Good morning, and welcome to Southern Copper Corporation's Third Quarter 2019 Results Conference Call. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the third quarter 2019 as well as answer any questions that you might have. The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially and the company cautions to not place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. Now I will pass the call on to Raul Jacob.

Thank you very much, Victor, and good morning to everyone, and welcome to Southern Copper's Third Quarter 2019 Earnings Conference Call. In today's call, we will begin with an update on our view of the copper market. We will then review Southern Copper's key results related to production, sales, operating costs, financial results and expansion projects. After that, we will open the session for questions. Now let us focus on the copper market, the core of our business. During the third quarter of 2019, the London Metal Exchange copper price decreased by about 5.1% from an average of $2.77 per pound in the third quarter of 2018, down to $2.63 this past quarter. Even though we see a [ therapeutical ] market for copper, we believe the falling prices is now reflecting a slowdown of the world economy, strongly related to Brexit and the escalation of trade protectionism between the U.S., Europe and China. We believe a clear path of solution to this event is necessary for a recovery in copper prices. Considering the third quarter data, we're now adjusting our view of the refined copper demand growth to 0.9% for refined copper worldwide. In 2019, with the positive growth in the U.S., we have the U.S. and Asia growing, China particularly demanding 2.5% of more refined copper than in 2018. On the supply side, at the beginning of 2019, the market had several production losses related to labor strikes, heavy rains in Chile and Peru and technical problems. As a reference, some analysts considers that today, the industry has over 481,000 tons of production losses. However, the recent slowdown in refined copper demand is changing the -- our market balance view. We previously indicated that we were expecting a significant deficit in this year, now we have reduced that…

[Operator Instructions] Our first question will come from the line of Jon Brandt from HSBC.

Firstly, I wanted to ask you about your expansion projects. So I understand that you're not necessarily basing these projects on copper prices but the quality of the assets. And it's pretty clear how you get to the 1.1 million tons of production, but then that jumped to 1.5 million tons by 2026. I'm just wondering -- I guess a couple of things. First, is there anything that could slow those projects? I mean a lot of them tend to be in Peru, where there's a lot of, I guess, anti-mining protests at the moment not only with Southern Copper, but also just kind of generally throughout the industry. So is there anything that could maybe slowdown that time line? And then secondly, on Tia Maria, I'm just wondering how long the Mining Council can actually put this project on hold. Is there a time line to when they can actually have to make a decision? If it is canceled or it is given a go-ahead, what then happens to your other Peru projects? Would you continue with those? Or would you slow down investment there?

Okay. Thank you very much for your questions, Jon. Let me start by the last one on the Tia Maria. The Mining Council after -- it's conducted a -- I haven't mentioned this, but there was a hearing conducted by the Mining Council this past October 7. We presented our case. We believe that we have very solid arguments that should be -- our construction permit should be confirmed. That's our company position and that's what we're expecting. After the hearing, the Mining Council has a 15-day -- 15-working-day frame to issue its verdict to say so. So that's -- we're expecting that before the end of this month, that should be, well, between now and the end of next week if we adjust to that time frame. In the case of the growth, they jumped from 1.1 million tons to 1.6, actually by 2026, million tons. It's coming basically from the 3 projects that we have in Peru: Tia Maria, which we're expecting to produce by start 2026, 124,000 tons; Los Chancas, that should add 153,000 tons by that same year; and Michiquillay, which will be initiated production in this year, that's our expectation, with 238,000 tons of copper in that year. So that's how we get from 1.1 million tons of capacity to 1.5 million by 2026. Then we have in next year, 2027, we -- our current plan is to initiate El Arco production at full capacity that year, 2027, adding 240,000 tons of copper to our production pipeline.

So that -- it makes sense. I mean just a quick follow-up. If the macro environment doesn't cooperate, and I know that these projects make sense at even lower copper prices, but could these time lines slip a little bit if the copper price continues to fall or the macro environment doesn't cooperate? Or are you committed to these time lines? I'm just trying to think of external factors that could influence the timing of these projects.

Yes. Well, these projects have very good fundamentals, generally speaking, at copper prices that are on the low side of the rack. We have a very good double-digit returns in the -- our estimate. So the copper market obviously we have to follow it, and we have to be sure that it's a project -- to move on with the project at a specific time. And these are projects that are ahead in times over 5 years now. So we will be monitoring the market as we keep developing the technical and permitting aspects of these projects as well. So it's more a quality answer that we would have considering not only the project's fundamentals, but also the other conditions that are expected at that time. For now, this is our plan, and we're quite committed to address it. We're doing all we can to move on with these projects.

And our next question will come from the line of Timna Tanners from Bank of America.

Just wanted to follow up with a similar line of questioning. But given the smaller CapEx than was initially expected and the aggressive CapEx numbers going forward, how does that change the time line, the fact that CapEx is lighter than the $1.8 billion that was initially expected for 2019? And how do you think about prioritizing where you're investing within that CapEx and balancing that with the dividend?

Okay. Thank you for your question, Timna. Well, we're adjusting our capital budget as we move on through time and the different project demands. In this case, we were expecting, as we mentioned at the beginning of the year, to initiate the Tia Maria project this year and we had a budget of $300 million that obviously won't be spent as much as we believe at the beginning of this year on this project, and that has made us to move a little bit our CapEx forecast at this point. As we indicated in our press release and now at the call, we're moving forward as well with the developing of 3 projects in Mexico that have a total budget of about $900 million. I mentioned them already. It's in our -- they are in our press release. Those projects are moving forward very, very nicely, and we're happy to report on their developments in the next few quarters. And that's basically what we're seeing at this point. Copper will be adjusted. And as you know, the company has a policy that reduce CapEx and financial needs as well as generation of cash by our operations. And on the base of that, we have a definition on the -- I mean the Board established a dividend to pay. So it depends on several conditions that are very carefully reviewed at each board meeting and we will decide on that basis.

Okay. I wanted to follow up with something that Jon said on Peru. And I wanted to see if you could talk a little bit more broadly about Peru risk. So how would you characterize what's happening lately? Is it a broader issue in the Peruvian market and more mining risk that we should be cognizant of? Or do you think that it's maybe like project-specific? And how would you characterize the risk as we head into next year's potential elections as well?

We don't have -- so far, we haven't seen any changes in the risk in the Peruvian operations. No significant initiative has been -- it's been under discussion or something that may affect us. We believe that we're facing basically the same kind of circumstances that were -- the ones that we had at the beginning of this year.

So you don't think there's a broader Peruvian risk issue? You think it's just specific to Tia Maria, particularly?

No. We don't think so.

And our next question comes from the line of Jens Spiess from Morgan Stanley.

Yes. So G Mexico announced the CapEx guidance for -- of $3.15 billion for 2020. Could you maybe tell us how much will come from Southern Copper of that? And also, if you could give us a conservative estimate if you were to exclude the projects that are still facing uncertainty regarding permitting and execution. And then on cash costs, cash costs for byproducts were $1.50 per pound this quarter. And concerning that the issues at the SX-EW at Buenavista and the ramp-up of the expansion at Toquepala basically concluded, how do you see cash costs evolving from here? And where do you see pockets of opportunity to decrease cash costs any further? And lastly, could you maybe comment on the potential outcomes from the decision of the Mining Council? I mean besides the cancellation or approval of the construction permit, are there any other potential outcomes you envisioned?

Okay. Thank you very much for your questions, Jens. Okay. Let me start with the CapEx guidance. Well, I mentioned already that our current forecast for the year is $146 million for this year, 2019. For next year, we're expecting to spend $1,450 million; for 2021, $1.6 billion; 2022, $2.9 billion; 2023, $3.4 billion; 2024, $3.1 billion. And as you know, we will be developing several projects at that time. Just to mention some of them. Well, we have the Buenavista zinc operation, El Pilar, Pilares, the 3 -- these 3 projects. They are the ones that are in our press release. But on top of that, in our current plan, we have El Arco, which we'll be spending heavily after [ 2019, 2021 ] and some other projects at our Mexican as well as Peruvian operations. In the case of Peru, where we -- I mentioned already Michiquillay and Los Chancas. Okay. On the second point, well, the project that we have been delaying very consistently is Tia Maria, and you are quite aware of that, the reasons for that. But other than that, our other projects, Los Chancas and Michiquillay, are moving forward under -- in scale, and we are basically developing the technical aspects and working on the -- with the social groups that are close by, the communities in order to get the projects moving forward. We have no -- we're not reporting any difficulties with these other projects. On cash costs, well, for this year, as I said, we're expecting a cash cost of $0.82. We're expecting a further reduction in our current cash cost, and $0.82 for the year. For 2020, about the same level. 2021 should be decreasing to $0.80; 2018 -- 2022, $0.84. And then in 2023, when we have -- we…

Okay. The quick -- another quick question. Maybe any thoughts on potential M&A, given your current cash balance?

Not at this point. There is nothing in the pipeline. Obviously, if there is an opportunity, we'll -- the responsible thing for us as management is to study it and do a recommendation to our Board on that basis.

[Operator Instructions] Our next question comes from the line of John Tumazos from Very Independent Research.

Many of these environmental and political groups have no honor, honesty, truth, et cetera, and many of the indigenous people do not speak Spanish or read or write. In Peru, do you communicate in the indigenous languages, Quechua, whatever the people speak. And do you have communications initiatives for people who don't read or write, such as -- I don't know if they have TV channels in the indigenous languages or radio shows or -- but unfortunately, some of my friends at mining companies go to the capital and speak to a mining minister who went to Harvard or Yale and speaks perfect English. But in the mines, the people are illiterate, different. Just explain to me your communications programs for illiterate people who might fall prey to blatant lies.

Okay. Let me first say that you express some opinions that we don't necessarily share. The way that we touch base with the communities that we have to work with is using an approach that is very respectful on their customs, the language that they speak and the uses that they have for different activities. One of the very important things that we want to share with them is that we don't have -- that we are there to provide opportunities for development and a better being in the future for the communities that are close to our operations. That could be in the way of forming new companies that will provide services or goods to our operations or being part of the labor for what -- we have different programs. Currently, for instance, we're implementing in the Tambo Valley our project -- our program Forging the Future, which is a scholarship program for [ joint ] men and women to have training in certain skills that are required for mining operations such as welding, heavy equipment, machinery driving, et cetera. These -- the first group of scholarships were in Mollendo, which is a nearby city of Tia Maria. We have 60 students, 23 of them graduated at the end of the program, and we are expecting to have these people available when we initiate the projects so we can have their participation in our operations. One of the best things that we are promoting is the well-being and progress of the nearby communities. I'd like to point out now that our -- the regions of Toquepala and -- sorry, the regions of Moquegua and Tacna where we have our operations of Cuajone and Toquepala, are in the top 5 regions of the country of Peru in terms of human development. They are very close to the Lima -- to Lima, which is the Peruvian capital and Arequipa, which is the second city of the country.

Excuse my perhaps ignorance, but I see pictures on the Inca Kola blog or other publications of huge crowds of protests. How do the people develop such hostility when you do such good works?

Well, we already mentioned that we believe that there are certain groups that are opposing, and very specifically, the Tia Maria project for different reasons. In the case of the other projects, we have no opposition on the one that you just mentioned.

And we have a follow-up from Jon Brandt from HSBC.

I wanted to touch base on Tia Maria, given the decision looks like it's coming by the end of October. Could you just walk us through sort of the 2 decisions, right? So if they give you the go-ahead, what does the timing look like, the ramp-up? Would you expect to start construction right away? Or I know you were originally willing to delay construction until the communities were more comfortable with your plans. So if you could talk a little bit about, one, that path. And then secondly, if they decide not to give you the go-ahead, what then are your options? Would you -- the project effectively killed? Or are there some other things that you could do to get approval?

Okay. Thank you. Thank you very much for your question, Jon. In the case of Tia Maria, as we expressed, we're expecting to have a good -- a solid relationship with the local communities in order to move on with the project. At this point, we don't want to set a specific date for that. We believe that the project should be up and running by 2024. So before that, we obviously have to -- we have to have all the construction and all the relation with the communities in order. This is a long-term relationship. So we want to start this on a good ground, on a positive ground in order to have a reasonable and a good operation in Tia Maria as well. In terms of the decision that we're expecting, we don't want to speculate on what if we don't get the permit confirmed. We believe that, as I say, our reasons are very solid, and we expect to have the confirmation on our construction permit. If that doesn't happen, we will analyze the circumstances and make a decision at that time.

And I'm not showing any further questions at this time. I'd like to turn it back over to speakers for any further or closing remarks.

Thank you very much, Victor. Well, with this, we conclude our conference call for Southern Copper's third quarter 2019 results. We certainly appreciate your participation. I hope to have you back with us when we report the year 2019 and the fourth quarter of this year. Thank you very much, and have a very nice day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.