サザン・カッパー（SCCO）2026年第3四半期決算説明会：過去最高益とプロジェクトの最新情報

主要ポイント

• サザン・コッパー（Southern Copper Corporation、NYSE: SCCO）は、2026年第3四半期の売上高が過去最高の47億ドル、調整後EBITDAが30億ドル、純利益が18億ドルになったと発表しました。前年同期比ではそれぞれ39%増、54%増、63%増となりました。
• 調整後EBITDAマージンは59%から65%に拡大し、純利益率は33%から38%に上昇しました。銅の販売量減少や営業費用の増加があったものの、銅および副産物の価格上昇がそれを補いました。
• ペルーでの品位および回収率の低下により生産量が減少し、銅生産量は前年同期比1%減の232,396トンとなりました。経営陣は2026年の銅生産量を当初計画を0.7%上回る918,000トンと予想しています。
• 12億ドルの副産物クレジットに支えられ、銅1ポンドあたりのネットキャッシュコストは77%減少して0.09ドルとなりました。クレジット差し引き前のキャッシュコストは10%増加して2.46ドルとなりました。
• ティア・マリア（Tia Maria）プロジェクトは9月30日時点で進捗率が50%に達し、2028年上半期に操業を開始する予定です。ティア・マリアとエル・ピラール（El Pilar）を合わせ、年間156,000トンの精錬銅生産量の追加が見込まれています。
• 経営陣はインフレの影響に伴いプロジェクト予算を見直しており、2026年通期決算発表時に改定後の設備投資額および2027年の生産見通しを提供する予定です。

主要財務データ

事業および操業実績

第3四半期の売上高のうち銅が74%を占めました。生産量は1%減の232,396トンとなり、トケパラ（Toquepala）およびクアホネ（Cuajone）での品位と回収率の低下により、ペルーでの生産量が6%減少しました。メキシコでの生産量は、ブエナビスタ（Buenavista）およびIMMSAでの増産を主因に2.5%増加しました。製錬所および精錬所の生産量はそれぞれ18%増、16%増となりました。

2026年最初の9か月間の銅生産量は2.9%減の693,602トンでした。第3四半期の銅売上高は、販売量が0.4%減少したにもかかわらず41%増加しました。LME銅平均価格は44%上昇して1ポンドあたり6.41ドルとなり、COMEX平均価格は34%上昇して6.48ドルとなりました。

モリブデンは売上高の12%を占めました。平均価格は36%上昇して1ポンドあたり32.93ドルとなったものの、生産量は2%減少しました。銀は売上高の7%を占め、平均価格は59%上昇して1オンスあたり62.80ドルとなりました。銀の鉱山生産量は2%減少、精錬銀生産量は6%減少しました。

亜鉛は売上高の4%を占めました。平均価格は36%上昇して1ポンドあたり1.74ドルとなりましたが、鉱山生産量は8%減の41,880トンとなり、精錬生産量は6%減少しました。

経営陣は2026年の銅市場が若干の供給過剰になると予測しています。10月9日時点におけるLME、COMEX、上海および保税倉庫の合計在庫は110万5,000トンで、世界需要の約14日分に相当します。

業績見通し（ガイダンス）

サザン・コッパーは2026年の銅生産量を918,000トンと予想しており、これは920,000トンをわずかに下回るものの、当初計画を0.7%上回ります。また、モリブデンは当初計画を12%上回る29,000トン、銀は計画通りの2,400万オンス、亜鉛は計画を1%下回る163,400トンを見込んでいます。

2026年第4四半期の副産物クレジット差し引き前キャッシュコストについて、経営陣は生産目標の達成を前提として、第3四半期と同等かそれをやや上回ると予想しています。2027年の詳細な生産およびコストガイダンスは示されておらず、2027年1月に改定見通しを発表する予定です。

ティア・マリアは操業初期の数年間、年間120,000トンの銅カソードを生産する予定です。同プロジェクトは9月30日時点で50%完了しており、8億8,400万ドルが投資され、11億ドルが確保されています。操業開始は2028年上半期に予定されています。

エル・ピラールの推計投資額は5億5,100万ドル、年間計画生産量は36,000トンの銅カソードです。建設は2027年第1四半期に開始され、2029年下半期に生産を開始する見込みです。

提案されているクアホネの拡張計画では、推計6億8,000万ドルを投じて処理能力を日量90,000トンから120,000トンに引き上げる予定です。これにより、年間平均で55,000トンの銅と1,400トンのモリブデンを生産できる可能性があります。経営陣は日量150,000トンの選択肢も技術的検討を行っているものの、日量120,000トンが引き続き最も有力なシナリオであると述べています。

ロス・チャンカス（Los Chancas）は、推定設備投資額26億ドルで年間130,000トンの銅と7,500トンのモリブデンを生産することを目標としており、2031年までの操業開始を見込んでいます。ミチキライ（Michiquillay）は年間225,000トンの銅を生産する見込みで、投資額は約25億ドルと試算され、2032年の生産開始を目指しています。

リスクおよび注視すべき点

• トケパラおよびクアホネでの鉱石品位と回収率の低下により、当四半期のペルーでの銅生産量が減少しました。
• 経営陣は、機器および広範なインフレの影響を考慮してティア・マリアやその他のプロジェクト予算を見直しています。改定後の設備投資前提は通期決算時に発表される見込みです。
• ロス・チャンカスの鉱区内には依然として200人以上の違法採掘者が残留しています。環境影響調査、許認可取得、その他の開発作業を進める前に、彼らの退去が必要です。
• エルニーニョ現象が発生した場合、ペルー南部が干ばつに見舞われる可能性があります。経営陣は水源の確認を行っており、2027年に向けて十分な供給量を確保できる見込みであると述べました。
• 溶錬・精錬費（TC/RC）のマイナス化により、新たな製錬能力への投資の魅力が低下しています。経営陣は、サザン・コッパーがペルーまたはメキシコで新しい製錬所の整備を進めるには、市場環境の変化が必要になると述べています。
• より大規模な日量150,000トン規模のクアホネ拡張計画の時期と設備投資額については、引き続き技術的検討と取締役会の承認が必要です。

アナリスト質疑応答のハイライト

アナリストはティア・マリアの変更されたスケジュールと設備投資コストのインフレ可能性に注目しました。経営陣は、期間延長の理由を機械設備の組み立ておよびエンジニアリング作業によるものと説明しましたが、改定後の設備投資見積もりの提示は次回の決算発表電話会議まで見送りました。

株主還元について、経営陣は配当の決定が引き続き取締役会の承認対象であり、現金残高、営業キャッシュフロー、投資計画、その他の財務的要件が考慮されることを強調しました。サザン・コッパーは、普通株式1株につき1.30ドルの四半期現金配当および0.0106株の株式配当を発表しました。

クアホネについて、経営陣は技術的検討が進展しており、日量120,000トンへの拡張計画は最終決定に近いと述べました。そのシナリオに必要な水需要は特定されていますが、日量150,000トンへの拡張の実現可能性と設備投資コストについては引き続き検討中となっています。

ロス・チャンカスについて、経営陣は比較的短期間で違法採掘者が退去すれば2028年下半期に建設を開始できる可能性があり、目標とする2031年の稼働開始を支えることになると述べました。ミチキライの地域社会との関係構築について経営陣は正しい軌道に乗っていると表現したものの、同プロジェクトは依然として許認可や開発の初期段階にあると注記しました。

決算説明会 文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to Southern Copper Corporation's Third Quarter and 9 Months 2026 Results Conference Call. With us this morning, we have Southern Copper Corporation's Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the third quarter and 9 months 2026 as well as answer any questions that you might have.

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.

Raul Jacob

Thank you very much, Victor. Good morning, everyone, and welcome to Southern Copper's Third Quarter of 2026 Results Conference Call. At today's conference, I'm accompanied by Mr. Leonardo Contreras, CEO of Southern Copper and Board member. Let me say first that we're very pleased to report strong third quarter performance as we hit record highs for net sales, adjusted EBITDA and net income for the second consecutive quarter. Concurrently, our report will show that Tia Maria and El Pilar, which are under construction, are expected to add 156,000 tons of refined copper to our total production figure.

At this print, we will widely surpass the annual production mark of 1 million tons. These outstanding achievements are driven by operating excellence and reflect our commitment to creating long-term value for our stakeholders in a context marked by sustained demand for copper and the other minerals we produce. Today, we will begin with an update on our view of the copper market and then review Southern Copper's key results related to production, sales, operating costs, financial results, expansion projects and ESG. After this, we will open the session for questions.

For the copper market, the LME copper price increased 44% from an average of $4.24 (sic) [ $4.44 ] per pound in the third quarter of 2025, up to $6.41 this past quarter. In the COMEX market, we saw a 34% increase with an average of $6.48 per pound this past quarter. Based on current supply and demand dynamics, we estimate now a slight copper market surplus for 2026. Copper inventories worldwide, the total combining stock in LME, COMEX, Shanghai and bonded warehouses, stood at 1,105,000 tons as of October 9 of this year. We estimate that this inventory can currently cover approximately 14 days of global demand.

Now let's look at Southern Copper's production for the past quarter. Copper represented 74% of our sales in the third quarter of this year. Copper production registered a decrease of 1% compared to the third quarter of 2025 and stood at 232,396 tons in this past quarter. Our quarterly results reflects a 6% drop in production in Peru, which was driven by a decrease in production at both our Toquepala and Cuajone mines due to lower ore grades and recoveries. These were partially offset by an increase of 2.5% in production at our Mexican operations, which was mainly fueled by higher production at our Buenavista and IMMSA mines.

Our copper smelters and refineries increased their production by 18% and 16%, respectively, in the third quarter. On a year-to-date basis, copper production fell 2.9% in 2026 to stand at 693,602 tons. This evolution was mainly driven by a decrease in production at our Peruvian mines due to lower ore grades. Year-on-year, the company's smelting and refining facilities increased their production by 16% and 10%, respectively. For 2026, we expect to produce 918,000 tons of copper, an increase of 0.7% over our initial plan.

Molybdenum represented 12% of our sales in the third quarter of 2026 and is our primary by-product. Molybdenum prices averaged $32.93 per pound in the quarter compared to $24.30 in the third quarter of last year. This represents an increase of 36% in price. Molybdenum production dropped 2% in the third quarter of this year compared to the same period of 2025. This was mainly driven by lower production at our La Caridad and Buenavista mines, which was largely offset by higher production prints at our Toquepala and Cuajone mines. In 2026, we expect to produce 29,000 tons of molybdenum, which is 12% above our initial plan.

Silver represented 7% of the company sales in the third quarter of this year. Silver prices averaged $62.80 per ounce in the quarter compared to $39.56 per ounce in the third quarter of 2025. This represents an increase of 59%. Silver is currently our second most important by-product. Mined silver production decreased 2% in the third quarter of this year versus the same period in 2025, driven primarily by a drop in production at our open pit operations. These results were partially offset by an increase in production at our IMMSA mine. Refined silver production decreased 6% quarter-over-quarter, fueled mainly by a drop in production at the La Caridad and Ilo refineries. For 2026, we expect to comply with our plan to produce 24 million ounces of silver.

For zinc, it represented 4% of our sales value in the third quarter of 2026 with an average price of $1.74 per pound in the quarter, which represents a 36% increase compared to the third quarter of last year. Zinc is currently our third by-product. Zinc mine production decreased 8% quarter-on-quarter and totaled 41,880 tons. This was mainly due to a drop in production at Buenavista, Charcas and San Martin operations. These results were partially offset by higher production at our Santa Barbara operation. Refined zinc production decreased 6% in the third quarter vis-a-vis the third quarter of 2025. For this year, we expect to produce 163,400 tons of zinc, 1% below our initial plan.

Looking into our financial results for the third quarter of 2026, sales were $4.7 billion, which is $1.3 billion above the sales print in the third quarter of 2025 or a 39% increase. Copper sales increased 41%, while volume decreased 0.4% in a scenario of better prices. As we mentioned, the London Metal Exchange price increased 44%, and the COMEX 34%. Regarding our main by-products, sales of molybdenum were up 31% due to better prices, which were partially offset by a decrease in volume. For zinc sales, they also increased by 36%, fueled by better prices and better volume.

Lastly, silver sales also rose this quarter, riding the wave of better prices, whose impact was partially offset by a decrease in volume. Our total operating costs and expenses increased by $223 million or 17% when compared to the figure in the third quarter of last year. The main cost increments were in diesel and fuel, workers' participation, inventory consumption, depreciation, power and labor costs. These cost increments were partially offset by translation difference of $22 million plus an exchange rate variance that favor our cost in local currencies.

Our third quarter adjusted EBITDA hit a record high of $3 billion, which represented an increase of 54% with regard to the $2 million (sic) [ $2 billion ] registered in the third quarter of 2025. The adjusted EBITDA margin in the third quarter of this year stood at 65% versus 59% in the same period of 2025. Adjusted EBITDA for the 9 months of this year was $1.8 billion (sic) [ $8.6 billion ], which is 56% higher than the print for last year. The adjusted EBITDA margin in the 9 months of 2026 stood at 65% versus 58% in the same period of last year.

Cash cost. Operating cash cost per pound of copper net of by-product revenue credits was $0.09 in the third quarter of 2026, which represented a decrease of 77% compared to $0.52 (sic) [ $0.42 ] reported in the third quarter of 2025. This result was mainly driven by an increase in by-product revenue credits of 31%, which rose on the back of better price.

Operating cash cost per pound of copper before by-product credits was $2.46 per pound this past quarter. This is $0.23 higher than the value for the third quarter of 2023 (sic) [ 2025 ]. This 10% increase in operating cash cost before credits was the result of an increase in cost per pound from production costs and for administrative expenses, which was partially offset by an increase in the premium and treatment and refining benefits that the company has been collecting.

Regarding by-products, we had a total credit of $1.2 billion or $2.36 per pound in the third quarter of 2026. These figures represent a 31% increase compared to a credit of $900 million or $1.81 per pound in the third quarter of 2025. Total credits increased for molybdenum, zinc, silver and sulfuric acid.

For the 9 months of 2026, the operating cash cost per pound net of by-product credits was $0.01. This represents a decrease of 98% compared to the $0.61 reported for the 9 months of 2025. For the year, cash cost decrease was driven by an increase in by-product credits of 54%. This is for the year-to-date figure of -- for cash costs.

The third quarter of 2026 net income hit a record high of $1.8 billion, which is up 63% versus the $1.1 billion registered for the third quarter of 2025. This was mainly due to higher net sales. Net income margin in the third quarter of this year stood at 38% versus 33% for the same quarter of 2025. On a year-to-date basis, net income was 67% higher than in 2025 due to growth in net sales. Net income margin for the 9 months stood at 38% versus 32% in 2025.

Cash flow from operating activities in the third quarter of this year was $2.2 billion, 43% above the figure in the third quarter of 2025. This improvement was mainly attributable to strong cash generation at our operations, which was driven by higher sales. For the 9 months of this year, cash flow from operating activities stood at $5.9 billion, which represented an increase of 81% over the $3.3 billion posted in the 9 months of 2025.

Capital investments. Our current capital investment program for this decade exceeds $21 billion (sic) [ $15 billion ] and includes investments in projects in Peru and Mexico. Given that there is a description of our main capital projects in Southern Copper's press release, I'm going to focus on updating new developments for each.

For the Peruvian projects, I'll begin with Tia Maria. Tia Maria is expected to produce 120,000 tons of SX-EW copper cathodes per annum in the early years of operations. Operations are scheduled to begin in the first half of 2028. As of September 30 of this year, the company has invested $884 million in project execution and committed $1.1 billion to cover diverse activities, acquisitions and related contracts. Large-scale earthworks have concluded, and 18.9 million metric tons of material has been transferred to the La Tapada stripping deposit. Most work orders for the project's primary equipment have been issued. Purchase orders for the leaching process have been placed to secure the main equipment, which will be outfitted with cutting-edge technology as well as secondary equipment and materials.

On the energy supply front, work is advancing at the main electrical substations and the 220-kilovolt transmission line in its final stage of construction. In parallel, large-scale earthworks to develop dry and wet areas have been completed. At the project's main installations, civil work is advancing alongside efforts to assemble metal structures and the main components of the crushing equipment for the primary, secondary and tertiary crushing circuits in the dry area. In the wet area, work to build the solvent extraction and electrodeposition facilities, among others, is progressing.

As of September of this year, the Tia Maria project was 50% complete. Additionally, 6,817 new jobs have been created, 1,181 of them were filled by local applicants. To the extent possible, the company intends to cover the estimated 7,000 jobs that will be created during Tia Maria's construction phase with workers from the Islay province.

For Los Chancas, this is a project also in Peru at the Apurimac region that is expected to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The capital investment is estimated at $2.6 billion, and we expect to begin operations by 2031.

For the project update, social and environmental management programs are currently being implemented in the communities within the project's direct area of influence in accordance with the Framework Agreement signed for the Development of the Tiaparo Peasant Community and the Los Chancas Mining Project. In addition, measures are being taken to regain control of the project area, which has been threatened by illegal miners. Regaining control is essential if we are to continue developing our Los Chancas project.

For the Michiquillay project in Cajamarca, Peru, this is a project that we expect to -- in which we expect to produce 225,000 tons of copper per year with by-products of molybdenum, gold and silver. The mine life is estimated at 25 years, and we estimate to invest approximately $2.5 billion to begin production expected by 2032.

The deposit's Mineral Resource Estimation and Classification report has been developed with geological information obtained from drilling programs and geological models. These reports and studies are complying with SEC's S-K 1300 mining disclosure standards. A conceptual study is underway to determine where a conventional and/or filtered tailings storage facility should be located. Hydrological, hydrogeological, and geotechnical studies are also being conducted.

We're adding an expansion of the Cuajone operation to our pipeline of projects in Peru. This is to maintain or potentially increase production levels for the Cuajone operation. And for this, the company is evaluating an expansion from the current milling capacity of 90,000 tons per day to 120,000 tons per day. This is a 33% increase in milling capacity.

The expansion will require additional mining equipment and a new production line at the Cuajone concentrator. Current estimates point to a capital cost of $680 million to produce an average of 55,000 tons of copper and 1,400 tons of molybdenum per year. As part of a thoughtful review on the matter, studies are underway to determine the viability of expanding the Cuajone operation to 150,000 tons of milling capacity per day.

Focusing on our Mexican projects, Southern Copper has several projects in its Mexican pipeline that may boost organic growth if they are found to be of value for both stakeholders and the communities in which we operate. These projects are Angangueo, Chalchihuites and Empalme Smelter. They are expected to bolster our position as a fully integrated copper producer. We're engaged in talks with the current administration to continue rolling out SCC's Mexican investments for about $10.2 billion.

El Pilar, which is located in the Sonora state of Mexico, is a project that -- it's about 45 kilometers from Cananea and Buenavista mine -- from the Cananea town and the Buenavista mine. Its copper oxide mineralization contains estimated proven and probable reserves of 317 million tons of ore with an average copper grade of 0.25% and a life of mine of 18 years. El Pilar will operate as an open pit mine with annual production of 36,000 tons of copper cathodes, utilizing cost-efficient and environmentally friendly SX-EW or Solvent Extraction and Electrowinning technology. With an investment of $551 million, this project will employ a direct workforce of 450 people during the construction phase and 300 during the operational phase.

El Pilar, it's a new copper project that has obtained the necessary environmental permits. Early site preparation began in September of this year to develop energy lines and build on-site construction offices. Contracts and studies related to the substation and transmission line are in the works. Basic engineering contracts for the access road, railway spur, substations and power lines have been signed. The EPCM bidding process for the SX-EW plant is underway and expected to culminate before year-end. Project construction will commence in the first quarter of 2027 and production is expected to begin in the second half of 2029.

Focusing on environmental, social and corporate governance, or ESG practices. We are glad to report that our sustainability ratings continue to improve. In its Corporate Sustainability Assessment 2026, S&P Global increased Southern Copper's rating by 2 points over last year's print. The company ranks among the top 3 performers in the mining sector with a rating double -- a rating that doubles that of the industry standard. Some of SCC's individual ratings were top of class for the sector. That is the case for transparency of reporting, materiality, risk management, business ethics, energy, biodiversity and community relations.

On top of what I just mentioned, 4 operations in Sonora, these are the lime plant, the La Caridad mine, the Minera Mexico's copper smelter and refinery. These 4 operations were awarded with the Silver Helmet by the Mexican Mining Chamber or CAMIMEX for their safety and accident prevention metrics. This is the first time that 4 operations in Sonora is awarded simultaneously, which attests to our teams' commitment to strengthen preventive practices, safety controls and worker protection.

In the Michiquillay operation in Peru, as part of our commitment to promote the stakeholders' active participation in new project development, the Participative Environmental Committee for the Michiquillay project in Peru completed its third verification of environmental performance in 2026. Community leaders and representatives of public and private entities sit on this committee, which has the technical capabilities to collect soil, water and air samples and interpret results. Their participation in project development strengthens actions and measures to prevent or manage impacts on the environment and communities.

For the past 14 years, our program Forjando Futuro, Forging Futures, has been developing capacities and providing access to local job opportunities in the areas of influence of our operations in Peru and Mexico. Currently, 17% of the jobs on the Tia Maria project are held by locals who access these opportunities through our on-site offices or in coordination with local contractors. Under this program, Forging Futures, we have awarded 700 scholarships to young people to obtain certifications to operate heavy equipment or engage in welding and topography. These efforts strengthen participants' technical competencies and broaden capacities to successfully insert in the job market.

Changing subject, we're going into dividends. And as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans and other financial needs at each Board meeting to determine the appropriate quarterly dividend. Accordingly, on October 15, Southern Copper Corporation announced a quarterly cash dividend of $1.30 per share of common stock and a stock dividend of 0.0106 shares of common stock per share. This is payable on November 19 of this year to shareholders of record at the close of business on November 3, 2026.

Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us. And now we would like to open the forum for questions.

Operator

[Operator Instructions] First question from the line of Carlos De Alba from Morgan Stanley.

質疑応答

Carlos de Alba

My first question is just on Tia Maria, maybe a little bit more color with what seems to be a little bit of a delay from the fourth quarter of 2027 to the first quarter or the first half of 2028. If you can provide a little bit more color as to what prompted that decision? And if you could expect maybe a potential increase in CapEx. I noticed that it's still $1.8 billion, but typically, when there are delays, more often than not, it comes with a higher CapEx associated with that. So I wanted to get your color. That was my first question. I'll ask the one next.

Raul Jacob

Okay. On the expected start-up of Tia Maria, we have found that it will take a little bit longer for us to assemble doing the mechanical assembly of all the equipment as well as some works related to engineering on the project. I think that's why we -- when we review the expected time line, we pass it from the fourth quarter of this year to the first half of 2027.

On potential CapEx increase, we are not reporting on any changes on that. We will mention this issue and address it in the call that we have in January, not only for Tia Maria, but in general, for our production forecast as well as our CapEx for this next year and on.

Carlos de Alba

And if I may ask, what is your production -- maybe not guidance, but the range of where you see production for copper, moly, maybe silver in next year as well as cash cost before by-products maybe in the fourth quarter or 2026 or the full 2026 and also the early indication for next year?

Raul Jacob

Okay. On production for next year, it should be expected to be now for this year, about a little bit less than 920,000 tons. And for next year, we'll provide an update when we finish our -- we're doing currently a thoughtful review on all our mining plans. And on the base of that, we will issue a much more firmer forecast at the beginning of 2027 in our January call.

For cash cost, well, as you know, this is one of the hardest things to forecast because you not only have whatever happens with cost of production of copper and copper production and also what goes on regarding by-products. But let's say that we should be about to where we are now or a little bit better cash cost-wise for next year.

Carlos de Alba

So okay. So slightly flat to or a slightly stable plus maybe slightly better next year. And the fourth quarter, do you think will remain also relatively stable versus what you reported in the third quarter of 2026?

Raul Jacob

I'm so sorry, I couldn't get what you said, Carlos.

Carlos de Alba

Yes. On the fourth quarter -- sorry, on the fourth quarter 2026 cost before by-products, would you expect them to remain also stable versus the third quarter?

Raul Jacob

We don't see any that may distort the cost or treatment. We see some possibilities of a cash cost reduction before any credits, but that's contingent of getting our production goals, which we're focusing on that as well as our -- well, by-products credits that, as you well know, are strongly influenced by prices in before by-products.

Operator

Our next question comes from the line of Matheus Moreira from Bradesco BBI.

Matheus Moreira

Two quick questions on my side. First, on capital allocation. I mean, cash obviously continues to build at a very fast pace. And even with CapEx expected to reach $2.5 billion in 2027, we would expect cash accumulation to continue at this strong pace, right? So I'm just wondering how is management thinking about the potential for increased shareholder distributions for you? That's my first question.

And then my second question is a broader question on CapEx. We've seen several major projects revise their CapEx estimates higher in the recent months amid broader inflationary pressures. I know half -- roughly half of Tia Maria's CapEx has already been deployed. But how do you see risks of revising the remaining CapEx higher? And how should we think about potential inflationary pressures across your other growth projects? Those are my 2 questions.

Raul Jacob

Well, on the -- well, on potential inflationary impact, we are looking. On potential inflationary pressures, we'll make -- we're currently reviewing our CapEx. We will be giving some color on this when we report the end of the year as well as the look forward for 2027. I'm so sorry, there is one microphone that is open. So regarding inflation, we're looking into our projects, current budgets, see if they have to accommodate any variances for next year.

So far, we have not reported anything specific on this. Well, and regarding dividends, as you know, it is always contingent of a Board decision. The company has been giving dividends in cash as well as in stock that was acquired at $26 per share that are being handed back to our shareholders, considering the current position of the company, which I think is very favorable in that regard.

Operator

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

Emerson Vieira

So 2 quick questions here. The first one is on Cuajone. Just trying to understand when you guys expect to submit the project to Board approval and when we could see effectively the incremental copper production coming online? And also, I mean, what needs to happen for you guys to take a decision on the expansion to further 100,000 to 200,000 tons per day capacity? So that's the first one.

And just on cash costs, specifically before by-products, right? It seems like energy costs in Mexico have been rising, right, due to natural gas. So I just want to understand if the cost pressure that we saw this quarter is structural indeed. And if you guys see, I don't know, any levers to potentially offset those impacts, right?

Raul Jacob

Okay. On the Cuajone expansion, we have to finish the technical studies that are very well advanced. That's why the Board has authorized us to mention it in our press release as something that it's very likely to go on, even though we don't have the final go for the project, we are very close to getting it. So I would say that it's going to be a very, very interesting investment for us.

In the case of cash cost, we're seeing different impacts on materials. In the case of gas, we're importing it for the Mexican operations from the Texas basin, the Permian Basin. And that is, being a product of oil, gas has had some very competitive cost that has helped us in our cost for gas consumption at the Mexican operations. We don't see a problem with that. We think that the market will have a reasonable supply at a good cost for the company for the Mexican operations.

Besides this, on the by-products, being as sulfuric acid producers, we have been consuming our own sulfuric acid at very competitive cost, which is the one that we have for production. And a portion of our production, particularly at the Peruvian operations, it's been sold at the South American market, which has a very competitive price for the spot price as well as for contracts on this. So I've already covered a little bit our view on the cash cost. And hopefully, we will have it maintaining its current level or improving slightly, I would say, regarding to where we are.

Emerson Vieira

Right. Just one more on Tia Maria, please. So just confirming the company does not expect CapEx to increase, I mean, to above the $1 billion that is remaining, right? Despite of this, let's say, 1, 2 quarter delay. And just on Tia Maria, again, I mean, the deceleration in physical progress that you saw this quarter, you mentioned it was driven by longer times in assembly of the mechanical equipment. So that was a one-off and then physical progress should then accelerate in the next quarters. Does this make sense?

Raul Jacob

On CapEx, we're going -- we're currently reviewing all of them. So I'm not making a specific comment on that. I couldn't get the second point of your concern, Emerson.

Operator

Next question will come from the line of Myles Allsop from UBS.

Myles Allsop

Just a couple of questions. On the Cuajone expansion, if you go large to 150,000 tons per day, should we assume the CapEx is broadly the $1.4 billion, twice the $680 million if you put one mine in? That's the first question.

Raul Jacob

On this, we're not making any comments. When we have -- when we finish the studies that are being conducted for 150,000 tons of daily milling capacity, we'll report to the market on the estimated CapEx that it has.

Myles Allsop

Okay. But it would be a decision early next year is what you're suggesting, either to 120,000 or 150,000?

Raul Jacob

Yes. The company -- currently, we see a much more firmer possibility for going into 120,000 tons. However, we are looking into 150,000 tons of milling capacity since we had some of the estimated restrictions that it had has been removed, and that is something that allow us to consider this as a possibility. So once we realize that this is feasible, we decided to go ahead with the technical studies for 150,000 to see if we can confirm this as an option. And if so, we will present it to the Board for an approval. But for now, the most likely scenario is 120,000.

Myles Allsop

Okay. No, that's very helpful. With Los Chancas, how -- I mean, when do you hope to get the illegal miners off? And if we -- if you are successful getting them off, what's the pathway to FID there?

Raul Jacob

Well, we have a little bit north of 200 illegal miners. We have been in talks with the Peruvian authorities to solve this. They shouldn't be in our concession. Once they are removed from the concession, we believe that we can move on with the environmental impact assessment and some other works that we have to do on a quick pace. And if so, that's why we are expecting Los Chancas to go ahead with production by 2032. Sorry, let me correct what I just said, it's 2031.

Operator

Next question comes from the line of David Feng from CICC.

Tingshuai Feng

Just a quick follow-up question on Los Chancas and illegal mining. We have noticed that the Peruvian government has recently submitted a new proposal to the Congress on a new scheme to replace the original REINFO system. So how do you see the potential implications for this move to address the illegal mining problem around the Los Chancas? Are you seeing any positive signs on the ground that could help the project forward?

Raul Jacob

In this case, we have a group of people doing mining activities in a concession and a land that is company property. So for this specific case, they have to go out of our concession and our property. In the case of what you just mentioned this new proposal given by the government is one initiative of the mining and -- energy and mining minister, which we certainly think is a pace -- is a step in the right direction for the country because we cannot maintain the current situation where you have an operating certificate that is not complying with the proper production, labor and environmental practices for artisan mining.

So that has to be fixed, and we hope that the law is discussed at Congress and we get a good tool for the development of artisan mining in Peru. But in the specific case of Los Chancas, they have to leave the premises that they are currently using. And with that, the company will go on with the project.

Tingshuai Feng

Understood. And also, I think we have also seeing some encouraging comments from the new administration about streamlining the application for mining permits. I'm just wondering from your discussions with the authorities, what kind of -- or which parts of the approval process could see the most meaningful improvements? And could this potentially help accelerate projects such as Michiquillay?

Raul Jacob

We think that the government has been appointed in key positions, a very well-rounded and technical capable personnel. That should improve the process of moving forward of projects. Besides this, I think that we're seeing this effort by the Ministry of Energy and Mines of eliminating or replacing by a statement of some procedures. We think that this is going to be very helpful for the industry, but we need to see the specific procedures that will be changed by this effort of the authorities. However, we believe that it's a step in the right direction for the government and the industry and the country.

Operator

Our next question will come from the line of [ Bogdan Goia ] from Far Hills Fitness.

Unknown Analyst

On Coimolache in Peru, could you give us an update on where things stand and potential integration and expansion on that deposit and that location in Peru?

Raul Jacob

We're doing a technical. This is an operation where we have -- we are in a joint venture with Buenaventura and some other partner. We're currently working on a sulfur deposit development for copper. There are different options that are being reviewed. And I think that, that's pretty much what I can say on that. It's something that is moving forward. We see this as a good opportunity for the future, but there is nothing to report at this time.

Operator

And our next question comes from the line of Alfonso Salazar from Scotiabank.

Alfonso Salazar

A couple of questions. The first one is regarding El Pilar. I understand that the increase in CapEx is related to additional infrastructure that you need to include in the project. I think that you will have to build and build the transmission lines. I just want to confirm if that is the case.

And the second is regarding the Cuajone expansion. This is a project that has been in your portfolio pipeline for many, many years. So just wondering if -- what drove the delay? Or is this simply not the best timing for doing it? Just trying to understand that.

And also, what is the water situation if you have enough water and enough -- anything you need for an expansion of this size? Especially for the one that you are planning considering as well of 150,000 tons per day capacity. So just if you can give us some color on that, please?

Raul Jacob

Sure, Alfonso. In the case of El Pilar, we have an increase in CapEx. Well, we have been looking into this project for quite a while. We had a challenge that we want to increase recovery that we were getting from the mineral that was treated at the El Pilar investment. And besides this, we have been -- the CapEx increase is also related to the inflation that we have seen in some equipment. Keep in mind that the cost of El Pilar, the prior one was kind of a historic budget that was prepared a few years back, a little bit more than 5 years away.

In the case of the Cuajone expansion, well, we have been looking into different possibilities for getting the water for the project, and that has taken a little bit longer than what we believed a while ago. But in general, we think that we are -- we have identified good sources of water for the Cuajone expansion. For 120,000 tons, we believe that we have all the water requirements that we have. We need to do some other works on the technical side and some other challenges that the project has. And that's why we have taken a while to look into this matter and making a proper decision. And now we are reporting that this is a good possibility for us, and we are -- we will be showing the advancement that we have on this matter as we move on into -- well, the end of this year and 2027.

Alfonso Salazar

Just to confirm, so you have to build the transmission lines for El Pilar or is the Comisión Federal is going to deal with it?

Raul Jacob

Sorry, I couldn't get what you just said, Alfonso.

Alfonso Salazar

Yes, sure. For El Pilar, you need to -- are you including the transmission lines in your budget for the project or not?

Raul Jacob

I don't have a specific answer for that question, Alfonso.

Operator

And our next question will come from the line of Matt Dushkin from Wells Fargo.

Matthew Dushkin

I just wanted to clarify the questions on the cost. I know we went over it a bit. But it sounds like you're guiding or pointing to flat sequential costs before by-products for Q4. And then for 2027, when you said flat to lower, is that from the Q3 level, like the Q3 run rate? Or are you talking about full year 2026?

Raul Jacob

No, it's sequential for where we are. Please keep in mind that cash cost is very difficult to predict. We are at a very competitive cash cost of $0.09 per pound this past quarter if prices of our by-products hold. And copper -- I think our copper production will improve a little bit on the fourth quarter vis-a-vis last year. We should be reporting a cash cost before by-product credits in line or slightly better than what we did last quarter. That's our expectation at this point. For 2027, we will report in detail when we address the January call with our 2026 results as well as the outlook for 2027 and the year. Thank you.

Matthew Dushkin

Okay. That's helpful. And then I know this is also really tough to predict like costs, but just with everybody talking about a Super El Niño and potential big impacts to mining maybe in Peru, how are you all preparing for it, if you are at all? What kind of things can you do in advance to get ready for -- I think it's supposed to hit in early 2027?

Raul Jacob

Well, in the -- depending on where you are in the country, the El Niño has a different impact. In the case of where we are, we are at the southern part of Peru. And the usual trend of El Niño is that you have excess rain at the northern -- the center to the northern part of the country and a drought on the southern part. So we are currently -- we have been evaluating our water sources. We have been taking some actions to be sure that we have all the water that we need for next year. And that is -- the balance has shown us that we have a reasonable supply even to address this drought that we're expecting at the southern part of Peru.

Operator

And our next question will come from the line of Jon Brandt from HSBC.

Jonathan Brandt

First, I just wanted to ask on project time lines. So you mentioned 2031 for Los Chancas, but obviously, that's dependent on getting the illegal miners out. So is there sort of a time line like when do you need to sort of remove the illegal workers to hit that 2031 start-up? And along with that, I think you said Michiquillay was coming in 2032, and these are, sort of, 2 relatively big projects. So I'm just trying to understand your level of comfort around hitting these time lines of 2031 and 2032 start-up for both of these projects.

And then my second question relates to, I guess, the TC/RCs, the negative TC/RCs that we're seeing in China. And I know historically, you said there might be some investment in your own smelting and refining capacity. So I guess I just want to understand sort of how the negative TC/RCs in China are impacting you, your potential capital investment going forward and sort of even on -- are you sending more concentrate to China to take advantage of these TC/RCs? So any sort of color you could mention there would be great.

Raul Jacob

Okay. On the time line for Los Chancas and removing the illegal miners, let me -- I don't want to put a specific deadline for removing them, but obviously, it has to be in a relatively short term. And because otherwise, we cannot move on with all the other parts of the project that we need to comply with in order to get the environmental impact assessment finished, get the permit for construction and so on. So -- but we have -- we consider that we could begin the construction in 2028 and in the second half of 2028. And with that, we will -- we should be finishing the project by 2031, as I said.

In the case of Michiquillay, we don't have illegal mining activities, and we do have a social contract signed or social agreement signed with the 2 communities that are in the Michiquillay that are directly related to the Michiquillay project. On that, I don't think that we have a matter. The work with these 2 communities is moving forward on the right path, and we are certainly very positive and optimistic on Michiquillay. The time line goes to 2032 because we are at more of a beginning of all the process for getting the project complete and all the permitting ready, et cetera.

Focusing on negative TC/RCs. Well, obviously, it's hard to consider building a new smelter with this environment where you get a premium on top of your concentrate copper price. That's what's happening here with the negative TC/RCs. The upside is that sulfuric acid prices are at a good level, and that is something that help us in our revenues because we are long in sulfuric acid, particularly at the Peruvian operations.

Obviously, a possible new smelter for both Peru or Mexico is something that is contingent of having the proper market conditions, and we are considering the current circumstances as one of the points to have -- that has to be addressed and probably change in direction before we go ahead with the construction of a new smelter in any of these 2 countries.

However, this is something that goes to our DNA of being an integrated copper producer. We think that the fact that we produce refined copper, and this is something that will increase when we put Tia Maria and El Pilar. Both projects will produce refined copper with very high quality, which is certainly appreciated by the market that provide us not only with the copper price, but also with a premium on top of the market price for our refined copper. So this is, for us, being fully integrated and producing more refined material is one of the goals that we are looking into for the long run of the corporation.

Operator

Thank you. I'm not showing any further questions in the queue. I would like to turn the call back over to Raul Jacob for closing remarks.

Raul Jacob

Thank you very much, Victor. Well, with this, we conclude our conference call for Southern Copper's third quarter results. We certainly appreciate your participation and hope to have you back with us when we report the fourth quarter of this year and the full 2026 results. Thank you very much for being with us today, and have a nice day.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.