10-KPeriod: FY2019

SOUTHERN COPPER CORP/ Annual Report, Year Ended Dec 31, 2019

Filed February 28, 2020For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported strong operational performance for the year ending December 31, 2019, with record net sales of $7.3 billion. This growth was driven by increased sales volumes across its key products, particularly copper, molybdenum, and silver. Despite a slight dip in copper and molybdenum prices, the company's focus on cost control and production efficiency, coupled with robust copper reserve positions, positions it favorably within the global mining industry. SCCO's capital investment program remains significant, with substantial spending allocated to expanding production capacity and maintaining operational excellence across its Peruvian and Mexican facilities. The company also highlighted its commitment to social and environmental responsibility, continuing to invest in community programs and sustainable practices. While facing some market volatility and operational risks inherent in the mining sector, SCCO's integrated business model, substantial reserves, and ongoing investment in growth projects suggest a resilient operational outlook. Investors can monitor copper price fluctuations and the company's progress on its extensive capital project pipeline for key performance indicators.

Financial Highlights

52 data points
Beta

Revenue

$7.29B

40.0% Gross Margin

Net Income

$1.49B

20.4% Net Margin

EPS (Diluted)

$1.92

Total Assets

$16.41B

Cash & Equivalents

$1.93B

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$7.29B
Cost of Revenue$3.61B
Gross Profit$2.91B
SG&A Expenses$131.80M
Operating Expenses$4.53B
Operating Income$2.75B
Net Income$1.49B
EPS (Basic)$1.92
EPS (Diluted)$1.92
Shares Outstanding (Basic)773.10M
Shares Outstanding (Diluted)773.10M

Key Highlights

  • 1Record net sales of $7.3 billion in 2019, an increase from $7.1 billion in 2018, primarily driven by higher sales volumes of copper, molybdenum, and silver.
  • 2Copper production increased by 12.5% year-over-year to 2,191.0 million pounds, boosted by strong performance at Toquepala and Buenavista mines, and the restoration of San Martin mine operations.
  • 3Significant capital investments of $707.5 million were made in 2019 to support growth projects and operational improvements, with $1.15 billion planned for 2020.
  • 4The company maintains a strong liquidity position, with cash and cash equivalents of $1.9 billion as of December 31, 2019.
  • 5Southern Copper emphasizes its position as one of the world's largest copper producers with the largest copper reserve position globally.
  • 6The company's operating cash cost per pound of copper, net of by-product revenues, was $0.88 in 2019, reflecting efficient cost management.
  • 7Total proven and probable copper reserves were estimated at 52.7 million tons, based on SEC guidance.

Frequently Asked Questions

In 2019, Southern Copper's revenue was primarily driven by copper sales, which accounted for approximately 80.2% of total net sales. Molybdenum, silver, and zinc contributed significant amounts as well, representing 7.5%, 4.5%, and 3.8% of net sales, respectively. The company's integrated operations allow for the recovery of these valuable by-products during copper production.

Southern Copper saw a significant increase in production volumes in 2019 compared to 2018. Copper mine production rose by 12.5% to 2,191.0 million pounds, primarily due to higher output at the Toquepala mine following the ramp-up of its new concentrator and improved performance at the Buenavista mine. Molybdenum production also increased by 22.3%, and zinc production saw a 4.4% rise, supported by improved operations and the restoration of production at the San Martin mine.

Southern Copper made substantial capital investments totaling $707.5 million in 2019, with plans to increase this to $1.15 billion in 2020. These investments are focused on expanding production capacity, enhancing operational efficiency, and developing new growth projects. The company aims to increase its annual copper production to 1.5 million tons by 2028 through the development of new projects, including Buenavista Zinc, Pilares, and El Pilar in Mexico, and Los Chancas and Michiquillay in Peru.

While net sales increased due to higher volumes, the company's financial results were influenced by lower metal prices in 2019. The average LME copper price decreased by 8.1% to $2.72 per pound, and molybdenum prices fell by 5.0%. Zinc prices also declined by 12.8%. Silver prices showed a modest increase of 3.3%. These price fluctuations, combined with increased operating costs and depreciation, led to a slight decrease in net income attributable to SCC in 2019 compared to 2018.