Southern Copper (NYSE:SCCO) Q3 2026 Earnings Call

0:00 Good morning and welcome to Southern Copper Corporation's third quarter and nine months 2026 results conference call. With us this morning we have Southern Copper Corporation's Mr. Raul Jacob, Vice President, Finance, Treasurer, and CFO, who will discuss the results of the company for the third quarter and nine months 2026, as well as answer any questions that you might have. The information discussed on today's call may include following the statements regarding the company results and prospects which are subject to risks and uncertainties. After results made different materially and accompanying cautions to not place under 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.

0:50 All results are expressed in full U.S. GAAP. Now I'll pass the call on to Mr. L. Jacob.

0:58 Thank you very much, Victor. Good morning, everyone, and welcome to Southern Copper's third quarter of 2026 results conference call. At today's conference, I'm accompanied by Mr. Leonardo Contreras, CEO of Southern Copper and board member. Let me say first that we're very pleased to report strong third quarter performance as we hit record highs for net save, adjusted EBITDA, and net income for the second consecutive quarter. Concurrently, our report will show that Tiamaria and Estilar, which are under construction, are expected to add 156,000 tons of refined copper to our total production figure. At this point, we will widely surpass the annual production mark of 1 million tons.

1:47 These outstanding achievements are driven by operating excellence and reflect our commitment to creating long-term value for our stakeholders in a context marked That is sustained demand for copper and the other minerals we produce. Today, we will begin with an update on our review of the copper market and then review Southern Copper's key results related to production, sale, operating costs, financial results, expansion project, and EOT. After this, we will open the session for questions. For the copper market, the LME copper price increased 44% from an average of $4.24 per pound in the first quarter of 2025 up to $6.41 this past quarter. In the COMEX market, we saw a 34% increase with an average of $6.48 per pound this past quarter. Based on current supply and demand dynamics, we estimate Now, a slight deficit, a slight copper market surplus for 2022.

2:58 Copper inventory is worldwide. The total combining stock in L&E, Comet, Shanghai, and Bondi warehouses is still at 1,105,000 tons as of October 9 of this year. We estimate that this inventory can currently cover approximately 14 days of global demand. Now let's look at Thousand Copper's production for the past quarter. Copper represented 74% of all sales in the third quarter of this year. Copper production registered a decrease of 1% compared to the third quarter of 2025 and stood at 232,396 tons in this past quarter. Our quarterly results reflect a 6% drop In production in Peru, which was driven by a decrease in production at both our Toquetal and Guajone mines due to lower oil rates and recoveries.

4:01 These were partially upset by an increase of 2.5% in production at our Mexican operations, which was mainly fueled by higher production at our Buenavista and Inza mines. Our copper smelters and refineries increased their production by 18% and 16% respectively in the third quarter. On a year-to-date basis, copper production fell 2.9% in 2026 to stand at 693,602 tons. This evolution was mainly driven by a decrease in production at our colludium mines due to lower oil rates. Year-on-year, the company's melting and refining facilities increased their production by 16% and 10% respectively.

4:54 For 2026, we expect to produce 918,000 tons of copper, an increase of 0.7% over our initial plans. Molotven represented 12% of our sales in the third quarter of 2026, and is our primary dry pro. Molybdenum prices average $32.93 per pound in the quarter compared to $24.30 in the third quarter of last year. This represents an increase of 36% in price. Molybdenum production dropped 2% in the third quarter of this year compared to the same period of 2025.

5:42 This was mainly driven by lower production at our La Caridad and Buenavista mines, which was largely offset by higher production prints at our Toquetala and Coajone mines. In 2026, we expect to produce 29,000 tons of molded lune, which is 12% above our initial plan. Silver represented 7% of the company sales in the first quarter of this year. Silver prices average $62.80 per ounce in the quarter, compared to $39.56 per ounce in the third quarter of 2025. This represents an increase of 59%. Silver is currently our second most important by-product.

6:33 Mine silver production decreased 2% in the third quarter of this year versus the same period in 2025, driven primarily by a drop in production at our open-pit operations. Its results were partially upset by an increase in production at our in-sap mine. Refined silver production decreased 6% quarter over quarter, fueled mainly by a drop in production at the La Caridad Añilo refinery. For 2026, we expect to comply with our plan to produce 24 million ounces of silver. For Zinc, it represented 4% of our sales value in the third quarter of 2026, with an average price of $1.74 per ton in the quarter, which represents a 36% increase compared to the third quarter of last year.

7:33 Zinc is currently our third best seller. Zinc, my introduction, decreased 8% quarter-on-quarter, and total 41,880 tons. This was mainly due to a drop in production at Buenavista, Charcas, and San Martín operations. These results were partially offset by higher production at our Santa Barbara operation. Refining production decreased 6% in the third quarter vis-a-vis the third quarter of 2025. For this year, we expect to produce 163,400 tons of zinc, 1% below our initial plan. Looking into our financial results for the third quarter of 2026, sales were $4.7 billion, which is 1.3 billion above the sales in the third quarter of 2025, or a 39% increase. Copper sales increased 41% while volume decreased In a scenario of better prices. As we mentioned, the London Metal Exchange price increased 44% and the Commerce 34%.

8:49 Regarding our main byproducts, sales of modulums were up 31% due to better prices, which were partially offset by a decrease in volume. For sink sales, they also increased by 36%, fueled by better prices and better volumes. Lastly, several sales offer rose this quarter right in the wake of better prices whose impact was partially offset by a decrease in volume. Our total operating costs and expenses increased by $233 million or 17% when compared to the figure in the third quarter of last year. The main cost increments were in diesel and fuel, water participation, Inventory Consumption, Depreciation, Power, and Labor Costs.

9:44 These cost increments were partially offset by inflation difference of $22 million. That's an exchange rate variance that favors our cost in local currency. Our third quarter adjusted EBITDA hit a record high of $3 billion, which represented an increase of 54% with regard to the 2 million registered in the third quarter of 2025. Adjusted the BIDDA margin in the third quarter of this year stood at 65% versus 59% in the same period of 2025. Adjusted the BIDDA for the nine months of this year where it was 1.8 billion, which is 56% higher than the print for last year. Adjusted the BIDDA margin in the nine months of 2026 stood at 65% versus 58% in the same period of last year.

10:46 Cash cost. Operating cash cost per ton of copper, net of by-product revenue credits was nine cents in the third quarter of 2026, which presented a decrease of 77% compared to the 52 cents reported in the third quarter of 2025. This result was mainly driven by an increasing by-product revenue credit of 31%, which rose on the back of better price. Operating cash cost per pound of copper before by-product credit was $2.46 per pound this past quarter.

11:32 This is 23 cents higher and the value for the third quarter of 2023. This 10% increase in operating cash cost before trade was the result of an increasing cost per pound from production costs and for administrative expenses, which was partially upset by an increase in the premium and treatment and refining benefits that the company has been collecting. Regarding by-products, we had a total credit of $1.2 billion or 236 cents per pound in the third quarter of 2026. These figures represent a 31% increase compared to a credit of $900 million or $1.81 per pound in the first quarter of 2025.

12:27 Total credits increased for melatonin, zinc, For the nine months of 2026, the operating cash cost per pound net of by-product credits was one cent. This represents a decrease of 98% compared to the 61 cents reported for the nine months of 2025. For this year, Cash cost decrease was driven by an increasing by product credit of 54%. This is for the year-to-date figure of cash cost. The third quarter of 2026 net income hit a record high of $1.8 billion, which is up 63% versus $1.1 billion for the third quarter of 2025.

13:25 This was mainly due to higher net sales. Net income margin in the third quarter this year is 2.38% versus 33% for the same quarter of 2025. On a year-to-date basis, net income was 67% higher than in 2025 due to growth in net sales. Net income margin for the nine months took at 38% versus 32% in 2025. Cash flow from operating activities in the third quarter of this year was $2.2 billion, 43% above the figure in the third quarter of 2025. This improvement was mainly attributable to strong cash generation of our operations, which was driven by higher sales. For the nine months of this year, Cash flow from operating activities stood at $5.9 billion, which represented an increase of 81% over the $3.3 billion post in the nine months of 2025.

14:35 Capital investment. Our current capital investment program for this decade exceeds $21 billion and includes investments in projects in Peru and Mexico. Given that there is a description of our main capital projects in thousand coppers per release, I'm going to focus on updating new developments for each. For the Peruvian projects, I'll begin with Tiamaria. Tiamaria is expected to produce 120,000 tons of SXEW copper cathodes per annum in the early years of operations. Operations are scheduled to begin in the first half of 2028. As of September 30th of this year, the company has invested $884 million in project execution and committed $1.1 billion to cover diverse activities, acquisitions, and related contracts.

15:34 Large-scale airworks have concluded and 18.9 million metric tons of material have been transferred to the Atapada stripping deposit. Most work orders for the project's primary equipment have been issued. Purchase orders for the leaching process have been placed to secure the main equipment, which will be outfitted with cutting-edge technology, as well as secondary equipment and materials. On the energy supply front, work is advancing at the main electrical substation and the 220 In parallel, large-scale airworks to develop dry and wet areas have been completed.

16:23 As the project makes its main installations, civil work is advancing alongside efforts to assemble metal structures and the main components of the trashing equipment for the primary, secondary, and tertiary trashing circuits in the dry areas. In the West Area, who worked to build the solar extraction and electric position facility, among others, is present. As of September of this year, the Tia Maria project was 50% complete. Additionally, 6,817 new jobs have been created. 1,181 of them were filled by local applicants. To the extent possible, the company intends to cover the estimated 7,000 jobs that will be created during Camarilla's construction phase with workers from these live products.

17:19 For Los Chancas, this is a project also in Peru at the Apurímac region that is expected to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The capital investment is estimated at $2.6 billion and we expect to begin operations by 2031. For the project update, social and environmental management programs are currently being implemented in the communities within the project's direct area of influence in accordance with the framework agreement signed for the development of the Teaparo present community and the Los Chancas mining project. Measures are being taken to regain control of the project area which has been threatened by illegal miners. Regaining control is essential if we are to continue developing our Los Chancas project.

18:18 For the Michiquillai project in Cajamarca, Peru, this is a project that we expect to, in which we expect to produce 225,000 tons of copper per year with byproducts of molybdenum, gold, and silver. The mine life is estimated at 25 years and we estimate to invest approximately $2.5 billion to begin production expected by 2032. The Deposit Mineral Resource Estimation and Classification Report has been developed with geological information obtained from building programs and geological models. These reports and studies are complying with FTC's FK1300 Mining Disclosure Standards.

19:09 A conceptual study is underway to determine where a conventional and or filter alien storage facility should be located. Hydrogeological and geotechnical studies are also being conducted. We're adding an expansion of the Cajon operation to our pipeline of projects in Peru. This is to maintain or potentially increase production levels for the Quajone operation. And for this, the company is evaluating an expansion from the current milling capacity of 90,000 tons per day to 120,000 tons per day. This is a 33% increase in milling capacity.

19:55 The expansion will require additional mining equipment and a new production line at the Quajone concentration. Current estimates point to a capital cost of $680 million to produce an average of 55,000 tons of copper and 1,400 tons of molybdenum per year. As part of a thoughtful review on the matter, studies are underway to determine the ability of expanding the cuajon operation to 150,000 tons of milling capacity per day. Focusing in our Mexican project, Caldron Copper has several projects in its Mexican pipeline that may boost organic growth if they are found to be of value for both stakeholders and the communities in which we operate.

20:46 These projects are Angangueo, Chalchihuite, and Empalmes Next. They are expected to bolster our position as a fully integrated copper producer. who are engaged in talks with the current administration to continue rolling out SSE's Mexican investments for about 10.2 billion dollars. El Pilar, which is located in the Sonora state of Mexico, is a project that is about 45 kilometers from Cananea and Buena Vista 9, from the Cananea town and the Buena Vista 9. Its copper oxide mineralization contains estimated proven and probable reserves of 317 million tons of ore with an average copper grade of 0.25% and a life of mine of 18 years.

21:43 El Pilar will operate as an often peaked mine with an oil production of 36,000 tons of copper Utilizing cost-efficient and environmentally friendly SXUW or solar instruction and electrowin technology. With an investment of $551 million, this project will employ a direct workforce of 450 people during the construction phase and 300 during the operational phase. El Pilar is a new corporate project that has obtained the necessary environmental permits. Early site preparation began in September of this year to develop energy lines and build on-site construction offices.

22:31 Contracts and studies related to the substation and transmission lines are in the works. Basic engineering contracts for the access roads, railways, pools, substations, and power lines have been signed. The EPCM bidding process for the FXCW plant is underway and expected to culminate before year end. Project construction will commence in the first quarter of 2027 and production is expected to begin in the second half of 2029. Focusing on environmental, social, and corporate governance or ESG practices, We are glad to report that our sustainability ratings continue to improve.

23:18 In its corporate sustainability assessment in 2026, S&P Global increased Southern Copper's rating by two points over last year's 20. The company ranks among the top three performers in the mining sector, with a rating that doubles that of the industry standard. Some of SEC's individual ratings were top of class for the sector. That is the case for transparency of reporting, materiality, risk management, business ethics, energy, biodiversity, and community relations. On top of what I just mentioned, four operations in Sonora, these are the lime plant, the La Caridad mine, The Minera Mexico Copper Smelter and Refinery, these four operations were awarded with a silver helmet by the Mexican Finance Chamber for their safety and accident prevention metrics.

24:25 This is the first time that four operations in Sonora is awarded simultaneously, which is a test to our team's commitment to strengthen preventive practices, safety controls, and Walter Preveche. In the Michiquillai operation in Peru, as part of our commitment to promote the stakeholders' active participation in new project development, the Participative Environmental Committee for the Michiquillai project in Peru completed its third verification of environmental performance in 2026. Community leaders and representatives of public and private entities sit on this committee which has the technical capabilities to collect soil, water, and air samples and interpret results. Their participation in project development strengthens actions and measures to prevent or manage impacts on the environment and communities.

25:28 For the past 14 years, our program Forjando Futuro, or Forging Futures, has been developing capacities and providing access to local job opportunities in the areas of influence of our operations in Peru and Mexico. Currently, 17% of the jobs on the Tia Maria project are held by locals who access these opportunities through our on-site offices or in coordination with local contractors. Under this program, for the future, We have awarded 700 scholarships to young people to obtain certifications to operate heavy equipment or engage in welding and photography.

26:13 These efforts strengthen participants' technical competency and broaden capacities to successfully enter in the job market. Changing subjects we are going to be giving And as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans, and other financial needs at each board meeting to determine the appropriate quarterly dividend. Accordingly, on October 15, Southern Copper Corporation announced a quarterly cash dividend of $1.30 per share of common stocks and stock dividend of 0.0106 shares of common stock per share. This is payable on November 19th of this year to shareholders of record at the close of business on November 3rd, 2026.

27:19 Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us, and now we would like to open the forum program. At this time we will conduct a question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question. First question comes from Carlos de Alba from Morning Stanley. Your line is open.

27:58 Good morning, everyone. Thank you. My first question is just on Tia Maria, maybe a little bit more color with what seems to be a little bit of a delay from the fourth quarter of 2027 to the first quarter or the first half of 2028. If you can provide a little more color as to what prompted that decision, and you could expect maybe a potential increase in capex. I noticed that it's still 1.8, but typically when there are delays, more often than not, it comes with a higher capex associated with that, so I wanted to get your color. That was my first question. I'll ask the one next.

28:47 With respect to the start-up of Tia Maria, we have found that it will take a little bit longer for us to assemble, doing the mechanical assembly of all the equipment, as well as some works related to engineering on the project. I think that's why we, when we review the expected timeline, we pass it from the fourth quarter of the year The first half of 2027. On potential capex increase, we are not reporting on any changes on that. We will mention this issue and address it in the call that we have in January, not only for Quemaria but in general for our production forecast as well as our capex for this next year and on.

29:47 Thank you. And if I may ask, what is your production, maybe no guidance, but the range and what do you see production for copper, moly, maybe silver next year, as well as cash costs before by-products, maybe in the fourth quarter or 2026 or the full 2026, and also the early indication for next year. Thank you, Raul.

30:17 Okay, on production for next year, it should be expected to be now for this year, about a little bit less than 920,000 tons. And for next year, we'll provide an update when we finish our, we're doing currently a full review on all our mining plants and on the basis that we will We will issue a much more firmer forecast at the beginning of 2027 in our January call. For cash cost, well, as you know, this is one of the hardest things to forecast because you not only have whatever happens with cost of production of copper and copper production, and also what goes on regarding by-products. But let's say that we should be about to where we are now for a little bit better cash-cost-wise for next year.

31:29 So, okay, so slightly flat or slightly stable plus maybe slightly better next year. And the fourth quarter, do you think we will be also relatively stable versus what you reported in the third quarter of 2026?

31:45 I'm sorry, I couldn't get what you said, Carlos.

31:48 Yeah, on the fourth quarter, sorry, on the fourth quarter of 2026 cost before by-products? Do you expect them to remain also stable versus the third quarter?

32:03 We don't see any that may distort the cost or increase them. We see some possibilities of a cash cost reduction before any credits, but that's a contingent of getting our production goals, which we're focusing on that as well as As you will know, we are strongly influenced by crisis in the fold by Crocs.

32:38 Okay. Thank you.

32:39 You're welcome. Thank you. One moment for our next question. Our next question comes from . Your line is open. Hi, good morning. Thank you for taking my questions. Two quick questions on my side. First, on capital allocation, I mean, cash obviously continues to yield at a very fast pace. And even with cash expected to reach 2.5 billion in 2027, we would expect cash accumulation to continue at this strong pace, right? So I'm just wondering how many are thinking about the potential for increased shareholder distributions for you. That's my first question.

33:25 And then a second question, a broader question on CAPEX. We've seen several major projects revise their CAPEX estimates higher in the recent months in bothering the questionary pressures. I know roughly half of the CAPEX has already been deployed, but how do you see risks of revising the remaining CAPEX higher? And how should you think about potential questionary pressures across your other growth projects? Those are my two questions. Thank you.

33:57 On potential inflationary pressures, we're currently reviewing our topics. We will be giving some color on this when we report the end of the year as well as the as well as Luke Ford for 2027. I'm so sorry, there is one microphone that is open. So, regarding inflation, we're looking into our project, the current budget, see if they have to accommodate any variances for next year.

34:55 We have not reported anything specific on this. Well, and regarding dividends, as you know, it is always a contingent of a board decision. The company has been giving dividends in cash as well as in stock that was acquired at $26 per share that are being handed back to our shareholders. Considering the current position of the company, which I think is very favorable in that regard. Okay, that's all I have for you. Thank you. That was it.

35:41 Thank you. The next question is from Emerson Sosa Vieira from Goldman Sachs. Your line is open. Hi everyone, good morning. So, two quick questions here. The first one is, when did I expect to distribute the product to more people and when did I see effectively the information coming online? And also, I mean, what needs to happen for Mexico to take a decision on the expansion to further 100 feet to 1,000 feet per day capacity. So that's the first one. And just on cash costs, specifically the car back products, right?

36:32 It seems like energy costs in Mexico have been rising, right, due to natural gas. So, I just want to understand if the cross-pressure that we saw this quarter is structural, indeed, and if you guys see, I don't know, any leverage to potentially offset those impacts.

36:54 Right. Thank you. Okay. On the Cojone expansion, we have to finish the technical studies that are very well advanced. The board has authorized us to mention it in our press release as something that is very likely to go on. Even though we don't have the final vote for the project, we are very close to getting it. So, I would say that it's going to be a very interesting investment for us. In the case of cash costs, we're seeing different Different impacts on materials.

37:42 In the case of gas, we're importing it for the Mexican operations from the Texas basin, the Spanian basin. And that is being a product of oil, gas has had some very competitive costs that has helped us in our costs for gas consumption at the Mexican operations. We don't see a problem with that. We think that the market will have a reasonable supply at a good cost for the company for the Mexican operations. Besides this, on the byproducts, being as sulfuric acid producers, we have been consuming our own Andres Carlos Ferrero Ghislieri, Patricio Ovejas Simon So I already covered a little bit our view on the cash costs and hopefully we will have it maintaining its current level or improving

39:14 slightly, I would say, regarding to where we are. All right, thank you. Just one more on Camarillo, please. So just confirming, the company does not expect Patricio to increase, I mean, trouble, the one video that is winning, right, despite of this, let's say, once a quarter delay. And Justin Camaria, again, I mean, the deceleration, the physical progress that he saw this quarter, he mentioned it was driven by longer times in the same year that he was recruited. So that was a one-off. And then physical progress should then accelerate in the next quarters. Does this make sense? Is it?

40:04 On CAPEX, we're currently reviewing all of them, so I'm not making a specific comment on that. I couldn't get the second point of your concern, Anderson. Thank you. One moment for the next question. Next question comes from Miles Arsop from UBS, Iran is open.

40:39 Great, thank you. Just a couple of questions. On the Quahone expansion, if you go large to 150,000 tons per day, should we assume the capex is broadly the 1.4 billion, twice the 680 if you put one line in? That's the first question. On this, we're not making any comments. When we finish, the studies that are being conducted for 150,000 tons of daily needing capacity will report to the market on the estimated topics that it has. Okay. But it would be a decision early next year, is what you're suggesting, either to 120 or 150?

41:32 Yes, the company currently we see a much more firmer possibility for going into 120,000 tons. However, we are looking into 150,000 tons of milling capacity since we have some of the estimated restrictions that it has been removed and that is something that allows us to consider this as a possibility. Once we realized that this is feasible, we decided to go ahead with the technical studies for $150,000 to see if we can confirm this as an option, and if so, we will present it to the board for an approval.

42:18 But for now, we're most likely to carry it for $120,000. Okay, that's very helpful. Lerdo Riosanchez, how, I mean, what did you have to get the illegal miners off, and If you are successful, what's the pathway to FIT there? Well, we have a little bit north of 200 illegal miners. We have been in talks with the Peruvian authorities to solve this. They shouldn't be in our concession. Once they are removed from the concession, we believe that we can move on with the environmental impact assessment and some other work that we have to do on a quicker pace. And so, that's why we are expecting to go ahead with the production by 2032. Okay.

43:31 Thank you.

43:32 Sorry. Let me correct what I just said. It's 2031. 31. Okay. Thank you. One moment for the next question. Next question comes from David Feng from CICC. Your line is open. Hi. Good morning, Raul and team. Just a quick follow-up question on Los Chancas and illegal mining. We have noticed that the Peruvian government has recently submitted a new proposal to Congress on a new scheme to replace the original reinforced system. So how do you see the potential implications for this move to address the illegal mining problem around the Los Chancas? Are we seeing any positive signs on the ground that could help the project forward?

44:38 In this case, we have a group of people doing mining activities in a concession and a land that is company property. So, for this specific case, they have to go out of our concession and our property. In the case of what you just mentioned, this new proposal given by the government, this one initiative of the Mining and Energy and Mining Minister, which we certainly think is a step in the right direction for the country because we cannot maintain the current situation where you have an operating certificate that is not complying with the with proper production, labor, and environmental practices for artisan mining. So that has to be fixed, and we hope that the law is discussed at Congress and we get a good tool for the development of artisan mining in Peru.

45:52 But in the specific case of Los Chancas, they have to, They have to leave the premises that they are currently using and with that the company will go on with the project. Thank you very much and also I think we have also seen some encouraging comments from the new administration about streamlining the application for mining permits. I'm just learning from your discussions with the authorities What kind of or which parts of the approval process could see the most meaningful improvements and could this potentially help accelerate projects such as Michigan LIFE?

46:42 We think that the government has been appointed in key positions a very well-rounded and technical paperwork personnel that should improve the process of of Moving Forward Projects. Besides this, I think that we're seeing this effort by the Ministry of Energy and Mines of eliminating or replacing by an statement some procedures. We think that this is going to be very helpful for the industry, but we need to see Andres Carlos Ferrero Ghislieri, Patricio Ovejas Simon Andres Carlos Ferrero Ghislieri, Patricio Ovejas Simon Andres Carlos Ferrero Ghislieri, Patricio Ovejas Simon Andres Carlos Ferrero Ghislieri, Patricio

47:54 Hey, good morning. Thank you for the call and all the information. On Coimelache in Peru, could you give us an update on where things stand and potential integration and expansion on that deposit and that location in Peru?

48:15 We're doing a technical, this is an operation where we have a joint venture with Buenaventura and some other partners. We're currently working on a sulfur deposit development for copper. There are different options that are being reviewed and I think that That's pretty much what I can say on that. It's something that is moving forward. We see this is a big opportunity for the future, but there is nothing to report at this point. Okay. Okay. Thank you. Fair work. Thank you. And our next question comes from Afonso Salazar from Scotiabank. Your line is open.

49:07 Thank you and good day, Raul. A couple of questions. The first one is regarding the PILAP. I understand that the increase in CAPEX is related to additional infrastructure that you need to include in the project. I think that you will have to do and build the transmission lines. I just want to continue if that is the case. And the second is regarding the Quajon expansion. This is a project that has been in your 424 pipeline For many, many years. So just wondering what's the delay or is this simply, you know, the best time for doing it? Just try to understand that. And also, what is the situation if you have enough water and enough, anything you need for an expansion of these sites?

49:58 Especially for the one that you are considering as well of 150,000 tons per day capacity. So just if you can give us some color on that, please.

50:11 Sure. Sure, Alfonso. In the case of El Pilar, we have an increasing complex. Well, we have been looking into this project for quite a while. We have the challenge that we want to increase capacity Andres Carlos Ferrero Ghislieri, Patricio Ovejas Simon A few years back, a little bit more than five years ago.

51:04 In the case of the Quajon expansion, well, we have been looking into different possibilities for getting the water for the project. And that has taken a little bit longer than what we believed a while ago. But in general, we think that we have identified good sources of water for the Cojón expansion. For 120,000 tons, we believe that we have all the water requirements that we have. We need to do some other works on the technical side and some other challenges that the project has, and that's why we have taken A while to look into this matter and making a proper decision.

51:56 But now we are reporting that this is a good possibility for us and we will be showing the advancement that we have on this matter as we move on into the end of this year and 2023. Just to confirm, so you have to build the transition lines for El Pilar or is the Commission Federal going to deal with it?

52:25 Sorry, I couldn't hear what you just said, Alfonso. Yes, sure. For El Pilar, you need to, are you including the transition lines in this project for the project or not?

52:39 Okay. So, I don't have some specific answer for that question, I think. Okay. Thank you. Thank you. And our next question will come from Matt Grishkin from Wells Fargo. Your line is open.

53:00 Yeah. Hey, guys. How y'all doing? I just wanted to clarify the questions on the cost. I know we went over it a bit. But it sounds like you're guiding or pointing to flat sequential costs before byproducts for Q4. And then for 2027, when you said flat to lower, is that from the Q3 level, like the Q3 run rate? Or are you talking about full year 2026? No, it's...

53:31 It's sequential for where we are. Please keep in mind that cash cost is very difficult to predict. We are at a very competitive cash cost of $0.09 per pound this past quarter. Prices of our by-products hold and corporate I think a copper production will be put a little bit on the fourth quarter that year. We should be reporting a cash call before by product trade in line or slightly better than what we did last quarter. That's our expectation at this point. For 2023, we will report in detail when we address the January call. with our 2026 results as well as the outlook for 2023 and the year. Thank you.

54:33 Okay. That's helpful. And then I know this is also really tough to predict, like, costs, but just with everybody talking about a super El Nino and, you know, potential big impacts to, you know, mining maybe in Peru, How are you all preparing for it, if you are at all? You know, what kind of things can you do in advance to get ready for, you know, I think it's supposed to hit in early 2027?

55:01 Well, depending on where you are in the country, El Niño has a different impact. In the case of where we are, we are in the southern part of Perú. and the usual trend of El Niño is that you have excess rain at the northern center to the northern part of the country and a draw on the southern part. So we are currently, we have been evaluating our water sources. We have been taking some actions to be sure that we have all the water that we need for next year. and that is the balance has shown us that we have a reasonable supply even to address this draw that we're expecting at the southern part of Peru.

56:03 That's helpful. I appreciate the color. You're welcome. Thank you. And our next question will come from John Bryant from HSBC. Your line is open.

56:17 Hey, Raul. Thanks for taking my questions. First, I just wanted to ask on project timelines. So you mentioned 2031 for Los Chacos, but obviously that's dependent on getting the illegal miners out. So is there sort of a timeline, like when do you need to sort of remove the illegal workers to hit that 2031 startup and Along with that, I think you said which PI was coming in 2032, and these are sort of two relatively big projects. I'm just trying to understand your level of comfort around hitting these timelines of a 2031 and 2032 startup for both of these projects. And then my second question relates to, I guess, the TCRCs, the negative TCRCs that we're seeing in China I know historically you said there might be some investment in your own smelting and refining capacity.

57:11 So I guess I just want to understand sort of how the negative TCRCs in China are impacting you, your potential capital investment going forward and sort of even on are you sending more concentrate to China to take advantage of these TCRCs? So any sort of color you could mention that would be great.

57:33 Okay. On the timeline for Rochancas and removing the legal miners, I don't want to put a specific deadline for removing them, but obviously it has to be in a relatively short term. Because otherwise we cannot move on with all the other parts of the project that we need to to comply with in order to get the environmental impact assessment finished, get the permit for construction, and so on. So, but we have, we consider that we could begin the construction in 2028, and in the second half of 2028, and with that, we should be finishing the project by 2031st, when I say.

58:33 In the case of Michiquillay, we don't have legal mining activities and we do have a social contract signed or social agreement signed with the two communities that are in the Michiquillay, that are directly related to the Michiquillay project. On that, I don't think that we have a matter. The work with these two communities is moving forward on the right path, and we are certainly very positive and optimistic on the GKI. The timeline goes to 2032 because we are at the beginning of all the process for getting the project complete and all the permitting ready, et cetera.

59:32 Focusing on negative TCEs, RCs. Well, obviously, it's hard to consider building a new smelter with this environment where you get a premium on top of your concentrate copper price. That's what is happening here with the negative TCEs, RCs. The upside is that sulfuric acid prices are at a good level. and that is something that help us in our revenues because we are longing to forecast it particularly at the Peruvian operations. Obviously, the possible news motor for both Peru or Mexico is something that is continuing of having the proper market conditions and we are considering The current circumstances as one of the points that have to be addressed and probably changing in direction before we go ahead with the construction of a new smelter in any of these two countries.

1:00:49 This is something that goes to our DNA of being an integrated copper producer. We think that The fact that we produce refined copper, and this is something that will increase when we put Tia Maria, and both projects will produce refined copper with very high quality, which is certainly appreciated by the market that provides us not only with the copper price, but also with the premium on top of the market price for our refined copper. So this is... For us, being fully integrated and producing more refined material is one of the goals that we are looking into for the long run of the corporation.

1:01:40 Great.

1:01:41 Thanks, Raul.

1:01:42 You're welcome. Thank you. I'm not sure we have any further questions in the queue. I'd like to turn the call back over to Raul Jacob for closing remarks.

1:01:52 Thank you very much, Victor. Well, with this, we complete our conference call for Southern Copper's third quarter results. We certainly appreciate your participation and hope to have you back with us when we report the fourth quarter of this year and the full 2006 results. Thank you very much for being with us today and have a nice day. Thank you for your participation in today's conference. This will conclude the program. You may now disconnect. Everyone have a great day.