10-QPeriod: Q1 FY2023

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 2, 2023For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a modest increase in net sales for the first quarter of 2023, reaching $2.79 billion, a slight uptick from $2.76 billion in the prior year period. This growth was primarily driven by increased sales volumes of copper, silver, and zinc, alongside a significant surge in molybdenum prices. However, lower copper prices, coupled with reduced molybdenum sales volumes, tempered overall performance. Net income attributable to SCC saw a positive increase of 3.6% to $813.2 million, or $1.05 per diluted share, up from $784.7 million, or $1.02 per diluted share, in Q1 2022, indicating improved profitability despite a challenging pricing environment for key commodities. The company demonstrated strong operational execution with a 4.1% increase in mined copper production, largely due to improved performance at the Cuajone mine and normalized operations at Toquepala. Despite rising operating costs, particularly in its Mexican underground operations (IMMSA), SCCO managed its overall cost structure effectively, with operating cash costs per pound of copper produced (net of by-products) increasing to $0.76 from $0.55 year-over-year. Significant capital investments continue, with $238.1 million deployed in Q1 2023 towards growth projects in Mexico and Peru, underscoring the company's commitment to long-term production expansion.

Financial Highlights

48 data points
Beta

Revenue

$2.79B

57.3% Gross Margin

Net Income

$813.20M

29.1% Net Margin

EPS (Diluted)

$1.05

Total Assets

$17.32B

Cash & Equivalents

$2.30B

Free Cash Flow

$947.10M

Financial Statements
Beta
Revenue$2.79B
Cost of Revenue$1.19B
Gross Profit$1.60B
SG&A Expenses$30.40M
Operating Expenses$1.44B
Operating Income$1.35B
Net Income$813.20M
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)773.10M
Shares Outstanding (Diluted)773.10M

Key Highlights

  • 1Net sales increased slightly to $2.79 billion, driven by higher sales volumes of copper, silver, and zinc, and a significant jump in molybdenum prices.
  • 2Net income attributable to SCC rose by 3.6% to $813.2 million ($1.05 per diluted share), reflecting improved profitability despite lower copper prices.
  • 3Mined copper production increased by 4.1% year-over-year, primarily due to strong performance at the Cuajone mine.
  • 4Operating cash costs, net of by-product revenues, increased to $0.76 per pound of copper produced, up from $0.55 in Q1 2022, largely due to higher production costs.
  • 5Capital expenditures totaled $238.1 million in Q1 2023, reflecting ongoing investment in growth projects.
  • 6The company ended the quarter with a strong cash position of $2.3 billion, providing ample liquidity.
  • 7A new fast-track bill impacting the mining industry was approved by the Mexican Senate in late April 2023, introducing changes to concession periods, water use, environmental guarantees, and exploration governance, the full impact of which is still under analysis.

Frequently Asked Questions

Southern Copper's net sales saw a modest increase to $2.79 billion in Q1 2023. This was primarily driven by higher sales volumes in copper, silver, and zinc, complemented by a significant 68.7% increase in molybdenum prices. However, lower copper prices and reduced molybdenum sales volumes partially offset these gains.

Net income attributable to Southern Copper Corp. increased by 3.6% to $813.2 million in Q1 2023 from $784.7 million in Q1 2022. This improvement was mainly due to the higher sales volumes of key metals, although this was somewhat counteracted by the decline in average prices for most metals, with the exception of molybdenum.

The company expects copper production to increase by 5% in 2023 to approximately 939,400 tonnes. While the LME copper price saw a decline of 10.6% year-over-year in Q1 2023, the outlook for the copper market in 2023 is seen as positive due to factors like potential easing of interest rate hikes, China's economic recovery, uncertainty in future production from Chile and Peru, low global inventories, and copper's essential role in the clean energy transition.

Southern Copper invested $238.1 million in capital projects during Q1 2023. Key ongoing projects include the Buenavista Zinc project in Mexico, expected to double zinc production capacity and commence operations in the second half of 2023, and the Pilares project in Mexico, which is already operating. Other significant projects in development or planning stages include El Pilar in Mexico, and Quebrada Honda dam expansion, and the potential Tia Maria project in Peru.

In late April 2023, the Mexican Senate approved a bill that introduces significant changes to the mining industry, including shorter concession periods, new water use restrictions, requirements for environmental liability guarantees, and altered exploration governance. While Southern Copper believes it already meets many of these environmental and water management requirements, the company is analyzing the full impact of these legislative changes on its business and future growth plans.