Southern Copper Corporation

Good morning and welcome to Southern Copper Corporation's second quarter and six months 2026 results conference call. With us this morning we have Southern Copper Corporation's Mr. Raul Jacob, Vice President Finance, Treasurer and CFO, who will discuss the results of the company for the second quarter and six months 2026, 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 and the company cautions not to place under 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 All results are expressed in full U.S. GAAP. Now I'll pass the call on to Mr. Raul Jacob.

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's third second quarter of 2026 results conference call. At today's conference, I'm accompanied by Mr. Leonardo Contreras, CEO of Southern Copper and also a board member. Let me first begin by mentioning that Southern Copper delivered another exceptional quarter, registering record-breaking results in sales, adjusted EBITDA, and net income. These outstanding achievements are driven by operating excellence and reflect our commitment to creating long-term value for our stakeholders in a context marked by sustained demand for copper and the other minerals we produce. Today we will begin with an update on our view of the copper market And then we'll use Southern Copper's key results related to production, sale, operating costs, financial results, expansion projects, and ESE. After this, we will open the session for questions. The London Metal Exchange copper price increased 40% from an average of $4.32 per pound in the second quarter of 2025 to $6 and four cents this past quarter. In the COMEX market, we saw a 31% increase with an average of $6.16 per pound this quarter. Based on current supply and demand dynamics, we estimate a slight copper market deficit for 2022. Copper inventories worldwide, the total combining stock up in London with Exchange, COMEX, Shanghai and London warehouses, In fact, the sum of this inventory is 1,123,000 tons as of yesterday, July 21st. We estimate that this inventory can currently cover approximately 15 days of global demand. Now let's look at Southern Copper's production for the past quarter. Copper represented 73% of our sales in the second quarter, Andres Carlos Ferrero Ghislieri. These results were partially offset by an increase in production at our Mexican operation of 3.2%, which was driven by higher production at our Buenavista, La Caridad, and Insa 9. For 2026, we expect to produce 917,000 tons of copper, an increase of about 1% over our initial plan. For molybdenum, it represented 11% of our sales in the second quarter and is currently our first high growth. Molybdenum prices averaged $29.44 per pound this quarter, compared to $20.57 in the second quarter of 2025. This represents an increase of 43%. Molybdenum production dropped 11% in the second quarter of this year, compared to the same period as last year. This was mainly driven by a decrease in production at all our mines due to lower oil prices. In 2026, we expect to produce 27,900 tons of more aluminum. This is 7% above our initial plan. For silver, it represented 9% of the company's sales value in the second quarter of this year. Silver prices averaged $73.49 per ounce this quarter compared to $33.62 in the second quarter of last year. This represents an increase of 118% in price. Silver is currently our second by-product. Despite high production at our La Calidad and Insa mines, silver production fell 4% in the second quarter of 2026, driven by the lowest production at the Tocetala, Coajone and Buena Vista mines. The fine silver production decreased 0.3%, quarter over quarter, driven mainly by a drop in production at the Illo refinery in Peru. In 2026, we expect to comply with our plan to produce 24 million ounces of silver. 4% of our sales value in the second quarter of 2026, with an average price of $1.57 per pound in the quarter, which represents a 31% increase compared to last year's second quarter. Mining production decreased 14% quarter-on-quarter to a total of 39,250 pounds, 50 Fahrenheit. This decrease was mainly driven by lower production of the Buena Vista, San Martin, and Charcas mines. Refined zinc production decreased 6% in the second quarter of this year vis-a-vis the same second quarter of 2025. This was principally due to lower oil grades. For this year, 2026, we expect to produce 163,900 tons of zinc. Financial results. For the second quarter of 2026, sales were $4.3 billion. This is $1.2 billion higher, the print in the second quarter of 2025, a 41% increase. Copper sales increased 38% while the volume fell 1.5% in a scenario of dimension better price. Regarding our main by-products, we registered higher sales for molybdenum by 34%, zinc sales in turn rose 24%, silver were up 86% in the three cases of these by-products due to higher prices, and these sales were partially offset by a decrease in volumes. Our total operating costs and expenses increased 202 million, or 14%, compared to the second quarter of 2025. The main cost increments were in operating materials, purchase copper, diesel and fuel, workers' participation, and translation difference, as well as other factors. These cost increments were partially offset by a decrease in repair materials and inventory consumption. The second quarter of 2026 adjusted EBITDA hit a record high of $2,856 million, which represented an increase of 60% with regard to the $1,791 million registered in the second quarter of 2025. Adjusted EBITDA margin in the second quarter of this year stood at 67% versus 59% in the second quarter of last year. Adjusted the visa year-to-date was $5,569 million, which is 58% higher than the print in the six months of 2025. Adjusted the visa margin in the six months of this year to the 65% versus 57% for the six months of 2025. Operating cash cost per pound of copper before October 30th was $2.29 per pound in the second quarter of 2023. That is two cents lower than the value for the third quarter of this year. One percent decrease in operating cash cost is a result of lower cost per pound from production and administrative expenses, a higher premiums. This result was partially offset by decreased in treatment and refining charges. Thousand cooperating cash costs, including the benefit of by-product service, was 5 cents per pound in the second quarter of 2026. Even though this cash cost was 15 cents higher than the cash cost of minus 11 cents for the first quarter, we think that this is an excellent mark for the company. Regarding by-products, We had a total credit of $1,106 million or $2.24 per count in the second quarter of 2026. This figure represents a 7% decrease compared to a credit of $1,189 million or $2.41 per count reported in the first quarter of 2026. Total credit has increased for malignant The second quarter of 2026 net income hit a record high of $1,670 million, up 72% versus the $973 million registered in the second quarter of last year. This was the result of higher net sales, mainly the results of higher net sales and the cost control measures that we The net income margin in the second quarter of 2026 stood at 39% versus 32% in the second quarter of 2025. On a year-to-day basis, net income was 69% higher than in 2025 due to higher net savings. Cash flow from operating activities in the six months of this year was $3,682 million, which represents an increase of 117% compared to the $1,698 million post in the six months of last year. This improvement was attributable to strong cash generation at our operations, which was driven by higher sales and a decrease of $719 million in operating assets and liability requirements. This year, on June 24th, the company issued $1.25 billion in a 10-year fixed-rate senior unsecured notes. This debt is due in 2036 with an annual interest rate of 5.35%. Demand for the notes was $4 billion, which was 3.2 times greater than the total issued amount. Proceeds will be used exclusively by Southern Peru Copper Corporation, our premium branch, to develop the Tia Maria project, finance its capital expenditure program, as well as general corporate purposes for Southern Peru Copper Corporation. Regarding capital investment, Southern Copper's current capital investment program for this decade exceeds $20.5 billion and includes investments in projects in Peru and Mexico. In the second quarter of this year, we spent $423 million in capital investments, which reflected a 79% increase over the figure reported in the second quarter of 2025 and represents 25% of this quarter's net income. In the first half of the year, we spent $865 million in capital investments, which represents a 27% increase Looking at our Peruvian project, as Peru is poised to begin a new executive cycle, we're encouraged by the initial statements made by President-Elect Mrs. Keiko Fujimori. Accordingly, SEC reiterates its commitment to work with the incoming administration to promote economic growth and social development in Peru through the advancement of our Peruvian projects Tia Maria, Los Chancas, and Michiquillán, which represent a combined investment of approximately 10.3 billion dollars. Given that there is a description of our main capital project in thousand coppers per series, I'm going to focus on updating new developments for each of them. In the case of the Tia Maria project located in the Peruvian region of Arequipa, as of June of this year, June 30th, the company has committed $1,101 million to various project activities of which $693 million has already been invested. Mass Airworks has moved 13.8 million metric tons of material from La Tapada. This is a 71% progress. And also, most purchase orders for the project's major equipment have been issued. Regarding the leaching process, purchase orders have been placed for key state-of-the-art equipment, and procurement activities for the remaining mayor equipment continue. Regarding the power supply, electromechanical works are underway at the main electrical substations and efforts continue to build the 220 kilowatt transmission line. Concurrently, the mass airworks required to develop both the dry and wet areas are in their final stage. Cedar Works and Steel Structure Assembly have commenced in key facilities, including the primary, secondary, and tertiary trashing circles, as well as the solar extraction and electro-wheeling facilities, among others. At the close of June, the Tia Maria project had reached 42% completion and 5,817 new jobs had been created. Of these positions, 1,254 has been filled with local applicants. For the Los Chancas project in the region of Apuimac in Peru, as of June 30th, the presence of illegal miners within the project area continues despite the state's on-site enforcement efforts through the Environmental Prosecutor's Office. This has hindered the project's progress. Meanwhile, community development and environmental management programs continue in the communities of Tiaparo and Tapairiwa, both located within our direct area of influence. In the case of the Michiquillay project in the rural region of Cajamarca, studies to estimate mineral reserves and develop the mine plan coupled with hydrological and hydrogeological assessments are currently underway. In addition, the technical research is progressing and entering its final phase. Focusing in our Mexican projects, Southern Copper 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 Anganguero and Chalchihuites, which are part of the Mexican Copper Service. and the Empalmes Network, which are expected to bolster our position as a fully integrated copper producer. We're engaged in talks with the current administration to continue rolling out SEC's Mexican investments for $10.2 billion. El Pilar in the Sonora State, it's a greenfield project that has to obtain the necessary environmental permits and will begin early site preparation work in September of the Year to develop energy lines, water pipelines, roads, workers' accumulations, and some other facilities. Projects for project construction will commence in the first quarter of 2027, and production is expected to begin in the second half of 2029. This project is located in Sonora, in Mexico, approximately 45 kilometers away from the Cananea and Benavista mines. Its copper oxide mineralization contains estimated proven and probable reserves of 217 million tons of ore with an average copper weight of 0.249% and a life mine of 18 years. It will operate as an open pit mine with annual production capacity of 36,000 tons of copper cattle Utilizing cost-efficient and environmentally friendly SXEW technology. SXEW stands for Solar Instruction and Electroweaving. With an investment of $551 million, this project will employ a direct workforce of 450 people during the construction phase and 300 during the operational phase. For environmental, social, and corporate governance, or ESG practices, over the last five years, we have reported several times on the Curajaguira Dam, located in the Candarave area in southern Peru. This is in the Tacna region in Peru. This dam has transformed the lives of 18% farmers of the area and their facilities by providing Year-round access to water. According to the Ministry of Agricultural Development, crop yields in the area have risen around 20%. This infrastructure, with a capacity of 2.5 million cubic meters, was built by our company through an alliance with the Peruvian state and local farmers. We continue to work with authorities to build the Callaza and Caliente dams, also in the Candarabas area, And with these additional dams, more than 90% of farmers' water needs will be cut off. Moving to Mexico, students from Nacosari and Esqueda schools, both in Sonora, Mexico, performed admirably in national and international competitions, including the Mexican Mathematics Olympics and Informatics 2026. These achievements reflect the company's commitment to education and the development of esteemed skills. The company currently benefits 3,000 students through 11 education centers it operates in Mexico and Peru. 4.5 Community Integration and Well-Being To promote integration and well-being through sports, our company joined the global social initiative of the Mexican government. Our efforts, which focus on communities neighboring our operation, has brought together 2,629 participants who are organized into 206 teams of employees and community members with categories for children and youth. Alongside this initiative, 580 volunteers work to create 14 community murals and recognition sports venues, which strengthens harmonious relations Inclusion, and The Social Project. These sports and cultural programs cover approximately 41% of the general population close to our Mexican operations. Vivian Announcement. Regarding Vivian, as you know, it is the company's policy to review our cash positions, expected cash flow generation from operations, capital investment plans, and other financial needs at each board meeting to determine the appropriate order delivery. Accordingly, on July 16th of this year, Southern Corporate Corporation announced a quarterly cash dividend of $1.10 per share of common stock and a stock dividend of 0.012 shares of common stock per share. This will be payable on August 27th of this year, 2026, to shareholders of record at the closest distance on August 11th, 2020. Let me mention that factoring in both the cash dividend and the equivalent value of the stock dividend, the total estimated dividend payment is $3.23 per share. Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us, and now we would like to open the forum for questions.

Thank you so much. And as a reminder, to ask a question, Press star 1-1 on your telephone and wait for your name to be announced. To remove yourself, press star 1-1 again. One moment for our first question. It's from Richard with Barclays. Please proceed.

Great. Thank you for taking my question. Just want to talk about copper production in the quarter. It was down 3.5% year over year. Can you just talk about how the grades have progressed at Toquepala and Quajone? And what do you see that doing in the second half of this year? And, you know, is that impacting your four-year production expectations at all?

Thank you very much for your question, Richard. Well, we have been reporting and we mentioned this at the beginning of the year that our expectation was at the first part of the year we were expecting to produce in 2026 about 910,000 tons of copper. Now we're expecting for this year 917,000 tons of copper. So we're improving a little bit on our plan. But the main reason for the change or for the lower production vis-a-vis last year is It's all great, particularly at the Guajone mine, where we had a reduction that translates into about 35,000 tons of lower copper production, and the difference comes from Toquepala. As I mentioned, we have been at the same time doing some important efforts to increase production for the Mexican operations, and that has been to maintain our production levels in Mexico, but having a lower volume in the range of 40,000 tons in total at the Peruvian sites.

Great. And if I can just ask a bigger picture question. You talked about 10.3 billion in cash required for your Peruvian projects. And with the new administration, is it expectations that there'll be some additional funding incentives that could be potentially in place for, you know, local production growth? And then, you know, relative to that, you did issue 1.25 billion of debt for Timoria. Is funding going to be the main expectation for, you know, financing these new projects? Or how do you think about

The latest bond issue, the one that we mentioned in our first release for $1.25 billion was for mainly for financing the Tia Maria project. As you know, we expect to spend in total $1.8 billion in Tia Maria, so with this bond we should cover a significant portion of it. If by any reason we have We finished Pia Maria before spending this money. We'll have some other projects that could absorb a portion of the funds, but if that would be the case, that would be a very small amount. For the Peruvian projects, we are indicating the expected capital expenditures for each of them, for Los Chancas and Chiquillay. Those numbers will be reviewed and updated when we have a goal for the project as we have done in this past quarter with El Pilar, where we have already a budget that is what we expect to spend in the construction of El Pilar. Generally speaking, the company considers use of some debt at certain point in the developing of the projects of the company. Well, that's a good practice to have a balance or a better balance capital, debt capital structure in our financial statements. That's basically it. So, even though I cannot assure you that we will issue bonds or some other forms of financing at each time that we go on with the project, This is what we have been doing in the last few years, so I believe that we could move on in the same direction for the future projects as well. Thank you. Thank you.

Our next question is from Emerson Vieira with Goldman Sachs. Please proceed.

Hello. Good morning, everyone. I have two questions. I want to just talk a little bit more about your project. I understand that... I'm sorry.

I can't copy you well. Is it better now? Yes.

Okay, go on please. Thank you. So yeah, I have two questions. The first of them, I see you guys in Chevalier Project. I understand that the fiscal progress is advancing right, but there is a beautiful equipment component, which is the decarbonization plant. So I just wanted to double check. Emerson.

Emerson, please. I think, sorry for saying this, but could you separate a little bit your... Well, from the microphone, because it doesn't stop you.

Okay.

How about now? Better? Excellent. Excellent. Okay. Thank you. Thank you, yeah. Got an intro here with the mic. So, yeah, I have two questions. First of them on the project. On Chiamarie specifically, it's good to see that physical progress is advancing, but I understand there's a critical component, which is the disarmament point. So, I wanted just to double check if the order to purchase that equipment has already happened, and if not, if there is a risk for delaying the product. If I recall well, last quarter, the automation started up in the third quarter of 2077, and in this press release, the company automation started up in the second half. So, it just starts in December. If you guys see risk of some delays in the project, that's for Tia Maria. Also on the Mexican project, Pilar, just start to listen here if the company was able to obtain the water license that was expired. You mentioned that all environmental license have been obtained, but just double check, double checking if everything is indeed Well-placed to start the early works. So these are the projects, and then I have another question, but I will do it later on.

Okay. Let me start by a pillar, because that's the easiest way, the easiest to answer. We already have the license, the water license renewed, so we're ready to go, and that's why we are reporting it to Begin initial works of construction in September and then a full construction process in the first quarter of next year. For Tia Maria, there are several. We are putting purchase orders and doing the proper contacts to different suppliers of the major parts of equipment, among them the desal plant. For now, we don't expect a delay in the project. That's what we're reporting. But if there is a perception that the project will delay a little bit, we'll certainly report that to the market. But for now, we don't have nothing to report on this.

All right. Thank you. A second one right now on sales, right? There was a gap this quarter. Sales was a little bit below production. So just trying to understand if you guys expect to see a reversal in the second half. I don't know, maybe inventories being consumed so that we see sales coming above production for the second half of this year. Thank you.

No, I think we should do a little bit better in terms of volume in the second half. The reason for that is that we have been increasing a little bit our material process at our operations in the first half of the year. I expect that metal to show up and being available for sales at a certain point in the second half of this year. So that's my personal view for now. We are advising the market on 917,000 tons of total production for the year. So that's basically what we're thinking now.

Okay, thank you. You're welcome.

Thank you. Our next question comes from Rafael Barcelos with Bradesco PBI. Please proceed.

Good morning, and thanks for taking my questions. So, the first question, I just wanted to get your views on the overall political environment in Peru. I mean, we are about to start a new government, so if you can give your broad view on what can change going forward on the regulatory backdrop and on top of that if you can comment specifically about two projects right of course the first one Tia Maria what can you change for the for the project and I understood from your last from the last question that you see Tia Maria on track I just wanted to get more insights on where are the main risks for us to to keep an eye on here on the execution of the project you know particularly because 2027 is a key year in terms of capex disbursement right so just wanted to understand what do you see the risks and in the case of Los Chancas also in this context on the political environment I mean you've been facing these illegal mining activities right so just wanted also to understand how can those things change given the new The New Government. And as a second question, can you comment a bit more on the outlook that you see for copper and byproducts production for the second half of the year and 2027? I'm understanding that you have a chance to beat the previous guidance for the year, which was 911 but I just wanted to understand how does it change your view for 2017 as well? Thank you.

Okay. Thank you for your questions, Rafael. On the political environment, well, we see we have to review the plan that was presented by the elected president for the elections for Keiko Fujimori. They are considering several initiatives that we believe will be positive for the mining industry in Peru. In general for the economy, but particularly in the mining industry. I think that at the same time the priorities that the incoming administration have mentioned are important because one of them is the The fight to illegal mining, which is something that is affecting us on Los Chancas. So we believe that some initiatives that are to fault, a new law for artisan mining, which is something that is widespread in Peru and has centuries of activities being through a strong mining country. So for that, I think that we'll see some positive developments. Some of them will be favorable for the chancas, we believe so. For the Tiamariya project deployment, I think that the risks are the usual ones that you may expect for a project under construction, even though we have reviewed very detailed, very strong detail of the For now, we don't see anything like that showing up. The social environment is positive for the project. We are working with the local population in several initiatives. There are, as we reported, significant amount of people from the area. In many cases, we're Former protesters of the project or family of those persons, and they are okay. We are fine in that regard. I already comment on the, what we're seeing, how we're seeing right now the project. On the outlook for copper and byproducts for the second half, I mentioned already for this year, our goals for for the four materials that we, copper, copper, moly, silver, and sulfuric acid, I think, and sulfuric acid. So, you already have this information. For next year, for copper, we will, we are expecting to produce more or less the same that we have this year. For now, that's what we have to report. In 2028, we will have for next year some help for, we expect to have some help from Tia Maria's tonnage, hopefully in the later part of 2027. For 2028 and on, we expect Tia Maria to fill in and increase our production level to about 970,000 tons. In 2029, our copper production should be over a million tons, 1,060,000 tons. That's our current expectation. A portion of that will come from Tia Maria and from recoveries in all grades Atroge Pala, and Juan Juan. And basically, in 2029, we will have the positive benefits of El Pilar and some other better upgrades at the Mexican operation. So we are very positive. As you know, our goal is to be over 1.6 million tons of copper by 2029. and that's what we're heading towards with organic growth in projects pretty much fully owned by the company.

This is a follow-up. Can you be more specific when you say the, you know, about expectations for a new or revision on the mining law in Peru, which sort of aspects you believe could improve in the medium term?

Now, it's more than reviewing the mining law, it's improving the safety, the security, excuse me, the security environment in the country. That by itself would be very useful for mining projects in Peru. Besides that, we expect the government to maintain the fiscal accounts in order, and On top of that, there have been some changes in the institutional arrangement of the country. We will have a Senate in Peru that we haven't had for over 30 years, and some other changes that will make the political environment much more stable. That's our expectations. We have to see what the elected President Fujimori proposes in her speech in July 28, when she will take over the position of President. That's when we'll see specifically what their goals are and have more clarity in this, but the general view is a positive one, as I mentioned. Okay, very clear. Thank you. Thank you very much.

Thank you. Our next question is from David Tseng with CICC. Please proceed.

Hi, good morning, thank you for answering my question. My first question is a follow-up question on the new administration. We saw that the incumbent administration has proposed distributing up to 40% of the mining cannon directly to their residents in producing areas. So based on your experience in local communities in Peru, Do you believe this would maturely improve community acceptance or could it make the existing community agreements more complicated?

In this case, David, we will not comment on this until we see specifically what's the proposal. If it holds, that's the very first thing, if it will hold or... They have to review it and we will know that as the policies of the new administration are deployed. So, for now, we don't have anything to comment on this.

Okay, I understand. And I have another question on the CMRE. So, we saw that you have provided a cash cost estimate. of 1.96 per pound, dollar per pound. Just would like to double confirm. If it's after byproduct credits, and if so, what byproduct price assumptions underpins this estimate? And should we expect it to be a lot of my average cost, or cost can be reached at the initial years of the project, let's say, 208 or 209.

Okay, well, Pia Maria has no by-products. So, it's just copper, but we will reproduce. And as you mentioned, the cash cost estimate that we have is $1.16. So, it's $1.16. That's the cash cost that we have as an estimate right now. Hopefully, well, we have seen some changes in fuel prices and some other materials, but so far, this is the estimate that we're looking at right now.

Thank you so much. I'll pass it on. You're welcome.

Thank you. And our next question is from John Tumasos with John Tumasos, Very Independent Research. Please proceed.

Thank you very much. I want to try to understand a little better some of the project delays. And maybe LPVAR is a simple one, just 36,000 tons copper production, smaller open pit. The predecessor Mercator bought it in 2009 for 40 million from Stingray. You bought it out for 100 million in 2015. from the Mercator Bankruptcy. It's now 11 years that you've had it. Please explain the delays in engineering and permitting and why it takes so long. This seems to be much easier than Tia Maria or Michi Kile or Alarca or some of the other projects.

Thank you for your question, John. Each project has its own challenges. And in the case of El Pilar, we had technical and indeed technical review in order to be absolutely sure that we were getting the recovery from copper that we were expecting for the project. That was something that took us a little bit longer than what we When we acquired the project, and you mentioned already the year. Besides this, in the meantime, we had to renew some of the permits that we have for the project, and we have finished this process recently, and that's why our last board meeting, the project was presented for approval and we got it, so that's why we're moving forward with it. So usually, projects have different challenges. In this case, it was the very beginning, as I say, some technical issues that have to be quite clear before we go into the investment. And the second is, well, some permitting that given the time spent in solving all the technical issues, it took a little bit longer as well.

How much was the impact when Obrador Wanted to halt the open pits in Mexico. Is that the way it is?

For now, for us, it has not the impact since we already have our concessions including the open pit ones and so there's no point in this. For instance, El Pilar is open pit and we are fine moving forward with it without the permitting for the price.

Thank you. I wait many years, and I hope God gives me enough years to see everything get built.

We hope so.

Thank you.

And thank you, and this concludes our Q&A session. I will pass it back to Raul Jacob for closing comments.

Thank you, Carmen. Well, this will conclude our conference call for Southern Copper's second quarter 2026 results. We certainly appreciate Thank you very much for your participation and hope to have you back with us when we report the third quarter of this year results. Thank you very much for being with us today and have a nice day.

And this concludes today's conference. Thank you for participating and you may now disconnect.