Post on 12-Oct-2020
0
Southern Copper CorporationSeptember, 2020
1
I. Introduction
2
This presentation contains certain statements that are neither reported financial results nor other
historical information. These estimates are forward-looking statements within the meaning of the
safe-harbor provisions of the securities laws. These forward-looking estimates are subject to risk
and uncertainties that could cause actual results to differ materially from the expressed in the
forward-looking statements. Many of these risks and uncertainties relate to factors that are
beyond Southern Copper’s (SCC) ability to control or estimate precisely, such as future market
conditions, commodity prices, the behavior of other market participants and the actions of
governmental regulators. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this presentation. SCC does not
undertake any obligation to publicly release any revision to these forward-looking estimates to
reflect events or circumstances after the date of this presentation.
Safe Harbor Statement
3
Corporate Structure
100.0% (*)
99.29 % 99.96 %
11.1% (*)
Public Float
SCC Peru Branch Minera Mexico
(*) As of June 30, 2020
AMERICASMINING
CORPORATION
88.9% (*)
China49%
Asia Ex China12%
Europe16%
USA8%
Japan4%
Other11%
Transport11%
Electrical Network
24%
Construction30%
Industrial Machinery
10%
Consumer & General Products
25%
LME Copper Cash Price vs. Inventories
Copper Consumption by End-use
Solid Fundamentals Copper Consumption by Region
Wood Mackenzie 2018
Copper – The Best Fundamental Story in Commodities
4
― COVID-19 has dramatically changed the expected supply
and demand balance, affecting both of them.
― As of June 30th, refined copper inventories increased by
48K tons since Dec-19.
― Difficult to predict any market direction. At this point,
equilibrium has been found at a much lower activity level.
Wood Mackenzie 2018
► Refined copper inventories have decreased by 34%, since its
peak in March, 2018.
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2-J
an-1
5
30
-Ap
r-1
5
25
-Au
g-1
5
18
-De
c-1
5
15
-Ap
r-1
6
11
-Au
g-1
6
6-D
ec-1
6
4-A
pr-
17
31
-Ju
l-1
7
23
-No
v-1
7
22
-Ma
r-1
8
19
-Ju
l-1
8
13
-No
v-1
8
12
-Ma
r-1
9
9-J
ul-1
9
1-N
ov-1
9
28
-Fe
b-2
0
26
-Jun
-20
LME COMEX shanghai LME Cash
5
Southern Copper Strengths
►Highest copper reserves of the industry
►Excellent organic growth projects
►Low cost, fully integrated operations
►Experienced management team
►Strong financial performance / investment grade since 2005
►Outstanding dividend history
►Good long-term copper & by-product fundamentals
6
II. Overview of Operations
7
Peru
Ilo
Mexico
Copper open pit mines
Underground mines
Smelters and Refineries
Key
Company Overview
Copper Reserves 1: 67.6 mmt
2020 Cash Cost $ 0.72/lb.
2020 Estimates (@ $2.75 x Lb of Cu):
Copper Production: 997 kt
Sales: $ 7.5 B
EBITDA: $ 3.5 B
47% of Sales
#1 copper company by reserves 2
#5 copper producer 3
#10 copper smelter 3
#7 refinery 3
Source: Company FilingsNotes: 1 Copper contained in reserves based on US$2.90 per pound of copper as of December 31, 20192 Based on available companies reports3 Wood Mackenzie Limited 2017
Santa Barbara
Charcas
Taxco
San Luis Potosi
Santa Eulalia
San Martin
Cuajone
La Caridad
Buenavista
ToquepalaTia Maria
Projects
El Arco
El Pilar
Los Chancas
Michiquillay
8
Copper Reserves as Reported SCC Highlights
►#1 mine life among copper producers
►#5 world’s largest producer of mined copper
►Highly diversified geographical presence
►Four large-scale open-pit mines
►A strong pipeline of world class copper
greenfield projects and several other
opportunities
Mine Life (years of production)
World’s Largest Copper Reserves
67.6
52.6
46.644.4
28.8
19.217.3
13.1
0
10
20
30
40
50
60
70
80
SC
C
Fre
ep
ort
Co
de
lco
BH
P B
illito
n
Gle
nco
reX
str
ata
Fir
st
Qu
an
tum
An
glo
Am
eri
ca
n
Rio
Tin
to
Co
pp
er
Re
se
rve
s (
Mt)
Source 10K 10K Annual Rep. 20F Reserve Rep. Annual Rep. Annual Rep. Annual Rep.
Period Dec.31, 2019 Dec.31, 2019 Dec.31, 2019 Jun. 30, 2019 Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2019 Dec. 31, 2019
Cu Price $2.90 $2.50 $2.96 $2.65 N/A $3.00 $2.70 $2.97
94
68
49
36 34
27 27 2623 21
0
20
40
60
80
100
SCC2015
SCC2019
SCC afterexpansion
(2028)
Freeport FirstQuantum
AngloAmerican
Codelco BHPBilliton
Rio Tinto Xstrata
Geographic Footprint & Product Diversification
2019 Revenue by Product 2019 Revenue by Market
9
Copper81%
Molybdenum8%
Zinc4%
Silver3%
Other4%
Asia 40%
Mexico 28%
United States12%
Europe 8%
Other LatAm7%
Peru 5%
10
Low Cost Operations
Cash Cost per Pound of Copper Produced
Net of By-Products
Operating Cash Cost per Pound of Copper
Produced
Low Cost Drivers
Fully integrated low cost operations
World class assets
Significant SX-EW production
Strong by-product credits
Management focus on cost efficiency and growth
(1) 2019
Cost Structure (1)
Operating Materials
18%
Fuel13%
Power15%
Labor14%
Maintenance21%
Other19%
1.66
1.441.49 1.54 1.52
1.42
1.26
1.20
1.70
2015 2016 2017 2018 2019 1Q20 2Q20
(US
$/lb
)
1.11
0.950.92
0.87 0.88
0.76
0.67
0.6
0.8
1.0
1.2
2015 2016 2017 2018 2019 1Q20 2Q20
(US
$/lb)
11
Global WeightedAvg.
138.0 c/lb
2019 Copper Production Cash Cost by Company
12
III. Financial Overview
13
SCC Financial Summary
(US$ MM) 2017 2018 2019
Copper Price (LME) US$ per pound 2.80 2.96 2.72 2.62 2.75
Income Statement:
Net Revenues $6,655 $7,097 $7,286 $7,257 $7,503
EBITDA 3,292 3,556 3,527 3,322 3,526
EBITDA Margin 49% 50% 48% 46% 47%
U.S. Income Tax Reform Adjustment (743)
Net Income 729 1,543 1,486 1,466 1,600
Dividends paid per share 0.59 1.40 1.60 0.60 0.60
Balance Sheet Statement:
Cash, Equivalents & Short Term
Investments $1,055 $1,058 $2,006 $2,640 $2,783
Total Assets 13,771 14,485 16,407 17,083 17,260
Total Debt 5,957 5,960 6,941 6,541 6,541
Total Liabilities 7,621 7,872 9,549 9,098 9,141
Total Shareholders' Equity 6,108 6,567 6,810 7,933 8,067
Cash Flow Statement:
Capital Expenditures $1,024 $1,121 $708 $800 $800
Free Cash Flow 1
953 1,114 1,204 1,377 1,520
Dividends paid to common shareholders 456 1,082 1,237 464 464
Total Debt / EBITDA 1.8x 1.7x 2.0x 2.0x 1.9x
Net Debt / EBITDA 1.5x 1.4x 1.4x 1.2x 1.1x
1 Free Cash Flow defined as net cash from operating activities less capital expenditures.
2020 E
Top Tier Margins and Conservative Leverage for Increased Financial Flexibility
2019 Total Debt / EBITDA (x)2019 EBITDA Margin (%)
14Source: Bloomberg Consensus
Amortization Schedule
Source: Company Reports and Bloomberg Consensus
Solid Financial Performance
$1,000
$1,500
$1,200
$1,100
$1,000
$51
$500
$300
$400
2050
2045
2042
2040
2035
2028
2025
2022
2020
15%
34%
40%
48%
48%
49%
52%
Freeport
Anglo
American
First
Quantum
Rio Tinto
SCC
Antofagasta
BHP
4.8
4.6
2.0
1.0
1.1
0.9
0.6
First
Quantum
Freeport
SCC
Antofagasta
BHP
Anglo
American
Rio Tinto
15Source: SCC
Toquepala Concentrator Expansion
4Q18 - $1.2B - 100K Tons Cu, 3.1K
Tons Mo
2017-2020 2021-2024Buenavista:
- $3.1B program to increase capacity
from 180K Tons Cu to 500K Tons Cu,
4.6K Tons MoBuenavista Zinc Conc. 2022 - $413M 20K
Tons Cu, 100K Tons Zn
Los Chancas Conc. & SX/EW
1H27 - $2.8B - 130K Tons Cu,
7.5K Tons MoPilares 2022 - $159M 35K Tons Cu
Investment Program to SignificantlyIncrease Production
Board approved Other projects
2018-2028 Capex Program Overview (MM) 2018-2028 Copper Production Forecast (‘000 MT Cu)
Tia Maria SX/EW 2H24 – $1.4B - 120K
Tons Cu
El Arco Conc. & SX/EW 2H27 -
$2.8B 190K Tons Cu, 105K Oz
Au
Ilo Smelter & Refinery
Expansion 1H25 - $1.3
El Pilar 1Q22 - $256M – 35K Tons Cu
MEXICO PERU
Michiquillay 1H28 - $2.5B -
225K Tons Cu
Empalme Smelter 1H25 -
$1.1B
1,053
678 800
1,705
2,031
2,862 2,738
2,126
2,960
2,076
358
200
600
1,000
1,400
1,800
2,200
2,600
3,000
3,400
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Average:$1.8 B
884 994 997 986 950
1,067 1,105 1,127 1,159
1,298
1,752
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
+98%
Key Differentiators to Achieve Lower Capital Intensity
• Reduced mining preparation cost due to low pre stripping for Tia Maria and Buenavista projects
• Experienced project development team focused on capital efficiency16
Best-in-class Mining Projects Reaching Completion Providing Competitive Cash Costs and Increased Production Levels
Initial Capex % of Total Incremental Production Capital Intensity
(US$ MM) Capex Cu Eq. (kt/y) (US$/tpy Cu Eq.)
Brownfield Projects
Toquepala concentrator expansion Expansion (N) 1,253.2 8.5% 100.0 12,532
Buenavista SXEW III Expansion (N) 1,363.5 9.3% 120.0 11,363
Buenavista concentrator expansion Expansion (N) 1,785.4 12.1% 188.0 9,497
Buenavista Zinc Probable 413.0 2.8% 61.7 6,697
Pilares Extension 159.0 1.1% 35.0 4,543
Total / Weighted average intensity 4,974.1 33.8% 504.7 9,856
Greenfield Projets
Tia Maria SXEW Probable 1,400.0 9.5% 120.0 11,667
Los Chancas Probable 2,800.0 19.0% 150.0 18,667
Michiquillay Possible 2,500.0 17.0% 225.0 11,111
El Pilar Probable 256.0 1.7% 35.0 7,314
El Arco Possible 2,800.0 19.0% 209.8 13,343
Total / Weighted average intensity 9,756.0 66.2% 739.8 13,187
Weighted average project capital intensity of existing projects
US$ 000 per tonne of Cu equivalent annual incremental production
Source: Wood Mackenzie (Global copper mine supply summary, 1Q 2019); SCC fi l ings and presentations
Project Capital Intensity at SCC Projects
Type
Industry-Wide Capital Intensity Comparison vs. SCC Projects
5.9
12.7 12.6 12.3
9.9
11.8
14.7
13.2
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Restarts Extensions of existingmine life
Expansions to existingMine/Plant (X)
Expansions newprocess plant (N)
SCC Brownfield Probable Possible SCC Greenfield
$2,728
$1,945$2,212
$3,292 $3,556 $3,527 $3,526
47%
38% 41% 49%
50% 48% 47%
2014 2015 2016 2017 2018 2019 2020E
SCC EBITDA and % Margin(in US$ millions)
SCC is the Premier Copper Play
• World class assets in investment grade countries.
• #1 in reserves of any company with various organic growth prospects.
- Copper production heading towards 1.8M Tons by 2028.
• Capacity to deliver projects through flexible capital structure and significant cash generation
capability. Investments focused on cost competitiveness.
• Fully integrated low cost operations. Expects cash cost of $0.72 per pound by 2020.
• Outstanding dividend history.
• Experienced management with proven track record.
SCC’s Major Strengths
17
Cu price $3.11 $2.50 $2.21 $2.80 $2.75$2.72$2.96