Southern Copper - Earnings Call - Q3 2025

Executive Summary

• Record quarter: net sales $3.38B (+15.2% y/y), adjusted EBITDA $1.98B (+17.3% y/y), and net income $1.11B (+23.5% y/y), driven by higher metal prices and strong by-product volumes; net income margin expanded to 32.8%.
• Solid beat vs Wall Street: revenue $3.38B vs $3.21B consensus (+~5%); EPS $1.35 vs $1.25 consensus, supported by a collapse in operating cash cost to $0.42/lb (net of by-products) as zinc, silver and moly volumes/prices surged. Consensus from S&P Global estimates.*
• Dividend raised: cash dividend increased to $0.90 (from $0.80 in Q2) plus 0.0085 stock dividend; payable Nov 28, 2025 (record Nov 12).
• Strategic progress: Peru’s Ministry of Energy and Mines authorized commencement of exploitation activities for Tía María; ramp expected through 2027, with financing likely via debt as rates fall.
• Setup for 2026-2027: Company reiterated 2025 copper production ~960kt and indicated 2026 forecast ~911kt (under review), with 2026 capex ~$2.0B including ~$866M for Tía María; medium-term growth levered to Tía María, El Pilar, and El Arco.

What Went Well and What Went Wrong

• What Went Well

  • New company records in net sales, adjusted EBITDA, and net income; management credited improved prices across all products and by-product strength: “cash cost of $0.42/lb… one of the industry’s lowest”.
  • By-product volumes and prices materially improved cost structure: zinc mined +46.3% y/y; silver mined +16.4%; moly mined +8.3%; by-product credit drove the $0.42/lb net cash cost in Q3.
  • Peru project momentum: Tía María received authorization to begin exploitation; early works progressing; management expects ramp in 2027.

• What Went Wrong

  • Copper production softness: mined copper 234,892 tonnes in Q3, down 6.9% q/q and total production -6.4% y/y, with lower grades in Peru and Mexico and Buenavista concentrator fully dedicated to zinc/silver instead of copper.
  • Smelting/refining throughput down y/y: smelted -16.9%, refined/rod -10.3% in Q3; some maintenance at Ilo impacted throughput and sulfuric acid by-product credits.
  • Cost line items mixed beneath the surface: while net cash cost plunged, purchased concentrates, workers’ participation, and services were cited as areas of cost increase; cash cost before by-product credits rose to $2.23/lb.

Transcript

Speaker 0

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

Speaker 1

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's third quarter 2025 results conference call. At today's conference, I'm accompanied by Mr. Oscar 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 ESG. After this, we will open the session for questions. Our performance in the third quarter delivered new company records for net sales, adjusted EBITDA, and net income. These milestones are a testament to the strength of our strategy, execution, and commitment to sustainable growth. This strong performance was primarily driven by a rise in by-product production and improved metal prices across all our products.

Zinc production rose 46%, mainly on the back of significant production at our Buenavista zinc concentrator. Silver and molybdenum output grew 16% and 8%, respectively. The combination of higher production volumes and better copper and by-product prices enabled us to achieve a cash cost of $0.42 per pound of copper in the third quarter of this year, one of the industry's lowest. We remain firmly committed to enhancing productivity and cost efficiency, driven by a strategy anchored in discipline and focus on achieving a long-term goal to produce 1.6 million tons of copper at the lowest possible, most competitive cost per pound. Looking into the copper market, the LME copper price increased 7% from an average of $4.17 per pound in the third quarter of 2024, up to $4.44 this past quarter. For the COMEX market, we saw a 14% increase.

Based on current supply and demand dynamics, which include the negative production effects that were seen in Indonesia and Chile, we're currently estimating a copper market deficit of almost 400,000 tons. Copper inventories worldwide, which is the sum of the London Metal Exchange, COMEX, and Shanghai warehouses, as well as other bonded warehouses, these inventories, the sum of these different inventories at the end of September, were 609,000 tons. We estimate that this inventory currently covers approximately eight days of global demand. The recent U.S. tariff policy changes have thus far had a limited impact on our results. As such, we're confident now that the long-term fundamentals of prices for copper and other metals will remain very positive. Now, let's look at Southern Copper's production for the past quarter. Copper represented 72% of our sales in the third quarter of this year.

Copper production registered a decrease of 7% compared to the third quarter of 2024 and stood at 234,892 tons this past quarter. Our quarterly results reflect a 7% drop in production in Peru, which was triggered by a decrease in production at our Toquepala and Cuajone mines. Production at our Mexican operations fell 7% quarter on quarter, driven by a decrease in production in our Buenavista mine due to lower ore grades, and by the fact that the new Buenavista concentrator was fully dedicated to maximizing zinc and silver production to leverage the favorable ore grades identified in an important segment of the mine. On a year-to-date basis, copper production fell 3% in 2025 to stand at 714,098 tons, mainly driven by a decrease in production at our Mexican and Peruvian operations due to lower ore grades.

For this year, 2025, we expect to produce 960,000 tons of copper. This is slightly lower, less than 1%, than the plan and a decrease of 2% over 2024's final plan. Molybdenum represented 13% of the company's face value in the third quarter of 2025 and is currently our first by-product. Molybdenum prices averaged $24.30 per pound in the quarter compared to $21.68 per pound in the third quarter of 2024. This represents an increase of 12%. Molybdenum production registered an increase of 8% in the third quarter of this year compared to the same period of 2024. This was mainly driven by higher production at our La Caridad and Toquepala mines, which were partially offset by lower production at our Buenavista and Cuajone operations. In 2025, we expect to produce 30,000 tons of molybdenum, which represents an increase of 4% over our 2024 production level.

For silver, it represented 7% of our face value in the third quarter of 2025, with an average price of $39.56 per ounce for the quarter. This reflected an increase of 34%. Silver is currently our second by-product. Mine silver production increased 16% in the third quarter of 2025, which is the same quarter of 2024, after production growth in our Mexican operations, and this was partially offset by lower production in the Peruvian mines. Refined silver production increased 2% quarter over quarter. This evolution was mainly driven by higher production in our Ilo refinery, which was partially offset by a drop in production in La Caridad refinery. In 2025, we expect to produce 23 million ounces of silver, an increase of 10% compared to last year.

Zinc represented 4% of our face value in the third quarter of 2025, with an average price of $1.28 per pound in the quarter. This represents a 2% increase compared to the third quarter of 2024. Zinc is currently our third by-product. Mine zinc production increased 46% quarter on quarter and totaled 45,482 tons. This was mainly driven by an increase in production at the Buenavista zinc of 108%. This Buenavista zinc concentrator has been processing high ore grade material that we found in a segment of the Buenavista mine that, well, it was reviewed and decided on the basis of the value that this additional production is contributing to this year's results. For the year 2025, we expect to produce 174,700 tons of zinc, which represents an increase of 34% over our 2024 production level.

This growth will be driven by the production of our Buenavista zinc concentrator, which I already mentioned is operating at full capacity dedicated to zinc production. For the third quarter of this year, sales were $3.4 billion. This figure was $446 million, or 15% above the third quarter of 2024 trend. The copper face value increased. Volume dropped 4% in a scenario of better prices. The London Metal Exchange price increased 7%, and the COMEX price increased 14%. Regarding our main by-products, we registered an increase in sales of molybdenum by 46% due to growth in volume. Volume of molybdenum sales increased 8% and better prices. Zinc sales increased 12% due to an uptick in volume of 7% and better prices for this material zinc. Finally, silver sales increased 65% due to higher volume, 22%, and better prices for silver.

Our total operating costs and expenses were up to $128 million, or 9%, compared to the third quarter of 2024. The main cost increments were in purchased copper concentrates, workers' participation, labor, operations contractors and services, energy, and sales expenses. These cost increments were partially offset by a drop in inventory consumption and other factors. The third quarter of 2025 EBITDA, Adjusted EBITDA, was $1,975 million. This represented an increase of 17% with regard to the $1,685 million registered in the third quarter of 2024. The Adjusted EBITDA margin in the third quarter of this year stood at 59% versus 58% in the third quarter of 2024. Adjusted EBITDA year-to-date was $5,512 million. This is 13% than the mark for the nine months of 2024. The Adjusted EBITDA margin in the nine months of this year stood at 58% versus 57% in the nine months of 2024.

Operating cash cost per pound of copper before by-product credits was $2.23 per pound in the third quarter of 2025. This is $0.12 higher than the value for the second quarter of 2025, which was $2.11. This 5% increase in operating cash cost is a result of higher cost per pound from production cost, administrative expenses, and lower premium, and was offset by lower treatment and refining costs. Southern Copper's operating cash cost, including the benefit of by-product credits, was $0.42 per pound this past quarter. This cash cost was $0.21 lower, or 34% lower, than the cash cost of $0.63 that we had in the second quarter of 2025. Regarding by-products, we had a total credit of $895 million, or $1.81 per pound in the third quarter of 2025.

These figures represent a 22% increase in by-product credits when we compare them to a credit of $766 million, or $1.48 per pound, in the second quarter of this year, 2025. Total credits have increased for molybdenum in 23%, for silver 29%, and decreased a little bit for zinc 1% and sulfuric acid, where we have lower volume due to major maintenances at our smelter in Ilo. For net income in the third quarter of this year, net income was $1,108 million, which represented a 23% increase over the $897 million registered in the third quarter of 2024. The net income margin in the third quarter of this year stood at 33% versus 31% in the same quarter of last year. These improvements were mainly driven by an increase in sales and cost containment activities.

On a year-to-date basis, net income was 17% higher than in 2024 due to growth in net sales. The net income margin year-to-date stood at 32% versus 30% for the nine months of last year. Cash from operations or cash flow from operating activities in the third quarter was $1,560 million, 8.4% above the figure in the third quarter of 2024. For the nine months of 2025, cash flow from operating activities stood at $3,258 million, which represented an increase of 6% over the $3,061 million posted in the nine months of 2024. Capital investment. For the Peruvian projects, our investments in Peruvian projects that are being built or for which basic or detailed engineering is being conducted could surpass $10.3 billion in the next decade.

Given that there is a description of our main capital projects in Southern Copper's press release, I'm going to focus on updating new developments for each of them. In the case of the Tía María project in the Arequipa region in Peru, as of September 30th of this year, progress at Tía María stood at 23%, and 2,109 new jobs had been generated. 809 of these jobs were filled with local applicants. To the fullest extent possible, we intend to fill the 3,500 jobs estimated to be required during the Tía María construction phase with workers from these Islay provinces. In 2027, when we start operations of Tía María, the project will generate 764 direct jobs and 5,900 indirect jobs. In the early construction phase, progress on access roads and platforms stands at 90%.

We will advance this effort alongside work to set up a temporary camp, engaging massive earthwork and rollout mine opening activities. Recently, on October 14th of this year, the company received authorization from the Ministry of Energy and Mines to begin exploitation activities on the Tía María project. This authorization is based on considerations outlined in the supporting technical report and the environmental certification approved for the project. Consequently, we will soon initiate pre-stripping activities in La Tabada and begin building main project components. For the Los Chancas project in the Apurímac region of Peru, as of September 30th of this year, social and environmental management programs are underway in the communities directly influenced by the project, in accordance with the framework agreement signed between the Diaparo prison community and the Los Chancas mining project.

Necessary actions are being undertaken to regain control of the project in response to the presence of illegal miners. This control is essential to us for continuing advancing the development of our Los Chancas project. In the case of the Michiquillay project in the Cajamarca region of Peru, the geological information obtained from drilling programs has been used to develop the models required to estimate the deposit's mineral resources. These models are currently being audited by a third party under the SEC's mining disclosure standard SK-1300. A conceptual study is underway to determine the best location for our conventional or filtered tailings storage facility. Hydrogeological and geotechnical studies are also being conducted. SCC 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. We are conducting talks with the current administration to continue rolling out SCC's Mexican investments for $10.2 billion. We have in Mexico also the El Arco in the Baja California state project. In this case, we are not reporting additional progress in these projects for now. Regarding environmental, social, and corporate governance, or ESG practices, our sustainability rating is improving. In the Corporate Sustainability Assessment 2025, S&P Global increased SCC rating by four points over last year's strength. This result positions the company among the leaders in the mining sector's performance ranking, with a rating that is more than twice the industry's average. Some of SCC's disaggregated ratings were the highest reported for the sector.

That is the case for transparency and reporting, environmental management, biodiversity, cybersecurity, labor practices, human rights, and community relations. Regarding greenhouse gas emissions at our operations, the electricity that our underground mines have received from the Fenicias wind farm has enabled us to curb greenhouse gas emissions by 180,000 tons of carbon thus far in 2025. This is equivalent to electricity supply needed to sustain 40,000 households in Mexico. We are recovering ecosystems in Mexico and Peru. So far in 2025, we have conducted advanced work to restore 67 hectares at our Buenavista Recovery Installations in Sonora and about 10 hectares in the Ite wetlands in Peru. These efforts entail reincorporating areas of the landscape that were previously impacted by our operations and providing important environmental services.

Additionally, we are preparing stocks and services and are installing assisted irrigation systems on approximately 200 hectares in Sonora, which will be reforested in 2025. In the case of the Tía María project, through the Works for Taxes mechanism, we are financing modernization and upgrades at an emblematic secondary school in the district of Cocachacra, which will serve 400 students, and also using this Works for Taxes mechanism, we're working on the construction of the biomedical sciences laboratory at the Universidad Nacional San Agustín in Arequipa, which will be used by about a little bit more than 3,000 students and researchers. During its tour of Sonora in 2025, the Dr. Vagón Health Train, sponsored by Fundación Grupo México, imparted more than 20,000 free consultations in eight municipalities, marking an all-time high in Dr. Vagón's history.

Over its nine previous visits to the region, more than 59,000 medical consultations and 70,000 prescriptions were provided at no cost. With these results, Dr. Vagón has become one of the most important traveling health projects in Sonora, Mexico. Regarding dividends, as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans, and other financial needs at each board meeting to determine the appropriate quarterly dividend. Accordingly, on October 23 of this year, Southern Copper Corporation announced a quarterly cash dividend of $0.90 per share of common stock and a stock dividend of 0.0085 shares of common stock per share. This will be payable on November 28th of 2025 to shareholders of record at the close of business on November 12th of this year. Ladies and gentlemen, with these comments, we end our presentation today.

Thank you very much for joining us. Now we would like to open the forum for questions. And thank you so much. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. Please stand by for our first question, please. It comes from Carlos de Alba with Morgan Stanley. Please proceed. Mr. Alba, your line is open. Yeah, thank you. Good morning, Raul. Sorry, I was on mute. What is the expectation in terms of cash cost before byproducts in the fourth quarter and maybe in 2026? For the fourth quarter, Carlos, we will very likely decrease our cash cost because we will be having a partial recovery of production. Particularly at the Peruvian operations, we believe that production will improve in the fourth quarter.

So we are operating at about $2.23, if I recall it well, and we're expecting to have, well, in the range of $2.15-$2.20 in the fourth quarter. Okay, thank you. And how much purchases of third-party concentrates or cathodes did the company do in the third quarter? And if you could comment on any expectations for the fourth quarter. Yes. These acquisitions were for the Mexican operations. It was to fill up some of our facilities at the IMMSA mines. We will very likely maintain buying some materials from third parties in Mexico because of the way that they blend with our own materials. So that was the main driver of these acquisitions. But you're buying concentrates? You didn't buy cathodes, even if the inventory was down? No, no.

We sold more copper concentrates at the Peruvian operations because of the maintenance that the Ilo smelter and refinery had. We didn't acquire any copper cathodes. Okay. And if I may, just one more. We regularly see headlines in Mexico about the government engaging with Southern Copper on discussions to try to remediate what they believe, or some people believe, are still pending actions by the company after the spill in Río Sonora. Can you maybe give us some comments as to what is the company's perspective on these negotiations and what impact or initiatives and the potential financial impact those may have in the company? Well, we are having these conversations now, and we are basically well, for us, this is a matter that was solved already. However, there are always good possibilities of making progress in government talks for other objectives that the company may have.

So there's not much to report at this point, Carlos, on this. Thank you, Raul. You're welcome. Thank you. Our next question is from Tina Tanners with Wells Fargo. Please proceed. Yeah, hey, good morning. I wanted to ask, with regard to silver, I realize you don't move your volumes on a dime, but the guidance seems to imply a quarter-over-quarter drop into Q4, and I wanted to make sure I understood that. But given the strong price of silver, is there anything you can do to try to produce a bit more in the next medium term? Thank you for your question, Tina. This is what we have been doing through 2025. We have the new concentrator in Buenavista, which is a concentrator that has the capacity of producing copper and zinc.

In other years, last year, for instance, 2024, we did bundles of copper production as well as zinc production, but looking at the areas that we were getting into in 2025 and the zinc content, the zinc ore that we were finding in these parts of the Buenavista mine, we decided to not produce copper with this new concentrator of Buenavista in this year, but zinc, and the reason for that is that the zinc content is much higher. That's why we are producing a significant, much important amount of zinc than last year, and obviously, the copper that we produced with this facility last year that was in the north of 12,000 tons was not produced in this same facility in 2025, so that explains why we are not producing as much copper as in 2024.

Now, as I mentioned before, we're very close to less than 1% of getting all the copper that we did that we forecast in our plan now. We're hopefully making the plan, and the plan, when we announced it last year, had a reduction in copper production of about 2%. Obviously, if we see opportunities to improve this, we will certainly try to do it, but that's so far what we're considering for this year, Tina. Okay. My question was more about silver just because of the strength of that market. But if you could comment on silver. And then my second question was more about any updated thoughts on M&A, given some additional M&A in the space. Are you still preferring your organic projects, or given some delays there, would you start to look at maybe buy versus build? Thank you. Okay.

On the silver, Tina, we're producing more silver this year, not less than last year, and we already updated our silver production forecast. This is at 23 million ounces, which will be 10% more than last year, than 2024. Coming to your question on M&A, well, now we're basically focusing on organic growth. These projects that we're undertaking are excellent projects. The economics of them are much better than what we see outside the company. Obviously, if there is a good opportunity, we will certainly review it and make a recommendation to our board, but so far, this is what we're considering now. Okay. Thank you. You're welcome. Thank you so much. One moment. Our next question is from the line of Alejandro Demichelis with Jefferies. Please proceed. Yes. Good morning, Raul and gentlemen. A couple of questions, if I may.

Raul, could you give us some kind of indications of how you're seeing 2026 in terms of volumes, CapEx, and so on? That's the first question. And then the second question is, obviously, we have seen the change in government recently in Peru. We have seen some protests and the state of emergency. So have you seen any kind of impact on the areas in which you're producing or in the ports in the south where you're kind of exporting from? Okay. Let me go to your last question first. We are seeing no impact on our operations coming from the political situation in Peru. I just like to mention that the current president has an approval of 45% regarding the last poll.

And I think that the protests that you mentioned have, I believe, they are diminishing as we have seen, and particularly at the southern part of the country where we have our operations. Our projects are in the center of Peru, in Apurímac. They are okay. We have a legal mining issue over there that we're working with the authorities to fix. And the northern part, we have some HPI with no specific issues regarding social unrest. And in the Tía María project, we're moving forward with the construction, as I reported before. Looking into 2026, we are still looking into what we expect for next year. We are, at this point, have a forecast that is under review to produce about 911,000 tons of copper next year. We expect to review this and hopefully improve it a little bit more. But that's our current forecast for copper next year.

Cash costs, well, obviously, depending on the continuing of the byproduct prices, it's hard to say, but let's say that it's in the range of where we are now in terms of the year-to-date cash cost, or better if prices hold as they have been the case in the past quarter. On CapEx, we do have where we're getting into the construction of Tía María next year. This will require Tía María, alone will require about $866 million of CapEx. And consequently, we are expecting a much higher CapEx in the range of $2 billion for next year. That's fantastic. Thank you very much. You're welcome. Thank you. Our next question is from Miles Allsop with UBS. Please proceed. Okay. Thank you. Maybe with Tía María, could you just give us a sense? You've got the authorization to start exploitation now.

Do you have all the permits that you need to push ahead with the project? And when do you think we'll get to completion of the project and the ramp-up phase? Sure. The straight answer to your question is yes. There are some for initiating the construction and developing mining activities, we have all the permits. Once you are finishing the construction, you need to get a final permit from the authorities to begin operations, but that's kind of more a routine type of a permit. Now, we're expecting to have the ramping up of the project through 2027. Hopefully, it will be at the half of 2027 when we will be able to initiate the initial testing of the equipment and the ramping up. We do operate very similar plants than the one that we want to build in Tía María in some other locations, both Mexico and Peru.

Hopefully, we will do a good ramping up in terms of timeline for it. But that's something that we will be reporting as we move on with the project. Okay. And in terms of the financing, I know in the past you've done bonds to link to the kind of project kind of CapEx. Is it still the intention that you'd finance it along those routes? It's something that we look as we move on. Obviously, as interest rates are decreasing, we are seeing this as a more positive thing, but we're still evaluating if we want to follow that route for issuing one bond, etc., or doing some other using our own CapEx, our own cash position. But I think it's going to be more likely than not that we will go to the debt market at a certain point in time to finance our Tía María project. Okay.

And then maybe just as it's more of an organic kind of growth pathway that you're looking at, when we look at the next projects, Los Chancas and El Arco, which one do you think will be ready to FID first? And what needs to happen with each of them together? Or is it a different project that we should as it comes forward next after Tía María? Well, the timeline that we have is that Los Chancas should be the next project in terms of execution. Michiquillay is also in line for that. The results of Michiquillay have been very interesting, very good, actually. We are quite encouraged to move on with it, but we still need to do some work that has been already done for Los Chancas.

The case of El Arco, it's also scheduled to move on entering the next decade, and hopefully, we will be able to do that as well. Yeah. So with Los Chancas as the next project, how much of the illegal miners off the land would you be in a position to actually FID a project? Is it still two years after getting rid of the illegal miners, or can that be brought forward? It could be sped up a little bit. In this, we have to talk with the Peruvian authorities to see when are they taking some actions regarding the illegal mining activities that we're seeing there. We're working with the communities because we believe that this could be also resolved with the if the communities look into the matter and talk with the authorities on this issue as well. Okay. Thank you. You're welcome. Thank you.

Our next question comes from the line of Alfonso Salazar with Scotiabank. Please proceed. Thank you for taking my questions. I have two questions, and first of all, sorry to put you on the spot, but a moment ago, you said that you are focusing on organic growth. We see that on the capital allocation front that you already are increasing, and you have been increasing your cash position quite fast. It's now at $4.5 billion, and if you continue with these hybrid dividends and given the cash generation that you are having today, this will continue to pile up, so I just want to understand how to reconcile these two things, especially what is the rationale behind having so much cash and increasing your cash position at this time. The second question is regarding Tía María.

And it's great to see that the project is moving ahead, but I think it's about to start a critical moment with elections in Peru and potential protests and noise against Tía María once again. So I'm just wondering what are the actual reaction plan? What are you doing to deal with such situations in case it comes? Thank you. Okay. Regarding your comment on the company's cash position, well, we are not having at this point the debt that we require to finance, say, Tía María. And that is why we are having slightly higher than the usual cash. But plus the fact that prices are really contributing to that. That's mainly what we're currently having a comfortable cash position for keep paying the dividends that the board has approved, as well as taking care of the projects that we have.

Now, regarding potential social or political impact in the Tía María area, well, yes, that is always a possibility, but so far, we're not seeing anything like that. So we do have some plans. We have been working with both the people in the area as well as the authorities, particularly the mayors of the Islay province where Tía María is located. And so far, what we're seeing is a calm environment that is very favorable for the project. Now, obviously, we are continuously monitoring the social circumstances, but at this point, we don't have a concern regarding the impact of the political campaign in the area. Alfonso? Yes. Thank you. Thank you. All right. You're welcome. We have a question from the line of Xinchuan Feng from CICC. Please proceed. So hi, good morning. Victor, this is David. Congratulations on the strong results.

My first question is about LPR. We know that on your slides, LPR is still expected to start production in 2028. Well, the project is not mentioned in the latest quarterly press release. So I'm just wondering, can we have any updates on the project development progress at LPR? I'll come back with my second one. Okay. Okay. Thank you for your question, David. No, we have not much to report on it. We are looking into the recovery that the leaching part of the project has. And so far, we have no major progress on this at this point. So that's why we haven't mentioned it in our press release. Understood. Thank you all. And my second question is just a follow-up on Los Chancas. We noticed that recently, there's some discussion about extending the reinforced scheme by five more years.

So just wonder from your perspective, any further extension of the scheme would have any impact on your development plan at Los Chancas, especially when you are dealing with the illegal miners? Well, at this point, we have no people with this specific permit that you mentioned inside the premises of the project. So for us, it's a non-issue at this point. What you just said regarding this reinforced permit, it's something that has to be reviewed by Congress. We believe that Congress are realizing what we're seeing, which is that most of the population in Peru does not like to have illegal mining activities in general. That has been strongly shown in polls and different other by some other different ways. So our view is that there should not be any extension of this type of permits. Okay. Thank you very much. That's really helpful. Thank you.

Our next question comes from the line of Matheus Moreira with Bradesco BBI. Please proceed. Tails, your line is open. Matheus, do you have a question? Okay. Let's move on. We may connect later. Our next question is from John Brandt with HSBC. Please proceed. Thank you. Hi, Raul. Thanks for taking my questions. Just two quick ones for me. I know this is a board decision, but on the dividend, has the board given you any rationale for why they're continuing the stock dividends? I mean, the cash dividend is at $0.90 is pretty good. So I guess I just don't see the rationale for stock dividends. I'm hoping you can sort of help me understand that.

And then the second question is just on hedging, if you've given any thought to potentially hedging, even if not copper, maybe some of the byproducts like silver and molybdenum, which have done well, particularly as you're going into a CapEx phase next year with Tía María. And then even after that, I would suspect if you're going to start on Los Chancas, etc., that the CapEx will remain quite high. So I guess I'm wondering if there's any discussion about maybe locking in some of these higher metal prices. Thanks. Okay. Let me focus on your last question first. We have not had any specific discussions on hedging, copper hedgings, or byproduct hedgings at this point. In the past, when we did the Toquepala expansion, we did a hedge using a zero-cost collar.

That was, I believe, a good idea because it allowed us to protect the revenues from copper at that time when we were undertaking a major project. On the rationale for the stock dividend, as you well mentioned, it's a board decision. Well, we wouldn't be able to pay the dividends that we have been paying without using a portion of the shares. So $0.90 in cash is what the company can pay out. But if we want to provide the stockholders with more liquidity, it has to be using the shares that were acquired before 2016 at a much, much lower price. So that's what the board has been considering and deciding. Okay. Can you tell us how many shares are left? And should we assume that the stock dividend will continue until those shares are depleted? Hold on a second. We have about 65 million - I don't know.

At this point, before paying the dividend, 72 million shares that we have in the treasury. Okay. Thank you. Thank you. Our next question comes from the line of Grant Sporre with Bloomberg Intelligence. Please proceed. Good afternoon, and thanks for taking my questions, Raul. The question is really around about your sort of medium-term copper guidance, and I'm looking at the chart that you put out after the second quarter results, which has 2027 going up by about 50,000 tons and then 2028 by another 70,000 tons. I know those are constantly under review, but if we assume that that's roughly in line with what you're still expecting, can you sort of guide us through the dynamics on how that works?

Are you assuming a ramp-up for Tía María and then LPR, and that offsets some of the grade decline in your existing operations, or how do we go about thinking about that? Yes, Grant, hold on a second. We're assuming for 2027 the ramping up of Tía María. Okay. Our production will increase as we get in operation our major projects. In the case of Tía María, it will kick in with production in 2027. Later on in time, but it will be more in the 2030s. We will have Los Chancas and Michiquillay. But in the meantime, we're expecting to have LPR getting in 2028 and El Arco in 2028, 2029. Now, having said that, on the existing operations, we have for the long term some grade decay that we're considering some actions to contain the full impact of that.

Basically, in the case of Cuajone, we're expecting a reduction in ore grade starting next year, and for that, we will take some actions such as expanding our Cuajone concentrator once again in order to fill up that material. That has not been approved by the board, but it's something that we're looking as a possibility. We also have some other actions regarding different operations, and that's how we should comply or maintain our production level and increase it as we go towards 2030. Okay.

So just to sort of clarify, so if we take your existing operations in a sort of a do-nothing scenario where you don't try and mitigate the impact of ore degradation or ore grade decline, your existing operations would probably decline sort of what, 2-3%, and you're hoping to offset that through various actions, and then the rest of your projects are all growth on top of that. That would be, I'm guessing, your ideal scenario. Is that? That is current. What we're considering is basically on the existing operations, taking actions in order to maintain the production level or reduce as much as we can the decay due to ore reduction. I mentioned the Cuajone situation as an example.

And besides this, we have new projects kicking in, which will provide new production and help us to maintain our production level and increase it up to 1.6 million tons by, say, mid-2030s. Got it. Thank you very much. You're welcome. Thank you. And we have a question from the line of Marcio Farid with Goldman Sachs. Please proceed. Thank you. Hi, Raul. Thanks for the time. Quick follow-up on the two projects that you mentioned. Tía María, you're talking about potentially ramping up in the first half of 2027. And a follow-up to the earlier question as well. It seems like in order for you to recover part of the loss in 2027, you'd need some significant volumes from Tía María, right, which I think is embedded in the guidance today.

Can you remind us, I mean, how confident you are you can get to Tía María at nearly 100,000 tons production by 2027, considering the current schedule? And then secondly, Cuajone, I think we've talked about it before, potentially adding another concentrator at Cuajone as well. What's the sort of timeline? When can you expect that decision to be discussed or be made by the board? That would be great. And lastly, sorry, how does the, if there is any change to potential 2026, 2027, or 2028 guidance, how should we think about cost in the context of lower fixed cost dilution as well? Thank you. Okay. Thank you for your questions, Marcio. In the case of Tía María, we are expecting to initiate production in 2027. As a general comment, we're still looking in our plans for the next few years.

I mentioned already that we are expecting to have more production over 911,000 tons for next year. Hopefully, we will improve that when we do our report in January, and same thing applies to our guidance for the next few years. I think that we will provide a more detailed and clearer situation in our January report. Coming to your other questions, the Cuajone expansion, we're still working on what to do. It is not a new concentrator. It's going to be a new line in the existing concentrator that may have a much lower cost than a new concentrator. Just to give you an idea, we're thinking about something between $600 million and $700 million for that project, and it will provide about 40,000 tons of copper, but as I said, this is not board-approved, so we're still working on having a solid case to present to the board.

When could this be approved? Well, let's say that we finish the work and present some guidance to the board next year, then we could have an initial approval. And when we have all the permits and everything, then we could be able to go for a final and construction approval to the board. I think I already answered your questions unless you have some other comment, Marcio. No, that's great. Thank you very much, Raul. Thank you so much. And this concludes our Q&A session for today. Thank you, everyone. And I will pass it back to Raul Jacob for any final comments. Thank you very much, Carmen. With this, we conclude our conference call for Southern Copper's third quarter of 2025. We certainly appreciate your participation and hope to have you back with us when we report the fourth quarter and full 2025 results.

This will be in our January call. Thank you very much for being with us today, and have a nice day. Thank you so much, and this concludes our conference for today. You may now disconnect. Everyone, have a great day. You too.