Southern Copper Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2023

There are 7 speakers on the call.

Operator

Good morning, and welcome to Southern Copper Corporation's 3rd Quarter 2023 Results Conference Call. 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 Q3 2023 as well as answer any questions 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 risks and uncertainties. Actual results may differ materially and the company cautions not to place undue reliance on these forward looking statements.

Operator

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 U. S. GAAP. Now I will pass the call on to Mr.

Operator

Raul Jacob.

Speaker 1

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's Q3 of 2020 results conference call. Before we go into today's agenda, let me mention that on October 5 this year, Southern Copper lost one of the pillars of our organization, Mr. Javier Garcia de Quevedo, Board member and Executive Vice President of Grupo Mexico passed away. Over a period spanning 50 years, Javier exsteered the company with intelligence, sound judgment and hard work.

Speaker 1

He took great pleasure in shared knowledge, Mentoring and developing talent as well as supporting multiple generations of employees at our organization. We will miss him deeply. At today's conference, I'm joined by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board Member as well as Mr. Leonardo Contreras, is also a Board member.

Speaker 1

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 EAC. After this, we will open the session for questions. Now let us focus on the copper market. In the Q3 of this year, The London Metal Exchange copper price increased 8% from an average of 3.51 dollars per pound in the Q4 of last year, up to $2.79 this year. Even though this is a better price than what we had a year ago, we still see the market reflecting the uncertainty that involves Basic metals due to the slow recovery of the Chinese economy, a recession in Europe And a soft landing or minor recession in the U.

Speaker 1

S. At this point, we see the following factors affecting the copper market. The most relevant market in hedging houses for the copper market are now expecting a market in surplus of about 170,000 tons for this year. Even though copper inventories are still at a very low level, They have increased from 235,000 tons in June up to 292,000 tons In September, this is a 24% increase. And what we're looking at is the sum of the London Network Exchange, COMEX exchange, Shanghai exchange and the bundled warehouses in China.

Speaker 1

On top of this, we're seeing a stronger than expected U. S. Dollar, which is reducing copper and automotive prices expressed in their feedback. It is important to emphasize that copper plays a leading role in the global shift to clean energy, which correlates positively with our assertion that the underlying demand for copper will be strong in the long term. In this scenario, we believe the current cycle of relatively low prices will be short today.

Speaker 1

Now let's look at Southern Copper's production for

Speaker 2

the past

Speaker 1

quarter. Copper represented 75% of our sales in the Q3 of 2023. Copper production registered a decrease of 1.9% in the Q3 of this year In a quarter on quarter terms, we stand at 226,120 tons. Our quarterly result reflects A 2.1% decrease in production in Peru, driven by our Coaxone mine, which reported lower ore grades. This was partially offset by higher production at Toquepala due to better oil grades.

Speaker 1

Production at our Compared to the Q2 of this year, copper production slightly decreased 0.6%, which was mainly attributable to our reduction in production at For this year, 2023, we expect to produce 917,000 tons 700 tons For molybdenum, it represented 40% of the company's sales value in the Q3 of this year and is currently our first byproduct. Molybdenum prices averaged $23.59 per pound in the quarter compared to $16 in the Q3 of 2022. This represents an increase of 47.4% in the molybdenum price. Molybdenum production increased also by 12.6% in the Q3 of 2023. This was mainly driven by an increase in production at the La Caridad, Toquepala and Buenavista mines due to higher ore grades, and these results were partially offset by lower production at the Quahome mine.

Speaker 1

For 2023, we expect to produce 25,900 tons of molybdenum. For the short term, we believe molybdenum prices will have good support due to a market deficit and higher demand coming from the aerospace and defense industries. Silver represented 4% Of our sales value in the Q3 of 2023 with an average price of $23.60 per ounce in the quarter. This reflected an increase of 23.5% compared to the Q3 of 2022. Silver is currently our 2nd lifeblood.

Speaker 1

Mine silver production decreased 10% in the 3rd quarter versus the same period of 2022 after production decreased at our operations with the sole exception of Cotoquepala mine. Refined silver production fell by 11.4% quarter over quarter, which was mainly driven by a drop in production at our INZA Finally, for commercial and operational reasons, the lead concentrate is now being sold to the market as concentrate instead of being processed in the refining. In 2023, we expect to produce 19,300,000 ounces of silver, an increase of 4% compared to 2022. Zinc represented 3% of our sales value in the Q4 of 2023 with an average price of $1.10 per pound in the quarter. This represents a 26% decrease with regard to a Q3 of 2022 figure.

Speaker 1

Zinc mine production increased 9.4% quarter on quarter and totaled 16,281 This was driven primarily by an increase in production at the Santa Barbara and Charcas mines, which was partially offset by lower production at the San Martin mine. Refined zinc production decreased by 12% in the Q3 compared to the same period of 2022. For this year, 2023, we expect to produce 64,200 tons of zinc, which represents an increase of 7% over our 2022 production For our financial results, in the Q3 of 2023, Sales were BRL 2,500,000,000. This is BRL 348,000,000 higher than sales For the Q3 of 2022, it is a 16% increase in sales. Copper sales volume Increased by 4.5%, while value increased 16% in a scenario of better prices for this metal.

Speaker 1

Regarding our main bifurals, we had higher sales of molybdenum that increased by 61% in molybdenum sales, And this was due to a combination of better prices and higher volume. Silver sales increased 19% due mainly to better prices. On zinc, we had lower sales by 31%, mainly due to lower prices and volumes. Our total operating costs and expenses increased by €67,000,000 or 5% when compared to the Q3 of 2022. The main cost increases has been in repair materials, workers' participation, depreciation, sales expenses, operations, contractors and other factors.

Speaker 1

These cost increases were partially compensated by lower energy costs and lower inventory consumption. The Q3 of 2023 adjusted EBITDA was $1291,000,000 which represented an increase of 27% with regard to the EUR 10.18 million registered in the Q3 of last year. The adjusted EBITDA margin in the 3rd quarter stood at 52% versus 47% in the same period of 2022. Adjusted EBITDA for the 9 months was €3,974,000,000 This is 7% higher than what we had in 2022 for the 9 months. The adjusted EBITDA margin in the 9 months of 2023 Stood at 52%, which compares with 51% in the same period of 2022.

Speaker 1

Southern Copper operating cash cost, including the benefit of byproduct credits, was $0.98 per pound in the Q3 of 2023. This cash cost was $0.14 lower than the cash cost of $1.12 that we had in the Q2 of this year. Operating cash cost per pound of copper before by federal credit was $2.24 per pound in the Q3 of this year. That is $0.05 higher And the value for the Q2 of 2023, which was $2.19 This 3% increase in operating cash Costs before credits is a result of higher cost per pound from production and administrative expenses And administrative expenses, these two increases in costs were partially compensated by lower treatment and refining charges at higher premiums. Regarding Life Products, we had a total credit of $604,000,000 or $1.26 per pound in the Q3 of this year.

Speaker 1

These figures represent an 18% per pound increase In byproduct credits, when compared to the credit that we had in 2022, which was $517,000,000 in Total credits for $1.07 per pound, that's for the Q2 of 2023. Total credits have increased for molybdenum, zinc and sulfuric acid and decreased for silver. For net income, net income in the Q3 of this year was $619,500,000 which represented a 19.4% increase with regard to a $519,000,000 registered in the Q3 of 2022. The net income margin was in the Q3 of this year, 24.7% versus 24.1% in the Q3 of in the same period of 2022. These improvements were mainly driven by an increase in sales.

Speaker 1

Cash flow from operating activities in the 9 months of this year was $3,032,000,000 which represented an increase of 76% over the MXN1720 million post in the 9 months of 2022. For capital expenditures, our current capital investment program for this decade exceeds $15,000,000,000 and includes investments in the Buenavista Zinc, Villares, Espilar and El Arco projects in Mexico and in the Tia Maria, Los Chancas and Michiquillay projects in Peru. This capital forecast includes several infrastructure investments, including key investments to bolster the competitiveness of the El Arco player. In the 9 months of the year, we spent $753,000,000 on capital investments, which represents a 38% of net income and reflects a 14.5% uptick in capital expenses year on year. Since there is a short description of our main capital projects in SEC's press release, I'm going to update new developments for each.

Speaker 1

For the Buenavista zinc concentrator in Sonora, the capital budget for this project is $413,000,000 most of which have already been investors. Progress is 99%, and we have initiated the commissioning process, Ramping up of the plant initially scaled to concluding this quarter has been pushed back to the Q1 of 2024, given that the concentrator requires some technical adjustments. For the Pilares project in Sonora, This is a pretty good half of budget of $176,000,000 of which $144,000,000 has been invested. Pilares is currently operating and delivering copper ore to the Caridad concentrator. We will report on Pilares One more time at the closing of 2023.

Speaker 1

And after that, we will remove it from the list of ongoing projects of the company. For the El Pilar project in Sonora, we are having already the results from experimental tests in the leaching process that has confirmed adequate levels of copper recovery, and we're evaluating different options to improve the same. Basic engineering study has been completed and the company is engaging in project developing and on-site environmental activities. Project engineering is being developed by an external engineering and technology company. Mine life, as you know, is estimated at 13 years.

Speaker 1

For El Arco, the company has completed the environmental baseline study for the mine concentrator and duster facilities, And we'll proceed to submit the environmental impact statement in Spanish, To the Secretary of Environment and Natural Resources, Sezmar Natt. This is our respective environmental impact permits. The company is currently preparing its studies for the port, power line, townsite and auxiliary services. For the Peruvian projects, we have the Tia Maria project in the Arequipa region in Peru. This is a greenfield project located in Arequipa, Peru that will use a state of the art FXEW technology with the highest International environmental standards to produce 120,000 tons of SX EW corporate capitals per year.

Speaker 1

The estimated capital budget for this project is $1,400,000,000 It's important to mention that the company is ready to undertake this project. We have the national the resources as well as All the engineering ready to go for Tia Maria. Southern Copper has been consistently working to promote the welfare of the population of As part of these efforts, we have implemented successful social programs in education, healthcare and productive development to improve the quality of life in the region. We have also promoted agriculture and livestock activities in the value In the Tambo valley and supported growth in manufacturing, fishing and tourism in slide. For Los Chancas In the Acuimarc region of Peru, as of September 30 this year, the company has held talks with representatives of the Tiaparo community who acquired part of the land required for the project.

Speaker 1

Simultaneously, we continue to work with the proven authorities to eliminate illegal mining activities at our concession. SEC will initiate hydrogeological and geotechnical studies soon to gather Additional information on the characteristics of the Los Chancas deposit. The Michiquillay project in the Cajamarca region of Peru In 2023, in accordance with our social agreements with the Michiquillay and La Encana community, The company has hired unskilled labor and is paying for the use of surface land. We're also supporting social programs in both communities. Simultaneously, exploration activities are underway.

Speaker 1

As of September of this year, we have drilled 46,500 meters and obtained 14,882 core samples, which are currently under evaluation. Regarding environmental, social and corporate government Practices, yes, as it is known. We're building drinking water infrastructure to remedy Shortages in Cananea and in Acosari communities in Sonora in Mexico. Approximately 75,000 residents will benefit This effort is aligned with our policies and commitments for sustainable development And it's part of the $77,000,000 that we have invested in Mexico and Peru over the last 5 years. We're doing some innovation in the use and efficiency of water.

Speaker 1

We are currently recovering about 6,000 This is equivalent to 0.6 cubic meters of water per tonne of tailings. With a design capacity of 10,000 tons per day and an investment to date of $27,000,000 This dam filter is the largest tailings processing unit of its kind in the market. We're continuing with focus on prevention and risk management. In September of this year, our Buenavista Recovery Unit in Sonora Received the safe and healthy work environment recognition from the Mexican government after successfully passing an audit conducted by the Mexican Social Security Institute. All of our other Mexican units Also hold this recognition, which is awarded to companies that implement effective strategies and preventive actions for occupational health and safety.

Speaker 1

We continue to make progress with our critical risk registry And the performance levels of the controls in place to prevent or mitigate undesirable events has improved. To receive this, we have involved the head of each operating unit in the process to establish and continue to monitor controls. All results are reported to managing executives on a monthly basis to facilitate supervision And subsequent monitoring by the Board of Directors. Innovation in climate change mitigation. In September of this year also, Southern Peru received the 2023 National Mining Award in the Mining Economy category Within the framework of Perunim 36 Mining Convention, helping the Arequipa region in Turin.

Speaker 1

They will study Integration scenarios of renewable electricity generation systems in the mining sector of Peru by 2,050, The Terabyte engineer Rolando Jesus Clarios from the Power Systems area of Southern Peru, proposes the use of clean and renewal Energy sources as part of the global energy transition process. Southern Copper aims to achieve net 0 emissions by 2,050. For disclosure, transparency and accountability, to provide more clarity regarding Southern Copper's performance on ESG issues, We have published a supplement to the 2022 Sustainable Development Report and have also incorporated new topics On our sustainable development page, Fotis biodiversity, our people, human rights and supply chain. At the behest of our investors, we have to expand our responses to the CDP questionnaires to include the forest questionnaire. This information component responses to our climate change and water security questionnaires that has been available since 2016 and 2022, respectively.

Speaker 1

From Los Tumil, a journey of environmental restoration. Year to date, we have reforested 3 times the area impact in the same period. We have restored 13.18 8 hectories replanted versus 424 hectares in past. Additionally, we have implemented works to retain 10,722 tons of soil that will have otherwise been lost to erosion in the state of Sonora in Mexico. These actions are between the framework of our strategy to achieve 0 net deforestation and generate a net positive impact On biodiversity, particularly in areas close to our operations.

Speaker 1

In terms of the communities near our operations are highly active in the social programs we offer. Thus far this year, we have recorded 170,000 participations in these programs, which is a 7% increase from the previous year. 1 of our most noteworthy efforts, The youth orchestras and course program recently celebrated its 5th year and is now present in 11 communities with 1596 students in Mexico and Peru. To date, 8 out of 10 of our alumni Pursue a bachelor's degree with 2% choosing music as their life Changing subjects regarding dividends, as you know, it is the company's policy to review our cash position, Expected cash flow generation from operations, capital investment plans and other financial needs in each Board meeting to determine the appropriate quarterly dividend. Accordingly, as announced to the market on October 19, The Board of Directors authorized a cash dividend of $1 per share of common stock, which will be payable on November 22nd to shareholders of record at the close of business on November 8 this year.

Speaker 1

Ladies and gentlemen, with these comments, we would like to end our presentation today. Thank you very much for joining us, And we would like now to open up the floor for questions.

Operator

Thank One moment for our first question please. And it's coming from the line of Gabriel Simoes with Goldman Sachs. Gabriel, your line is open.

Speaker 3

Hi, thank you for the presentation. Thank you for taking my questions. I have two questions here. The first one is about Capital allocation, right. So El Pilar was postponed a bit basically because of the new regulatory process that you have to go through Together approved in Mexico and some issues we've seen some issues with the other projects advancing in the near term.

Speaker 3

So We're at the point that LPW Light is the last board approved project. So I just wanted to have an idea of what we should expect in terms of CapEx and the capital allocation for the coming years and when we should see new projects being taken to the Board given the advancements that you guys are making on the other projects That you have on the pipeline. And in the meantime, if you have any thoughts that you could share on Distributions? So that's the first question. And the second question here is about the costs in the mining division here for the company.

Speaker 3

So In the beginning of the year, if I'm not mistaken, we were aiming at $1.9 per pound before byproduct for the costs, And we're running at a much higher level. So we just wanted to understand what was the main change this year versus the beginning of the year That would explain this difference and the fact that we're running at higher levels. And then how should we think about the cost for the Q4 and for 2024 and the main drivers for this, I mean, on your opinion here? Thank you.

Speaker 1

Yes. Thank you for your question, Gabriel. Actually, you said 2 questions, but there are at least 4, but I'm glad that you made them. Okay. Let's no, no, no problem at all.

Speaker 1

On capital allocation, Well, we are working we're still doing some engineering work for ETR, some tests. We want to be sure On the recovery and actually what we would like to get is even an improvement of the current recovery rate that we're that we have in this project just to improve its profitability for the future. This is the time where you need to do this test, Not when you have the whole facility design and already built. On the other projects, basically, we will be Informing to the market as we undertake the different projects that are in our pipeline, We can give you always a forecast of our CapEx considering the development of the projects that I comment A few minutes ago, and I'll do that now. For this year, we're expecting to finish the year At about $1,000,000,000 in capital expenditures.

Speaker 1

For 2024, number will be EUR 1,300,000,000 For 2025, dollars 1,700,000,000 2026, dollars 2,100,000,000 And 2027, dollars 2,600,000,000 Dividends, it's always up to the Board. The Board approved a dividend of $1 per share for the last quarter. And if you look at our track record, it's quite clear that the company will not pour Cash, that has been our record, and we expect that to be the case for the future as well. Cash cost, we have some expenditures that were not considered In terms of our operating cost, let me comment on that. As you may know, the Mexican exchange rate Appreciate it.

Speaker 1

Through the year, that impact our pesos denominated costs. In the Peruvian case, we had no significant variance in the exchange rate. So we didn't have And that's of a net worth of an effect on that. For

Operator

Some costs,

Speaker 1

we are seeing now, they reflect of inventory consumption. And a practical example is what has happened with Tires for mining trucks, when we had the beginning of the war For the invasion, to be more proper, of Russia to Ukraine, we had right away an increase in fuel And some other materials like ammonia that was used for explosives. But certain costs Such as the ones for tires were not impact because we were consuming our stocks. Now we're replenishing the stocks for some of these Materials and that is somehow affecting our cash cost per pound, even though we are producing a little bit more Copper than last year. But as I'm saying that, we're also seeing some reductions in in some costs, particularly in 3 items: fuel, Well, we have a small slight variance.

Speaker 1

Costs as well as steel. And what we are also doing is catching up in certain Maintenance expenditures that we could make in the Through the COVID years and later on last year. Regarding what we are expecting for cash flow, For this year, we believe we could close It's about the level that we are now or slightly better because we will have a little bit more production in the Q4.

Speaker 4

For 2024,

Speaker 1

about $1 very close to where we are now. And then it depends on how the new projects are kicking in into our production profile for the next few years.

Speaker 3

That's very clear. Thank you very much. I just wanted to do a follow-up. Basically, on the cash cost, I just wanted to understand If you have a guidance for the before byproduct cost as well, that would be helpful. Thank you.

Speaker 1

As above where we are now, in the last quarter In the last quarter, it was $2.24 per pound. We believe it could be Lower than that for the next few quarters. But for now, it will be a little bit more of 220.

Speaker 3

Okay. Thank you very much.

Speaker 1

You're welcome.

Operator

Thank you. One moment for our next question please. All right, it comes from the line of Sofia Martin with GDN. Please proceed. Hi.

Operator

Thank you for taking my question and congratulations on your results. I have 2 main questions. My first one is, could you give us any color on production for the rest of the year and 2024? And if you have any further guidance going forward? And my second question is related to copper prices and market dynamics.

Operator

Do you have any color heading into 2024? Thank

Speaker 3

you. Thank

Speaker 1

you for your questions, Sofia. For this year, as I mentioned, we're expecting 917 918,000 tonnes. That's for 2023. For next year, we expect to increase it for A few reasons. Let me comment on that.

Speaker 1

Our goal is 946,700 for next year. We will have the contribution at full speed of Pilares. Pilares this year, we are getting about 23,000 tons Of course, from Pilares. And the reason for that is that at the beginning of the project, we had oxides that are that were sent to Minerals in the form of oxides were sent to our SX EW plants, and they take a little bit longer For next year, we're expecting Pilares to increase from 23,000 tons of copper to 30,000 tons of copper. We will get the positive contribution of the Navista zinc for about 30,000 tons, and we will have improvement In the Toquepala and Rojone ore grades, that will increase a little bit their Production in the case of Toquepala by 7,000, in the case of Cuajone by 9,000.

Speaker 1

So we have some Additions on that. Later on, we will have for 2025, our expectation is 956,500. In that case, we are expecting the contribution of Aepilar, a partial contribution of Aepilar As well as Buenavista Zinc and Pilaris copper production at full speed. For 2026,€985,400 And for 2027, 1,000,000 tons of copper production. For 2024, Well, it's hard to say.

Speaker 1

We're looking at the market. As I mentioned, even though we have an 8% Increase in prices, we're still seeing a market that is not defining its direction Actually, for now, we are expecting prices in the range of where we are now, maybe a little bit better with China comes back consuming more basic materials than what has had in the past through this year. That is it's hard to predict at this point. Long term, we do see a very strong demand coming From the energy revolution that includes electric vehicles and some other important copper construction Consumption as transmission lines, aoelect energy and so on.

Operator

Thank you very much. Thank you. One moment for our next question please. And it comes from the line of John Tumazos with Very Independent Research. Please proceed.

Speaker 5

Thank you very much. The $1 quarterly dividends, thank you, have been bigger than Reported earnings in 20222023. And the 4 very big capital projects are delayed and distant. There is $7,000,000,000 of debt and lease Before cash balances and investments, does the Board place a priority on Perhaps reducing the debt just in case when feasibility studies are updated, The capital costs rise. There's other companies or projects where capital costs doubled.

Speaker 5

I know that won't happen at Southern Copper, but You never know. Thank you.

Operator

Well,

Speaker 1

I think that the let me comment on our debt position. Currently, Well, you indicated, John, that you are considering also a lease included as part of our debt. Actually, it's a long term contract. It's a PPA that we have for power for both the Peruvian and Mexican operations. Accounting wise, we have to register that as a lease, but actually it's a PPA, a purchase agreement Power purchase agreement.

Speaker 1

But our debt position, it's about $6,200,000,000 The average rate is 6%. In the last few years, we did Several bond issues that allow us to capture lower rates and that has improved our debt profile. We will not have to pay for any principal up to $225,000,000 when we have $500,000,000 that's our view. Last year, we paid $300,000,000 And for now, Unless we have a project going on and getting into the construction phase, one of the main projects that I mentioned already, We believe that we will maintain the current cash position and debt position. For dividends, as I mentioned, it's a decision that always taken by the Board.

Speaker 1

But what we're seeing is that, Generally speaking, the company is not hoarding any cash. I think that, that will be our behavior in the next few quarters.

Speaker 4

Thank you.

Operator

Thank One moment for our next question. And it comes from the line of Timna Tanners with Wolfe Research. Please proceed.

Speaker 6

Hey, good morning. I know one of the other large copper producer CEOs mentioned that At current copper prices projects were no longer so attractive, especially given higher costs for startups. I'd like your thoughts on that. I know you still have quite a few projects in your pipeline, but they have been delayed a bit. I'm just wondering if you still find Building attractive or if there is a different approach to building versus buying, if M and A is interesting, great to get your thoughts.

Speaker 3

Thank you very much for

Speaker 1

your question, Timna. Okay. On our projects, The price that the current at current prices say $360,000,000 Even though cost Have increased for both CapEx as well as OpEx. We see that they are attractive in terms of the returns that they are Providing to the company. I think that as costs increase for operating purposes, We are seeing also an increase in the long term price For the market, and let me explain what I mean.

Speaker 1

Usually, long term a reasonable way to look at the long term price will be The average industry cost plus maintenance capital for current for the current operations worldwide. As the long term price used to be at about 3.30 To promote the growth of our industry, now you have to add to that whatever inflation is affecting both CapEx as well as OpEx. And considering that, I believe that we will be at about $360,000,000 or even higher than that For the long run, I think new price reference. So I believe that the copper prices decrease Further down from where they are, which is not our base case, but that may happen. We should see Again, what we have seen in some other copper price cycle where supply is somehow affected by demand restriction.

Speaker 1

Now having said that, It seems important to me to consider that production coming from Chile and Peru has been affected by Different circumstances in these two countries and that has somehow slowed the development of new projects that Should supply the copper for the future. So my view is that it's positive in the sense of a midterm to long term, But we still have to pass through these strange fees that we're seeing nowadays.

Speaker 6

Okay. Thanks, Carol. That's helpful. I know there's also been some headlines around your Buena Vista operations and some blockages that have been reported in the local press That has caused some concern. I think that wasn't a cause of any disruption, but would be great to get your perspective on that or how

Operator

you see that getting resolved.

Speaker 1

Well, as you will mention, it has not affected our operations. We're seeing some Mainly related to the political campaign that it's about to begin or it's already Under course, in Mexico. As you know, there is we had a significant change In unions regarding the Buena Vista operation in the past decade, and I think There are certain external forces or political forces that would like to affect our operations. They haven't had Any success so far in these many years, and I believe that, that will be the case for the future as well.

Speaker 6

Okay. Super. Thanks again.

Speaker 1

Thank you very much for your question, Tina.

Operator

Thank you. One moment for our next question. And it comes from the line of Alex Hacking with Citi. Please proceed.

Speaker 2

Hi, Raul, and thanks for the call. I just wanted to clarify on the guidance. You said 946,000 tonnes next year. In my notes, I had that Last quarter that guidance was 1,026,000 tonnes, which is 80,000 tonne cut to that Guidance? Am I correct?

Speaker 2

And if so, I guess, what's driven that downgrade in expectation for next year? Thanks.

Speaker 1

The reference that you gave us, Alex, is correct. We have made an adjustment in our Production for the current operations, particularly Buenavista And Buenavista, Inc. Those 2 has been has reduced their forecast for next year. This number is still under review. We will do a new set of forecast at the beginning Of next year in our January conference and currently what we're considering is how are we going to improve the 946 1,000 tons that I mentioned before.

Speaker 2

Thanks. And then just to follow-up with the issue there, Obviously, there's a little bit of timing slippage right on Buenavista Zinc. But would the other would the main issue be grade? Would that be the reason that like the grade is effectively going to be a little bit lower than this previously forecast?

Speaker 1

It's basically ore grade because the operations are at full speed all the time, 20 fourseven. So it's mainly all grades or recoveries depending on the different places that you are in the mines that changes a little bit. And that plus the start up of projects are the drivers Of changes in production on yearly basis. Okay, makes sense. Thank you all.

Speaker 1

You're welcome.

Operator

Thank you. One moment for our last question please. And it comes from the line of Carlos De Alba with Morgan Stanley. Please proceed.

Speaker 4

Yes. Thank you very much. Good morning, everyone. So Raul, any comments on how Southern Copper Has taken the plan proposed by the Mexican government to remediate what they Claim is still contamination in Veosunora from the spill in 2014?

Speaker 1

Very straightforward answer is no, Carlos. We are looking at the information and we're Starting it and we'll answer that when it corresponds. But at this point, we have no comments on this.

Speaker 4

Okay. That's clear. Now just the company, if I understand correctly, has done Several analysis throughout the years and they don't show any information left. Is that fair?

Speaker 1

That's our view on the matter, yes.

Speaker 4

All right. Thank you very much.

Speaker 1

You're welcome.

Operator

Thank you, sir. And I'm not showing any further questions in the queue.

Speaker 1

Okay. Thank you very much, Carmen. And this will conclude our conference call for The Q3 of 2023, we certainly appreciate your participation and hope to have you back with us when we report the Q4 of this year and the end of the year results in January. Thank you very much and have a nice day.

Operator

Thank you all for participating and you may now disconnect.

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