Southern Copper's Q1 2025: Key Contradictions in Dividend Strategy, Production Guidance, and Tia Maria Project Costs

Dividend strategy, 2025 production guidance, issues with project timeline and capital expenditure, copper production forecast, and Tia Maria project timeline and costs are the key contradictions discussed in Southern Copper's latest 2025Q1 earnings call.



Copper Market and Pricing Dynamics:
- The London Metal Exchange copper price increased 11% year-over-year, from an average of $3.83 per pound in Q1 2024 to $4.24 in Q1 2025.
- A significant arbitrage difference between COMEX and LME prices was observed, with the COMEX price reaching a peak of $0.73 per pound above the LME price on March 26.
- The market is projected to maintain a year-end deficit of 300,000 metric tons, and inventories cover only 1 week of global demand.
- The intense commercial war between the U.S. and China is expected to affect economic growth and indirectly impact copper demand.

Copper Production and Financial Performance:
- Southern Copper's copper production remained stable at 240,226 tons for Q1 2025, with SX-EW cathode production at Buenavista increasing by 24% and Toquepala concentrate production up by 2%.
- Net sales increased by 20% to $3 billion, driven by a 19% increase in copper sales and higher prices.
- The adjusted EBITDA rose 23% to $1,746 million, with an adjusted EBITDA margin of 56%.
- Cash cost per pound of copper before by-products was $0.77, a 21% reduction compared to the previous quarter.

Capital Investments and Expansion Projects:
- Southern Copper's capital program for the decade exceeds $15 billion, with significant investments in Mexico and Peru.
- Tia Maria construction is expected to cost less than $200 million in 2025 and $460 million in 2027, affecting CapEx figures for upcoming years.
- The company plans to invest over $600 million in Mexico this year, focusing on operational improvements and water management.

By-Product Performance and Impact:
- Molybdenum prices averaged $20.43 per pound, up 3% from the previous year, with production rising 9% due to higher ore grades at key mines.
- Silver prices increased 38%, reaching $32.31 per ounce, with production up 14% due to improved production at Buenavista and Cuajone mines.
- Zinc prices rose 16%, with mined zinc production increasing 49% due to a 161% increase in production at Buenavista's new zinc concentrator.