Southern Copper increases Q2 profit

Southern Copper, with operations in Peru and Mexico, boosted second quarter net income by 36.7% due mainly to stronger sales and cost-cutting offsetting production declines.

Southern posted a US$410mn profit in the quarter compared with US$300mn profit a year earlier as sales rose 20.1% to $1.84bn from US$1.53bn a year ago, the Phoenix-based company said in a statement.

Southern said copper prices rose 19.8% to US$3.09/lb on the Comex in Q2, while zinc rose 19.5% to US$1.41/lb and molybdenum jumped 44.4% to US$11.55/lb. Silver slid 4% to US$16.50/oz.

The company brought down cash costs net of by-products to US$0.81/lb in the quarter from US$0.98/lb the previous year, while capex was US$266.4mn, with the bulk of spending on the US$1.26bn Toquepala expansion in Peru.

Copper output rose 3% to 228,005t in the quarter from 221,384t a year ago as higher output in Peru offset production declines at its Mexican operations, Southern said. Zinc climbed 0.9% to 17,983t and silver gained 16.1% to 4.64Moz. Molybdenum was little changed at 5,395t.

The company added it has signed a three-year collective bargaining agreement with one of its six labor unions, including 5%/y wage increases, and continues to negotiate with the other five unions.

Projects

Southern, which in 2016 completed a $3.5 billion expansion at Mexican Buenavista mine, said it is acquiring equipment for a US$413mn, 80,000t/y zinc concentrator at Buenavista, scheduled to start operating in 2020.

The company added it is working on mine preparation including a road for the US$159mn, high-grade Pilares project near its La Caridad mine, which is expected to add 35,000t/y copper in 2019. Southern added it has finished environmental studies and will present them to the Mexican government.

In Peru, Southern has invested US$1.04bn to date in an expansion of its 100,000t/d Toquepala concentrator plant to 245,000t/d. The project is 95% complete and due to start production in Q3.

The company is hoping to secure a construction license this year for its US$1.4bn Tía María copper project, delayed by environmental opposition since 2011, the company said.

It is counting on expansions in Peru and Mexico to help boost annual copper output to 1.5Mt by 2023.