Southern Copper Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 2, 2024

There are 7 speakers on the call.

Operator

Good day, and welcome to Southern Copper Corporation's 4th Quarter and Year 2023 Results Conference Call. With us today, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance Treasurer and CFO, who will discuss the results of the company for the past quarter 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 risks and uncertainties. Actual results may differ materially and the company cautions not to place undue reliance on these forward looking statements.

Operator

Southern 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.

Operator

Raul Jacob.

Speaker 1

Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's Q4 of 2023 and full year 2023 results conference call. 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, With 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 EFT. After this, we will open the session for questions. Before we get into the details of this past 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 $9,896,000,000 this is $152,000,000 or 1.5 percent lower than 2022 net sales.

Speaker 1

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 accounting adjustment of Active by a year accounting adjustment of $406,000,000 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 will have been 3% higher than the 2022 mark.

Speaker 1

The 2023 copper production increased 1.8% year on year to 900 And 11,000 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 of our Mexican operations was mainly fueled by a drop And recovery at the Buenavista mine. In the second half of last year, we experienced a reduction of fresh water at our Buenavista operation, which was generated by the fact that we lacked a permit we expect to receive We're building a pipeline of approximately 20 kilometers to transport water from the well to the operations at nearby townsite. For 2024, the company has decided to transport the water Through other means to secure the supplies required to ensure that Buenavista can operate at full capacity for copper 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 and the figure of 20.22.

Speaker 1

This increase was due to higher production at 3 of our 4 mines, the section was Toquepala. Mine zinc production rose 9.2% year on year due to higher production At the Charkas and Santa Barbara mine, mine 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 a $0.25 increase in cash costs reported versus the $0.78 per pound in 2022 was mainly attributable To $0.17 per pound increase in the production cost and $0.08 reduction in byproduct revenue credit. At this point, we believe we are seeing the end of the inflation related cost push.

Speaker 1

Our cash cost before bacteroides evolved From $2.09 per pound in the Q1 of 2023 to $2.23 per pound in the 4th 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 byproduct rates to be 2.20 Thanks, Bertao. We expect zinc and silver to contribute positively to growth in 2024 On the back of an uptick in volumes, for zinc, we expect a growing production of 80%, 80%. For silver, 13%. Nonetheless, we'll suspect molybdenum prices To remain at the level that they are right now, which is about $0.19 per pound.

Speaker 1

In this scenario, all in company cash cost credits for 2024 will total $1.03 per ton. Therefore, our cash cost after byproduct credit is estimated at $1.17 per pound for this year, 2024. This increase in value was driven primarily by a 13% reduction in bifurrotraits. Adjusted EBITDA in 2023 was $5,029,000,000 This is 6% lower or €320,000,000 below the figure of 2022. The drop in adjusted EBITDA year on year was Primarily attributable to our reduction in sales equivalent to $152,000,000 A $113,000,000 non recurring variance in other income due to 2022 insurance and tax And a $54,000,000 uptick in operating costs.

Speaker 1

The adjusted EBITDA margin in 2023 was 50.8 percent versus 53.2% in 2022. For net income, Last year, we had $2,425,000,000 That's 8% lower than the mark for 2022. The net income margin was 24.5% last year versus 26 3% in 2020. Now let us focus on the copper market. The London Metal Exchange copper price increased 2.2 percent from an average of $3.63 per pound in the Q4 of 20.22 up to $3.71 per pound in the 3rd in the Q4 of At the beginning of last quarter, we were expecting a market surplus for this year.

Speaker 1

However, After a significant reduction in copper production was announced by some producers, market expectations for surplus And we're replaced by concerns about potential deficits due to the extremely low available inventories. Even though still are significant uncertainties this year for the world 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 Cover production registered a decrease of 3% in the 4th quarter and a quarter on quarter terms to stand at 234,000 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.

Speaker 1

Production at our Cerulean operations increased 6.6% in a quarter on quarter terms, which was mainly due to higher production at our Toquepala operation. Compared to the Q3 of last year, Copper production increased 3.5%, which was mainly attributable to higher production at the Cuajones, Toquepala And Caridad's mine. 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 2 projects to contribute with 44,000 tons of copper to our production.

Speaker 1

Molybdenum represented 10% of the company's safe value in the Q4 of 2023 and is currently our 1st diaphragm. Molybdenum prices averaged $18.41 per pound in the quarter compared to $21.17 in the Q4 of 2022. This represents a decrease of 13%. Molybdenum production increased 6.6% in the 4th quarter compared to the same quarter of 2022. This was mainly driven by an increase in production at the Toquepala and La Carias mines due to higher ore grades in both operations.

Speaker 1

These results were partially offset by lower production at the Cuajone and Buenavista mines. Molybdenum production increased 2.3% year on year in 2023 after production grew at La Caridad, Cuajonia and Buenavista. It was partially offset by lower production at Toquepala. For this year, 2024, we expect 25,500 tons of molybdenum. For silver, it represented 4 point 3% of our sales value in the Q4 of 2023 with an average price of $23.25 Mine silver production decreased 3.2% in the 4th quarter versus the same mark of 2022 after This was partially offset by higher production at the Toquepala, Caridad and Ingsac operations.

Speaker 1

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 20,700,000 ounces of silver, an increase of 13% compared to 2023. Think represented 3.3% of our sales value in the Q4 of 2023. Think prices averaged $1.13 per pound in the quarter.

Speaker 1

This is a 17% decrease regarding the Q4 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 Chartas mines. Refined zinc production decreased by 0.9 percent 1% in the 4th quarter. In 2023, We produced 65,509 tons of zinc, an increase of 9.2% compared to 20 This was mainly driven by an uptick in production at the Santa Barbara and Charkas operations.

Speaker 1

This was partially offset by a decreased production at the San Martin mine. Refined zinc production increased by 1% in 2023 compared to 2022. For this year, we expect to produce 113 1800 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 pounds For the years 2025 and on, we expect to produce over 170,000 tons per year of zinc. Financial results.

Speaker 1

For the Q4 2023 sales were $2,300,000,000 This is $525,000,000 lower And sales for the 4th quarter or 19% reduction. Even though copper Prices were 2% higher than in the Q4 of 2022, sales of this metal decreased almost 10%. Net sales in the past quarter were negatively impacted by a quarterly adjustment Accounting adjustment of $62,200,000 for copper sales, and this was basically for lower metal prices and 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. Regarding our byproducts, despite a 6% increase in the volume of molybdenum sold, sales of our main byproduct decreased 54 Due to lower prices and an important accounting adjustment of $106,200,000 on malignant sales.

Speaker 1

Sales decreased 18% due to lower prices and volumes. For silver, Sales fell 10% due to lower volume, which was partially offset by better price. So the Q4 of last year Sales reduction was mainly affected by an increase in copper inventory and adjustments on open sales of copper and aluminum for $168,400,000 Operating costs. Our total operating Costs and expenses decreased by $23,500,000 or 2% when compared to the Q4 of 2023. The main cost reduction has been in inventory consumption, capitalized leachable material, worker participation and energy.

Speaker 1

These cost reductions were partially offset by higher contractor costs, labor, exchange rate variances, repair materials, Water, fuel and other costs. The Q4 of 2020 adjusted EBITDA was $10.55,000,000 which came 35.3% under the 16 €31,000,000 registered in the Q4 of 2022. The adjusted EBITDA margin for the 4th quarter was 46% versus 58% in the Q4 2020. Cash cost. Southern Copper operating cash Including the benefit of Waiprotrail was $1.25 per pound in the Q4 of 2023.

Speaker 1

This cash cost was $0.27 higher than the cash cost of $0.98 in the Q3 of this year of this past year. Operating cash cost per pound of copper before by product credits was $2.23 per In the Q4 of 2023, that is $0.01 lower than the value for the 3rd 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 cattle sales and higher treatment and refining charges on concentrate sales. Regarding byproducts, we reported a $0.28 reduction in credit. This Q4 2023 had we had a credit of for the Q4 of last year, we had a credit of $491,000,000 or $0.984 per pound.

Speaker 1

These figures represent a 22% decrease when compared to a credit of 600 And $4,000,000 or $1.26 per pound in the Q3 of last year. Total credit increased 14%, but decreased for molybdenum 33% and sulfuric acid 11%. Net income in the 4th quarter was $445,000,000 which represented a 51% decrease versus the Q4 of 2022 figures. The net income margin in the Q4 of 2023 was 19% versus 32% in the Q4 of 2022. Net income was affected by lower sales as explained As earlier and by year end non recurring adjustments in non operating costs as well as tax.

Speaker 1

Cash from operations. Cash flow from operating activities in 2023 was 3,573,000,000 which represented an increase of 27% over the BRL 2,802,000,000 post 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 $15,000,000,000 and It currently includes investments in the Buenavista Zinc and Pilares project in Mexico and in the Tia Maria, Los Chancas and Michiquillay projects in Peru. In 2023, we spent $1,000,000,000 on capital investments, which reflected a 6% increase year on year And represented a 41% of net income in 2022.

Speaker 1

Since there is a description of our main capital project in ESES 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 439,000,000 most of which has already been invested. We have initiated the commissioning process And progress is 99%. Ramping up of the plant began in the Q1 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 5 years. For the Pilares project in Sonora, Mexico, the budget for this project is $176,000,000 of which $145,000,000 has been invested.

Speaker 1

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, Pilar graduated from the project stage and is now part of the La Caridad operation. For the Peruvian project, in the case of the Tia Maria project in Arequipa, We reiterate our view that the initiation of construction activities at Tia Maria will generate significant economic opportunities 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 Tia Maria's construction.

Speaker 1

Additionally, from day 1 of our operations, we will generate significant contribution to revenue in the Arequipa region by paying royalties and later on income tax. The Los Chancas project In A Purimas, 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 Cajamaraca, as of December 31 last year, we have drilled 63,000 meters from a total program of 110,000 meters and obtained 20,137 Core samples for chemical and ag, 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.

Speaker 1

We will also begin hydro geological and geotechnical studies and assess the results of metallurgical testing at the deposits. The company continues working with the Michiquillay and Encana 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. Over the last 4 years, we have improved the use of water at our operations, 1.64 cubic meters less than 1 cubic meter, 0.64 Water per mill ton of mineral in 2020 to 0.53 cubic meters in 2023. This represents an increase in efficiency of 17%.

Speaker 1

Improvement has primarily been driven by the company's initiatives to Our water from our Quebrada on the tailings dams 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 and P Global results in its corporate sustainability assessment or CSA indicate that Southern Corporate Corporation Has achieved a place among the top 10 of performers in the mining sector with a rating that exceeds The industry averaged 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 5th consecutive year in the Dow Jones Sustainability Index.

Speaker 1

In 2023, SEC achieved some of the highest Scores in the sector for key CS8 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 is a step to the progress the company has made in this area. Additionally, we achieved a score of 100 in the task 4 on climate related disclosures, which focus on managing and disclosure of financial risks and opportunities related to climate change. Additionally, investor led Climate Action 100 Star Initiatives recognize our efforts to develop an emission reduction roadmap and award us a full compliance rating In the TCFD category, furthermore, the rating agency, Substant Analytics, Reduce the company's risk by 2 levels between 2020 2023.

Speaker 1

In 2023, we registered 97% increase in year to date Year to year investment in social infrastructure. In Mexico, dollars 35,900,000 was allocated to these efforts, A project that was particularly noteworthy this year focused on improving water infrastructure for the communities of Canania and Meso San. In Peru, dollars 45,700,000 was invested in social infrastructure, including the progress in building the waste Water Treatment Plant for the car, meaning. The company also prioritized the location infrastructure development in Peru And we'll build upon successful previous initiatives in Moquewa and TAC. Continuing our commitment, the company is actively Expanding educational infrastructure to benefit the community and the work for access mobilized.

Speaker 1

This effort includes setting up 5 High Performance School or Core as is the acronym in Spanish for 1500 students To strengthen the capacity of outstanding students in the state educational system. 2 schools are currently under construction, In Moqueba and Tacos, these investments have made Southern Copper's the primary private investor In Peru's National Educational Infrastructure. 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, As announced to the market on January 25, the Board of Directors authorized a cash dividend of $0.80 per share of common stock payable on February 29 to shareholders of record at the close of business on February 13, 2024. Ladies and gentlemen, with these comments, we end our presentation today.

Speaker 1

Thank you very much for joining us. And we would like to now open up the forum for questions.

Operator

Thank It comes from the line of Timna Tanners with Wolfe Research. Please proceed.

Speaker 2

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

Speaker 1

Yes. Very well, Sima.

Speaker 2

Okay, great. I hope everyone is 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 That we've been seeing prevalent in the last couple of years.

Speaker 1

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 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. And that somehow has helped us and made us stabilize our cash cost before credit At about $2.23, dollars 2.24 last year and we have the expectation of decreasing it a little bit more

Speaker 2

Given the release this time and in the remarks. And I'm just wondering if it's actually time to put it in our estimates as Coming forward and if so, if you could elaborate on timing. Also that $1,400,000,000 amount in light of all that Cost inflation around miners globally, can you just remind us if that's an updated number and what that entails? Thanks a lot.

Speaker 1

Sure. Regarding the CapEx, we already have spent a little bit north of $350,000,000 on equipment There is a store with the proper care nearby the Tia Maria deposit. And we are more positive for sure on Tia Maria and we are Moving forward with some actions that we will report on progress as we get better news on it. But yes, we are much more positive regarding the project. But we would like to give Good news when we have something relevant to report.

Speaker 2

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

Speaker 1

Thank you very much, Tina.

Operator

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

Speaker 3

Hi. Thank you for taking my questions. I have 2. 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.

Speaker 1

Sorry, Gabriel, I can't copy you. David, I can't copy you well. Could you get us closer to your yes, much better now.

Speaker 3

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. So you mentioned that this is due to the anode inventory Any additional details that you could provide us on the market here would be interesting. And in addition, would you expect There's gap to be reversed in the coming quarters, so the excess inventory that you accumulated due to the higher production, That would be interesting to know as well.

Speaker 3

And my second question is regarding the comment that you guys made on the Buenavista water 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, 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 metaphor for the costs. Thank you.

Speaker 1

Okay. Thank you very much for your questions, Gabriel. Okay. Well, we have And inventory buildup related to Minera Mexico'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 Q1 of this year. So this is not like it's more Like one thing, obviously, inventories are not are varying all the time.

Speaker 1

But in this case, We had some repairs that were scheduled for the end of the year that generated this uptick in inventories in process. Regarding the Buenavista water situation, well, we have as I mentioned, we the company has taken action On solving this problem for this year, we're basically moving water Using water tankers, water tankers trucks. And obviously, it has an impact in cost. We'll see that it's about $29,000,000 that we're expecting. And in terms of production, it created a problem 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.

Speaker 1

So that's why the company Has made a very different way to solve this. And we finally Took a decision and are implementing it since this month I'm sorry, since January.

Operator

Thank you. Our next question comes from Alfonso Salazar with Scotiabank. Please proceed.

Speaker 4

Thank you and good day, Thao. I have three questions. The first one is regarding the water concessions.

Speaker 1

I want to

Speaker 4

understand How this water from La 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, Buenavista, which I think the company clarified that There were no such concessions granted. And the second question was regarding El Arco. I didn't see the details in the press release about this product.

Speaker 4

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 going to be Using Pilares as a satellite mine, so I would imagine that we should increase the Caritas mine as More production comes from Pilares. So just want to understand what to expect in terms of a blended grade there? And these are the 3 questions that I have, Raul.

Speaker 1

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, it's the final permit to build a pipeline.

Speaker 1

So that is something that we We expect to have when we finish working on the construction for the wells that we haven't received it yet. So This is what has created. This was some lower rain than expected this year, This past year, I should say. That is basically what we have in the wells We will solve the problem in terms of water availability. No matter how the weather It affects rains in the area.

Speaker 1

Now in the case of El Arco, We haven't make any reference to the project because we have to not make 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, but there's nothing relevant to report. And then on the blended rate expected for La Caridad, let me explain What's happening

Speaker 4

in

Speaker 1

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 sales force, which are the feed for the concentrator. So the 1st month, This was at the end of 2022 and the Q1 of 2023. We basically removed these oxides from the Pilares deposit and send it to our SX EW Leaching areas. That material is being processed, so we will We expect to have some more refined SX EW copper coming from Pilares in the near future. And then we look at the prices, relative prices of molybdenum visaviscopper, This was by mid-twenty 23.

Speaker 1

Molybdenum had very good prices and copper not as good as we I had to say in the year before. And after making some numbers, some financial Reviews, we conclude that it was interesting to increase The molybdenum production of La Carriag, which is from our 4 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, say, reported lower than what we had before.

Speaker 1

And consequently, we're coming back to sending ore from Pilares Our expectation is that we should be producing about 35,000 tons Of copper from Gilares, in the mix at the Caridad concentrator with Caridad material.

Speaker 4

Okay. And if I understand, in case money prices soar again, you may reduce The input from Pilares to produce more molybdenum, right?

Speaker 1

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

Speaker 4

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?

Speaker 1

I don't think I think that this is a different matter. It's just a pipeline permit that is taking longer than what we We initiated this the work in these 2 roles.

Speaker 4

Thank you very much,

Operator

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

Speaker 5

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 $113,500,000 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 And what had been the other income which declined?

Speaker 1

Okay. Let me address the last question. Other income, What's the expected one in 2023, other incomeexpense It was the proper one, the usual trend of the company in 2023. The anomaly was in 2022 It was a positive thing for the company. We had some insurance refunds As well as tax refund that we Had in 2022.

Speaker 1

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 community that blockaded the water Live for Quaffoni was, as I say, 54 days. That was in 2022. So in 2023, Quaffoni operated at Full capacity, which is excellent for us, and that's why we reduced significantly our purchases of 3rd party material.

Speaker 1

Generally speaking, we are buying 3rd party 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. But sometimes we want to acquire 3rd party material that has certain Technical characteristics that improve our process and that's why we are buying some of that. That's our report shows. Thank you.

Operator

Thank you. And one moment for our next question. And thank you. Our next question comes from Sofia Martin with GBM. Please proceed.

Speaker 6

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

Speaker 1

years? Certainly, Sofia. Okay. I already mentioned that For 2024, it's 935,900 936,000 For 2025, 956,000. 2026, 985,000.

Speaker 1

2027, dollars 1,000,000 2028, $1,018,000

Speaker 6

Perfect. Thank you very much.

Speaker 1

You're welcome. Thank you. 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

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

Speaker 2

Thanks for taking my follow ups. I just had two more questions. One was Related to the reported interest of Grupo Mexico and

Speaker 1

We cannot we don't hear we couldn't hear you at the beginning.

Speaker 2

Sorry. So just Two quick questions. One is related to the reported interest in Las Cruces from Grupo Mexico. 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?

Speaker 2

Thank you.

Speaker 1

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

Speaker 2

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

Speaker 1

It's a relevant question for a group of Mexico 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 has 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.

Speaker 1

And in this case, if you see our cash generation from operations was somehow lower. So the Board decided to cut a little bit the copper I'm sorry, the dividend in order To maintain a solid cash position for the company.

Speaker 2

Okay. Thank you, Jan.

Operator

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

Speaker 1

Okay. Thank you very much, Carmen. Well, with this, we conclude our conference call for Southern Copper's 4th quarter and full year results For 2023, we certainly appreciate your participation and hope to have you back with us when we report the Q1 of 2024 results. Thank you very much for being with us and have a very nice day.

Operator

And thank you all for joining our call today and you may now disconnect.

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Earnings Conference Call
Southern Copper Q4 2023
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