Southern Copper Earnings Call: Profits Soar, Output Slips

Southern Copper Corp ((SCCO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Southern Copper Rides Record Profits Amid Production Headwinds

The tone of Southern Copper Corp.’s latest earnings call balanced strong optimism on financial performance with measured caution on operations. Management repeatedly highlighted record revenue, EBITDA and net income, powered by a very supportive metals price environment and booming by‑product output that sharply improved margins and cash generation. At the same time, executives acknowledged rising costs, a modest decline in copper production with a lower 2026 outlook, and project‑specific issues in Peru and Mexico. Overall, the message to investors was that the earnings power of the business has rarely been stronger, even as near‑term operational challenges and capital spending commitments remain in focus.

Record Net Sales Driven by Prices and By‑products

Net sales climbed to an all‑time high of $13.4 billion in 2025, a 17% increase versus 2024. Management attributed the surge largely to higher volumes of by‑products such as zinc, silver and molybdenum, combined with firmer prices across the metals complex. The company underscored that this top‑line expansion came despite a slight drop in copper production, underscoring the importance of portfolio diversification in its revenue mix.

EBITDA Surges with Industry‑Leading Margins

Adjusted EBITDA also set a new record at $7.8 billion for 2025, up 22% year‑on‑year, with the full‑year adjusted EBITDA margin improving to 58% from 56% in 2024. The fourth quarter was particularly strong: adjusted EBITDA reached $2.3 billion, up 53% versus the prior year’s quarter, and margin expanded to 60% from 54%. These figures position Southern Copper among the most profitable names in the global mining sector, reflecting a powerful combination of price leverage, by‑product credits and disciplined cost control at the consolidated level.

Net Income Hits New High as Profitability Deepens

Net income rose even faster than sales, reaching a record $4.3 billion in 2025, up 28% from 2024. The fourth quarter netted $1,038 million, a 65% jump compared with Q4 2024. The net income margin improved to 32% for the full year, up from 30% previously, underscoring how operating leverage and by‑product contributions are flowing straight to the bottom line. Management framed this profitability as a key support for future investment and shareholder returns.

Robust Operating Cash Flow Underpins Investment Capacity

Cash flow from operating activities totaled $4.8 billion in 2025, up 8% from 2024, primarily following the sharp rise in net earnings. Despite some working capital pressure from higher accounts receivable, the company generated substantial free cash to fund an expanding capital expenditure plan and a generous dividend policy. Executives emphasized that strong cash generation provides a buffer against commodity volatility and supports the long‑term growth pipeline.

By‑product Tailwinds Boost Revenues and Reduce Costs

The company’s by‑product portfolio played a central role in 2025 performance. Mined zinc production jumped 36%, mainly on higher output from the Buenavista operation, adding 52,500 tons. Silver production increased 15% to 24 million ounces, while molybdenum output rose 7% to 31,200 tons. In the fourth quarter alone, by‑product credits reached $920 million, equivalent to $1.77 per pound of copper, up 3% sequentially. These credits materially offset cash costs per pound of copper and significantly supported margins.

Metal Price Environment Provides Powerful Tailwind

Southern Copper benefited from a markedly stronger price backdrop for key metals. Copper prices were particularly supportive, with LME copper up 21% and COMEX up 22% in Q4 2025 versus the same quarter a year earlier. Molybdenum prices increased 5% over that period, silver prices were cited as rising roughly 74% to an average of $54.48 per ounce in the quarter, and zinc prices gained about 4.3%. Management highlighted that this favorable price environment amplified the impact of higher by‑product volumes, magnifying both revenue and margin expansion.

Capex Ramps Up as Long‑Term Project Pipeline Takes Shape

Capital expenditures reached $1.3 billion in 2025, a 29% increase year‑on‑year, as the company accelerated work on its project portfolio. Southern Copper reminded investors that it has a long‑term capital program exceeding $20.5 billion over the decade. A key focus is the Tia Maria copper project in Peru, which is now 24% complete with roughly $800 million committed. The company expects a cash outlay of about $508 million in 2026 for Tia Maria, targeting first production in the second half of 2027 and ramp‑up to 120,000 tons per year by 2028. Management framed this capex as critical to lifting copper output in the late 2020s.

Shareholder Returns and ESG Credentials in the Spotlight

Alongside growth spending, Southern Copper continues to return substantial cash to shareholders. The board approved a quarterly cash dividend of $1.00 per share, paired with a stock dividend of 0.0085 shares for each existing share. The company also underscored its environmental, social and governance (ESG) credentials, noting that three of its key mines—Buenavista, Toquepala and Cuajone—have received The Copper Mark accreditation. Additionally, its La Caridad SX‑EW facility received safety recognition. Ongoing community investments and public works programs in Peru were highlighted as part of the company’s social license strategy.

Copper Production Declines and Outlook Softens Near Term

Despite the financial records, copper production slipped modestly. Full‑year 2025 copper output declined 1.8% to 956,270 tons and came in about 1% below the company’s plan of 965,000 tons. Looking ahead, 2026 guidance calls for 911,400 tons, a 4.7% drop from 2025. Management attributed the decrease mainly to lower ore grades at its Peruvian operations. While not dramatic, this near‑term production softness contrasts with the company’s strong profitability and places more emphasis on executing its expansion projects.

Rising Operating Costs and One‑off Charges Weigh on Margins

Operating costs moved higher, especially in the final quarter of the year. Total operating costs and expenses increased by $282 million, or 19%, in Q4 2025 versus the same period in 2024. Key drivers included higher workers’ participation, increased purchased copper, greater inventory consumption and higher contractor expenses. The company also recorded a one‑time $60 million asset retirement obligation adjustment in Mexico, mainly linked to the Buenavista operation. While high metal prices and by‑product credits more than offset these pressures in 2025, investors will watch closely how cost inflation evolves.

Cash Costs Per Pound Tick Up but Stay Competitive

On a unit basis, operating cash cost per pound of copper before by‑product credits rose to $2.29 in the fourth quarter of 2025, a roughly 3% increase from $2.23 in the previous quarter. After factoring in by‑product credits, Q4 net cash cost was $0.52 per pound, $0.10 higher than in Q3. For the full year, cash cost before credits was $2.17 per pound, up from $2.13 in 2024. Even with this upward drift, cash costs net of credits remain low by industry standards, a key strength in volatile commodity markets.

Security Issues Delay Los Chancas Development

The Los Chancas project in Peru is facing delays due to the presence of illegal miners within the project area. Management said it is working with authorities to regain control of the site, but progress has been constrained. While not a near‑term volume driver, Los Chancas is part of the company’s longer‑term growth pipeline, and the disruptions highlight the political and social risks that can affect mine development in key jurisdictions.

Operational Trade‑offs at Buenavista Affect Copper and Molybdenum

At the Buenavista mine in Mexico, the company deliberately shifted concentrator priorities toward zinc and higher‑silver ore pockets, a move that supported the by‑product windfall but reduced copper throughput. This strategy also has implications for molybdenum, with the company expecting a decline in moly production in 2026 as mining moves into lower‑grade areas. Management portrayed these as conscious trade‑offs to maximize portfolio economics, but they also contribute to the near‑term copper production decline and by‑product volatility.

Working Capital Dynamics Temper Cash Conversion

While operating cash flow rose meaningfully, working capital movements partially offset the benefit. Higher net operating assets, particularly increased accounts receivable, put some pressure on cash conversion. Management framed this as a natural consequence of higher sales and price levels but acknowledged that it tempers the immediate translation of earnings into free cash. Investors will likely monitor whether these receivables normalize as volumes and prices stabilize.

Guidance: Flat Costs, Lower 2026 Output, Long‑term Growth Ahead

Looking forward, Southern Copper expects 2026 copper production of 911,400 tons, down 4.7% from 2025, with 2027 volumes “a little north of 900,000 tons.” A multi‑year ramp is projected thereafter, with output rising to around 970,000 tons in 2028 and approximately 1,060,000 tons between 2029 and 2031 as Tia Maria and other projects come on line. Tia Maria’s total budget remains at $1.8 billion, with construction slated to finish by the first half of 2027, initial production of about 30,000 tons in the second half of 2027 and a full run‑rate of 120,000 tons per year from 2028. For by‑products, management is guiding to molybdenum production of around 26,000 tons in 2026 (down from 31,200 tons in 2025), silver output near 24 million ounces (flat to slightly down) and continued support from zinc after its 36% jump in 2025. On costs, the company expects operating cash costs per pound to remain “relatively flat” in 2026 on a per‑pound basis, while noting the impact of currency appreciation in Mexico and Peru. Management also referenced its view of a 2026 copper market deficit of roughly 320,000 tons and global inventories near 14 days of demand, a backdrop it believes will underpin prices.

In closing, Southern Copper’s earnings call painted the picture of a miner at a financial high point, with record revenue, margins and profits supported by strong metals prices and exceptional by‑product performance. At the same time, modestly declining copper volumes, rising operating costs and project‑level challenges introduce some complexity to the story. For investors, the key takeaways are a resilient, cash‑generative business today and a clearly defined growth path into the next decade, contingent on delivering major projects like Tia Maria on time and managing operational and geopolitical risks along the way.