regarding byproducts, we had a total credit of $895 million or 181 cents per pound in the third quarter of 2025. These figures represent a 22% increase when we compared them to a credit of $756 million, or $1.48 per pound, in the second quarter of this year, 2025. Total credits have increased from original in 23%, considered 29%, and decreased a little bit for zinc, 1%, and sulfuric acid, where we have lower volume due to carbon dioxide. major maintenances at our non-serving areas. For net income, in the third quarter of this year, net income was $1,108 million, which represented a 23% increase over the $897 million released in the third quarter of 2024. The net income margin in the third quarter of this year stood at 33%, versus 31% in the same quarter of last year. These improvements were mainly driven by an increase in sales and cost-containing activities. On a year-to-date basis, net income was 17% higher than in 2024 due to growth in net sales. The net income margin year-to-date stood at 32% versus 30% for the nine months of last year. cash from operations or cash flow from operating activities in the third quarter was $1,560 million, 8.4% above the figure in the third quarter of 2024. For the nine months of 2025, cash flow from operating activities stood at $3,258 million. which represented an increase of 6% over the $3,061 million posted in the nine months of 2024. Capital investments. For the Peruvian projects, our investments in Peruvian projects that are being built or for which basic or detailed engineering is being conducted could surpass $10.3 billion in the next decade. Given that there is a description of our main capital projects in Southern Copper's press release, I'm going to focus on updating new developments for each of them. In the case of the Tia Maria project in the Arequipa region in Peru, as of September 30th of this year, progress at Tia Maria stood at 23%, and 2,109 new jobs had been generated. 809 of these jobs were filled with local applicants. To the fullest extent possible, we intend to fill the 3,500 jobs estimated to be required during the Tia Maria construction phase with workers from the slide province. In 2027, when we start operations of Tia Maria, the project will generate 764 direct jobs and 5,900 indirect jobs. In the early construction phase, progress on access roads and platforms stands at 90%. We will advance this effort alongside work to set up a temporary camp, engage in massive air work and roll out mine opening activities. Recently, on October 14 of this year, the company received authorization from the Ministry of Energy and Mines to begin exploitation activities on the Tia Maria project. This authorization is based on considerations outlined in the supporting technical report and the environmental certification approved for the project. Consequently, we will soon initiate pre-skipping activities in La Tabada and begin building main project components. For the Los Chancas project in the Afurima region of Peru, as of September 30th of this year, social and environmental management programs are underway in the communities directly influenced by the project. In accordance with the framework agreement signed between the Tiaparo prison community and the Los Chancas mining project, necessary actions are being undertaken to regain control of the project in response to the presence of illegal miners. This control is essential to us for continuing advancing the development of our Toschancas project. In the case of the Michiquillay project in the Cajamarca region of Peru, the geological information obtained from drilling programs has been used to develop the models required to estimate the deposit's mineral resources. These models are currently being audited by a third party under the FCC's Mining Disclosure Standards SK1300. A conceptual study is underway to determine the best location for our conventional or filtered tailings storage facility. Hydrogeological and geotechnical studies are also being conducted. FCC has several projects in its Mexican pipeline that may boost organic growth if they are found to be of value for both stakeholders and the communities in which we operate. These projects are Angangueo, Chachihuites, and the Empalmes Melter, which could bolster our position as a fully integrated copper producer. We are conducting talks with the current administration to continue rolling out FEC's Mexican investments for $10.2 billion. We have in Mexico also the ARCO in the Baja California State project. In this case, we're not reporting additional progress in these projects for now. Regarding environmental, social, and corporate government or ESG practices, our sustainability ratings are improving. In the Corporate Sustainability Assessment 2025, S&P Global increased SEC rating by four points over last year's strength. This result positions the company among the leaders in the mining sector's performance ranking, with a rating that is more than twice the industry's average. Some of SEC's desegregated ratings were the highest reported for the sector. That is the case for transparency and reporting, environmental management, biodiversity, cybersecurity, labor practices, human rights, and community relations. Regarding greenhouse gas emissions at our operations, the electricity that our underground lines have received from the Phoenicia's wind farm has enabled us to curb greenhouse gas emissions by 180,000 tons of carbon. that's far in 2025. This is equivalent to electricity supply needed to sustain 40,000 households in Mexico. We're recovering ecosystems in Mexico and Peru. So far in 2025, we have conducted advanced work to restore 67 hectares at our Buenavista recovery installations in Sonora, and about 10 hectares in the ITE wetlands in Peru. These efforts entail reincorporating areas of the landscape that were previously impacted by our operations and providing important environmental service. Additionally, we're preparing stocks and services and are installing assisted irrigation systems on approximately 200 hectares in Sonora, which will be reforested in 2025. In the case of the Tia Maria project, through the workforce taxes mechanism, we're financing modernization and upgrades at an emblematic secondary school in the district of Cocachaca, which will serve 400 students. And also, using this workforce taxes mechanism, we're working on the construction of the Biomedical Sciences Laboratory at the Universidad Nacional San Agustin in Arequipa, which will be used by about a little bit more than 3,000 students and researchers. During its tour of Sonora in 2025, the Doctor Vagon Health Train, sponsored by Fundacion Grupo Mexico, imparted more than 20,000 free consultations in eight municipalities, marking an all-time high in Dr. Vagon's history. Over its nine previous visits to the region, more than 59,000 medical consultations and 70,000 prescriptions were provided at no cost. With these results, Dr. Vagon has become one of the most important traveling health projects in Sonora, Mexico. Regarding dividends, as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans, and other financial needs at each board meeting to determine the appropriate quarterly dividend. Accordingly, in October 23 of this year, Southern Copper Corporation announced a quarterly cash dividend of $90,000. cents per share of common stock and a stock dividend of 0.0085 shares of common stock per share. This will be payable on November 28th of 2025 to shareholders of record at the close of business on November 12th of this year. Ladies and gentlemen, with these comments, We end our presentation today. Thank you very much for joining us. Now we would like to open the forum for questions.

And thank you so much. And as a reminder, to ask a question, simply press star 1-1 on your telephone and wait for your name to be announced. To remove yourself, press star 1-1 again. Please stand by for our first question, please. It comes from Carlos de Alba with Morgan Stanley. Please proceed. Mr. Alba, your line is open.