Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Southern Copper Corp (SCCO, Financial) reported a 36% increase in net sales for the second quarter of 2024, driven by higher sales volumes and increased prices for copper, molybdenum, silver, and zinc.
- Copper production increased by 15% in Peru, with significant growth at the Toquepala mine due to higher ore grades.
- The company's adjusted EBITDA for the second quarter of 2024 was $1,797 million, a 61% increase compared to the same period in 2023, with an adjusted EBITDA margin of 58%.
- Southern Copper Corp (SCCO) completed the ramp-up of the Buenavista Zinc concentrator, which is now operating at full capacity and contributing significantly to zinc production.
- The company is making progress on its Tia Maria project, which is expected to generate significant economic and social benefits for the Arequipa region, with plans to start operations in 2027.
Negative Points
- Despite the increase in sales, Southern Copper Corp (SCCO) experienced an 8% rise in total operating costs and expenses, driven by higher costs in workers' participation, repair materials, and contractors.
- The company reported a decrease in cash flow from operating activities by 18% in the first half of 2024 compared to the same period in 2023, primarily due to an increase in working capital.
- Southern Copper Corp (SCCO) is facing challenges with weak copper demand from China, particularly from its real estate market, which could impact future sales.
- The company is revising its capital budget for the Tia Maria project due to inflation and additional facilities, which could lead to increased capital expenditures.
- There is uncertainty regarding the environmental approval for the Tia Maria project, which could introduce new risks and potentially complicate the project's progress.
Q & A Highlights
Q: Can you explain the rationale behind the new environmental approval for Tia Maria and the potential shift from a desalination plant to a dam for water supply?
A: We are currently maintaining our approved project, which includes a desalination plant. If a dam becomes a viable option in the future, we will consider it. We are revising the capital expense of $1.4 billion to include new facilities and account for inflation. This includes a new road to avoid disturbing the Tambo Valley, addressing local concerns.
Q: What is the outlook for cash costs before by-products?
A: We expect cash costs before by-products to be around $2 per pound this year, including costs from our new zinc concentrator. This could decrease when Tia Maria starts production in 2027, as it has a lower expected cash cost.
Q: How confident are you in meeting your production guidance for the year?
A: We are confident in maintaining or improving our production guidance. Our new zinc concentrator is operating well, and water scarcity issues at Buenavista have been resolved, which should boost SX-EW copper production in the second half of the year.
Q: Can you provide guidance on copper production for the next few years?
A: For 2024, we expect 963,200 tons. In 2025, production will slightly decrease to 921,000 tons due to lower ore grades. By 2028, with Tia Maria at full production, we expect over 1 million tons.
Q: How do you view capital allocation priorities, especially with upcoming projects like Tia Maria?
A: Our focus is on organic growth, with projects like Tia Maria, Los Chancas, and Michiquillay in Peru, and El Arco and El Pilar in Mexico. We are also considering metallurgical complexes in both countries to process our concentrate production.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
