Good morning, and welcome to Southern Copper Corporation's First Quarter 2025. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the first quarter of 2025 as well as answer any questions that you might 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 to not place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. Now I will pass the call on to Mr. Raul Jacob.

Thank you very much. Good morning, everyone, and welcome to Southern Copper's First Quarter 2025 Results Conference Call. Today, I am joined by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board member, along with Mr. Leonardo Contreras, also a Board member. We will start with an update on the copper market, followed by Southern Copper's key results regarding production, sales, operating costs, financial outcomes, expansion projects, and ESG. After that, we will open the floor for questions. Now, let's turn our attention to the copper market. The London Metal Exchange copper price rose 11% from an average of $3.83 per pound in the first quarter of last year to $4.24 this past quarter. Considering current supply and demand dynamics, we estimate that the year-end deficit will be approximately 300,000 metric tons. Currently, copper inventories worldwide cover about one week of global demand. Over the last quarter, a significant arbitrage difference was noted between COMEX and LME prices. At its peak on March 26, the COMEX price reached $0.73 per pound, or 17% above the London Metal Exchange price. This unusual disparity reflects the strong possibility of a 25% tariff on U.S. copper imports. While we maintain a positive long-term outlook for copper, we believe that a trade war between the U.S. and China will negatively impact global economic growth and, consequently, copper demand. Now looking at Southern Copper's production for the past quarter, copper accounted for 78% of our sales in the first quarter this year. Copper production was stable at 240,226 tons. We saw positive results from Buenavista's SX-EW cathode production, which increased by 24%, and Toquepala concentrate production rose by 2%. These positive results were somewhat offset by a decline in copper production at La Caridad due to lower ore grades and recovery. We expect to produce 968,200 tons of copper this year, which is a 2,400 tons increase compared to our initial plan of 965,000 tons. Molybdenum made up 10% of our sales value in the first quarter and is currently our primary by-product. Molybdenum prices averaged $20.43 per pound this quarter, up from $19.84 in the first quarter of 2024, which is a 3% increase. Molybdenum production increased by 9% compared to the same period last year, driven mainly by production boosts at the Toquepala, Caridad, and Buenavista mines, supported by higher ore grades. However, this was partially offset by lower production at the Cuajone operation. For 2025, we expect to produce 27,400 tons of molybdenum, which is 5% above our initial forecast. Silver accounted for 6% of our sales in the first quarter, with an average price of $32.31 per ounce, reflecting a 38% increase over the first quarter of 2024. Silver is currently our second by-product. Mine silver production boosted by 14% in the first quarter compared to 2024, attributed to enhancements at Buenavista, IMMSA, and Cuajone. Refined silver production rose by 8% quarter-over-quarter due to increased output from all our refineries. In 2025, we aim to meet our plan of producing 23 million ounces of silver, an increase of 9% from last year. Zinc represented 4% of our sales in the first quarter, with an average price of $1.29 per pound, a 16% increase from the first quarter of 2024. Zinc is our third by-product. Mined zinc production surged by 49% compared to Q1 2024, totaling 39,375 tons, primarily due to a 161% increase from the new Buenavista zinc concentrator. Refined zinc output declined by 11% compared to the same quarter last year. For 2025, we expect to produce 170,100 tons of zinc, aligning with our plan, which represents a 31% increase over 2024 production levels. This growth will be driven by output from the Buenavista zinc concentrator, anticipated to add 105,000 tons to our total production, which is operating at full capacity, and we are pleased with the results from this investment. Turning to our financial results, first quarter net sales were $3 billion, a 20% increase or $522 million above the $2.48 billion in the first quarter of 2024. Copper sales rose by 19%, with volumes up by 4%. For our main by-products, molybdenum sales increased by 10% driven by higher prices and volume growth. We also saw a significant 59% rise in zinc sales, supported by improved pricing and volume increases, with sales volumes up by 42%, mainly from Buenavista. Silver sales increased by 58% due to better pricing and larger volumes. Our total operating costs and expenses grew by $176 million or 12% compared to the first quarter of 2024, with the main cost increases in inventory consumption, workers' participation, repair materials, depreciation, exchange rate variances, and other materials such as tires, explosives, and grinding media. These were partially offset by reduced fuel and leachable materials costs. The adjusted EBITDA for the first quarter of 2025 was $1,746 million, representing a 23% increase over the $1,418 million recorded in Q1 2024. The adjusted EBITDA margin for this quarter was 56%, up from 55% last year. The adjusted EBITDA was also 16% higher than the $1,507 million posted in Q4 2024. Our operating cash cost per pound of copper before by-product credits was $2.05, which is $0.27 lower than the $2.32 per pound recorded in Q4 2024, reflecting a 12% decrease resulting from reduced costs in production, treatment and refining charges, and administrative expenses, along with an increase in premiums. Including by-product credits, our cash cost was $0.77 per pound, down $0.19 from $0.96 in Q4 2024, marking a 21% reduction. In terms of by-product credits, we had a total of $659 million or $1.29 per pound for the first quarter, which is a 5% reduction compared to the $779 million or $1.36 per pound in the last quarter of 2024. Overall credits increased for molybdenum and silver while decreasing for zinc and sulfuric acid. As for net income, we reported $946 million for Q1 2025, up 29% from $736 million in the same quarter of the previous year. The net income margin for this quarter was 30% compared to 28% in Q1 2024. Compared to Q4 2024, net income rose by 19% from $794 million. Regarding cash from operations, we reported cash flow of $721 million for the first quarter of 2025, which is a 9% increase from $6 million in Q1 2024, driven by robust cash generation at our operations due to higher sales and efficient cost control. Our current capital program for this decade exceeds $15 billion, which includes projects in Mexico and Peru. Details of our main capital projects have been provided in Southern Copper's press release. For the Mexican projects, Minera Mexico plans to invest over $600 million this year at both open pit and underground mines. Half of this investment will ensure the long-term viability of operations through modernization and asset update. The rest will focus on improvements in water usage and tailings management for safety and efficiency in operations, alongside efforts for optimization and growth. For the El Arco project in Baja California, detailed engineering continues on the concentrator and SX-EW plant, along with logistics and power delivery. We have several projects in Mexico that could enhance organic growth if assessed favorably for both stakeholders and communities, including Angangueo, Chalchihuites, and the Empalme Smelter. In terms of Peruvian projects, the Tia Maria project has created over 628 jobs as of March, with 503 filled by local applicants. We aim to fill the 3,500 jobs required during the construction phase with workers from the Islay province. By 2027, when operations commence, it will create 764 direct jobs and approximately 5,900 indirect jobs. In the early construction phase, access roads and platforms are 61% complete, and work continues on setting up a temporary camp and substantial earthworks. We have installed 59 kilometers of live fence to demarcate the property. Regarding the Los Chancas project, we acquired 3,125 hectares of surface land from the Tiaparo community in February, securing our interest in the project. Unfortunately, from March 12 to 14, illegal miners attacked our facilities in Mazopampa and Patahias, damaging equipment and property. We are working with authorities to remove these illegal miners to continue project development. For the Michiquillay project, as of March, exploration progress was at 39%, with nearly 146,000 meters drilled and 48,000 drill core samples for analysis. We will continue diamond drilling and will provide information for mineralization interpretation and model development. Geo-metallurgical, hydrological, and hydrogeological studies have commenced, with a geotechnical study set to begin shortly. In terms of ESG, we have established two high-performance schools, COAR, in the Tacna and Moquegua regions of Peru, with a total investment of $60 million. These schools will accommodate 600 outstanding students annually from vulnerable areas, contributing to closing the education gaps in the country, with plans to build a new COAR in the Apurimac region soon. Our social practices have once again been acknowledged, receiving the Exceptional Company award for the third consecutive year, recognizing our commitment to Mexican communities. This award celebrates our initiatives to enhance regional economic and recreational development by creating urban parks in mining municipalities, benefitting over 50,000 users annually from the sports, recreational, and cultural facilities we have developed. We have maintained our ratings in climate change and water security as evaluated by the Carbon Disclosure Project, which is the leading environmental disclosure platform globally. We ranked above the sector and North America's average in both these categories. Now, regarding dividends, the company policy is to evaluate our cash position, expected cash generation, capital investment plans, and other financial requirements during each Board meeting to determine the appropriate quarterly dividend. Accordingly, on April 10, Southern Copper Corporation declared a quarterly cash dividend of $0.70 per share of common stock and a stock dividend of 0.0099 shares of common stock per share, payable on May 19, 2025, to shareholders of record as of the close of business on May 2, 2025. This effectively translates to one share dividend for nearly every 100 shares held. With that, we conclude our presentation today. Thank you for joining us, and we are now ready to take your questions.

Our first question comes from Alejandro Demichelis from Jefferies.

Two questions, if I may, please. The first one is, as you mentioned, we have seen an improvement in your cash cost this quarter. How should we think about cash costs evolving in the rest of the year? That's the first question. And then the second question is on the dividend that you just mentioned; we have seen an increase in the proportion of the share dividend. So first, why was that? Or what was the thinking behind that? And how should we think about that proportion of shares on the dividend side?

We are cautious in managing the company’s cash flow. While we don't want to unnecessarily accumulate cash, it's essential to fund our operations appropriately. In the past quarter, we had to make a final tax payment to the authorities in both Mexico and Peru. Generally, when we experience a year with better results than the previous one, we end up making a significantly larger payment for closing out the prior year’s taxes, as well as additional worker benefits like profit sharing. Specifically last year, we had an extra tax payment of $711 million for the year 2024, which reduced our cash from operations more than expected, given the prices and production profile of the company. Additionally, we had to make two specific tax payments in both Mexico and Peru that were due in the first quarter. These factors affected our cash position in the first quarter, but we anticipate this won't continue for the rest of the year, especially in the second quarter, since Mexican taxes are typically paid in that time frame. For our cash costs for the remainder of the year, they will depend on market prices. We're performing slightly better than our initial plan, and I expect this trend to continue. If the prices for our by-products remain stable, I project we will finish the year with cash costs in the range of $0.75 to $0.80 per pound of copper for 2025.

Our next question comes from the line of David Fang from China International Capital Corp.

So my first question is regarding your CapEx. So we can see that your CapEx increased a lot both year-over-year and quarter-over-quarter during the last quarter. So how much of Tia Maria's construction are currently in this CapEx? And besides Tia Maria, is there any increment from other projects? That's my first question. I'll come back with my second one.

Okay. For Tia Maria specifically, we expect to spend a little bit less than $200 million this year, 2025. Next year, 2026, we will be spending about $980 million. And in 2027, $460 million. That's basically for Tia Maria. In the case of the other projects, Michiquillay and Los Chancas, we'll start spending more money as we move on from the exploration part of the development of the project towards the construction. That is being reflected in our capital for the next few years. I'll give you the number of our forecast at this point for CapEx. For this year, $1.5 billion; for next year, 2026, $2.3 billion; 2027, $2.7 billion; 2028, $2.7 billion. And about that until we start finishing our projects, that should be by about 2031, 2030.

That's really helpful. And my second question is we know that the treatment and refining charges or TC/RC have been inactive for a long time in the spot market. So I just wonder how much flexibility do you have at this moment for you to sell more copper concentrate instead of refined copper based on the current market conditions and the long-term contracts you have?

We need to adhere to our contracts, which are primarily based on refined copper or further processed materials such as rod and copper concentrates. When producing refined copper, we gain not only the copper itself but also precious metals that may go unrecognized in copper concentrates, along with other materials. A key by-product of a smelter is sulfuric acid. Upon reviewing the numbers, even though the terms for treatment and refining charges are currently favorable for concentrate producers, our smelters remain quite competitive. We find that there's not much difference between selling concentrates or selling refined copper. Therefore, we are comfortable with our approach. Our main focus this year is to comply with our signed contracts and deliver copper to our industrial customers, as well as others we serve through Southern Copper.

Our next question comes from the line of Timna Tanners from Wolfe Research.

I wanted to ask a few questions about the Mexican pipeline. You mentioned a few projects, Chalchihuites and another one I just Googled. So I just wanted to understand how imminent they might be, how incremental. There looks like there is some decent information about the opportunity there online, but I'd like to hear it from you. And then can you remind us of your exposure to the CME as well? We keep getting questions about that.

Timna, I'm sorry I didn't fully understand your first question.

Sure. So just trying to understand, you mentioned in the press release and in the remarks that you're looking into some new opportunities to expand the pipeline in Mexico. I might butcher this, but Chalchihuites and another one that you detailed, again, hard to pronounce. So wondering if you could provide some further detail about how imminent they might be, what mined products you're looking at, what time frame?

Okay. We have another project called Angangueo, which is an underground project being explored in the Michoacán state. It contains copper, silver, zinc, and lead, making it quite attractive, and we are currently in the initial stages of this project. The other project is Chalchihuites, which I understand might be difficult to pronounce. This project is located in the Zacatecas region and is in the exploration phase, and it's very interesting. Additionally, we are considering building a new smelter in Empalme, in northern Mexico. We will review this as a potential investment, but I believe now is not the ideal time to construct a smelter. However, when the right conditions arise, the company will evaluate moving forward with this.

Okay. So in terms of timeline, would we think about tacking them on your existing project pipeline? Or is it something that could be more imminent? And again, with...

It is not that imminent. As we move on with the projects, we will report on them and we'll add them to our list of projects at the Mexican operations when it is proper.

Okay. Helpful. And then about the CME exposure, if you could remind us on that as well.

What do you mean by CME?

The COMEX versus the LME exposure.

Okay. Okay. COMEX. Okay. Well, we do have some of our contracts based on COMEX. There is still a spread. Now it's much lower than the one that I mentioned. It's about less than 10% now, about 7% if you look at the prices yesterday. And we are, well, basically dealing with this as we deal with some other issues at the commercial side of the business.

Okay. And then one last one, if I could, please. You commented broadly on a trade war and the negative impact on global demand for copper. But any thoughts about Mexico possibly getting excluded in early negotiation of USMCA? Or any insights have you been in dialogue with the Mexican government? Just wanted your thoughts there.

There isn't much to update. Currently, we have no duties or tariffs on our copper operations in Mexico or Peru. In my opinion, this is a positive move from the U.S., as it is facing a significant copper shortage. Imposing tariffs on imported copper would not enhance domestic production; rather, it would raise costs for consumers of copper-manufactured products and reduce the country's competitiveness in various industries. Therefore, I believe it is a prudent decision for the U.S. government to refrain from implementing any tariffs on copper so far.

Our next question comes from the line of John Tumazos from John Tumazos Very Independent Research, LLC.

Congratulations on the good results, Raul. Some other large mining companies have had a lot of cost escalation. First Quantum and Newmont, for example, had 10%, 15% unit cost, sequential escalations. Newmont had a $2,000 gold cost in Argentina, for example. Could you explain in a little more detail the ability of Southern Copper to hold the cash cost at $0.77? How your suppliers don't hold you up and get price hikes? Or just how you're able to keep costs under control so uniquely and superbly?

Well, thank you very much for your comment, John. In reality, what we do is it's a part of the company DNA to be very cautious about costs, operating costs. The other point which is very important is that we continue our investment in maintaining our facilities in very good shape. I think that, in general, we do negotiate and have a very good relationship with our vendors. At the same time, we are focusing on increasing our production, maintaining our cost in line. Particularly in this year, we're seeing the positive effect of the important investment that we did in the last 3 years in Buenavista by building a new concentrator that is giving the company excellent results. The cash cost of this facility is extremely low per pound of zinc. We are seeing that as a major contribution of value this year. Besides that, the company had a very good year last year in production, and we have been maintaining our production level this year, which is excellent for us. I think that this combination of being well-focused on keeping our production on track, increasing it as much as we can, obviously, without jeopardizing the long-term situation of the company, as well as having strategic alliances and development opportunities together with our suppliers, are some of the reasons why the company is maintaining a very competitive cash cost and very likely the lowest of companies of this size in the copper space.

Our next question comes from the line of Myles Allsop from UBS.

Just a few quick questions. Maybe on the production guidance you've talked to 2025. Could you give us a sense whether you'd be able to maintain production in 2026 and 2027 as well? Or are you expecting a bit of a dip to come through? That's the first question.

Okay. We will have an adjustment in production for next year. At this point, we want to maintain our production level where it is. But eventually, we may reduce a little bit our profile next year for copper. After that, you will see the impact of our new projects, particularly in 2027, Tia Maria, and we are expecting it to move towards over 1 million tons for production in 2028 and on. We will be increasing our production from a little bit north of 1 million tons in 2028 up to 1 million and 80,000 tons by 2030.

Okay. Regarding Tia Maria, when do you expect to issue bonds ahead of the significant capital expenditures? Is the delay in financing for Tia Maria due to the project itself or market conditions? Should we anticipate some of the increased capital expenditures being postponed, or is it anticipated to happen soon?

No. We will move on with Tia Maria. Let me put it differently. We have no concerns on the Tia Maria construction in terms of the project viability. We believe that the project is moving forward in a very nice way. We are very happy with how the community is working with the company at several instances to develop the project as fast as we can. I will say that we are considering moving forward with some financing for the project, but we believe that the market has to be more stable and reflect better the qualities that the company has for going to finance the project. So for now, I would say that to your question, it's more the market than specifically the project.

That makes sense. And has there been any protest over the last quarter at Tia Maria? Or has the project now become more widely accepted by the local communities?

Quite clearly, it's the second option. The project has been very widely approved and supported by the locals. There is always a small group of people that is against it. That's part of human nature. About 40 persons demonstrate against the project in an area where 52,000 people live. You may imagine that this is not getting any traction at all.

Okay. That's encouraging. Maybe on the projects, El Pilar, it's not mentioned at all in the release. Is that reflecting a change in heart with that project? Or is it still bubbling along in the background?

No, we're doing some work. We haven't reported it because there is no update that has changed with respect to what we have been reporting. El Pilar, we're looking into ways to improve the recovery of the project. That is something that we're focusing on. We believe that we should have some information to report through the year. But for now, in this press release, we didn't believe it was necessary to include it because it had no significant changes since the last time.

Okay. That makes sense. Maybe one last question on the Los Chancas projects. Have you acquired all the necessary land? And how long does it take to resolve the issue with the illegal miners? It seems there's always a challenge every quarter to eliminate them. Is there any meaningful progress, or when can we expect drilling to resume?

With the acquisition that we mentioned in the press release, we have basically acquired almost all the land that we need, a very high percentage of what we need. In the case of the removal of the illegal miners, we are working with the authorities, and we are developing our plans to move on and retire these people from where they are operating. We're seeing very positive actions by the national government on this matter. We believe that we could see some progress through the year and we initiate the work that we have to move on with. We believe that if we were to solve this problem, we will probably in 1 year, 1.5 years, be finishing the environmental as well as permitting part of the project, and that could open up the construction of Los Chancas. Hopefully, a little bit better than we're expecting now, but that's more a desire than the actual forecast that we have.

Our next question comes from the line of Juraj Domic from LarrainVial.

Just a single one from our side. Just to have your comments on how demand has been so far in the second quarter. Have you seen any variability or weakness in any of the markets?

I'm sorry, could you repeat that? I couldn't quite catch whether you were talking about a specific market or the copper market. Could you please clarify?

No, not any specific markets. Just an overall view would be perfect.

Overall, we maintain a positive outlook on the future of copper. We believe that demand is shifting, primarily from infrastructure projects in Asia towards new energy technologies and artificial intelligence, which are gaining momentum quickly. A notable aspect is that solar energy plants require significantly more copper per megawatt of capacity compared to traditional generation methods like hydro or gas combustion. This trend is encouraging. For example, offshore and onshore wind energy plants may need as much as 10 tons of copper per megawatt, whereas gas-powered facilities might only require 2 or 3 tons. Therefore, the outlook appears favorable. Additionally, the growth of artificial intelligence necessitates substantial amounts of not just copper, but also other materials like zinc and silver, which we are producing. Consequently, we expect good support for our prices in the coming years. Our only concern is the potential for economic slowdowns in the two major global economies, which could indirectly impact copper demand, but we anticipate any effects will be short-lived.

Our next question comes from the line of Camilla Barder from Bradesco BBI.

I have two questions here. The first one, you mentioned you see a potential decline in copper production in 2026. I was just wondering if copper prices remain at a low level, could you consider perhaps altering your production plans and go into areas of lower grades to increase production next year? That's my first question. And the second question, just a follow-up on costs. You mentioned cash costs after by-products in the range of $0.70 to $0.80 for this year. Can you comment please on the expectations of cash costs before by-products for 2025?

I think I mentioned already that we're expecting copper cash costs to be at about $0.75 to $0.80 per pound through this year. Hopefully, with better by-product prices, we may be a little bit better off than that, but that's our current expectation. For copper prices, generally speaking, we don't move our long-term production plans due to copper price changes. We're doing our plants using a much lower copper price. We're very conservative in that regard. Our plants are prepared using a long-term price of $3.30. That is a very conservative price nowadays. For us, it will be more like if we can maintain our production next year, that will be excellent. But so far, the plan calls for a small reduction in our production that is currently under review.

Okay. Can you hear me?

Yes, we do.

On the cash cost, my question was actually on costs before by-products.

Okay. Okay. Okay. That one has decreased. Keep in mind that we are adding to that cost the total cost of operation, the cost of the new zinc concentrator, which was not included 2 years ago. Our cash cost has decreased on a per pound basis given the productivity that the company has. I think it's important to share this point. The concentrator that we have built for Buenavista has made us to process zinc only this year. But we could do a mix between zinc and copper production in the Buenavista facilities, that we are not doing now because we have found that there is much more value in focusing only on zinc this year and in a few more than specifically copper on this specific facility. This has decreased the production that we may get from the Buenavista facility for about 2,000 tons that we had last year, and we are not having that volume this year. There are always possibilities of improving production. In this case, we did review the process and concluded that it was better to focus on zinc-only production with the Buenavista zinc facility than doing the mix between zinc and copper because by changing the processes from one metal to the other, we spent some time that has generated less value if we were only focusing on zinc, and that's what we're doing this year and probably a couple more.

Our next question comes from the line of Timna Tanners from Wolfe Research.

I just wanted to follow up on my last question and fully appreciate that we haven't seen tariffs on copper exported to the U.S. yet. But the market is obviously pricing in some chance of that happening. And it would be great to hear what Southern Copper's response could be to a 25% tariff on imports. How could Southern Copper react to that?

We believe that if we have a tariff as the one that you mentioned, it will make us reassign some of the production that we have to some other markets. By doing that, we will very likely have decreased significantly the impact that this may have on the company. At this point, we prefer to wait and see what's the end of this situation. As I mentioned, we are pleased to see that the U.S. government has recognized the important role of copper as some material to be imported with zero duties and hopefully, that will be the case in the long term.

Our next question comes from the line of Emerson Verrier from Goldman Sachs.

So I got two questions. The first one is on the COMEX LME price arbitrage. So I understand that the company might have been benefiting from this exposure to COMEX sales. So a few questions on this matter. What percentage of your contracts are spot? And what is the average duration for the remaining ones? And just a follow-up on this COMEX LME price arbitrage. For how long do you guys think you can benefit from this? I mean, U.S. customers do not want to double pay the tariff and non-U.S. customers would eventually switch to LME. That's what we think. So are you guys seeing clients in COMEX contracts already asking for renegotiation or early cancellation? Those are my questions.

We are not commenting on this. Our commercial team is in discussions with our customers about this matter. I'm sorry, but I have no comments on your question.

No worries at all. Can I just follow up on another point then? We saw by late March some news regarding projects from local communities in the Peru, Antapaccay region. So do you guys have any update on the situation, how this is being addressed? And for Tia Maria specifically, do you guys already have local agreements? How do you see this relationship evolving in Tia Maria's region?

What we're seeing in the case of Tia Maria is that the population of the area is much more focused on seeing the opportunities and the advantages that the project is bringing them than protesting against Tia Maria. I mentioned before that the number of protestors is relatively small vis-a-vis the 52,000 population of the Islay province. We believe that and we hope that this environment prevails through the construction phase. So far, we don’t have any significant concerns regarding the protest in Tia Maria. Thank you very much. With this, we conclude our conference of Southern Copper's First Quarter 2025 Results. We certainly appreciate your participation and hope to have you back with us when we report the second quarter of this year results. Thank you very much for being with us today, and have a nice day.

This concludes today's conference call. Thank you for participating. You may now disconnect.