SCC(US:SCCO)2025-04-30 19:15Part I. Financial Information Condensed Consolidated Financial Statements For the first quarter of 2025, Southern Copper Corporation reported a net income attributable to SCC of $945.9 million, a 28.5% increase year-over-year, driven by higher sales and metal prices Condensed Consolidated Statements of Earnings Net sales for Q1 2025 increased by 20.1% year-over-year to $3,121.9 million, leading to a 29.1% rise in operating income to $1,535.5 million and a diluted EPS of $1.19 Condensed Consolidated Statements of Earnings | Financial Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $3,121.9 | $2,599.8 | 20.1% | | Operating Income | $1,535.5 | $1,189.7 | 29.1% | | Net Income Attributable to SCC | $945.9 | $736.0 | 28.5% | | Diluted EPS | $1.19 | $0.95 | 25.3% | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $19.79 billion from $18.71 billion at year-end 2024, primarily due to a significant increase in cash and cash equivalents to $4.12 billion Condensed Consolidated Balance Sheets | Balance Sheet Item | March 31, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $7,220.0 | $6,174.3 | | Cash and cash equivalents | $4,116.3 | $3,258.1 | | Total Assets | $19,791.2 | $18,713.5 | | Total Current Liabilities | $1,944.4 | $2,248.1 | | Long-term debt, net | $6,747.0 | $5,758.5 | | Total Liabilities | $10,154.5 | $9,475.4 | | Total Equity | $9,636.7 | $9,238.1 | Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash from operating activities was $721.4 million, with cash and cash equivalents increasing by $858.2 million, supported by new debt issuance and partially offset by capital expenditures and dividend payments Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $721.4 | $659.7 | | Net cash (used in) provided by investing activities | $(290.7) | $56.2 | | Net cash provided by (used in) financing activities | $432.9 | $(620.1) | | Increase in cash and cash equivalents | $858.2 | $100.7 | Notes to Condensed Consolidated Financial Statements The notes detail significant financial events, including a $1.0 billion senior note issuance, ongoing legal challenges for the Tia Maria project, secured labor stability in Peru, and subsequent dividend declarations and debt payments - In February 2025, the company's subsidiary, Minera Mexico S.A. de C.V., issued $1.0 billion of fixed-rate senior notes due in 2032 with an annual interest rate of 5.625%53 - The company faces five ongoing lawsuits related to the Tia Maria project in Peru, challenging its Environmental Impact Assessment and construction license, which the company asserts are without merit85 - In Peru, the company signed long-term collective bargaining agreements with all six of its unions, with expirations ranging from 2027 to 2033, ensuring labor stability106107108 - As of March 31, 2025, the company had committed approximately $305.2 million to capital investment project developments135 - Subsequent to the quarter end, on April 10, 2025, the Board authorized a quarterly dividend of $0.70 cash and a stock dividend of 0.0099 shares per share, and on April 22, 2025, the company paid off $500 million in principal on its 2015 senior notes166168 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 20.1% year-over-year increase in Q1 2025 net sales, driven by higher metal prices and volumes, resulting in a 28.5% rise in net income and an improved operating cash cost per pound of copper Executive Overview & Key Matters In Q1 2025, net sales reached $3.12 billion and net income attributable to SCC was $945.9 million, driven by favorable metal prices and higher sales volumes, with operating cash cost per pound of copper falling to $0.77 Executive Overview & Key Matters | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,121.9 M | $2,599.8 M | 20.1% | | Net Income (SCC) | $945.9 M | $736.0 M | 28.5% | | EPS | $1.19 | $0.95 | 25.3% | - Sales composition in Q1 2025 was dominated by copper (77.9%), followed by molybdenum (9.6%), silver (5.7%), and zinc (3.6%)174 - Mined production highlights for Q1 2025 vs Q1 2024: - Copper: Stable at 529.6 million pounds - Molybdenum: Increased 8.6% to 16.9 million pounds - Silver: Increased 13.8% to 5.4 million ounces - Zinc: Increased 49.3% to 86.8 million pounds, driven by the Buenavista Zinc concentrator182183184185 - Operating cash cost per pound of copper, net of by-product revenues, decreased by 28.4% from $1.07 in Q1 2024 to $0.77 in Q1 2025193195 Capital Investment Programs The company's capital investments totaled $317.8 million in Q1 2025, with major projects like Tia Maria ($1.8 billion) and El Pilar ($310 million) advancing to support long-term organic growth - Tia Maria (Peru): A $1.8 billion project to produce 120,000 tons of copper cathodes annually, now in early construction with access road progress at 61%206207209 - El Pilar (Mexico): A $310 million project to produce 36,000 tonnes of copper cathodes annually, with project development and on-site environmental activities in progress203204 - Los Chancas (Peru): An illegal miner attack in March 2025 damaged facilities, and the company is working with authorities to remove the squatters to continue project development215 - Michiquillay (Peru): A $2.5 billion project with an expected output of 225,000 tonnes of copper per year, with exploration 39% complete and geo-metallurgical and hydrological studies underway216217218 Results of Operations Consolidated net sales for Q1 2025 increased 20.1% to $3,121.9 million, and operating income rose 29.1% to $1,535.5 million, driven by strong performance across Peruvian and Mexican operations Average Metal Price | Average Metal Price | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Copper (LME, $/lb) | $4.24 | $3.83 | 10.7% | | Molybdenum ($/lb) | $20.43 | $19.84 | 3.0% | | Zinc (LME, $/lb) | $1.29 | $1.11 | 16.2% | | Silver (COMEX, $/oz) | $32.31 | $23.35 | 38.4% | - Peruvian Operations: Operating income rose 22.7% to $561.5 million, driven by higher sales volumes of copper, molybdenum, and silver, along with higher metal prices234 - Mexican Open-pit Operations: Operating income grew 28.6% to $965.5 million, mainly due to a significant increase in zinc sales volume from the Buenavista concentrator and higher metal prices235 - Mexican Underground (IMMSA): Turned a $6.8 million operating loss in Q1 2024 into an $18.4 million operating income in Q1 2025, driven by higher metal prices and a 10.6% reduction in operating costs237 Liquidity and Capital Resources The company's cash position strengthened significantly in Q1 2025, with cash and cash equivalents increasing by $858.2 million to end the quarter at $4.12 billion, supported by operating cash flow and new debt issuance Cash Flow Summary (in millions) | Cash Flow Summary (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $721.4 | $659.7 | | Net cash (used in) provided by investing activities | $(290.7) | $56.2 | | Net cash provided by (used in) financing activities | $432.9 | $(620.1) | | Increase in cash and cash equivalents | $858.2 | $100.7 | - Financing activities in Q1 2025 were primarily driven by the proceeds from the issuance of debt ($993.8 million), partially offset by cash dividends paid to common stockholders ($553.3 million)16 Quantitative and Qualitative Disclosure about Market Risk The company's primary market risks include commodity price volatility, foreign currency exchange fluctuations, and open sales risk from provisionally priced contracts, with a $0.10 per pound change in copper price estimated to impact net earnings by $92.5 million Metal Price Change Impact on Net Earnings | Metal Price Change | Impact on Net Earnings (in millions) | | :--- | :--- | | Copper: +$0.10 / lb | $92.5 | | Molybdenum: +$1.00 / lb | $26.3 | | Zinc: +$0.10 / lb | $18.6 | | Silver: +$1.00 / oz | $10.6 | - A 10% appreciation of the USD against the Peruvian sol would increase net earnings by $15.1 million, while a 10% appreciation against the Mexican peso would decrease net earnings by $3.2 million252 - Provisionally priced sales of copper and molybdenum contain embedded derivatives that are marked to market through earnings each period, creating exposure to price fluctuations prior to final settlement253 Controls and Procedures As of March 31, 2025, the company's management concluded that its disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025257 - No material changes in the company's internal control over financial reporting occurred during the first quarter of 2025258 Part II. Other Information Legal Proceedings This section incorporates by reference the detailed discussion of legal matters from Note 10 of the financial statements, primarily relating to ongoing litigation concerning the Tia Maria project, the 2014 Buenavista mine spill, and various labor issues - The report refers to Note 10, "Commitments and Contingencies," for detailed information on legal proceedings266 Risk Factors The company has updated its risk factors to address the potential negative impacts of U.S. regulatory uncertainty, tariff threats, and international trade tensions, which could significantly affect cost structures and profitability - A key updated risk is the potential for new U.S. tariffs and trade tensions to adversely affect the company's cost structures, pricing, and profitability268 - The company notes that reciprocal tariffs enacted in April 2025, though later paused, caused fluctuations in the market prices for its main products and common stock, highlighting the volatility of the trade environment269 Other Items (Item 2, 4, 5, 6) This section addresses other required disclosures, confirming no unregistered sales of equity securities, no applicable mine safety disclosures, and no Rule 10b5-1 trading arrangement adoptions or terminations by directors or officers - Item 2: No unregistered sales of equity securities were conducted271 - Item 5: No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025273