Southern Copper Corporation (SCCO) Q4 2025 Earnings Call Transcript
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Overview
The company demonstrates strong production growth, particularly in zinc and silver, and maintains a positive copper market outlook. Despite minor setbacks in copper and molybdenum, optimistic guidance for Tia Maria and other projects bolster sentiment. The Q&A reveals effective cost management and potential dividend increases, enhancing shareholder value. Although some management responses lack clarity, the overall sentiment remains positive due to strategic expansions and partnerships, with potential risks being actively addressed.
Key Financial Performance
Net Sales Record sales of $13.4 billion in 2025, a 17% increase from 2024. This growth was driven by higher sales volumes for molybdenum, zinc, and silver, as well as stable copper sales volumes.
Adjusted EBITDA Record high of $7.8 billion in 2025, reflecting a 22% increase over 2024. This was due to higher production volumes and better metal prices.
Net Income $4.3 billion in 2025, a 28% increase from 2024. This improvement was driven by increased net sales and strict cost control measures.
Copper Production Decreased 1.8% year-over-year to 956,270 tons in 2025. This was due to lower production at Buenavista and Peruvian mines, partially offset by increases at IMMSA and La Caridad mines.
Molybdenum Production 31,200 tons in 2025, a 7% increase from 2024. Growth was driven by higher production at Toquepala and Caridad mines, partially offset by lower production at Buenavista and Cuajone mines.
Silver Production 24 million ounces in 2025, a 15% increase from 2024. This was due to higher production at all mines.
Zinc Production 165,500 tons in 2025, a 36% increase from 2024. Growth was driven by additional production from the Buenavista zinc concentrator and increased production at the Santa Barbara mine, partially offset by lower production at Charcas and San Martin operations.
Operating Costs Increased by $282 million (19%) in Q4 2025 compared to Q4 2024. The increase was due to higher costs in workers' participation, purchased copper, inventory consumption, and operation contractors and services, partially offset by lower labor costs in Peruvian operations.
Adjusted EBITDA Margin 58% in 2025, up from 56% in 2024, reflecting improved operational efficiency.
Cash Flow from Operating Activities $4.8 billion in 2025, an 8% increase from 2024, driven by higher net income, partially offset by increased net operating assets.
Operating Cash Cost per Pound of Copper (Before By-Product Credits) $2.17 per pound in 2025, a $0.04 increase from 2024, due to higher production costs and administrative expenses.
Net Income Margin 32% in 2025, up from 30% in 2024, driven by increased net sales and cost control measures.
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Operating Highlights
Mined zinc production: Increased 36% year-on-year, with an additional 52,500 tons from the Buenavista zinc concentrator.
Mined silver production: Increased 15% year-on-year, driven by higher production at all mines.
Molybdenum production: Increased 7% year-on-year to 31,200 tons.
Copper market: London Metal Exchange copper price increased 21% year-on-year to $5.03 per pound in Q4 2025. COMEX market saw a 22% increase to $5.15 per pound. Estimated copper market deficit of 320,000 tons for 2026.
Net sales: Achieved record sales of $13.4 billion in 2025, a 17% increase from 2024.
Adjusted EBITDA: Reached a record $7.8 billion in 2025, a 22% increase from 2024.
Net income: Hit a record $4.3 billion in 2025, a 28% increase from 2024.
Operating costs: Increased by $282 million (19%) in Q4 2025 compared to Q4 2024, driven by various factors including workers' participation and purchased copper.
Tia Maria project: Located in Peru, with a $1.8 billion budget, 24% complete as of 2025. Expected to generate $20.2 billion in exports and $4.6 billion in taxes over 20 years.
Los Chancas project: Progress hindered by illegal miners; company working with authorities to regain control.
Michiquillay project: Located in Peru, expected to produce 225,000 tons of copper annually with a $2.5 billion investment.
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Risk or Challenges
Copper Production: Copper production decreased by 1.8% in 2025 compared to 2024, and the 2026 forecast shows a further decline of 4.7% due to lower ore grades at Peruvian operations.
Molybdenum Production: Production at Buenavista and La Caridad mines decreased, partially offsetting gains at other mines. The 2026 forecast shows a decline to 26,000 tons from 31,200 tons in 2025.
Operating Costs: Total operating costs and expenses increased by 19% in Q4 2025 compared to Q4 2024, driven by higher costs in workers' participation, purchased copper, inventory consumption, and operation contractors.
Illegal Mining: The presence of illegal miners in the Los Chancas project area in Peru has prevented project advancement, posing a significant operational and strategic risk.
Tia Maria Project: The Tia Maria project in Peru is only 24% complete as of the end of 2025, with significant capital investment still required. Delays or cost overruns could impact financial performance.
Asset Retirement Obligations: A one-time adjustment of $60 million for asset retirement obligations at Mexican operations, particularly Buenavista, increased costs.
Cash Costs: Operating cash cost per pound of copper increased by 3% in Q4 2025 compared to Q3 2025, driven by higher production costs and administrative expenses.
Supply Chain and Energy: Delays in energy supply infrastructure for the Tia Maria project, including the main substation and transmission line, could impact project timelines.
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Guidance & Outlook
Copper Production: For 2026, Southern Copper expects to produce 911,400 tons of copper, representing a decrease of 4.7% compared to 2025. This decline is attributed to lower ore grades at Peruvian operations.
Molybdenum Production: The company projects molybdenum production of 26,000 tons in 2026.
Silver Production: Southern Copper anticipates producing 24 million ounces of silver in 2026, a slight decrease of 2% compared to 2025.
Capital Investments: The company plans to continue its capital investment program exceeding $20.5 billion for the decade, including projects in Peru and Mexico. In 2025, $1.3 billion was spent, and significant progress is expected on projects like Tia Maria, Los Chancas, and Michiquillay.
Tia Maria Project: The Tia Maria project in Peru is expected to begin operations in 2027, generating $20.2 billion in exports and $4.6 billion in taxes and royalties over its first 20 years. The project is currently 24% complete.
Michiquillay Project: The Michiquillay project in Peru is expected to produce 225,000 tons of copper annually, with an estimated investment of $2.5 billion. Geological reviews and mine planning are ongoing.
Copper Market Outlook: A copper market deficit of approximately 320,000 tons is projected for 2026, based on current supply and demand dynamics.
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Shareholder Return Plan
Quarterly Cash Dividend: Southern Copper Corporation announced a quarterly cash dividend of $1 per share of common stock.
Stock Dividend: A stock dividend of 0.0085 shares of common stock per share was announced.
Dividend Payment Date: The dividend is payable on February 27, 2026, to shareholders of record at the close of business on February 10, 2026.
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Key Q&A
Q:What are the updated thoughts on cost guidance given currency inflation and local currencies versus the dollar?
A:The worst part of inflation post-COVID has passed. Costs are more affected by currency appreciation for the peso and Peruvian sol than specific inflation from Mexico or Peru.
Q:What is the guidance on operating costs for the next quarter or year?
A:Operating costs are expected to be relatively flat on a per pound basis. Production will be slightly less than last year, but strong by-product production will help offset costs.
Q:Can silver production exceed expectations in 2026 given strong prices?
A:The company expects silver production of about 24 million ounces in 2026. They are focusing on high-grade zinc and silver ore at Buenavista, which could improve silver production. If current silver prices hold, silver may become the main by-product.
Q:Why is molybdenum production expected to decline in 2026?
A:Lower ore grades for both copper and molybdenum in certain operational areas are causing the decline. The company hopes to improve on the forecast.
Q:What is the latest update on the Cuajone concentrator expansion?
A:The project is still under preparation and has not yet been submitted to the Board for approval. The company views the project positively but needs to complete its work before presenting it.
Q:What is the timing and cash flow forecast for the Tia Maria project?
A:The company has committed $800 million in CapEx, with $508 million forecasted for cash outflow in 2026. Construction is expected to finish by mid-2027, with production of 30,000 tons in the second half of 2027 and full capacity of 120,000 tons per year in 2028.
Q:Why is the Tia Maria CapEx forecast lower than previously disclosed?
A:Better payment terms for purchase orders reduced the cash outflow forecast for 2026. The overall budget remains unchanged, and final payments will be made in 2027.
Q:What is the expected impact of a 5% production fall in 2026 on cash costs?
A:A 5% production fall is expected to increase cash costs by a similar percentage. The company is taking initiatives to control costs, including reducing maintenance expenditures and contractor services.
Q:What are the cost structures for Mexican and Peruvian mines?
A:39% of costs are in Mexican pesos, 10% in Peruvian sols, and 51% in U.S. dollars.
Q:What is the long-term production guidance?
A:2026 production is expected to be slightly above 900,000 tons. Production will increase to 970,000 tons in 2028 with Tia Maria's full-year contribution, and reach 1,060,000 tons in 2029 and 2031.
Q:What is the outlook for Buenavista and Caridad mines post-2030?
A:The company plans to find new reserves for Caridad and may consider expanding Buenavista's capacity. These plans are still under review.
Q:How will stronger cash inflows from higher copper prices be utilized?
A:The Board may increase the cash portion of dividends if results improve. Growth plans and dividend decisions depend on the Board's discretion.
Q:Does higher copper pricing make the Los Chancas project easier or more challenging?
A:Higher prices provide better returns and resources for project development. However, illegal mining remains a challenge. The company expects government action to address this issue.
Q:What is the company's view on the copper market and price momentum?
A:The company expects a market deficit of 320,000 tons. Demand is supported by electric vehicles, AI, and power centers, while China's real estate market is a concern. The company does not forecast prices but focuses on cost control and production.
Q:Will the Buenavista zinc concentrator continue prioritizing zinc over copper in 2026?
A:The company will continue prioritizing zinc and silver production at Buenavista based on current price dynamics. This strategy is reviewed regularly and may change if relative prices shift.
Q:What is the expected cadence of copper production in 2026?
A:Copper production is expected to be even throughout the year. Toquepala will experience lower ore grades temporarily, while Cuajone's production remains stable at its new structural ore grade.
Q:What are the key risks and timeline for the Tia Maria SX-EW operation?
A:The plant is expected to be operational by mid-2027, with production starting in the second half. The company is working with local communities to ensure smooth progress and mitigate risks.
Q:Has the percentage of COMEX sales changed significantly?
A:The company declined to comment on changes in COMEX sales percentages.
Q:What is the outlook for mining investments and licensing in Mexico?
A:The company sees an improved relationship with the Mexican government, which may accelerate project approvals. However, there is no specific progress to report.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the following:
1. The percentage of COMEX sales and any changes in this metric.
2. Specific progress or approvals for open-pit projects in Mexico, including El Arco.
3. Detailed updates on the Cuajone concentrator expansion timeline and decision-making process.
4. Comprehensive strategies to address illegal mining challenges at Los Chancas.
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Earnings Word Cloud
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SCCO Transcript
Southern Copper Corporation (SCCO) Q4 2025 Earnings Call Transcript
Positive1-28
The company demonstrates strong production growth, particularly in zinc and silver, and maintains a positive copper market outlook. Despite minor setbacks in copper and molybdenum, optimistic guidance for Tia Maria and other projects bolster sentiment. The Q&A reveals effective cost management and potential dividend increases, enhancing shareholder value. Although some management responses lack clarity, the overall sentiment remains positive due to strategic expansions and partnerships, with potential risks being actively addressed.
Southern Copper Corporation (SCCO) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call reveals strong financial performance with increased zinc production and decreased operating cash costs. The Q&A section highlights confidence in future projects and organic growth, despite some vague responses. Positive aspects include increased cash flow, cash position, and strategic plans for future production. The lack of major negative concerns or uncertainties, combined with optimistic guidance, suggests a positive short-term stock price movement.
Earnings call transcript: Southern Copper beats Q1 2025 forecasts, stock dips
Unknown4-25
The earnings call presents a mixed picture. Positive financial metrics include a 20% YoY increase in net sales and a 29% increase in net income, suggesting strong performance. However, regulatory issues, community protests, and potential production risks in 2026 present concerns. The Q&A reveals cautious management of cash flow and a positive copper demand outlook, but also highlights risks like tariffs and unclear contract details. Despite a dividend announcement, the lack of new partnerships or significant guidance changes tempers overall sentiment. Thus, the stock price is expected to remain stable within the next two weeks.
Southern Copper Corporation (SCCO) Q2 2024 Earnings Call Transcript
Neutral7-22
SCCO Report
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