21
1 SOUTHERN COPPER CORPORATION Company Presentation May 2021

SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

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Page 1: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

1

SOUTHERN COPPER CORPORATIONCompany Presentation

May 2021

Page 2: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

2

Index

Introduction 03

Overview of Operations 10

Financial Overview 16

Page 3: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

3

INTRODUCTION

Page 4: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

4

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

Page 5: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

5

Corporate Structure

(*) As of March 31, 2021

100.0% (*)

99.29 % 99.96 %

11.1% (*)

Public Float

Southern Perú Minera México

AMERICASMINING

CORPORATION

88.9% (*)

36% of EBITDA (*) 64% of EBITDA (*)

Page 6: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

6

Copper – The Best Fundamental Story in Commodities

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

Copper Market Solid Fundamentals Copper Consumption by Region

Wood Mackenzie

• Automobile industry’s global recovery was reflected in an 89% increase in production in 1Q21.

• President Biden’s $2.0 trillion infrastructure package will significantly increase copper demand, a fundamental green energy element.

• Expect a 2021 market deficit this year due to a significant recovery in demand, which should be between 3.5% and 5.5%.

Wood Mackenzie

-

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

4.00

4.50

5.00

4-J

an-1

6

22

-Ma

r-1

6

9-J

un-1

6

26

-Au

g-1

6

14

-No

v-1

6

2-F

eb

-17

21

-Ap

r-1

7

11

-Ju

l-1

7

27

-Se

p-1

7

14

-Dec-1

7

6-M

ar-

18

24

-Ma

y-1

8

13

-Au

g-1

8

30

-Oct-

18

18

-Ja

n-1

9

8-A

pr-

19

27

-Jun

-19

13

-Se

p-1

9

2-D

ec-1

9

20

-Fe

b-2

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-Ma

y-2

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29

-Ju

l-2

0

15

-Oct-

20

5-J

an-2

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24

-Ma

r-2

1

LME COMEX shanghai LME Cash

Page 7: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

7

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

Page 8: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

8

ESG at the Core of our Strategy (at GMex level)

⇒ Additional resources for ESG tasks, including the appointment

of a Corporate Sustainability Director to oversee fulfillment of

corporate ESG action plans and targets.

⇒ Internal and external Gap analysis, with specialized agencies.

⇒ Action Plan to close the gaps.

⇒ Intensive dialogue and communication with stakeholders and

Ratings Agencies (upgraded from CCC to B).

⇒ Improved Sustainability Report, aligned with GRI Reporting.

⇒ Included in the DJSI sustainability index.

Page 9: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

9

ESG at the Core of our Strategy

⇒ 2020 Highlights:

Zero fatalities.

2020 Incident rate reduced by 41% (2019).

Six new Corporate Policies:

Environmental

Community Engagement

Sustainable Development

Occupational Health and Safety

Diversity, Inclusion and Non-Discrimination

Human Rights

Page 10: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

10

OVERVIEW OF OPERATIONS

Page 11: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

11

Perú

Ilo

México

Copper open pit mines

Underground mines

Smelters and Refineries

Key

Company Overview

Copper Reserves 1: 67.7 mmt

2020 Cash Cost $ 0.69/lb.

2021 Estimates (@ $4.00 x Lb of Cu):

Copper Production: 951 kt

Sales: $ 9.8 B

EBITDA: $ 5.8 B

60% of Sales

1Q21 Cash Cost 0.74

#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$3.00 per pound of copper as of December

31, 20202 Based on available companies reports3 Wood Mackenzie Limited

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

Page 12: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

12

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

67.7

51.3

45.741.1

30.1 28.924.3

14.8

0

10

20

30

40

50

60

70

80

SC

C

Fre

eport

Codelc

o

BH

P B

illiton

Gle

ncore

First

Qua

ntu

m

Ang

loA

merican

Rio

Tin

to

Co

pp

er

Re

serv

es (

Mt)

Source 10K 10K Annual Rep. 20F Reserve Rep. Annual Rep. Annual Rep. Annual Rep.

Period Dec.31, 2020 Dec.31, 2020 Dec.31, 2020 Jun. 30, 2020 Dec. 31, 2020 Dec. 31, 2020 Dec. 31, 2020 Dec. 31, 2020

Cu Price $3.00 $2.50 N/A N/A N/A $3.00 N/A N/A

94

68

50

38 37 35

28 26 24 24

0

20

40

60

80

100

SCC2015

SCC2019

SCC afterexpansion

(2028)

AngloAmerican

FirstQuantum

Freeport Rio Tinto Codelco BHPBilliton

Glencore

Page 13: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

13

Geographic Footprint & Product Diversification

2020 Revenue by Product 2020 Revenue by Market

Copper84%

Molybdenum6%

Zinc3%

Silver3%

Other4% Asia 43%

Mexico 26%

United States13%

Europe 7%

Other LatAm7%

Peru 4%

Page 14: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

14

Maintenance22%

Power18%

Operating Materials

17%

Labor13%

Fuel12%

Other18%

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) L12M

Cost Structure (1)

1.11

0.950.92

0.87 0.88

0.690.74

0.6

0.8

1.0

1.2

2015 2016 2017 2018 2019 2020 1Q21

(US

$/lb

)

1.66

1.441.49 1.54 1.52

1.37

1.51

1.20

1.70

2015 2016 2017 2018 2019 2020 1Q21

(US

$/lb)

Page 15: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

15

15

Global WeightedAvg.

138.0 c/lb

2019 Copper Production Cash Cost by Company

Page 16: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

16

FINANCIAL OVERVIEW

Page 17: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

17

SCC Financial Summary(US$ MM) 2018 2019 2020 2021 E

Copper Price (LME) US$ per pound 2.96 2.72 2.80 4.00

Income Statement:

Net Revenues $7,097 $7,286 $7,985 $9,809

EBITDA 3,556 3,527 3,869 5,844

EBITDA Margin 50% 48% 48% 60%

U.S. Income Tax Reform Adjustment

Net Income 1,543 1,486 1,570 3,081

Dividends paid per share 1.40 1.60 1.50 1.30

Balance Sheet Statement:

Cash, Equivalents & Short Term

Investments $1,058 $2,006 $2,594 $4,424

Total Assets 14,485 16,407 16,664 19,555

Total Debt 5,960 6,941 6,544 6,544

Total Liabilities 7,872 9,549 9,388 9,569

Total Shareholders' Equity 6,567 6,810 7,276 9,926

Cash Flow Statement:

Capital Expenditures $1,121 $708 $592 $1,431

Free Cash Flow 1 1,114 1,204 2,191 2,211

Dividends paid to common shareholders 1,082 1,237 1,160 1,005

Total Debt / EBITDA 1.7x 2.0x 1.7x 1.1x

Net Debt / EBITDA 1.4x 1.4x 1.0x 0.4x

1 Free Cash Flow defined as net cash from operating activities less capital expenditures.

Page 18: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

18

4.2x

2.6x

1.8x

1.2x

1.2x

1.2x

0.6x

First Quantum

Freeport

SCC

BHP Billiton

Antofagasta

AngloAmerican

Rio Tinto

Top Tier Margins and Conservative Leverage for Increased Financial Flexibility

2020 Total Debt / EBITDA (x)2020 EBITDA Margin (%)

Source: 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

2050

2045

2042

2040

2035

2028

2025

2022

27%

32%

41%

48%

50%

52%

52%

Freeport

AngloAmerican

FirstQuantum

SCC

Antofagasta

Rio Tinto

BHP

Page 19: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

19

Source: SCC

Toquepala Concentrator Expansion4Q18 - $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 Mo Buenavista Zinc Conc. 2023 - $413M 20K

Tons Cu, 100K Tons Zn

Los Chancas Conc. & SX/EW 1H27 - $2.6B - 130K Tons Cu, 7.5K Tons Mo

Pilares 1Q22 - $159M 35K Tons Cu

Investment Program to Significantly IncreaseProduction

Board approved Other projects

2019-2029 Capex Program Overview (MM)2019-2029 Copper Production Forecast

(‘000 MT Cu)

Tia Maria SX/EW 2024 – $1.4B - 120K Tons Cu

El Arco Conc. & SX/EW 2H27 -$2.9B 190K Tons Cu, 105K Oz Au

Ilo Smelter & Refinery Expansion 1H25 - $1.3B

El Pilar 2023 - $310M – 35K Tons Cu

MEXICO PERU

Michiquillay 1H28 - $2.5B -225K Tons Cu

Empalme Smelter 1H25 - $1.1B

678 571

1,431

2,005

2,172 2,257

2,665

3,046

2,678

335 346

200

600

1,000

1,400

1,800

2,200

2,600

3,000

3,400

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Average:$1.7 B

994 1,001 951 914

1,031 1,136 1,120 1,162

1,298

1,863 1,806

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

+82%

Page 20: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

20

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 12.2% 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 33.9% 504.7 9,856

Greenfield Projets

Tia Maria SXEW Probable 1,400.0 9.5% 120.0 11,667

Los Chancas Probable 2,600.0 17.7% 150.0 17,333

Michiquillay Possible 2,500.0 17.0% 225.0 11,111

El Pilar Probable 310.0 2.1% 35.0 8,857

El Arco Possible 2,900.0 19.7% 209.8 13,820

Total / Weighted average intensity 9,710.0 66.1% 739.8 13,124

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, 3Q 2020); SCC fi l ings and presentations

Project Capital Intensity at SCC Projects

Type

Industry-Wide Capital Intensity Comparison vs. SCC Projects

5.9

11.7

13.6 13.7

9.9

11.6

14.4

13.1

-

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

Page 21: SOUTHERN COPPER CORPORATION · 2021. 5. 4. · Cash Flow Statement: Capital Expenditures $1,121 $708 $592 $1,431 Free Cash Flow 1 1,114 1,204 2,191 2,211 Dividends paid to common

21

$1,945$2,212

$3,292$3,556 $3,527

$3,869

$5,844

38% 41%

49% 50%48% 48%

60%

2015 2016 2017 2018 2019 2020 2021 E

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 1.9M 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. Cash cost of $0.69 per pound by 2020.

Outstanding dividend history.

Experienced management with proven track record.

SCC’s Major Strengths

Cu price $2.50 $2.21 $2.80 $2.96 $4.00$2.80$2.72