Southern Copper - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered broad-based strength: net sales rose 20.1% YoY to $3.12B, adjusted EBITDA increased 23.1% YoY to $1.75B, and net income climbed 28.5% YoY to $945.9M; net income margin expanded 200 bps to 30.3%.
• Consensus beat: revenue, EPS, and EBITDA exceeded S&P Global estimates; revenue $3.12B vs $2.95B*, EPS $1.19 vs $1.10*, EBITDA $1.75B vs $1.67B*; management attributed outperformance to higher volumes (Cu +3.6%, Zn +42.4%, Ag +14.1%, Mo +9.9%) and better prices.
• Cost tailwinds: operating cash cost, net of by-products, fell to $0.77/lb (from $1.07 in 1Q24 and $0.96 in 4Q24), supported by by‑product credits and lower operating costs; management guided 2025 cash costs to $0.75–$0.80/lb.
• Guidance and capital: 2025 copper production target raised to ~968kt (vs prior ~967kt), moly lifted to ~27.4kt (vs prior ~26.2kt), zinc nudged to ~170kt (vs prior ~171.7kt); 2025 capex forecast ~$1.5B with step-ups to $2.3B in 2026 and $2.7B in 2027–2028.
• Potential catalysts: copper price resilience, continued ramp at Buenavista zinc, dividend policy ($0.70 cash + 0.0099 stock/share), and progress at Tía María; watch COMEX-LME arbitrage and U.S.–China trade policy risk (no current copper tariffs on MX/PE).

What Went Well and What Went Wrong

What Went Well

• Strong top-line and margin expansion: sales +20.1% YoY to $3.12B, adjusted EBITDA +23.1% to $1.75B, EBITDA margin up 140 bps to 55.9%.
• Cost execution: cash cost net of by-products dropped to $0.77/lb, driven by lower operating costs and 22.2% growth in by-product credits, primarily zinc, silver, and moly.
• Management confidence: “This quarter, SCC’s net earnings totaled $946 million…driven by higher sales and lower unit costs…cash cost decreased from $1.07 to $0.77 per copper pound (-28%)” — Chairman Germán Larrea.

What Went Wrong

• Refining/smelting softness: smelted copper fell 13% YoY and refined/rod declined 2.5% YoY in the quarter; quarter-over-quarter, total mined silver sales decreased 4.2%.
• Zinc refined output down 11% YoY; mined zinc fell 8.7% QoQ (IMMSA mines -15.7%) despite YoY surge from Buenavista concentrator.
• Macro/policy uncertainty: management flagged risks from potential U.S.–China trade friction and COMEX-LME arbitrage dynamics; while no tariffs currently apply to MX/PE copper, the arbitrage peaked at 17% in late March.

Transcript

Operator (participant)

Good morning and welcome to Southern Copper Corporation's first quarter, 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 first quarter, 2025, as well as answer any questions that you might have. The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions to not place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statement, 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 onto Mr. Raul Jacob.

Raul Jacob (VP, Finance, and CFO)

Thank you very much, Gigi. Good morning, everyone, and welcome to Southern Copper's first quarter 2025 results conference call. At today's conference, I'm accompanied by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and board member, as well as Mr. Leonardo Contreras, 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 equity. After this, we will open the session for questions. Now, let us focus on the copper market. The London Metal Exchange copper price increased 11% from an average of $3.83 per pound in the first quarter of last year to $4.24 this past quarter. Based on current supply and demand dynamics, we estimate that the deficit at year-end will stand at about 300,000 metric tons.

This is the market deficit that we're expecting. Regarding copper inventories worldwide, we estimate that they are currently covering about one week of global demand. Over the past quarter, the copper market registered a significant arbitrage difference between COMEX and LME prices. At its peak on March 26, the COMEX price was $0.73 per pound, or 17% above the London Metal Exchange price. This huge difference and unusual reflected the strong possibility of a 25% tariff to be imposed on U.S. copper imports. Although we maintain a very positive long-term outlook for copper, we believe an intense commercial war between the U.S. and China will affect economic growth worldwide, consequently impacting copper demand. Now, let's look at Southern Copper's production for the past quarter. Copper represented 78% of our sales in the first quarter of this year.

Copper production remained stable at 240,226 tons for the first quarter of 2025. We registered positive results for Buena Vista SX-EW cathode production that increased by 24%, and Toquepala concentrate production that upticked by 2%. These good results were partially offset by a decrease in copper production at La Caridad due to a drop in ore rates and recovery. At this point, we expect to produce 968,200 tons of copper this year, 2025. This is a 2,400 tons increase when compared to our plan of 965,000 tons ahead. Molybdenum represented 10% of the company's sales value in the first quarter of this year and is currently our first by-product. Molybdenum prices averaged $20.43 per pound this quarter compared to $19.84 in the first quarter of 2024. This represents an increase of 3%. Molybdenum production rose 9% in the first quarter of this year compared to the same period of 2024.

This was mainly driven by an increase in production at the Toquepala, La Caridad, and Buena Vista mines, fueled by higher ore rates. These results were partially offset by lower production at the Cuajone operation. In 2025, we expect to produce 27,400 tons of molybdenum. This is 5% above our initial plan. For silver, it represented 6% of our sales in the first quarter, with an average price of $32.31 per ounce this past quarter. This represents an increase of 38% compared to the first quarter of 2024. Silver is currently our second by-product. Mine silver production increased 14% in the first quarter versus the same period of 2024. This was driven by better production at Buena Vista, IMMSA, and Cuajone. Refined silver production increased by 8% quarter over quarter, propelled by an increase in all our refineries.

In 2025, we expect to comply with our plan to produce 23 million ounces of silver, an increase of 9% compared to 2024. For zinc, it represented 4% of our sales in the first quarter of this year, with an average price of $1.29 per pound in the quarter. This represents a 16% increase compared to the first quarter of 2024 figure. Zinc is currently our third by-product. Mine zinc production increased 49% when compared to the first quarter of 2024 and totaled 39,375 tons. This was mainly driven by a 161% increase in production at the new Buena Vista zinc concentrator. Refined zinc production dropped 11% in the first quarter of this year vis-à-vis the same period of 2024. For 2025, this year, we expect to produce 170,100 tons of zinc in line with our plan. This represents an increase of 31% over our 2024 production level.

This growth will be driven by the production of our Buena Vista zinc concentrator that will add 105,000 tons to our production. This facility is certainly operating at full speed, and we're very pleased with the results that we're getting from this investment. Moving to the financial results of the company. For net sales in the first quarter of this year, sales were $3 billion. This is $522 million above the sales registered in the first quarter of 2024, or a 20% increase. Copper sales rose 19% and volume by 4% in a scenario of better prices. Regarding our main by-products, we registered growth in sales of molybdenum by 10%, which rose on the back of higher prices and an uptick in volume. We also had a significant increase in sales of zinc, 59%, which was fueled by better prices and bolstered by a rise in zinc volumes.

Zinc volumes increased, zinc sold volumes increased by 42%, mainly from Buena Vista. Finally, silver sales increased 58% due to higher prices and a larger volume. Our total operating costs and expenses increased $176 million, or 12%, when compared to the first quarter of 2024. The main cost increments have been in inventory consumption, workers' participation, repair materials, depreciation, exchange rate variance, and other materials such as tires, explosives, grinding media, etc. These cost increments were partially compensated by lower fuel and leachable materials costs. The first quarter of 2025 adjusted EBITDA was $1,746 million, which represented an increase of 23% over the $1,418 million registered in the first quarter of 2024. The adjusted EBITDA margin in the first quarter of this year was 56% versus 55% in the first quarter of 2024.

The first quarter adjusted EBITDA was 16% over the $1,507 million registered in the fourth quarter of 2024. Cash cost. Operating cash cost per pound of copper before by-product credits was $2.05 per pound in the first quarter of this year. This was $0.27 lower than the value for the fourth quarter that was $2.32 per pound. This 12% drop in the operating cash cost was driven by both decreases in cost per pound from production cost, treatment and refining charges, administrative expenses, and by an increase in the premium. Southern Copper operating cash cost, including the benefit of by-product credits, was $0.77 per pound in the first quarter of 2025. This cash cost was $0.19 lower than the cash cost of $0.96 that we had in the fourth quarter of 2024. This is a 21% reduction in cash cost.

Regarding by-products, we had a total credit of $659 million, or $1.29 per pound in the first quarter of this year. These figures represent a 5% decrease when compared with the credit of $779 million, or $1.36 per pound in the last quarter of 2024. Total credit has increased for molybdenum, silver and decreased for zinc and sulfuric acid. For net income, the first quarter of 2025 net income was $946 million, which represented an improvement of 29% compared to the $736 million registered in the first quarter of last year. The net income margin this past quarter was 30% versus 28% in the same period of 2024. Net income in the first quarter of 2025 was 19% versus the $794 million registered in the last quarter or the fourth quarter of 2024. Excuse me, please.

Regarding cash from operations, cash flow from operating activities in the first quarter of 2025 was $721 million, which represented an increase of 9% versus the $661 million posted in the first quarter of 2024. This improvement was attributable to the strong cash generation at our operations, which was driven by higher sales and cost control efficiency. For capital investments, our current capital program for this decade exceeds $15 billion and includes investments in projects in Mexico and Peru. 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. In the case of the Mexican projects, Minera México is planning to invest more than $600 million this year at both its open pit and underground mines.

Half of this investment will be used to guarantee the viability of long-term operations by actively modernizing and updating assets. Remaining funds will target improvements in water usage and tailings management to ensure safety and efficiency of our operations. We will also invest in efforts to bolster optimization and growth. For the El Arco project in Baja California, the company has moved on with the detailed engineering, which is still underway for the concentrator, as well as for the SX-EW plant, water salinization, logistics, infrastructure, and power delivery. Southern Copper Corporation 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, Chalchihuites, and the Empalme Smelter, which could bolster our position as a fully integrated copper producer.

For the Peruvian projects, in the case of the Tía María project, as of March of this year, the company has generated more than 628 jobs. Of those, 503 were filled with local applicants. To the fullest extent possible, we intend to fill the 3,500 jobs estimated to be required during Tía María's construction phase with workers from the Islay province. In 2027, when we start operations, the project will generate 764 direct jobs and about 5,900 indirect jobs. In the early construction phase, progress on access roads and platforms stands at 61%. We will advance these efforts alongside work to set up a temporary camp, engage in massive earthworks, and roll out mine operating activities. To date, we have installed 59 kilometers of light fence to delimit the property.

For the Los Chancas project in Apurímac, on February 4th of this year, the company acquired 3,125 hectares of surface land from the Tíaparo community. This was an important step in securing our stake in the Los Chancas project. Sadly, between March 12th and 14th of this year, a group of illegal miners attacked the project's facilities and set fire to our camps in Mazopampa and Patahías, damaging both equipment and facilities. The company is coordinating with the authorities to remove the 75 illegal miners who are exploiting our property so that the project development can continue. For the Michiquillay project, as of March in the Cajamarca region of Peru, as of March 31st of this year, the total progress of the exploration project was 39%. We have drilled almost 146,000 meters and obtained 48,000 drill core samples for chemical analysis.

Diamond drilling will continue and will provide information to interpret mineralization in geological sections, develop geological models, and evaluate mineral resources. Geometallurgical, as well as hydrological and hydrogeological studies have been initiated. The geotechnical study for the project is scheduled to begin shortly. For environmental, social, and corporate governance, ESG, we have in Peru two high-performance schools named COAR, which have been built by Southern Copper Corporation in the Tacna and Moquegua region of Peru. These were inaugurated by the President of the Republic of Peru and the Ministry of Education. A total of $60 million was invested through the works for taxes mechanism. The schools feature top-level services, which have been designed to maximize the student academic, artistic, and athletic activities. Every year, these COAR schools will educate 600 outstanding students from vulnerable areas of Peru.

As we have, this is a way to actively contribute to closing the educational gaps in the country. Work to build a new COAR in the Apurímac region is slated to begin soon. Our social practices have been recognized again. This is the third consecutive year that we received the Exceptional Company Award, which recognizes our commitment to Mexican communities. This distinction, bestowed by the Business Coordinating Council, the Communications Council, and the Institute for Promotion of Quality, applauds our initiative to drive regional economic and recreational development by developing the Tamosura and Pinacate urban parks in the mining municipalities of Cananea and Nacozari in Sonora. Every year, more than 50,000 users will benefit from the sports, recreational, and cultural facilities developed by the company.

We maintain our rating in the climate change and water security in the Carbon Disclosure Project, better known as CDP, in the evaluation that this agency has done. The CDP is the world's leading environmental disclosure platform, where part of more than 24,800 companies that last year voluntarily reported their environmental impact to the CDP, representing nearly two-thirds of global market capitalization. SCC, as part of Grupo México, ranked above the average for both the materials sector and the North America region in evaluations for both categories. Moving to 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, on April 10th, Southern Copper Corporation announced a quarterly cash dividend of $0.70 per share of common stock and a stock dividend of 0.0099 shares of common stock per share, payable on May 19th, 2025, to shareholders of record at the close of business of May 2, 2025. This is basically the shares dividend. This is one share per almost 100 shares of stock position. With this, ladies and gentlemen, we end up our presentation today. Thank you very much for joining us, and we would like to open the forum for questions now.

Operator (participant)

As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alejandro Demichelis from Jefferies.

Alejandro Demichelis (Managing Director)

Yes. Good morning, gentlemen. Thank you so much for taking my question. Two questions, if I may, please, Raul. The first one is, as you mentioned, we have seen an improvement in your cash cost this quarter. How should we think about cash costs evolving the rest of the year? That's the first question. The second question is on the dividends that you just kind of mentioned. We have seen an increase in the proportion of the share dividend. First, why was that, or what was the thinking behind that, and how should we think about that proportion of shares on the dividend side? We are relatively prudent regarding the management of cash flow for the company.

Raul Jacob (VP, Finance, and CFO)

We, as you know, we do not want to hoard cash, but at the same time, we have to fund our operations properly. In the case of the past quarter, we had some—the first quarter of the year, we usually have to do a final payment of taxes to the tax authorities in both Mexico and Peru. When you have a year where prices or productions, as it has been the case, are better than—excuse me, please. As I was saying, when you have a year where—so when we have a year where results are better than the prior one, usually you have to do a much higher payment for the closing of the prior year for taxes and some other benefits for the workforce, such as the profit sharing.

Last year, in particular, we had to pay, on top of all the taxes that we pay through the year 2024, a final closing payment of $711 million in taxes that was for 2024. That made our cash from operation relatively smaller than what may be expected given the prices and production profile of the company. Besides this, we have to pay also two specific taxes in both Mexico and Peru that are due in the first quarter. All of these has, as I say, affected a little bit our cash position in the first—cash flow generation in the first quarter, but we believe that this will not be the case in the rest of the year, particularly in the second quarter, because usually the Mexican taxes are paid in the second quarter of the year.

At this time, for just the calendar that we had for these payments, we had an unusual payment in the first quarter for the Mexican operations. Going back to your first question, cash costs for the rest of the year, it depends on how we are seeing the market prices. We're doing a little bit better than our initial plan, and I expect this to be the case through the year. If we have the same prices that we're seeing for our byproducts, my expectation is that we end up the year in this range of $0.75-$0.80 per pound of copper as a cash cost for 2025.

Alejandro Demichelis (Managing Director)

Perfect. Yes. Thank you.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of David Feng from China International Capital Corp.

David Feng (Equity Research Analyst)

Hi. Good morning, Raul, Victor, and team. Thanks for taking the question. My first question is regarding your CapEx. We can see that your CapEx increased a lot both year over year and quarter over quarter during the last quarter. Would we know how much does Tía María's construction cost accounted in this CapEx? Besides Tía María, is there any increment from other projects? That's my first question. I'll come back with my second one.

Raul Jacob (VP, Finance, and CFO)

Okay. For Tía María specifically, we expect to spend a little bit less than $200 million this year, 2025. Next year, 2026, we will be spending about $980 million, and in 2027, $460 million. That's basically it for Tía María. In the case of the other projects, Michiquillay and Los Chancas will start spending more money as we move on from the exploration part of the development of the project towards the construction. That is being reflected in our capital for the next few years. I'll give you the number of our forecast at this point for CapEx. It's for this year, $1.5 billion. For next year, 2026, will be $2.3 billion, 2027, $2.7 billion, 2028, $2.7 billion. About that, until we start finishing our projects, that should be by about 2031, 2032.

David Feng (Equity Research Analyst)

Thank you, Raul. That's really helpful. My second question is, we know that the treatment and refining charges, or TC/RC, have been negative for a long time in the spot market. I just wonder how much flexibility do you have at this moment for you to sell more copper concentrate instead of refined copper based on the current market conditions and the long-term contract you have?

Raul Jacob (VP, Finance, and CFO)

We want to—the first thing is that we have to comply with our contracts, and our contracts are a little bit north of 70% based on refined copper or further processed materials such as rock and copper concentrates. When you produce refined copper, you not only have the copper itself but also have precious metals that sometimes are not recognized when you sell copper concentrates, and you have some other materials. The main one of the byproducts of a smelter, for instance, is sulfuric acid. When you do all the arithmetics, even though the terms of TCs/RCs are very favorable now for concentrate producers, the smelters, at least in our case, are very competitive. We believe that we are doing more or less a very small difference between selling concentrates or selling refined copper. In that regard, we are okay with what we do.

As I say, our main point this year is to comply with the contract that we have signed and to deliver copper to our industrial customer base as well as some other customers that we have in the case of Southern Copper.

David Feng (Equity Research Analyst)

Understood. Thank you very much.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Timna Tanners for Wolfe Research.

Timna Tanners (Managing Director)

Yes. Good morning. Thanks, Raul. I wanted to ask a few questions about the Mexican pipeline. You mentioned a few projects, Chalchihuites, and another one I just googled. I just wanted to understand how imminent they might be, how incremental. It looks like there's some decent information about the opportunity there online, but I'd like to hear it from you. Can you remind us of your exposure to the CME as well? We keep getting questions about that. Thank you.

Raul Jacob (VP, Finance, and CFO)

Tina, so sorry that I couldn't get your first question.

Timna Tanners (Managing Director)

Oh, sure. Just trying to understand, you mentioned in the press release and in the remarks that you're looking into some new opportunities to expand the pipeline in Mexico. I might butcher this, but Chalchihuites, Chalchihuites. And another one that you detailed, again, hard to pronounce. Wondering if you could provide some further detail about how imminent they might be, what mine products you're looking at, what time frame. Thank you.

Raul Jacob (VP, Finance, and CFO)

In the case of, we have the other project that has been mentioned, Angangueo. It's an underground project that we're looking in the Michoacán state. It has copper, silver, zinc, and lead as materials, and it's very attractive. We're looking into it. We are still on the initial steps of this project. The other one is Chalchihuites. That's probably the one that had some difficulties for pronunciation. This is in the Zacatecas region, and it's in the exploration phase, but they are very interesting.

Besides this, we're considering the construction of a new smelter in Empalme, in a region at the northern part of Mexico. This is something that we will review and entertain as a possible investment. At this point, I think that this is not the best time to build a smelter, but whenever conditions are the proper ones, the company will consider to move on with this.

Timna Tanners (Managing Director)

Okay. In terms of timeline, would we think about tacking them on your existing project pipeline, or is it something that could be more imminent?

Raul Jacob (VP, Finance, and CFO)

It is not that imminent. As we move on with the projects, we will report on them, and we'll add them to our list of projects at the Mexican operations when it is proper.

Timna Tanners (Managing Director)

Okay. Helpful. Thank you. And then about the CME exposure, if you could remind us on that as well.

Raul Jacob (VP, Finance, and CFO)

What do you mean by CME?

Timna Tanners (Managing Director)

The COMEX versus the LME exposure.

Raul Jacob (VP, Finance, and CFO)

Oh, okay. Okay. The COMEX. Okay. We do have some of our contracts based on COMEX. There is still a spread. Now it's much lower than the one that I mentioned. It's about less than 10% now, about 7% if you look at the prices yesterday. We are, basically, dealing with this as we deal with some other issues at the commercial side of the business.

Timna Tanners (Managing Director)

Okay. And then one last one, if I could, please. You commented broadly on a trade war and the negative impact on global demand for copper, but any thoughts about Mexico possibly getting excluded in early negotiation of USMCA or any insights? Have you been in dialogue with the Mexican government? Just wanted your thoughts there. Thank you.

Raul Jacob (VP, Finance, and CFO)

Actually, not much to report. At this point, we have no duties, tariffs applied to the Mexican or the Peruvian operations for copper. This is, in my view, a very positive action from the U.S. because the U.S. is significantly short of copper. Putting tariffs on imported copper would not make the country production move on just with the tariffs. Basically, it will increase the cost for the end consumers of the products that are manufactured with copper and reduce the country competitiveness in several industries. To me, it's a wise decision that the U.S. government has not put any tariffs on copper so far.

Timna Tanners (Managing Director)

Okay. Great. Thanks again.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of John Tumazos from John Tumazos Very Independent Research LLC.

John Tumazos (Principal)

Congratulations on the good results, Raul. Some other large mining companies have had a lot of cost escalation. First Quantum and Newmont, for example, had 10-15% unit cost sequential escalations. Newmont had a $2,000 gold cost in Argentina, for example. Could you explain in a little more detail the ability of Southern Copper to hold the cash cost at $0.77, how your suppliers don't hold you up and get price hikes, or just how you're able to keep costs under control so uniquely and superbly?

Raul Jacob (VP, Finance, and CFO)

Thank you very much for your comment, John. In reality, what we do is it's a part of the company DNA to be extremely cautious about operating costs. The other point, which is very important, is that we continue investment, our continued investment in maintaining our facilities in very good shape. I think that in general, we do negotiate and have a very good relationship with our vendors. At the same time, we are focusing on increasing our production, maintaining our cost in line. Particularly in this year, we're seeing the positive effect of the important investment that we did in the last three years in Buena Vista by building a new concentrator that is giving the company excellent results. The cash cost of these facilities is extremely low per pound of zinc. We are seeing that as a major contribution of value this year.

Besides that, the company had a very good year last year in production, and we are maintaining our production level this year, which is excellent for us. I think that this combination of being well focused on keeping our production on track, increasing it as much as we can, obviously without jeopardizing the long-term situation of the company, as well as having strategic alliances and development of opportunity together with our suppliers, is some of the reasons why the company is maintaining a very competitive cash cost and very likely the lowest of companies of this size in the copper space.

John Tumazos (Principal)

Thank you.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Myles Allsop from UBS.

Myles Allsop (Mining Research Analyst)

Great. Thank you. Just a few quick questions. Maybe on the production guidance you've talked to 2025, could you give us a sense whether you'll be able to maintain production in 2026 and 2027 as well, or are you expecting a bit of a dip to come through? It's the first question.

Raul Jacob (VP, Finance, and CFO)

Okay. We will have an adjustment in production for next year. At this point, we want to maintain our production level where it is, but eventually, we may reduce a little bit our profile next year for copper. After that, you will see the impact of our new projects, particularly in 2027, Tía María. We are expecting it to move towards over a million tons for production in 2028. We will be increasing our production from a little bit north of one million tons in 2028 up to 1,080,000 tons by 2030.

Myles Allsop (Mining Research Analyst)

Okay. Maybe just on Tía María as well. When do you expect, I know you normally issue bonds ahead of the big CapEx. Is the delay in the financing for Tía María a reflection of the project or the market? Should we expect some of that step-up in CapEx to be pushed out, or is it imminent, should we say?

Raul Jacob (VP, Finance, and CFO)

No, we will move on with Tía María. Let me put it differently. We have no concerns on the Tía María construction in terms of the project viability. We believe that the project is moving forward in a very nice way. We are very happy to how the community is working with the company at several instances to develop the project as fast as we can. I will say that we are considering moving forward with some financing for the project, but we believe that the market has to be more stable and reflect better the qualities that the credit that the company has for going to finance the project.

For now, I would say that to your question is more the market than specifically the project. That makes sense. Has there been any protests over the last quarter at Tía María, or has the project now been more widely kind of accepted by the local communities? Quite clearly, it's the second option. The project has been very widely approved and supported by the locals. There is always a small group of people that is against it. That's part of human nature. About 40 persons that demonstrate against the project in an area where 52,000 people live. You may imagine that this is not getting any traction at all.

Myles Allsop (Mining Research Analyst)

Okay. That's encouraging. Maybe on the project, El Pilar is not mentioned at all in the release. Is that reflecting a change in heart with that project, or is it still bubbling along in the background?

Raul Jacob (VP, Finance, and CFO)

No, we're doing some work. We haven't reported it because there is no update that has changed vis-à-vis what we have been reporting. At El Pilar, we're looking into ways to improve the recovery of the project. That is something that we're focusing in, and we believe that we should have some information to report through the year. For now, in this special release, we didn't believe it was necessary to include it because they had no significant changes since the last time.

Myles Allsop (Mining Research Analyst)

Okay. That makes sense. Maybe one very last question on the projects. Los Chancas, have you bought all the land that you need to buy? And how long is a piece of string? I mean, with these illegal miners, it seems every quarter there's a challenge still to remove them. Yeah. Is there any meaningful progress, or when can we expect kind of drilling to restart there?

Raul Jacob (VP, Finance, and CFO)

With the acquisition that we mentioned in the press release, we basically have acquired pretty much almost all the land that we need, a very high percentage of what we need. In the case of the removing of the illegal miners, we are working with the authorities, and we are developing our own plans to move on and retire these people from where they are operating. We're seeing very positive actions by the national government on this matter.

We believe that we could see some progress through the year, and we initiate the work that we have to move on with. We believe that if we solve this problem, we will probably in a year, a year and a half, we'll be finishing the environmental as well as permitting part of the project, and that could open up the construction of Los Chancas, hopefully a little bit better than we're expecting now, but that's more a desire than the actual forecast that we have.

Myles Allsop (Mining Research Analyst)

Okay. No, that's very helpful. Thank you.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Juraj Domic from LarrainVial.

Juraj Domic (Senior Associate)

Hello. Hello. Good morning, everyone. Thanks for taking our question. Just a single one from our side. Just to have your comments in how have been demand so far in the second quarter. Have you seen any variability or weakness in any of the markets? Thank you.

Raul Jacob (VP, Finance, and CFO)

I'm so sorry, Juraj. Could you repeat it because I couldn't get? Are you referring to a specific market or the copper market? Could you?

Juraj Domic (Senior Associate)

Sorry. No. No, not any specific market. Just an overall view would be perfect.

Raul Jacob (VP, Finance, and CFO)

Overall, we are positive in general on the copper future. We believe that the fact that we have what we're seeing is a replacement of demand coming from infrastructure, mainly from Asia, towards the new energy technologies, artificial intelligence that are kicking in at a very strong speed.

The very positive news of that for us is that, generally speaking, for instance, if you consider a plant for solar energy, the tons of copper per megawatt of installed capacity is much higher than the traditional ways to generate, such as hydro or gas combustion or some other carbon coal power. In that regard, we're seeing a very positive development. Eolic, for instance, overseas requires much more copper per ton of installed capacity of generation. For instance, it may be 10 tons of copper per megawatt of installed capacity in an offland or an in-sea eolic plant. When you the option to that is maybe two or three with a gas burn facility for power generation. The outlook in that regard is very positive.

Besides that, we have the new developments of artificial intelligence that are requiring significant amounts, not only for copper, but some other materials such as zinc and silver. These three materials are being produced for us, so we see good support for our prices in the next few years. The only one concern that we have is that when you have the two major economies in a commercial war, it is a concern that may slow down economic growth and indirectly affecting the copper demand. That will be a short-lived impact, if any.

Juraj Domic (Senior Associate)

Okay. Perfect. Thank you very much.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Camilla Barter from Bradesco BBI.

Camilla Barter (Equity Research Analyst)

Good morning. Thank you for the opportunity of taking my questions. I have two questions here. The first one, you mentioned you see downsides raised to copper production 2026. I was just wondering if copper prices remain at a low level. Could you consider perhaps altering your production plans and going to areas of lower grades to increase production next year? That's my first question. The second question is just to follow up on cost. You mentioned cost after byproducts in the range of $0.70-$0.28 for this year. Can you comment, please, on the expectations of cash cost before byproducts for 2025? Thank you.

Raul Jacob (VP, Finance, and CFO)

I think I mentioned already that we're expecting copper cash cost to be at about $0.75-$0.80 per pound through this year. Hopefully, with better byproduct prices, we may be a little bit better off than that, but that's our current expectation. For copper prices, generally speaking, we do not move our long-term production plans due to copper price changes. We are doing our plans using a much lower copper price. We are very conservative in that regard. Our plans are prepared using a long-term price of $3.30. That is a very conservative price nowadays. For us, it will be more like if we can maintain our production next year, that will be excellent. So far, the plan calls for a small reduction in our production that is currently under review.

Camilla Barter (Equity Research Analyst)

Thank you.

Raul Jacob (VP, Finance, and CFO)

Any other questions?

Operator (participant)

Camilla? Camilla? Your line is still open.

Camilla Barter (Equity Research Analyst)

Can you hear me?

Raul Jacob (VP, Finance, and CFO)

Yes, we do.

Camilla Barter (Equity Research Analyst)

On the cash cost, my question was actually on cost before byproducts.

Raul Jacob (VP, Finance, and CFO)

Okay. That one has decreased. Keep in mind that we are adding to that cost, the total cost of operations, the cost of the new zinc concentrator, which was not included two years ago. Our cash cost has decreased on a per-pound basis, given the productivity that the company has. I think it's important to share this point. The concentrator that we have built for Buena Vista has made us process zinc only this year. We could do a mix between zinc and copper production in the Buena Vista facilities that we are not doing now because we have found that there is much more value in focusing only on zinc this year and in a few more than specifically copper on this specific facility. That has decreased the production that we may get from the Buena Vista facility for about 2,000 tons that we had last year.

We are not having that volume this year. There is always possibilities of improving production, but in this case, we did a review of the process and concluded that it was better to focus on zinc-only production with the Buena Vista zinc facility than doing the mix between zinc and copper because by changing the processes from one metal to the other one, we spend some time that has generated less value if we were only focusing on zinc. That is what we are doing this year and probably a couple more.

Camilla Barter (Equity Research Analyst)

Okay. Thank you. Thank you very much.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Timna Tanners from Wolfe Research.

Timna Tanners (Managing Director)

Hi. Thanks for letting me back in. I just wanted to follow up on my last question and fully appreciate that we haven't seen tariffs on copper exported to the U.S. yet, but the market is obviously pricing in some chance of that happening. It would be great to hear what Southern Copper's response could be to a 25% tariff on imports. How could Southern Copper react to that? Thank you.

Raul Jacob (VP, Finance, and CFO)

We believe that if we have a tariff, the one that you mentioned, it will make us reassign some of the production that we have to some other markets. By doing that, we will very likely have decreased significantly the impact that this may have to the company. At this point, we prefer to wait and see what is the end of this situation. As I mentioned, we are pleased to see that the U.S. government has recognized the important role of copper as a material to be imported with zero duties, and hopefully, that will be the case in the long term.

Timna Tanners (Managing Director)

Okay. Thank you.

Raul Jacob (VP, Finance, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Emerson Vieira from Goldman Sachs.

Emerson Vieira (Equity Research Associate)

Hi, guys. Good morning. I got two questions. The first one is on the COMEX LME price arbitrage. I understand that the company might have been benefiting from this exposure to COMEX sales. A few questions on this matter. What percentage of your contracts are spot, and what is the average duration for the remaining ones? Just to follow up on this COMEX LME price arbitrage, for how long do you guys think you can benefit from this? I mean, US customers will not want to double pay the tariff, and non-US customers would eventually switch to LME. That's what we think. Are you guys seeing clients in COMEX contracts already asking for renegotiation or early cancellation? Those are my questions. Thank you.

Raul Jacob (VP, Finance, and CFO)

Generally speaking, we are not commenting on this. It is where our commercial team is talking with our customers on this matter. Sorry, Emerson, but I have no comments to your question.

Emerson Vieira (Equity Research Associate)

No worries at all. Thank you. Just to follow up on the point, we saw by late March some news regarding protests from local communities in Peru, Arequipa region. So, do you guys have any update on the situation, how this is being addressed? For Tía María specifically, do you guys already have local agreements? How do you see this relationship evolving in Tía María's region, please?

Raul Jacob (VP, Finance, and CFO)

What we're seeing in the case of Tía María is that the population of the area is much more focusing on seeing the opportunities and the advantages that the project is bringing to them than protesting against Tía María. I mentioned before that the number of protesters is relatively small, vis-à-vis the 52,000 population of the Islay province. We believe that, and we hope that this environment prevails through the construction phase. So far, we are not seeing any significant—we do not have any significant concerns regarding the protests in Tía María.

Emerson Vieira (Equity Research Associate)

I see. Thank you, Raul and team. Thank you very much. It was very helpful.

Operator (participant)

Thank you. At this time, I would now like to turn the conference back over to Raul Jacob for closing remarks.

Raul Jacob (VP, Finance, and CFO)

Thank you very much, Gigi. With this, we conclude our conference of Southern Copper's first quarter 2025 results. We certainly appreciate your participation and hope to have you back with us when we report the second quarter of this year's results. Thank you very much for being with us today, and have a nice day.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.