Good morning, and welcome to Southern Copper Corporation's Fourth Quarter 2020 Results Conference Call. With us this morning, we have Southern Copper Corporation's, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the fourth quarter 2020 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 Mr. Raul Jacob.

Thank you very much, Gigi. And good afternoon to everyone and welcome to Southern Copper's Fourth Quarter and Full 2020 Results Conference Call. At today's conference, I'm accompanied by Mr. Oscar González Rocha, Southern Copper's CEO and Board member. Before we go into the details of the past quarter, let me first express my best wishes for you and your loved ones during these trying times. In today's call, we will begin with an update on the measures we have taken to keep COVID-19 at bay. We will then review the copper market and Southern Copper's key results for production, sales, operating costs, financial results and expansion projects. Subsequently, we will open the session for questions. In 2020, Southern Copper faced the challenges of the pandemic with resilience, innovation and solidarity. The new normal that the virus has imposed in the world requires governments, companies and society to assume joint responsibility to protect citizens as we resume growth, generate value and fuel economic recovery. When COVID-19 reared its head in early 2020, Southern Copper moved quickly to preserve the health of its workers, their families and the communities in the countries where we operate. The company is committed to guaranteeing safe work environments and has developed lines of action to prevent transmission, strengthen community outreach and bolster capacities for medical response. In Mexico, a special budget was allotted to properly equip health personnel and support care functions in COVID hospitals. The company used these funds to donate almost 0.5 million protection equipment kits, 139 artificial support ventilators and 500 noninvasive ventilators to hospitals in different states around Mexico, as well as an important number of medical supplies such as monitors, beds and resuscitation carts. Hundreds of portable sinks for handwashing were installed and a company facility in Sonora was conditioned…

[Operator Instructions]. Our first question comes from the line of Isabella Vasconcelos from Bradesco.

I have just a couple of questions on the outflow for cost and also CapEx on a year-by-year basis for the next couple of years or the next 3 or 4 years, if you can mention if there were -- have been any changes to the outlook versus what you mentioned in the latest conference call, that will be great.

Thank you for your question, Isabella. And yes, we have had some changes in our CapEx forecast. For this year, 2021, we expect to spend $1.4 billion in CapEx. For 2022, $2 billion. 2023, $2.2 billion. 2024, $2.3 billion. 2025, $2.2 billion. If you compare these figures with the ones that we have or the one that we reported last quarter, we have had a reduction in the figures. And the reason for that has been the rescaling of some of the capital expenditures for the projects, not that the projects haven't changed their budgets, but their -- the time line has spread a little bit over time. And that's why we are having a certain reduction in the CapEx forecast vis-à-vis last quarter.

Great. Very clear. And in terms of cost?

Cost? Cash cost?

Yes.

Well, I wish we could have all the year, the cash cost that we have -- we had for 2020, that was $0.69. But for this year, we're forecasting $0.89 per pound of cash cost. Should be remaining at about that level, $0.89, $0.90 per pound until we go into -- towards 2028, where we should have another -- well, a reduction in cash cost before by-products. Currently, we're expecting to have $1.66 per pound for this year on cash cost before credits. So credits are $0.77. That's our expectation. By the way, we're relatively conservative in the prices that we're using for by-products as well as for copper in our planning. And then it should trend a little bit up after 2022. But when we -- as we get the new production and new by-products coming into our operations, prices should tend to remain where they are or decrease a little bit under the $0.89, $0.90 per ton that I mentioned.

Our next question comes from the line of Andreas Bokkenheuser, UBS.

Just a quick follow-up. I mean you were talking about production earlier, obviously. What are you seeing both in Peru and Mexico, but mainly in Peru, I mean, we've obviously seen some COVID cases rising both in Chile and Peru and many of the large copper-producing nations of the world. But you also mentioned on the last call that you were bringing a lot of people back on site. Is that still happening? Are you kind of back to full nameplate capacity operating at a higher utilization here? Or are you still keeping some personnel off-site that could end up weighing a bit on production? Basically, that's the question. And maybe a follow up also, like what's the kind of conversation you're having with local communities, governments about this?

I couldn't get your second concern, Andreas.

Yes, sorry, just -- are you getting any pushback from local communities or governments about bringing people back on-site given that COVID cases are rising again? Or is that not really a problem in the areas that where you operate? That's the follow-up question.

No. What we are -- we were making our personnel coming back to work the premises. But the recent information that we have on the COVID-19 second wave that is affecting -- well, Peru, in particular, and Mexico has also a very serious problem as we do right now here in Peru. And as a consequence of that, the company has backed off a little bit on bringing in personnel to the premises, where what we have done is reorganize again and maintain our workforce as safe as we can. In the case of most administrative labor, it's coming back to work at a remote, if it is possible. And in many, many cases, that can be done. And the same with the -- obviously, with the most stringent strict protocols for sanitary safety, it's happening at the operations. In Mexico. We're doing a similar -- following a similar strategy. But currently, our operations are fine. We're in track for -- with our plans. Certain measures and activities that we have made between -- through the COVID-19 cycle has been very helpful for us in order to control the disease inside our premises. I think that we're being very successful at that point, and that has helped us to operate. And keep in mind that these are activities that are very high capital intensive. Many workers are isolated significant time of the daily shift. And the reason for that is that if you, for instance, operate a major mining track or certain facilities, you are usually with very important equipment that has been under your operation, but alone. It's not -- some of the crews that are required to do certain repairs or certain specific works require certain proximity. And in these cases, we are taking specific measures to protect our workforce in both Mexico and Peru.

That's very clear. That's very clear. And one follow-up question. You partly answered it on cost, but something you were talking about on the last call as well. I mean you guys have obviously managed to keep your cost very, very low at about $0.67 a pound on a net basis. But you were also talking a little bit about cost inflation on the last call and a little bit more material hardness and potentially lower grade, this sort of thing. Should we still expect some cost inflation going into this year on the back of that?

Yes. And that's why I mentioned that our cash cost for 2021 is expected to be at $0.89 per pound.

Right. So that's mainly driven by material hardness and the other factors?

Basically catching up on certain maintenance work, certain stripping that we could make, particularly at the Toquepala operation on the stripping, we could make the stripping at Toquepala and maintenance work that was postponed. For instance, certain activities that require a crew that work closely. Well, at the beginning of the pandemic, we believe that it was not a good idea. And we could postpone that for a while, so we did. But we have been doing -- catching up. And if you see our cash cost this past quarter, it has been slightly higher than the average for the year. And the reason for that is basically that we already initiated the catch-up work in the fourth quarter of 2020.

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

Raul, it's Jens. Just one question. Could you please repeat the guidance for 2021 for copper, moly and silver please? And also, in your CapEx guidance, when are you assuming that Tia Maria starts construction? And in case that gets delayed, do you think you could accelerate any other of smaller projects?

Yes. Okay. If I got -- well, your first question is guidance on 2021 production, right?

Correct. Also for the by-products and the copper, yes.

Okay. Yes. Yes. Okay. For copper, we're expecting to produce 943,000 tons, molybdenum 26,800, zinc 76,200, silver 21.4 million ounces. That's basically it. On the Tia Maria, well, the date that we're considering now is 2024 to initiate production. That means that we should be initiated construction in 2022. That's probably speaking what we're thinking. Now we -- the way that we see the Tia Maria circumstance right now is as follows. Generally speaking, we believe that the work that the company has had with the local communities has been very, very successful. We believe that there is much more back up for the project now than what it used to be. And actually, we believe that if we have the political support, the project could move on. But now for that, we also think that we need to have a government with the possibility of moving forward with the project. And we believe that for that to happen, we need to pass the current election time. The elections are scheduled for first round in April 11. And then in June 6, the second round where a new President should emerge from that second vote. And with that definition, I mean, new Congress, new executive branch we believe that we will have the political support that the project requires to move on. But now specifically answering to your question, Jens, well, yes, we could accelerate it because we are ready. We have all the economic facilities to initiate the construction right away. And we have studied the project in depth, and we believe that it's feasible to initiate the construction very quickly.

Our next question comes from the line of Grant Sporre from Bloomberg Intelligence.

It's just a follow-up question on CapEx. So if we look out to 2028, you've got 3, well, I would say, fairly large greenfield projects due to sort of kick off 2027, 2028, each between $2.7 billion and $2.9 billion. That implies that you sort of have to kick off construction probably 2025. So my question is twofold. In your sort of guidance for CapEx in 2024, $2.3 billion, how much have you earmarked for those big 3 greenfield projects? And secondly, it's quite unusual for even a company the size of yours to be initiating 3 greenfield projects at the same time. So I just want to know how you're going to manage the risk of doing that when the time comes?

Thank you for your question, Grant. Let me -- okay, on the 2024, $2.3 billion budget that we have. For El Arco, we have $525 million in CapEx. For Tia Maria, $312 million. For Michiquillay, $436 million. And Los Chancas 69 -- $70 million for 2024. That's on the detail that you requested. Well, on the risk of managing the projects. These projects are evolving at different stages. For instance, in the case of Tia Maria, it's more like execution of all the engineering that has already been done, all the equipment selection that we already have identified, et cetera, et cetera. So it's more like moving forward with the construction, doing biddings. It's a different part of the process. In the case of Michiquillay, it will go most likely after we be with Los Chancas already in line and ready to go. And in the case of El Arco, it will be -- we'll initiate construction in 2022. If everything goes okay. So generally speaking, the stages that these projects have are slightly different in time. You will not get caught by all of them at the same time at certain tasks. Now what you are saying is, it's obviously a concern for us. But we believe that the company has shown through the years that we are -- we have a very strong engineering team. The company prides on the fact that we usefully finish our projects under budget and on time. So we think that we can handle it. But obviously, what you're indicating, it's a matter of concern because one of the risks that these projects may have eventually.

Our next question comes from the line of Declan Hanlon from Santander.

My question has been answered.

Our next question comes from the line of Leopoldo Silva from LarrainVial. Our next question comes from the line of Jean Bruny from BBVA.

Raul, just to come back very quickly on cash cost. I understand your target of $0.89 per pound for this year. Maybe if you're focusing on a quarterly basis, can we expect the inflation to be gradual? Or do you expect to reach that number of $0.89 very quickly this year? And the second question, again, on cash cost. You mentioned by-product revenues of [ 77 ] for this year using very cautious estimates in terms of the pricing of by-product. I know you don't give a precise number in terms of prices. But can we expect prices being stable from current levels are going slightly down by year-end?

Well, more than cost inflation, what we are seeing is a catch-up in expenses. And that's why we are having also slightly lower ore grades at the Peruvian operations in this year and the next one. And the reason for that is that we will have -- we will be operating in certain areas of the mines where we didn't work last year. Last year, we focused basically on an area where we could get the mineral that was required to maintain our production level where we plan to do that under the COVID circumstance. Keep in mind that we operate at a certain point in time with about 40% of the labor force that we have. So it was certainly an emergency. And now we still have -- are facing the challenges of COVID. But at the same time, we have -- we are -- I think we managed to deal with this, with how to operate safe, with right sanitary level for our workforce. And do what we need to do in order to maintain a sound operation. So it's a catching up rather than inflation. Obviously, if you look at the fuel prices, yes, there has been some inflation on that, obviously. But more than that, I think it's a catching up in certain words. And that has a side consequence that we are having a much lower ore grade. By-product prices, well, we're very conservative on the kind of prices that we use for by-products. And I think that if we have a risk on this, it may go for having a much lower cash cost than what we're planning at this point. So the risk is for a downside or a better cash cost in our view. So yes. So for instance, for molybdenum, we're using $9.50 per pound. It's more or less in line with what we're seeing today, but the information that we have from our commercial team is that there is quite a good chance that the molybdenum market has a deficit in the next few quarters, that will certainly put pressure on the molybdenum prices. For zinc, it's $1.15, and today, we're at a little bit more than $1.20 -- in zinc, I'm sorry. While silver is more or less where it is today. And gold also more or less where we are nowadays. So the credits -- and the other thing is that our mine plans are focusing on getting the right or the expected copper production. The by-products are not as precise and usually, the bias is to the downside. So we underestimate a little bit, for instance, our molybdenum production each year. Our initial plan is usually lower than the actuals that we get through the year for different reasons. So we are much more optimistic and believe that if there is a risk on the cash cost, we expect it to be on the downside rather than an upside in it.

Our next question is from the line of John Tumazos from John Tumazos.

Some of the early-stage companies I follow, almost lost the whole year last year due to virus restrictions. I'm thinking of one company that had 7-month delays in drilling because of the transportation restrictions in the country they were in. For your distant projects, Tia Maria, Los Chancas, El Arco, Michiquillay, did you lose any of the cushion on the 2024 or 2027, '28 timeframes? I'm impressed that you still have the same schedule.

Well, we look at it. And our engineering team has indicated that they will do certain works in order to get these projects back on track as a scale. So they were -- they back up their initial results on most of the projects. This is the thing, John, and I certainly appreciate your question. It's been a bad year for capital goods vendors as well. So in some cases, what we're seeing is that lead times that certain equipment have had has reduced, and that has helped us. And so there are other things that are happening as well that are helping us, and that made our engineering teams to be -- to feel confident and to keep the initial goals as it scale.

Congratulations on keeping as close to track as you are.

Our next question is a follow-up from Leopoldo Silva from LarrainVial.

Sorry for -- I apologize for the technical issue on my side. So I have 2 questions. The first is very quick. I would like to know what the cash cost -- the guideline for the zinc project at? When -- if you can give maybe the quartile, it's going to be? And second, it's about your by-products. I was wondering with these prices of precious metals or molybdenum, will you be merging through to see, evaluate and make a streaming contract through an agreement as the ones we saw last year, maybe in molybdenum? If not, why it would be strategic to not to clean maybe your copper profile from this 15% of by-products and continue to operate them at least on your 4 main copper mines?

Okay. Let me start by the last one. We don't do streaming. We have -- we think that the company has -- will enjoy the upside of the different products that we produce and sell and live with the downside. But generally speaking, these are products -- the by-products are very, very competitive cost wise. So we believe that we are happy with having them inside our portfolio of different products to produce. On the cash cost for the Buenavista Zinc, I think, well, I have no -- I don't have information with me right now. But let me make a comment on that. This is a project that is inside the pit of the Buenavista mine. We will have to expand a little bit a certain area of the Buenavista Zinc -- the Buenavista pit. And if we don't do the concentrator, we will still need to do all the stripping. So instead of doing the stripping and losing the zinc, we are investing the money that we have a little bit more than $400 million for a zinc concentrator and some mining equipment that is required for the stripping. And capture the value of that metal. And I'm sorry for not having with me the cash cost -- the specific cash cost of this project.

At this time, I am showing no further questions. I would like to turn the call back over to Raul Jacob for closing remarks.

Thank you very much, Gigi. Well, with this, we conclude our conference call for Southern Copper's Fourth Quarter and Year 2020 Results. We certainly appreciate your participation and hope to have you back with us when we report the first quarter of 2021. Thank you very much, stay safe, please. So thank you very much, again.

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