SCC(SCCO) - 2024 Q3 - Quarterly Report

Form 10-Q Filing Information Southern Copper Corporation filed its Q3 2024 Form 10-Q, detailing its stock information and outstanding shares - Southern Copper Corporation (SCC) filed its Quarterly Report on Form 10-Q for the period ended September 30, 2024[1][2] - As of October 31, 2024, there were 785,540,179 shares of Southern Copper Corporation common stock outstanding[2] Registered Stock Information | Title of each class: | Trading Symbol | Registered: | | :--- | :--- | :--- | | Common stock, par value $0.01 per share | SCCO | New York Stock Exchange, Lima Stock Exchange | Part I. Financial Information This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (Unaudited) The company's unaudited financial statements for the three and nine months ended September 30, 2024 are presented Condensed Consolidated Statements of Earnings The company's net sales and net income increased significantly in the three and nine months ended September 30, 2024 Condensed Consolidated Statements of Earnings (Unaudited) - Key Figures | Metric (in $ millions, except per share) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 2,930.9 | 2,505.6 | 8,649.0 | 7,600.2 | | Total operating costs and expenses | 1,480.6 | 1,436.4 | 4,401.7 | 4,276.6 | | Operating income | 1,450.3 | 1,069.2 | 4,247.3 | 3,323.6 | | Income before income taxes | 1,426.7 | 1,017.4 | 4,112.9 | 3,168.0 | | Income taxes | 526.4 | 395.3 | 1,528.6 | 1,170.2 | | Net income attributable to SCC | 896.7 | 619.5 | 2,582.9 | 1,980.2 | | Net earnings-basic and diluted (per share) | 1.15 | 0.80 | 3.32 | 2.56 | Condensed Consolidated Statements of Comprehensive Income The company's comprehensive income reflects the growth in net income for the reported periods Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income and comprehensive income | 899.8 | 622.0 | 2,592.4 | 1,987.5 | | Total comprehensive income | 899.8 | 622.0 | 2,592.4 | 1,987.5 | | Comprehensive income attributable to SCC | 896.7 | 619.5 | 2,582.9 | 1,980.2 | Condensed Consolidated Balance Sheets Total assets and equity increased, driven by a significant rise in cash and cash equivalents - Cash and cash equivalents significantly increased from $1,151.5 million at December 31, 2023, to $2,654.8 million at September 30, 2024[12] - Current portion of long-term debt increased from $0 at December 31, 2023, to $499.6 million at September 30, 2024[12] Condensed Consolidated Balance Sheets (Unaudited) - Key Figures | Metric (in millions) | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | 5,926.4 | 4,429.5 | | Total assets | 18,415.5 | 16,725.3 | | Total current liabilities | 2,139.4 | 1,388.5 | | Total non-current liabilities | 7,286.7 | 7,855.6 | | Total equity | 8,989.4 | 7,481.2 | | Total liabilities and equity | 18,415.5 | 16,725.3 | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents increased due to strong operating cash flow and reduced financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 1,439.4 | 1,049.8 | 3,061.2 | 3,032.1 | | Net cash (used in) provided by investing activities | (236.0) | (509.0) | (511.5) | (791.4) | | Net cash (used in) financing activities | (471.0) | (775.1) | (1,091.2) | (2,325.7) | | (Decrease) / increase in cash and cash equivalents | 779.5 | (231.9) | 1,503.3 | (102.6) | | Cash and cash equivalents, at end of period | 2,654.8 | 1,967.1 | 2,654.8 | 1,967.1 | Condensed Consolidated Statements of Changes in Equity Total equity grew, supported by strong net earnings and changes in paid-in capital and treasury stock - Additional paid-in capital increased significantly from $3,532.8 million to $4,608.3 million, primarily due to a dividend paid in Common Stock[15] - Treasury stock decreased from $(3,149.0) million to $(2,831.0) million, mainly due to dividends paid in Common Stock[12][15] Condensed Consolidated Statements of Changes in Equity (Unaudited) - Key Figures | Metric (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Total Equity, beginning of period | 7,481.2 | 8,146.9 | | Net earnings attributable to SCC | 2,582.9 | 1,980.2 | | Dividends declared and paid, common stock | (1,087.3) | (2,319.3) | | Total Equity, end of period | 8,989.4 | 7,808.2 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's business, accounting policies, and financial items NOTE 1— DESCRIPTION OF THE BUSINESS SCC is an integrated mineral producer majority-owned by Grupo Mexico, with operations in Peru and Mexico - Southern Copper Corporation (SCC) is a majority-owned, indirect subsidiary of Grupo Mexico S.A.B. de C.V., with Grupo Mexico owning 88.9% of SCC's capital stock[17] - SCC is an integrated producer of copper and other minerals, operating mining, smelting, and refining facilities in Peru and Mexico[17] NOTE 2 — SHORT-TERM INVESTMENTS The company's short-term investments primarily consist of publicly traded bonds held as trading securities - Trading securities, consisting of publicly traded bonds, are intended for short-term sale[19][21] - Interest earned on trading securities for the nine months ended September 30, 2024, was $18.6 million, up from $7.6 million in 2023[22] Short-term Investments (in millions) | Type | At September 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Trading securities | $318.6 | $599.1 | | Available-for-sale | $0.2 | $0.2 | | Total | $318.8 | $599.3 | NOTE 3 — INVENTORIES Inventories are primarily composed of supplies and ore stockpiles on leach pads - Total leaching costs capitalized as non-current inventory of ore stockpiles on leach pads amounted to $189.8 million for the nine months ended September 30, 2024[23] Inventories (in millions) | Category | At September 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Finished goods | $60.3 | $68.8 | | Work-in-process | $292.9 | $313.0 | | Ore stockpiles on leach pads (current) | $224.6 | $230.9 | | Supplies | $412.6 | $404.2 | | Total current inventory | $990.5 | $1,016.9 | | Ore stockpiles on leach pads (long-term) | $1,143.7 | $1,121.7 | NOTE 4 — INCOME TAXES The effective income tax rate increased slightly due to currency fluctuations, with significant tax payments made - The increase in the effective income tax rate in 2024 was primarily due to exchange rate movements of the Mexican peso versus the U.S. dollar[24] - The Company made payments for uncertain tax positions of $72.5 million in Peru and $19.5 million in Mexico during the nine months of 2024[26] - The Company is monitoring the potential impact of the OECD's Pillar Two global minimum tax[27] Income Tax Provision (in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Statutory income tax provision | $1,298.7 | $985.8 | | Peruvian royalty | 45.5 | 30.2 | | Mexican royalty | 116.3 | 102.5 | | Peruvian special mining tax | 68.1 | 51.7 | | Total income tax provision | $1,528.6 | $1,170.2 | | Effective income tax rate | 37.2% | 36.9% | NOTE 5 — RELATED PARTY TRANSACTIONS SCC engages in various transactions with its parent company Grupo Mexico and its affiliates - SCC engages in various transactions with Grupo Mexico and its affiliates, including lease, transportation, construction, and energy supply services[28][34] - The Company has a 44.2% equity participation in Compania Minera Coimolache S.A. and a 30.0% participation in Apu Coropuna S.R.L[46][48] Related Party Receivable and Payable Balances (in millions) | Category | At September 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Related parties receivable current | $12.3 | $27.3 | | Related parties payable | $54.8 | $93.6 | Related Party Purchase and Sale Activity (in millions) - Nine Months Ended Sep 30 | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Total purchases | $267.2 | $322.5 | | Total sales | $51.1 | $80.8 | NOTE 6 — LEASES The company holds operating leases for power facilities, vehicles, and properties with an eight-year average term - The Company has operating leases for power generating facilities, vehicles, and properties, with a weighted average remaining lease term of approximately eight years[50][51] Operating Lease Expense (in millions) - Nine Months Ended Sep 30 | Category | 2024 | 2023 | | :--- | :--- | :--- | | Cost of sales (exclusive of depreciation, amortization and depletion) | $77.4 | $86.9 | | Selling, general and administrative | $0.1 | $0.1 | | Exploration | $0.1 | $0.2 | | Total lease expense | $77.5 | $87.2 | Maturities of Lease Liabilities (in millions) | Year | Lease liabilities | | :--- | :--- | | 2024 | $27.7 | | 2025 | $106.9 | | 2026 | $106.6 | | 2027 | $106.3 | | 2028 | $106.0 | | After 2028 | $421.8 | | Total lease payments | $875.3 | | Less: interest on lease liabilities | $(150.3) | | Present value of lease payments | $725.0 | NOTE 7 — ASSET RETIREMENT OBLIGATION The company maintains and adjusts asset retirement obligations for its mining properties in Peru and Mexico - The Company maintains asset retirement obligations for its mining properties in Peru and Mexico[51][57] - In 2024, the Company adjusted its asset retirement obligation estimates, resulting in a $3.2 million decrease for its Ilo facility and a $9.1 million decrease for its Mexican operations[56][58] - The Company is evaluating the financial impact of Peru's Law 31347, which requires additional guarantees for progressive closure and environmental remediation[54] Asset Retirement Obligation Activity (in millions) - Nine Months Ended Sep 30 | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Balance as of January 1 | $612.5 | $585.3 | | Changes in estimates | $(12.3) | $— | | Closure payments | $— | $(0.3) | | Accretion expense | $21.3 | $19.3 | | Balance as of September 30 | $621.6 | $604.3 | NOTE 8 — BENEFIT PLANS The company provides various defined benefit and defined contribution plans for its employees - The Company has non-contributory defined benefit pension plans for former salaried employees in the U.S. and certain expatriates in Peru[59][60] - For post-retirement health care plans in Mexico, the net periodic benefit cost for the nine months ended September 30, 2024, was $1.5 million[62] Net Periodic Benefit Costs (in millions) - Nine Months Ended Sep 30 | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Service cost | $1.9 | $1.6 | | Interest cost | $2.8 | $2.6 | | Expected return on plan assets | $(4.7) | $(4.2) | | Amortization of prior service cost/(credit) | $0.2 | $0.1 | | Amortization of net loss/(gain) | $0.3 | $0.3 | | Net periodic benefit cost | $0.5 | $0.4 | NOTE 9 — COMMITMENTS AND CONTINGENCIES This note details the company's environmental, legal, labor, and other commitments and contingencies Environmental matters The company maintains environmental programs and believes it is in material compliance with regulations - The Company has comprehensive environmental conservation programs in Peru and Mexico[63] - The Company believes it is in material compliance with applicable Peruvian and Mexican environmental laws and regulations[64][76] - New Mexican mining laws, approved in May 2023, reduce concession terms and impose new restrictions, but the Company does not expect material negative impacts[77][78] Environmental Capital Investments (in millions) - Nine Months Ended Sep 30 | Operations | 2024 | 2023 | | :--- | :--- | :--- | | Peruvian operations | $3.5 | $5.5 | | Mexican operations | $133.2 | $72.1 | | Total | $136.8 | $77.6 | Litigation matters The company faces lawsuits in Peru and Mexico but does not expect a material adverse effect - Five lawsuits are pending against the Peruvian Branch related to the Tia Maria project, challenging its environmental impact assessment and construction license[80][81][82][83][84][85][86] - In Mexico, legal procedures are pending regarding the 2014 Guaymas sulfuric acid spill and the Buenavista mine copper sulfate spill[74][90][91][92][93][94][96] Labor matters The company is managing union relations in Peru and long-standing labor disputes in Mexico - In Peru, 57.4% of the Company's 5,128 employees are unionized, with six separate unions[97][102][103] - In Mexico, labor disputes at the San Martin and Taxco mines, ongoing since 2007, remain pending resolution[107][109][111][112] Other commitments The company has significant investment and social responsibility commitments for its projects in Peru - The Michiquillay copper project in Peru has estimated inferred mineral resources of 2,288 million tonnes with 0.43% copper[113][114][115](index=115&type=chunk][116] - The Company has significant Corporate Social Responsibility commitments in Peru, often utilizing the 'Works for Taxes' program[118][119][120][121][122][125][126][127][128] - As of September 30, 2024, the Company had committed approximately $257.6 million to capital investment project developments[133] NOTE 10 — STOCKHOLDERS'EQUITY This note details changes in stockholders' equity, including dividends and stock-based compensation - The Company paid common stock dividends on May 23, 2024 ($199.5 million) and August 26, 2024 ($108.6 million), reducing treasury shares[134] - Stock-based compensation expense for the Directors' Stock Award Plan totaled $1.3 million for the nine months of 2024[136] - The Employee Stock Purchase Plan (2018 Plan) allows employees to purchase Grupo Mexico shares through payroll deductions[139][142] Treasury Stock Activity (in millions) - Nine Months Ended Sep 30 | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Balance as of January 1, SCC common shares | $2,766.7 | $2,766.9 | | Dividend paid in Common Stock | $(308.1) | $— | | Balance as of September 30, SCC common shares | $2,458.3 | $2,766.7 | | Balance as of January 1, Parent Company common shares | $382.3 | $340.7 | | Balance as of September 30, Parent Company common shares | $372.7 | $364.4 | | Treasury stock balance as of September 30 | $2,831.0 | $3,131.1 | NOTE 11 — FAIR VALUE MEASUREMENT The company classifies its financial instruments into a three-level fair value hierarchy - The Company classifies financial instruments into a fair value hierarchy (Level 1, 2, or 3) based on the observability of inputs[145][146] - Short-term trading securities and provisionally priced copper and molybdenum sales are classified as Level 1, valued using quoted market prices[151][152] Fair Values of Assets and Liabilities (in millions) - September 30, 2024 | Description (Level) | Carrying Value | Fair Value | | :--- | :--- | :--- | | Current portion of long-term debt (Level 1) | $499.6 | $497.6 | | Long-term debt (Level 1) | $5,706.6 | $6,021.0 | | Long-term debt (Level 2) | $51.2 | $55.6 | | Total long-term debt | $5,757.8 | $6,076.6 | NOTE 12 — REVENUE Copper sales constitute the majority of the company's revenue, with significant contributions from by-products - In the three months ended September 30, 2024, copper accounted for 77.1% of total net sales, molybdenum 10.1%, silver 5.2%, and zinc 3.9%[177][246] - As of September 30, 2024, the Company has long-term contracts to deliver 177,500 tonnes of copper concentrates and 48,000 tonnes of copper cathodes in 2024[162] Net Sales (in millions) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three months ended Sep 30 | $2,930.9 | $2,505.6 | | Nine months ended Sep 30 | $8,649.0 | $7,600.2 | Copper Sales Volume (million pounds) | Product Type | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Refined (including SX-EW) | 279.8 | 289.0 | 797.4 | 824.9 | | Rod | 78.7 | 84.7 | 259.4 | 258.8 | | Concentrates and other | 177.4 | 121.7 | 507.0 | 398.8 | | Total | 535.9 | 495.4 | 1,563.8 | 1,482.5 | NOTE 13 — SEGMENT AND RELATED INFORMATION The company operates through three reportable segments: Peruvian operations and two distinct Mexican operations - Southern Copper has three reportable segments: Peruvian operations, Mexican open-pit operations, and Mexican underground mining operations (IMMSA unit)[164][165][215] Segment Operating Income (in millions) - Three Months Ended Sep 30, 2024 | Segment | Operating Income | | :--- | :--- | | Mexican Open-pit | $866.2 | | Mexican IMMSA Unit | $36.6 | | Peruvian Operations | $549.7 | | Corporate, other and eliminations | $(2.2) | | Consolidated | $1,450.3 | Segment Total Assets (in millions) - September 30, 2024 | Segment | Total Assets | | :--- | :--- | | Mexican Open-pit | $8,975.0 | | Mexican IMMSA Unit | $1,196.6 | | Peruvian Operations | $5,473.9 | | Corporate, other and eliminations | $2,770.0 | | Consolidated | $18,415.5 | NOTE 14 — SUBSEQUENT EVENTS The Board of Directors authorized a quarterly cash and stock dividend payable in November 2024 - On October 17, 2024, the Board of Directors authorized a quarterly cash dividend of $0.70 per share and a stock dividend of 0.0062 shares per common share[172] - Cash will be distributed in lieu of fractional shares based on a share price of $112.43[173] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and key performance factors EXECUTIVE OVERVIEW Management focuses on value creation through production growth, cost control, and prudent capital investment - Southern Copper's primary business is copper production, with significant by-product recovery[176] - In Q3 2024, copper sales accounted for 77.1% of revenue, molybdenum 10.1%, silver 5.2%, and zinc 3.9%[177] - The LME copper price increased 10.0% YoY in Q3 2024 to $4.17/lb, with long-term demand bolstered by decarbonization and AI[178] - For 2024, the Company expects to produce 975,000 tonnes of copper (+7.0% YoY) and 120,300 tonnes of zinc (+84.0% YoY)[183][184] - Capital investments for the nine months of 2024 totaled $792.0 million, a 5.2% increase YoY[185] KEY MATTERS This section details key performance indicators including earnings, production, and operating costs Earnings Net sales and net income increased significantly in Q3 2024, driven by higher sales volumes and metal prices - Net sales in Q3 2024 increased by 17.0% YoY to $2,930.9 million, driven by higher sales volumes and metal prices[188] - Net income attributable to SCC for Q3 2024 rose 44.7% YoY to $896.7 million, primarily due to increased sales[190] Key Financial and Operational Data (in millions, except per share) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Copper price LME ($/lb) | 4.17 | 3.79 | 4.14 | 3.90 | | Pounds of copper sold (millions) | 535.9 | 495.4 | 1,563.8 | 1,482.5 | | Net sales ($ millions) | 2,930.9 | 2,505.6 | 8,649.0 | 7,600.2 | | Operating income ($ millions) | 1,450.3 | 1,069.2 | 4,247.3 | 3,323.6 | | Net income attributable to SCC ($ millions) | 896.7 | 619.5 | 2,582.9 | 1,980.2 | | Earnings per share ($) | 1.15 | 0.80 | 3.32 | 2.56 | | Dividends per share ($) | 0.60 | 1.00 | 1.40 | 3.00 | Production Production of all key metals increased in Q3 2024, with a notable surge in zinc output - Q3 2024 copper mine production increased 11.6% YoY, driven by higher ore grades and milling at all major mines[194] - Zinc production surged 90.9% in Q3 2024 due to the start-up of the Buenavista zinc concentrator[198] - For the nine months of 2024, mined copper production increased 8.6%, molybdenum 11.9%, silver 12.5%, and zinc 78.8%[199][200][201] Mine Production (Three Months Ended Sep 30) | Metal (in millions) | 2024 | 2023 | Variance | % Change | | :--- | :--- | :--- | :--- | :--- | | Copper (lbs) | 556.1 | 498.5 | 57.6 | 11.5% | | Molybdenum (lbs) | 16.0 | 15.1 | 0.9 | 6.0% | | Silver (ounces) | 5.3 | 4.4 | 0.9 | 21.5% | | Zinc (lbs) | 68.5 | 35.9 | 32.6 | 90.9% | Operating Cash Costs Operating cash cost per pound of copper decreased significantly due to improved production efficiency - Operating cash cost per pound of copper produced is a non-GAAP measure used to assess performance[202][204] - In Q3 2024, operating cash cost per pound net of by-product revenues decreased by 22.6% YoY to $0.76[211] Operating Cash Cost per Pound of Copper Produced | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating cash cost per pound before by-product revenues ($) | 1.95 | 2.24 | 2.07 | 2.17 | | By-products per pound revenues ($) | (1.19) | (1.26) | (1.21) | (1.22) | | Operating cash cost per pound net of by-product revenues ($) | 0.76 | 0.98 | 0.86 | 0.95 | Metal Prices The company's profitability is highly sensitive to fluctuations in international metal prices - The Company's profitability is significantly affected by international market prices for copper, molybdenum, zinc, and silver[214] Metal Price Sensitivity (Change in Net Earnings in millions for remaining 3 months of 2024) | Change in metal prices | Copper ($0.10/lb) | Molybdenum ($1.00/lb) | Zinc ($0.10/lb) | Silver ($1.00/ounce) | | :--- | :--- | :--- | :--- | :--- | | Change in net earnings | $31.6 | $8.2 | $6.0 | $3.1 | Business Segments The company's operations are divided into three reportable segments across Peru and Mexico - The Company operates through three reportable segments: Peruvian operations, Mexican open-pit operations, and Mexican underground operations (IMMSA unit)[215] Inflation and Exchange Rate Effect of the Peruvian Sol and the Mexican Peso Operating results are exposed to currency volatility as significant costs are in local currencies - The Company's functional currency is the U.S. dollar, while significant operating costs are in Peruvian sol and Mexican pesos[217] Capital Investment Programs The company is advancing several major capital projects in Peru and evaluating potential projects in Mexico Projects in Peru Key projects in Peru include the Quebrada Honda dam expansion and the Tia Maria greenfield project - The Quebrada Honda dam expansion project in Tacna has a total budget of $165.0 million, with $152.0 million invested[220] - The Tia Maria greenfield project is expected to produce 120,000 tonnes of copper annually, with construction planned for 2025[222][225][226][227] Potential projects The company's growth portfolio includes several world-class copper deposits in Mexico and Peru - El Arco (Baja California) is a world-class copper deposit expected to produce 190,000 tonnes of copper and 105,000 ounces of gold annually[229] - El Pilar (Sonora, Mexico) is a low-capital intensity copper project expected to produce 36,000 tonnes of copper cathodes annually[231] - Los Chancas (Apurimac, Peru) envisions an open-pit mine producing 130,000 tonnes of copper and 7,500 tonnes of molybdenum annually[232] - The Michiquillay Project (Cajamarca, Peru) is expected to produce 225,000 tonnes of copper per year with an estimated investment of $2.5 billion[233][234] ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") PRACTICES The company highlights its commitment to responsible production and community engagement through various initiatives - All three Peruvian operations received The Copper Mark and The Molybdenum Mark certifications for responsible production[235] - The Company delivered a $18 million Center for Research to Universidad Nacional de San Agustín de Arequipa[236] - The Cultural Center in Charcas, Mexico, received Noldi Schreck awards for architectural and social value[237] - Fundación Grupo México's 'Dr. Vagón' health program provided over 6,000 free medical services to 2,050 people in Cananea[238] ACCOUNTING ESTIMATES Financial statements rely on management's estimates and assumptions, which may differ from actual results - Management's financial statements rely on estimates and assumptions, including ore reserves, revenue recognition, and asset impairment[239] NEW ACCOUNTING DISCLOSURE RULES The company is preparing for the SEC's new climate disclosure rule, effective in 2025 - The SEC's new climate disclosure rule will require disclosures on greenhouse gas emissions (Scope 1 and 2) when material[240] RESULTS OF OPERATIONS This section provides a detailed analysis of the company's operational results for the reported periods NET SALES Net sales grew significantly in Q3 2024, driven by higher sales volumes and favorable metal prices - Net sales in Q3 2024 increased 17.0% YoY to $2,930.9 million, driven by higher sales volumes and metal prices[243] Statement of Earnings Data (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,930.9 | $2,505.6 | $8,649.0 | $7,600.2 | | Operating costs and expenses | $(1,480.6) | $(1,436.4) | $(4,401.7) | $(4,276.6) | | Operating income | $1,450.3 | $1,069.2 | $4,247.3 | $3,323.6 | | Net income attributable to SCC | $896.7 | $619.5 | $2,582.9 | $1,980.2 | Average Published Market Metal Prices | Metal (price per pound/ounce) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Copper (LME) | $4.17 | $3.79 | $4.14 | $3.90 | | Molybdenum | $21.68 | $23.59 | $21.07 | $25.50 | | Zinc (LME) | $1.26 | $1.10 | $1.22 | $1.22 | | Silver (COMEX) | $29.43 | $23.60 | $27.21 | $23.46 | OPERATING COSTS AND EXPENSES Operating costs increased moderately due to higher material costs and currency effects - Operating costs and expenses increased by $44.2 million (3.1%) in Q3 2024 YoY, primarily due to higher repairing materials and foreign currency effects[250][251] - For the nine months of 2024, operating costs and expenses increased by $125.1 million (2.9%) YoY[253] NON-OPERATING INCOME (EXPENSES) Net non-operating expense decreased due to higher other income and interest income - Non-operating income (expense) decreased by $28.2 million in Q3 2024 YoY, resulting in a net expense of $23.6 million[254][255] - For the nine months of 2024, non-operating income (expense) decreased by $21.2 million YoY, resulting in a net expense of $134.4 million[254][256] SEGMENT RESULT ANALYSIS This section analyzes the financial performance of the company's three operating segments Peruvian Open-pit Operations Net sales and operating income for Peruvian operations increased significantly in Q3 2024 - Net sales for Peruvian operations increased by $253.9 million (27.1%) in Q3 2024 YoY, driven by higher sales volumes and prices[259] - Operating costs and expenses for Peruvian operations increased by $43.2 million (7.2%) in Q3 2024 YoY[260] Peruvian Open-pit Operations - Key Financials (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,189.9 | $936.0 | $3,465.3 | $2,848.6 | | Operating costs and expenses | $(640.2) | $(597.0) | $(1,837.7) | $(1,743.7) | | Operating income | $549.7 | $339.0 | $1,627.6 | $1,104.9 | Mexican Open-pit Operations Net sales for Mexican open-pit operations grew, boosted by the new Buenavista zinc concentrator - Net sales for Mexican open-pit operations increased by $140.5 million (9.6%) in Q3 2024 YoY, driven by higher volumes and prices[262] - Operating costs and expenses for Mexican open-pit operations increased by $27.2 million (3.8%) in Q3 2024 YoY[264] Mexican Open-pit Operations - Key Financials (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,602.7 | $1,462.2 | $4,807.2 | $4,400.3 | | Operating costs and expenses | $(736.5) | $(709.3) | $(2,237.6) | $(2,126.3) | | Operating income | $866.2 | $752.9 | $2,569.6 | $2,274.0 | Mexican Underground Operations (IMMSA) IMMSA's net sales increased and operating income turned positive due to higher zinc sales and lower costs - Net sales for IMMSA increased by $31.3 million (20.4%) in Q3 2024 YoY, driven by higher zinc sales volume and prices[266] - Operating costs and expenses for IMMSA decreased by $6.5 million (4.2%) in Q3 2024 YoY[267] Mexican Underground Operations (IMMSA) - Key Financials (in millions) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $184.9 | $153.6 | $516.5 | $474.3 | | Operating costs and expenses | $(148.3) | $(154.8) | $(435.6) | $(477.0) | | Operating income | $36.6 | $(1.2) | $80.9 | $(2.7) | Intersegment Eliminations and Adjustments Adjustments are made to reconcile segment results with the consolidated financial statements - Intersegment eliminations and adjustments are applied to reconcile segment results to the condensed consolidated statement of earnings[269] LIQUIDITY AND CAPITAL RESOURCES This section details the company's cash flow activities, capital investments, and contractual obligations Cash flow Operating cash flow remained strong, supported by a significant increase in net income - Net cash provided by operating activities increased by $29.1 million (1.0%) to $3,061.2 million for the nine months of 2024 YoY[271][272] - Cash flow from operating assets and liabilities decreased by $182.8 million in 2024, primarily due to changes in accounts payable and receivable[272] Cash Flow (in millions) - Nine Months Ended Sep 30 | Metric | 2024 | 2023 | Variance | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,061.2 | $3,032.1 | $29.1 | | Net cash used in investing activities | $(511.5) | $(791.4) | $279.9 | | Net cash used in financing activities | $(1,091.2) | $(2,325.7) | $1,234.5 | | Net income | $2,592.4 | $1,987.5 | $604.9 | Net cash used in investing activities Investing activities were primarily focused on capital investments in Mexican and Peruvian operations - Net cash used in investing activities for the nine months of 2024 was $511.5 million, including $792.0 million for capital investments[271][274] - Mexican operations received $570.4 million in capital investments, while Peruvian operations received $221.6 million[274][275] - Investment activities in 2024 included $280.5 million of net purchase of short-term investments[276][278] Dividends The Board of Directors authorized a quarterly cash and stock dividend for November 2024 - The Board of Directors authorized a quarterly cash dividend of $0.70 per share and a stock dividend of 0.0062 shares per common share[279] Capital Investment and Exploration Programs Capital investments are funded by internal and external sources to enhance production and reduce costs - Capital investments are intended to increase production, decrease costs, or address social and environmental commitments[218][219][282] Contractual Obligations No material changes to contractual obligations were reported in the first quarter of 2024 - There have been no material changes in contractual obligations in the first quarter of 2024[283] NON-GAAP INFORMATION RECONCILIATION This section reconciles the non-GAAP measure of operating cash cost to GAAP financial measures - Operating cash cost is a non-GAAP measure that excludes certain non-cash and discretionary items to show controllable cash costs[202][204] Operating Cash Cost Reconciliation (in millions of dollars and dollars per pound of copper) | Metric | Three Months Ended Sep 30, 2024 ($ millions) | Three Months Ended Sep 30, 2024 ($ per pound) | Nine Months Ended Sep 30, 2024 ($ millions) | Nine Months Ended Sep 30, 2024 ($ per pound) | | :--- | :--- | :--- | :--- | :--- | | Cost of sales (exclusive of depreciation, amortization and depletion) | $1,223.1 | $2.29 | $3,629.6 | $2.33 | | Operating Cash Cost before by-product revenues | $1,046.2 | $1.96 | $3,230.6 | $2.07 | | Total by-product revenues | $(639.3) | $(1.19) | $(1,887.9) | $(1.21) | | Operating Cash Cost net of by-product revenues | $406.9 | $0.76 | $1,342.7 | $0.86 | By-product Revenues (in millions of dollars and dollars per pound of copper) - Nine Months Ended Sep 30, 2024 | By-product | $ millions | $ per pound | | :--- | :--- | :--- | | Molybdenum | $(949.5) | $(0.61) | | Silver | $(374.5) | $(0.24) | | Zinc | $(231.8) | $(0.15) | | Sulfuric Acid | $(200.7) | $(0.13) | | Gold and others | $(96.2) | $(0.06) | | Total | $(1,852.7) | $(1.19) | Item 3. Quantitative and Qualitative Disclosure about Market Risk The company is exposed to market risks from commodity prices, foreign currency rates, and open sales Commodity price risk The company's profitability is directly affected by the volatility of metal prices - The Company is subject to market risks from the volatility of copper and other metal prices[214][290] Foreign currency exchange rate risk Fluctuations in the Peruvian sol and Mexican peso can impact financial results - The Company's functional currency is the U.S. dollar, but significant operating costs are denominated in Peruvian sol and Mexican pesos[217][291] Currency Appreciation/(Devaluation) - Nine Months Ended Sep 30 | Currency | 2024 | 2023 | | :--- | :--- | :--- | | Peruvian Sol | (0.0)% | 0.6% | | Mexican Peso | (16.2)% | 9.0% | Effect of 10% USD Appreciation/Devaluation on Net Earnings (in millions) | Scenario | Effect in net earnings | | :--- | :--- | | Appreciation of 10% in U.S. dollar vs. Peruvian sol | $33.6 | | Devaluation of 10% in U.S. dollar vs. Peruvian sol | $(41.0) | | Appreciation of 10% in U.S. dollar vs. Mexican peso | $(13.7) | | Devaluation of 10% in U.S. dollar vs. Mexican peso | $11.2 | Open sales risk Provisional sales expose the company to price fluctuations before final settlement - Provisional copper and molybdenum sales contain embedded derivatives, marked to market through earnings[294] Short-term Investments Short-term investments are subject to fair value measurement and market fluctuations - The Company's short-term investments, including trading securities and available-for-sale debt securities, are subject to market fluctuations[19][295] Derivative Instruments The company uses derivatives to manage commodity price exposure but held none as of September 30, 2024 - The Company uses derivative instruments, such as cash flow hedges for natural gas, to manage exposure to commodity price changes[296][297][298] Item 4. Controls and procedures Management confirms the effectiveness of disclosure controls and reports no material changes in internal control EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES The company's disclosure controls and procedures were deemed effective as of September 30, 2024 - As of September 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[300] CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING No material changes to internal control over financial reporting occurred during the third quarter - There were no material changes in the Company's internal control over financial reporting during the three months ended September 30, 2024[301] Report of Independent Registered Public Accounting Firm The independent auditors found no material modifications needed for the interim financial information - The independent auditors are not aware of any material modifications needed for the interim financial information to conform with GAAP[303] - The auditors expressed an unqualified opinion on the Company's consolidated financial statements as of December 31, 2023[304] Part II. Other Information This part provides information on legal proceedings, risk factors, exhibits, and other required disclosures Item 1. Legal Proceedings Details on legal proceedings are incorporated by reference from Note 9 in Part I of this report - Legal proceedings, including lawsuits related to the Tia Maria project and environmental spills, are detailed in Note 9[80][90][308] Item 1A. Risk Factors This section updates risk factors, focusing on potential impacts from recent Mexican mining law changes - New Mexican mining legislation, approved in April 2023, introduces changes to mining concession periods, water use, and closure guarantees[309] - While the Company believes these changes will not materially impact its operations, future developments could affect its business[311] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable for this report Item 6. List of Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and technical reports - Exhibits include the Amended and Restated Certificate of Incorporation, By-Laws, various Indentures, and Technical Report Summaries[312][313][314] - The report includes XBRL Instance Document, Taxonomy Extension Schema Document, and other interactive data files[315] SIGNATURES The report is duly signed and certified by the company's executive officers - The report is signed by Oscar Gonzalez Rocha, President and Chief Executive Officer, and Raul Jacob, Vice President, Finance, Treasurer and Chief Financial Officer[316]