Southern Copper - Q4 2023

Transcript

Operator (participant)

Good day, and welcome to Southern Copper Corporation's fourth quarter and year 2023 results conference call. With us today, we have Southern Copper Corporation, Mr. Raúl Jacob, Vice President, Finance, Treasurer, and CFO, who will discuss the results of the company for the past quarter and year 2023, 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 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 to Mr. Raúl Jacob.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's fourth quarter of 2023 and full 2023 or year 2023 results conference call. At today's conference, I'm joined by Mr. Oscar González 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. Before we get into the details of this past quarter, I'd like to make some comments regarding the company results in 2023.

Even though 2023 was a challenging year for Southern Copper, we believe the company achieved good results. 2023 net sales were $9,886 million. This is $152 million or 1.5% lower than 2022 net sales. This result was driven by higher sales volumes for copper of 2.2% and molybdenum of 2.3%. Better prices for molybdenum by 28% and silver. This situation was partially offset by a decrease in metal prices for copper and zinc, and by a reduction in the sales volume of silver and zinc. Net sales in 2023 were negatively impacted by a year-end accounting adjustment of $406 million for lower metal prices on sales.

In addition to this, we estimate that 2023 sales were affected by a larger copper anode inventory in process at year-end. If we exclude these two effects, the sales for 2023 would have been 3% higher than the 2022 mark. The 2023 copper production increased 1.8% year-over-year to 911,000 tons of copper. The yearly result was mainly attributable to higher production at our Peruvian operations, a result that was partially offset by a reduction in production at our Mexican operations, which was mainly fueled by a drop in mineral processing and recovery at the Buenavista mine.

In the second half of 2023, we experienced a reduction of fresh water at our Buenavista operation, which was generated by the fact that we lacked the permits we expect to receive for building a pipeline of approximately 20 kilometers to transport water from the wells to the operation and nearby townsites. For 2024, the company has decided to transport water through other means to secure the supplies required to ensure that Buenavista can operate at full capacity for proper production and the ramp-up of new zinc concentrator operations. For our byproducts, molybdenum production totaled 26,836 tons in 2023, which was 2.3% higher than the figure of 2022. This increase was due to higher production at three of our four mines. The exception was Toquepala.

Mined zinc production rose 9.2% year-on-year, due to higher production at the Charcas and Santa Barbara mines. Mined silver production dropped less than 1% in 2023, primarily driven by lower production at the Buenavista mine. This decrease was partially offset by higher production at our Peruvian operations. In 2023, the operating cash cost per pound of copper, including by-product revenue credits, was $1.03. The 25-cent increase in cash costs reported versus the 78 cents per pound in 2022, was mainly attributable to 0.17 per pound increase in the production cost and 8 cents reduction in by-product revenue credit. At this point, we believe we are seeing the end of the inflation-related cost push.

Our cash cost before by-product credits evolved from $2.09 per pound in the first quarter of 2023, to $2.22 per pound in the fourth quarter... It is important to note that levels were relatively stable through the second half of last year. For 2024, we expect our cash cost before by-product credits to be $2.20 per pound. We expect zinc and silver to contribute positively to growth in 2024, on the back of an uptick in volume. For zinc, we expect a growth in production of 80%, 80%. For silver, 13%. Nonetheless, we also expect molybdenum prices to remain at the level that they are right now, which is about $19 per pound.

In this scenario, all-in company cash cost credits for 2024 will total $1.03 per pound. Therefore, our cash costs after the by-product credits, it is estimated at $1.17 per pound for this year, 2024. This increase in value was driven primarily by a 13% reduction in by-product credits. Adjusted EBITDA in 2023 was $5,029 million. This is 6% lower, or $320 million below, the figure of 2022. The drop in adjusted EBITDA year-on-year was primarily attributable to a reduction in sales equivalent to $152 million, a $113 million non-recurring variance in other income due to 2022 insurance and tax refunds, and a $54 million uptick in operating costs.

The Adjusted EBITDA margin in 2023 was 50.8% versus 53.2% in 2022. For net income, last year, we had $2,425 million. That's 8% lower than the mark for 2022. The net income margin was 24.5% last year, versus 26.3% in 2022. Now, let us focus on the copper market. The London Metal Exchange copper price increased 2.2% from an average of $3.63 per pound in the fourth quarter of 2022, up to $3.71 per pound in the fourth quarter of 2023.

At the beginning of last quarter, we were expecting a market surplus for this year. However, after a significant reduction in copper production was announced by some producers, market expectations for surplus ceased and were replaced by concerns about potential deficits due to the extremely low available inventories. Even though still are significant uncertainties this year for the world's economy, such as the slow recovery of China, a recession in Europe, and a soft landing or minor recession in the U.S., we believe copper prices should have good support through 2024. Now let's look at Southern Copper's production for the past quarter. For copper, it represented 77.8% of our sales in the fourth quarter of last year. Copper production registered a decrease of 3% in the fourth quarter, in a quarter-on-quarter terms, to stand at 234,089 pounds.

Our quarterly result reflects a 9.6% decrease in production in Mexico, driven by our Buenavista mine, which was partially offset by higher production at La Caridad mine due to better ore grades. Production at our Peruvian operations increased 6.6% in quarter-on-quarter terms, which was mainly due to higher production at our Toquepala operation. Compared to the third quarter of last year, copper production increased 3.5%, which was mainly attributable to higher production at the Cuajone, Toquepala, and Caridad mines. For this year, we expect to produce 936,000 tons of copper, an increase of 3% over the 2023 final trends. Last year, we drove our Pilares project to full capacity and initiated a ramp up at the Buenavista Zinc Concentrator.

For 2024, we expect these two projects to contribute with 44,000 tons of copper to our production. Molybdenum represented 10% of the company's sales value in the fourth quarter of 2023, and is currently our first by-product. Molybdenum prices averaged $18.41 per pound in the quarter, compared to $21.17 in the fourth quarter of 2022. This represents a decrease of 13%. Molybdenum production increased 6.6% in the fourth quarter, compared to the same quarter of 2022. This was mainly driven by an increase in production at the Toquepala and La Caridad mines due to higher ore grades in both operations. These results were partially offset by lower production at the Cuajone and Buenavista mine....

Molybdenum production increased 2.3% year-on-year in 2023, after production grew at La Caridad, Cuajone, and Buenavista. It was partially offset by lower production at Toquepala. For this year, 2024, we expect to produce 25,500 tons of molybdenum. For silver, it represented 4.3% of our sales value in the fourth quarter of 2023, with an average price of $23.25 per ounce in the quarter, which reflected an increase of 9%. Silver is currently our second by-product. Mine silver production decreased 3.2% in the fourth quarter versus the same mark of 2022, after production reduced in Buenavista and Cuajone. This was partially offset by higher production at the Toquepala, La Caridad, and IMMSA operations.

Refined production fell by 40% quarter-on-quarter, which was mainly driven by a drop in all of our refineries. On this, I'd like to comment that, we're expecting. We're having a different, a change in commercial conditions, and that has somehow altered the purchases of material for silver production at the refineries in Mexico. In 2024, we expect to produce 20.7 million ounces of silver, an increase of 13% compared to 2023. Zinc represented 3.3% of our sales value in the fourth quarter of 2023. Zinc prices averaged $1.13 per ton in the quarter. This is a 17% decrease regarding the fourth quarter of 2022 figure.

Zinc mine production increased 11% quarter-on-quarter and totaled 16,930 tons. This was driven primarily by an increase in production at the Santa Barbara and Charcas mines. Refined zinc production decreased by 0.9%, 1% in the fourth quarter. In 2023, we produced 65,509 tons of zinc, an increase of 9.2% compared to 2022. This was mainly driven by an uptick in production at the Santa Barbara and Charcas operations. This was partially offset by a decreased production at the San Martín mine. Refined zinc production increased by 1% in 2023 compared to 2022.

For this year, we expect to produce 113,800 tons of zinc, which represents an increase of 80% over our 2023 production level. This growth will be driven by the start-up of the Buenavista Zinc Concentrator that will contribute with 54,400 tons of zinc. For the years 2025 and on, we expect to produce over 170,000 tons per year of zinc. Financial results. For the fourth quarter of 2023, sales were $2.3 billion. This is $525 million lower than sales for the fourth quarter, or 19%, or a 19% reduction. Even though copper prices were 2% higher than in the fourth quarter of 2022, sales of this metal decreased almost 10%.

Net sales in the past quarter were negatively impacted by a quarterly accounting adjustment of $62.2 million for copper sales, and this was basically for lower metal prices on sales. In addition to this, at the end of the past quarter, we had a larger copper anode inventory in process, and that also affected sales. Regarding our by-products, despite a 6% increase in the volume of molybdenum sold, sales of our main by-product decreased 54% due to lower prices and an important accounting adjustment of $106.2 million on molybdenum sales. Zinc sales decreased 18% due to lower prices and volumes. For silver, sales fell 10% due to lower volume, which was partially offset by better prices.

So the fourth quarter of last year, sales reduction was mainly affected by an increase in copper inventory and adjustments on open sales of copper and molybdenum for $168.4 million. Operating costs. Our total operating costs and expenses decreased by $23.5 million, or 2%, when compared to the fourth quarter of 2022. The main cost reduction has been in inventory consumption, capitalized leachable material, worker participation, and energy. These cost reductions were partially offset by higher contractor costs, labor, exchange rate variances, repair materials, water, fuel, and other costs. The fourth quarter of 2023 adjusted EBITDA was $1,055 million... which came 35.3% under the $1,631 million registered in the fourth quarter of 2022.

The adjusted EBITDA margin for the fourth quarter was 46% versus 58% in the fourth quarter 2022. Cash cost. Southern Copper operating cash cost, including the benefit of by-product credits, was $1.25 per pound in the fourth quarter of 2022. This cash cost was 27 cents higher than the cash cost of $0.98 in the third quarter of this year, of this past year. Operating cash cost per pound of copper before by-product credits was $2.23 per pound in the fourth quarter of 2023. That is 1 cent lower than the value for the third quarter.

This 1% decrease in operating cash cost is a result of lower cost per pound from production and lower administrative expenses, were partially offset by lower premiums on cathode sales and higher treatment and refining charges on concentrate sales. Regarding by-products, we reported a 28-cent reduction in credits. This fourth quarter 2023 had we had a credit of for, for the fourth quarter of last year, we had a credit of $491 million or $0.984 per pound. These figures represent a 22% decrease when compared to a credit of $604 million, or $1.26 per pound, in the third quarter of last year. Total credits increased for zinc 16%, but decreased for molybdenum 33% and sulfuric acid, 11%.

Net income in the fourth quarter was $445 million, which represented a 51% decrease versus the fourth quarter of 2022 figures. The net income margin in the fourth quarter of 2023 was 19% versus 32% in the fourth quarter of 2022. Net income was affected by lower sales, as explained early, earlier, and by year-end non-recurring adjustments in non-operating costs, as well as taxes. Cash from operations. Cash flow from operating activities in 2023 was $3,573 million, which represented an increase of 27% over the $2,102 million posted in 2022. This result was mainly driven by a reduction in working capital.

For capital investments, our current capital investment program for this decade exceeds $15 billion, and it's currently, and it currently includes investments in the Buenavista Zinc and Pilares project in Mexico and in the Tía María, Los Chancas and Michiquillay projects in Peru. In 2023, we spent $1 billion on capital investments, which reflected a 6% increase year-over-year and represented a 41% of net income in 2022. Since there is a description of our main capital project in SCCO in Southern Copper's press release, I'm going to focus on updating new developments for each. For the Buenavista Zinc concentrator in Sonora, the capital budget for the project is $439 million, most of which has already been invested. We have initiated the commissioning progress, process, and progress is 99%.

Ramping up of the plant began in the first quarter of this year, this quarter, after technical adjustments to the concentrator. We expect to produce 54,500 tons of zinc and 11,900 tons of copper in 2024, and an average of 90,200 tons of zinc and 20,700 tons of copper per year in the next five years. For the Pilares project in Sonora, Mexico, the budget for this project is $176 million, of which $145 million has been invested. Pilares is currently operating at full capacity and delivering copper ore to the La Caridad operation. Since Pilares is fully integrated into our operations, this will be the last time we are reporting on it as a project.

In other words, Pilares graduated from the project stage and is now part of the La Caridad operations. For the Peruvian project, in the case of the Tía María project in Arequipa, we reiterate our view that the initiation of construction activities at Tía María will generate significant economic opportunities for the Islay province and the Arequipa region. Given the current Peruvian economic situation, it is crucial to move ahead on projects that will stimulate a sustainable growth cycle. We expect to begin the construction phase of the project in the near future. We will make it a priority to hire local labor to fill the 9,000 jobs that we expect to generate during Tía María's construction. Additionally, from day one of our operations, we will generate significant contributions to revenues in the Arequipa region, by paying royalties and later on, income tax.

The Los Chancas project in Apurímac, it's a greenfield project in which we are in a coordinated effort with the Peruvian authorities of the company, making significant progress in eradicating illegal mining activities at our concession. Once this process is complete, we will restart environmental impact assessment, conduct a diamond drilling campaign for 40,000 meters, and initiate hydrogeological and geotechnical studies to gather additional information on the characteristics of the Los Chancas deposit. The Michiquillay project in Cajamarca, as of December 31st of last year, we have drilled 63,000 meters from a total program of 110,000 meters, and obtained 20,137 core samples for chemical analysis. Geological modeling, cross-section interpretation, and drilling logging are currently underway. For 2024, the company expects to complete the diamond drilling program, geological modeling and resource evaluation.

We will also begin hydrogeological and geotechnical studies and assess the results of metallurgical testing at the deposit. The company continues working with the Michiquillay and La Encañada community, following the guidelines of the social agreements signed with them. For environmental, social, and corporate governance, or ESG practices, major improvement. We have a major improvement in water recovery that we want to report on. Over the last four years, we have improved the use of water at our operations, going from 0.64 cubic meters, less than one cubic meter, 0.64 of water per metric ton of mineral in 2020, to 0.53 cubic meters in 2023. This represents an increase in efficiency of 17%.

Improvement has primarily been driven by the company's initiatives to recover water from our Quebrada Honda in Peru, and by an uptick in the water volume recovered at the Buenavista del Cobre mine in Mexico. We continue to make progress in our sustainability ratings. S&P Global results in its Corporate Sustainability Assessment, or CSA, indicate that Southern Copper Corporation has achieved a place among the top 10 performers in the mining sector, with a rating that exceeds the industry average by 100%. These results reflect our ongoing commitment to improving our sustainability practices and maintaining the company's inclusion in the Dow Jones Sustainability Index for the Latin American region. This year marks our fifth consecutive year in the Dow Jones Sustainability Index.

In 2023, SCC achieved some of the highest scores in the sector for key CSA indicators, including transparency and disclosure, occupational safety and health, operations closure, and human capital development. We obtained a score of 90 out of 100 on CSA Climate Governance Index. This attests to a progress the company has made in this area. Additionally, we achieved a score of 100 in the Task Force on Climate-related Disclosures, which focus on management and disclosure of financial risks and opportunities related to climate change. Additionally, investor-led Climate Action 100+ initiative recognized our efforts to develop an emission reduction roadmap and award us a full compliance rating in the TCFD category. Furthermore, the rating agency, Sustainalytics, reduced the company's risk by two levels between 2020 and 2023.

In 2023, we registered a 97% increase in year-to-date, year-over-year investment in social infrastructure. In Mexico, $35.9 million was allocated to these efforts. A project that was particularly noteworthy this year focused on improving water infrastructure for the communities of Cananea and Nacozari. In Peru, $45.7 million was invested in social infrastructure, including the progress in building the wastewater treatment plant for Ilo in Peru. The company also prioritized educational infrastructure development in Peru, and will build upon successful previous initiatives in Moquegua and Tacna. Continuing our commitment, the company is actively expanding educational infrastructure to benefit the community under the Works for Taxes modality. This effort includes setting up five high-performance schools, or COAR, as is the acronym in Spanish, for 1,500 students to strengthen the capacity of outstanding students in the state educational system.

Two schools are currently under construction in Moquegua and Tacna. These investments have made Southern Copper the primary private investor in Peru's national educational infrastructure. Regarding dividend, 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 to, at each board meeting, to determine the appropriate quarterly dividends. Accordingly, as announced to the market on January 25th, the board of directors authorized a cash dividend of $0.80 per share of common stock, payable on February 29th, to shareholders of record at the close of business on February 13th of 2024. Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us, and we would like to now open up the forum for questions.

Operator (participant)

Thank you. As a reminder to our audience, to ask a question, simply press star one one on your telephone and wait for your name to be announced. To withdraw the question, press star one one again. One moment for our first question, please. It comes from the line of Timna Tanners with Wolfe Research. Please proceed.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Yeah. Hey, good day, now, and happy Friday. Can you hear me okay?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Yes, very well, Timna.

Operator (participant)

Yes.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Good.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Okay, great. Hope everyone's doing well. I have a bunch of questions. First off, wanted to hear about how you are guiding to lower costs, and just if you could provide some more color on how the costs come down, just given broader inflation that we've been seeing prevalent in the last couple years.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Okay. Basically, what we're seeing is that after an uptick in prices, saying after the Russian invasion to Ukraine, we saw a combination of the impact that it had on energy and some key materials for us, such as ammonia, that is used as a material for explosive production, as well as steel, for instance, and obviously oil. And we had some cost push. Well, we react to that reassigning, changing the mix of explosives, changing, making more research to improve our cost on steel, as well as looking into some other ways to save energy, both as power and as fuel.

That somehow has helped us, and, and made us, stabilize our cash costs before credits at about $2.23-$2.24 last year, and we have the expectation of decreasing it a little bit more through 2024.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Okay, that's helpful. Thank you. Regarding Tía María, you sounded more constructive in the release this time and in the remarks, and I'm just wondering if it's, you know, actually time to put it in our estimates as coming forward, and if so, you know, if you could elaborate on timing. Also, that $1.4 billion amount in light of all the cost inflation around miners globally, can you just remind us if that's an updated number and, and what that entails? Thanks a lot.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Sure. Regarding the CapEx, we already have spent a little bit north of $350 million on equipment that is stored with the proper care nearby the Tía María deposit. And we are more positive for sure on Tía María, and we are moving forward with some actions that... and we will report on progress as we get better news on it. But yes, we're much more positive regarding the project, but we would like to give good news when we have something relevant to report.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Okay. That's helpful. I'll leave it there. Thanks again.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Thank you very much, Timna.

Operator (participant)

Thank you. One moment for our next question, please. It comes from the line of Gabriel Simões with Goldman Sachs. Please go ahead.

Gabriel Simões (Analyst)

Hi, thank you for taking my questions. I have two. So the first one is if you could provide some more details on the gap that we observed in production versus copper sales in this quarter. So you mentioned this is due to the annual inventory, but-

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Sorry, Gabriel, I can't copy you. Gabriel, I can't copy you well. Could you get-

Gabriel Simões (Analyst)

Is it better?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

A little bit closer to your... Yes, much better now.

Gabriel Simões (Analyst)

Sorry. Sorry, I'm sorry about that. So the first question is about the gap that we observed this quarter in production versus sales for copper. Right, so you mentioned that this is due to the annual inventory situation, but any additional details that you could provide us on the market here would be interesting. And in addition, would you expect this gap to be reversed in the coming quarters, so the excess inventory that you accumulated due to the higher production? That'd be interesting to know as well. And my second question is regarding the comment that you guys made on the Buenavista water situation.

So I just wanted to have some more color on how this is going, and if it has already impacted some of your costs in some way, if it should affect your cost in a meaningful way, in the short term, and if there is a longer-term solution for this already underway, or could it structurally increase the cost of the mine in the future, if this is a relevant matter for the costs? Thank you.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

... Okay, thank you very much for your question, Gabriel. Okay, well, we had an inventory built up at the related to Minera México's refinery. At the end of the past quarter, we had about 7,800 tons of copper in process that should be sold, I believe, this quarter, in the first quarter of this year. So this is not like—it's more like a like one thing. Obviously, inventories are not varying all the time, but in this case, we had some repairs that were scheduled for the end of the year that generated this uptick in inventory in process.

Regarding the Buenavista water situation, well, we have, as, as I mentioned, we, the company has taken action on solving this problem for this year. We're basically moving water using water tankers trucks. And, obviously, it has an impact in cost. We'll see, we'll see that it's, it's about $29 million that we're expecting. And, and, in terms of production, it created a problem in production at Buenavista. If you look at the metrics that we're reporting for Buenavista, we're mentioning that there was a reduction in mineral process as well as recovery. That's directly related to the lack of water, so that's why the company has evaluated different ways to solve this.

We finally took a decision and are implementing it since this month. I'm sorry, since January.

Operator (participant)

Thank you. As a reminder, to ask a question, simply press star one one to get in the queue. Our next question comes from Alfonso Salazar with Scotiabank. Please proceed.

Alfonso Salazar (Director, Metals & Mining Equity Research)

Thank you, and good day, Raúl. I have three questions. The first one is regarding the water concessions. I want to understand how this water problem at Cananea relates with the new law in Mexico that requires a mining concession for use of water, specifically for mining activities. So I just want to understand if there is a link between these two things. If I'm not mistaken, I remember correctly, back in November 2022, there was a misunderstanding between the government and the company because of some concessions, water concessions granted to the company at Buenavista, which I think the company clarified that there were no such concessions granted. The second question was regarding El Arco.

I didn't see the details in the press release about this project. Just want to understand why is that? And the third question that I have is regarding the blended grade that we should expect at La Caridad, basically because it's gonna be using Pilares as a satellite mine. So I would imagine that we should increase the La Caridad mine as more production comes from Pilares. So I just want to understand what to expect in terms of a blended grade there. And these are the three questions that I have, Raúl.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Thank you very much, Alfonso. Good hearing from you. Okay, in the water concessions, well, basically, we do have the concession for the wells. What we don't have is a final permit to build a pipeline. So that is something that we expect to have when we finish working on the construction for the wells, but well, we haven't received it yet. So this is what has created this, plus some lower rain than expected this past year, I should say. That is basically what we have in the wells will solve the problem in terms of water availability, no matter how the weather affects rains in the area.

Now, in the case of El Arco, we haven't make any reference to the project because we have to not much much progress to report. We will do that when we have something relevant to share with the financial community. At this point, we're advancing with the project, there is nothing relevant to report. And then on the blended rate expected for La Caridad, let me explain what's happening in La Caridad now. When we initiated the production of mineral at the Pilares project, we found that there was an oxide layer that had to be removed before getting into the sulfide, which are the feed for the concentrator.

So the first month, this was at the end of 2022, and the first quarter of 2023, we basically removed these oxides from the deposit and sent it to our SX-EW leaching areas. That material is being processed, so we will expect to have some more refined SX-EW copper coming from in the near future. And then we look at the prices, relative prices of molybdenum vis-a-vis copper. This was by mid-2023. Molybdenum had very good prices, and copper not as good as we had, say, in the year before.

After making some numbers, some financial reviews, we conclude that it was interesting to increase the molybdenum production of La Caridad, which is from our four open pit mines, the ones that have the best ore grade for molybdenum. So the company favored the production of molybdenum at La Caridad, and that was sold, taking the opportunity of much higher prices for molybdenum. That has passed. The last quarter, we had a price that was reported lower than what we had before, and consequently, we're coming back to sending ore from to La Caridad.

Our expectation is that we should be producing about 35,000 tons of copper from in the mix at the La Caridad concentrator with La Caridad material.

Alfonso Salazar (Director, Metals & Mining Equity Research)

Okay. If I understand, in case moly prices soar again, you may reduce the input from Pilares to produce more molybdenum, right?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

If prices make sense to do that, we'll consider it.

Alfonso Salazar (Director, Metals & Mining Equity Research)

Okay. Thank you. And just to confirm, the problem with water that you have at Buenavista does not relate with the changes to the mining law and the water concessions?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

I don't think so. I think that this is a different matter. It's just a pipeline permit that is taking longer than what we believed when we initiated this the work in these two worlds.

Alfonso Salazar (Director, Metals & Mining Equity Research)

Thank you very much, Raúl.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

You're welcome.

Operator (participant)

Thank you. One moment for our next question, please. Comes from the line of John Tumazos, with John Tumazos Very Independent Research. Please proceed.

John Tumazos (President and Metals Analyst)

Thank you very much. I apologize if I have any construction noise in the background. Southern Copper had 24,500 tons less output from purchased ores in 2023, and $113.5 million less other income. Could you describe whether the purchased ores were in Sonora or Southern Copper, and if it's a regular, sustainable or sort of an episodic thing? What had been the other income which declined?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Okay, let me address the latter, the last question. Other income, what's the expected one in 2023? Other income is as expected, was the proper one, the usual trend of the company in 2023. The anomaly was in 2022, and it was a positive thing for the company. We had some insurance refunds, as well as a tax refund that we had in 2022. So more than having lower other income in 2023, we had an exceptional, very good 2022 in that regard.

Getting into the ore purchases, basically, we had to purchase an unusual amount of copper concentrate in 2022 to fill up our smelter in Peru due to the Cuajone mine stoppage of 54 days. We had a committee that blockaded the water supply for Cuajone. It was, as I say, 54 days. That was in 2022. So in 2023, Cuajone operated at full capacity, which is excellent for us, and that's why we reduced significantly our purchases of third parties' material. Generally speaking, we are buying third parties' copper for technical reasons because as you know, John, we are long in copper concentrate, so we could, using just our own material, fill up our smelters and refineries.

Sometimes we want to acquire third-party material that has the technical characteristics that improve our process, and that's why we are buying some of that. That's how our report shows.

John Tumazos (President and Metals Analyst)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Thank you. Our next question comes from Sophia Martin with GBM. Please proceed.

Sophia Martin (Analyst)

Hi, thank you for taking my question. I was just wondering if you could share your production guidance going forward for the next couple of years?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Certainly, Sophia. Let me... Okay. I already mentioned that for 2024, it's 935,900-936,000. For 2025, 956,000. 2026, 985,000. 2027, 1,001,000. 2028, 1,018,000.

Sophia Martin (Analyst)

Perfect. Perfect. Thank you very much.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

You're welcome.

Operator (participant)

Thank you.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

I mentioned already, also. I also mentioned that from this year, we're increasing our zinc production from 65,500 last year, up to 118,000 this year, and then over 170,000 for the next foreseeable future.

Operator (participant)

Thank you so much. We have one more question. One moment, please. It's a follow-up from Timna Tanners with Wolfe Research. Please proceed.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Oh, thanks for taking my follow-up. I just had two more questions. One was, you know, the related to the reported interest of Grupo México-

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Timna, we couldn't hear you at the beginning.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Oh, sorry. So just two quick questions. One is related to the reported interest in Las Cruces from Grupo México. Is that anything you can comment on? And the second one, just, is there anything that you can provide in terms of color on the board's decision to cut the dividend? Thank you.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

The first one, I couldn't get your question. So sorry.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Sorry about that. My connection might be kind of rough. It's been reported that Grupo México is looking at Las Cruces, the Spanish mine owned by First Quantum. So I'm just wondering if you have any comment on that or if it's relevant for Southern Copper?

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

It's a relevant question for Grupo México, actually. But just what we do if there is a good opportunity to generate value for our shareholders through an acquisition, we dive into these alternatives. In this case, the company is not directly involved. It's through AMC that the Las Cruces evaluation it's been done. In the case of the dividend, well, it's as we explained in each board meeting, the company, the board looks at how the market is, what are the next payments that the company has to do, what are the investment requirements? And in this case, if you see our cash generation from operations, was somehow lower.

The board decided to cut a little bit, I'm sorry, the dividend, in order to maintain a solid cash position for the company.

Timna Tanners (Managing Director and Senior Analyst, Metals & Mining Equity Research)

Okay. Thank you again.

Operator (participant)

Thank you.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

You're welcome.

Operator (participant)

Sir, I'm not showing any further questions in the queue.

Raúl Jacob Ruisánchez (VP of Finance, Treasurer, and CFO)

Okay, thank you very much, Carmen. Well, with this we conclude our conference call for Southern Copper's fourth quarter and full-year results for 2023. We certainly appreciate your participation and hope to have you back with us when we report the first quarter of 2024 results. Thank you very much for being with us, and have a very nice day.

Operator (participant)

Thank you all for joining our call today, and you may now disconnect.