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.