# Southern Copper Corp/: Form 10-Q for the period ended Jun 30, 2023

- Company: [Southern Copper Corp/](/companies/scco.md) (CIK 1001838)
- Form: 10-Q
- Filed: 2023-08-01
- Accepted by EDGAR: Aug 1, 2023, 16:31 ET
- Period: 2023-06-30
- Accession: 0001558370-23-012746
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1001838/000155837023012746/scco-20230630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1001838/000155837023012746/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $2.30bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $5.09bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $1.15bn | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $2.34bn | us-gaap:CostOfRevenue |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $31.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-06-30 | $61.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $900.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $2.25bn | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $294.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $774.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $549.6m | us-gaap:ProfitLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $1.37bn | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.71 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $1.76 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.71 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $1.76 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 773,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 773,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-04-01 to 2023-06-30 | $797.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $1.98bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-04-01 to 2023-06-30 | $252.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $490.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-04-01 to 2023-06-30 | $773.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $1.55bn | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-06-30 | $2.20bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $4.77bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $16.94bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $1.06bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-06-30 | $6.25bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-06-30 | $7.90bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 77,190 characters.

*The following discussion provides information that management believes is relevant to an assessment and understanding of the condensed consolidated financial condition and results of operations of Southern Copper Corporation and its subsidiaries (collectively, “SCC”, “the Company”, “our”, and “we”). This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with the Management Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements included in Part II of our annual report on Form 10-K for the year ended December 31, 2022.*

EXECUTIVE OVERVIEW

Business: Our business is primarily the production and sale of copper. In the process of producing copper, a number of valuable metallurgical by-products are recovered, which we also produce and sell. Market forces outside of our control largely determine the sale prices for our products. Our management, therefore, focuses on value creation through copper production, cost control, production enhancement and maintaining a prudent capital structure to remain profitable. We endeavor to achieve these goals through capital spending programs, exploration efforts and cost reduction programs. Our aim is to remain profitable during periods of low copper prices and to maximize financial performance in periods of high copper prices.

We are one of the world’s largest copper mining companies in terms of production and sales and our principal operations are in Peru and Mexico. We also have exploration programs in Chile, Argentina and Ecuador. In addition to copper, we produce significant amounts of other metals, either as a by-product of the copper process or through a number of dedicated mining facilities in Mexico.

Outlook: Various key factors will affect our outcome. These include, but are not limited to, the following:

- Sales structure: In the second quarter of 2023, approximately 77.5% of our revenue came from the sale of copper; 11.1% from molybdenum; 4.3% from silver; 2.7% from zinc; and 4.4% from various other products, including gold, sulfuric acid, and other materials.
- Copper: In the second quarter of 2023, the LME copper price decreased from an average of $4.32 per pound in the second quarter of 2022 to $3.85 (-10.9%), reflecting concerns about the impact of a slowdown of the China’s economy, a possible recession in Europe and a soft landing or light recession in the U.S.

Current prices for copper are at around $3.80 per pound, reflecting a less optimistic market than what we have seen in the last few quarters. At this point we see the following factors affecting the copper market:

- A reduction in global inflation, which may portend the end of the interest rates hike cycle led by the FED and the ECB.
- A strong recovery of mining production of Peru (19% growth for the period January-May of this year), reducing the uncertainty of current production. Chile is still lagging with a 5% reduction in copper production for the same period.
- Investments for future growth are still affected by expectations of economic changes in Chile and the social circumstances of Peru. These two countries represent about 40% of the global supply.
- The most relevant market intelligence houses for the copper market are now expecting a market in surplus of about 100,000 tonnes for 2023. This assumes a growth in demand of about 1% this year.
- Low copper inventories, which stood at 411,000 tonnes as of March 31, 2023 and are now at 235,000 tonnes. This 42% reduction in inventories is the lowest since 2005.

It is important to emphasize that copper plays a leading role in the global shift to clean energy, which correlates positively with our assertion that the underlying demand for copper will be strong in the long-term. In this scenario, we believe the current cycle of low prices should be short-lived.

- Molybdenum: Accounted for 11.1% of our sales in the second quarter of 2023 and is currently our most important by-product. Molybdenum prices averaged $20.87 per pound in the second quarter of 2023, compared to $18.30 in the same period of 2022, reflecting an increase of 14.0%.

Molybdenum is mainly used in the production of special alloys for stainless steel that require significant hardness and corrosion and heat resistance. New uses for this metal are associated with lubricants, sulfur filtering of heavy oils and shale gas production.

- Silver: Represented 4.3% of our sales in the second quarter of 2023. We believe that the prices for silver will be supported by intensive level of industrial use.
- Zinc: Represented 2.7% of our sales in the second quarter of 2023, with an average price of $1.15 per pound in the quarter, down 35.4% from the second quarter of 2022. Zinc is currently our third by-product.
- Production: For 2023, we expect to produce 932,100 tonnes of copper, an increase of 4.2% over 2022’s final print. This growth will unfold as we get Peruvian production back on track and will be complemented with new production at our Mexican operations through our Pilares and Buenavista Zinc Concentrator projects.

We also expect to produce 24,200 tonnes of molybdenum, which represents a decrease of 7.6% over our 2022 production level. In 2023, we expect to produce 20.1 million ounces of silver, an increase of 8.1% compared to 2022 production level. Additionally, we expect to produce 108,000 tonnes of zinc from our mines. which represents an increase of 80.0% over our 2022 production level. This growth will be driven by the production start-up of the Buenavista Zinc operations and by the recovery of the IMMSA mines production, where better ore grade areas have been identified. For 2024 and on we expect to produce over 200,000 tonnes of zinc per year.

- Capital Investments: In the first semester of 2023, we spent $490.6 million on capital investments; this represented 35.9% of net income and an increase of 14.2% compared to the amount registered for the same period in 2022. We continue to advance our projects, including the Buenavista Zinc, El Pilar and Pilares projects, which have registered good progress.

CYBERSECURITY

In the first half of 2023, we have had no material cybersecurity incidents. This is due to the Information Security Strategy that we have implemented and the commitment of our entire organization to consolidate a living and effective security culture.

Our focus on information security continues to be a strategic priority, our security policy focuses on continuously identifying and managing risks through standard frameworks and best practices. In addition to the training and awareness that we extend to our employees, we constantly monitor the effectiveness of our controls.

The Board of Directors has been proactive in its approach to cybersecurity, seeking to ensure that our organization remains secure and resilient to cyber threats, we have significantly improved our security posture and continue to moving forward with our information security strategy.

We know that, in today's environment, cyber threats are becoming more sophisticated and rapidly evolving risk management is critical to long-term business success. We remain alert to emerging challenges and with active investment processes to evolve our capabilities, improve our processes and promote the development of a safety culture in our organization.

KEY MATTERS

Below, we discuss several matters that we believe are important to understand the results of our operations and financial condition. These matters include, (i) our earnings, (ii) our production, (iii) our “operating cash costs” as a measure of our performance, (iv) metal prices, (v) business segments, (vi) the effect of inflation and other local currency issues, and (vii) our capital investment and exploration program.

**Earnings:** The table below highlights key financial and operational data of our Company for the three and six months ended June 30, 2023 and 2022 (in millions, except copper price, percentages and per share amounts):

| ​ ​ ​ | ​ | ​ ​ ​ Three months ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ | ​ ​ % Change | ​ ​ | ​ ​ ​ Six months ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ | ​ ​ % Change | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Copper price LME | ​ | ​ 3.85 | ​ | ​ 4.32 | ​ | ​ (0.47) |  | (10.9)% | ​ | ​ 3.95 | ​ | ​ 4.43 | ​ | ​ (0.48) |  | (10.8)% | ​ |
| Pounds of copper sold | ​ | ​ 482.8 | ​ | ​ 430.7 | ​ | ​ 52.1 |  | 12.1% | ​ | ​ 987.1 | ​ | ​ 889.2 | ​ | ​ 97.9 |  | 11.0% | ​ |
| Net sales | ​ | $2,300.7 | ​ | $2,306.9 | ​ | $(6.2) |  | (0.3)% | ​ | $5,094.6 | ​ | $5,070.7 | ​ | $23.9 |  | 0.5% | ​ |
| Operating income | ​ | $900.7 | ​ | $808.5 | ​ | $92.2 |  | 11.4% | ​ | $2,254.4 | ​ | $2,278.6 | ​ | $(24.2) |  | (1.1)% | ​ |
| Net income attributable to SCC | ​ | $547.5 | ​ | $432.3 | ​ | $115.2 | ​ | 26.6% | ​ | $1,360.7 | ​ | $1,217.1 | ​ | $143.6 | ​ | 11.8% | ​ |
| Earnings per share | ​ | $0.71 | ​ | $0.56 | ​ | $0.15 | ​ | 26.8% | ​ | $1.76 | ​ | $1.57 | ​ | $0.19 | ​ | 12.1% | ​ |
| Dividends per share | ​ | $1.00 | ​ | $1.25 | ​ | $(0.25) | ​ | (20.0)% | ​ | $2.00 | ​ | $2.25 | ​ | $(0.25) | ​ | (11.1)% | ​ |

Net sales in the second quarter of 2023 were 0.3% lower than in the same period of 2022. This decrease was mainly driven by a reduction in metal prices for copper (-10.9% LME) and zinc (-35.4%) and by a decline in the sales volumes of silver (-8.9%) and molybdenum (-0.1%). This effect was mostly offset by the increase in the sales volumes of copper (+12.1%) and zinc (12.9%) as well as by the increase in molybdenum (+14.0%) and silver (+7.1%) prices.

Net income attributable to SCC in the second quarter of 2023 was 26.6% higher than in the same period of 2022. This increase was mainly the result of a 6.6% reduction in operating costs, which was mainly attributable to a decrease in lower third-party copper concentrate purchases, in addition to higher sales volumes of copper and zinc. This effect was slightly offset by a drop in average prices for metals, with the exception of silver and molybdenum, as well as by a decrease in the sales volumes of silver and molybdenum.

Net sales in the first six months of 2023 were 0.5% higher than in the same period of 2022, due to higher sales volume of

copper (+11.0%), silver (+3.4%) and zinc (+9.2%), and to an increase in silver (+0.2%) prices. This effect was mostly offset by the drop in copper (-10.8% LME) and zinc (-25.9%) prices and by a reduction of sales volumes of molybdenum (-4.1%).

Net income attributable to SCC in the first six months of 2023 was 11.8% higher than in the same period of 2022. This increase was mainly attributable a reduction in operating costs as a result of the decrease in copper concentrate purchases, as well as higher sales at all our metal products, apart from molybdenum, and a reduction of 14.7% in income taxes.

**Production:** The table below highlights our mine production data for the three and six months ended June 30, 2023 and 2022:

| ​ ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ ​ ​ Six months ended June 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ ​ ​ % Change ​ ​ |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Copper (in million pounds) | 501.6 | 459.5 | 42.1 | 9.2% | 993.9 | 932.4 | 61.5 | 6.6% |
| Molybdenum (in million pounds) | 14.0 | 13.9 | 0.1 | 0.2% | 28.2 | 29.6 | (1.4) | (4.6)% |
| Silver (in million ounces) | 4.8 | 4.4 | 0.4 | 8.0% | 9.2 | 8.7 | 0.5 | 5.6% |
| Zinc (in million pounds) | 38.0 | 33.4 | 4.6 | 13.8% | 71.2 | 65.8 | 5.4 | 8.1% |

The table below highlights our mine production data for the three and six months ended June 30, 2023 and 2022:

| ​ ​ ​ ​ Copper (in million pounds): | ​ ​ Three Months Ended June 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ % Change | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ ​ ​ % Change ​ ​ |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: |
| Toquepala | 117.3 | 98.2 | 19.1 | 19.5% | ​ | 230.5 | 210.7 | 19.8 | 9.4% |
| Cuajone | 83.8 | 68.7 | 15.1 | 22.0% | ​ | 163.8 | 122.5 | 41.3 | 33.7% |
| La Caridad | 60.3 | 58.5 | 1.8 | 3.1% | ​ | 117.8 | 123.1 | (5.3) | (4.2)% |
| Buenavista | 234.8 | 228.9 | 5.9 | 2.6% | ​ | 471.8 | 466.5 | 5.3 | 1.1% |
| IMMSA | 5.4 | 5.2 | 0.2 | 2.2% | ​ | 10.0 | 9.6 | 0.4 | 4.6% |
| Total mined copper | 501.6 | 459.5 | 42.1 | 9.2% | ​ | 993.9 | 932.4 | 61.5 | 6.6% |

Second quarter: Mined copper production in the second quarter of 2023 increased 9.2% driven by higher production at all of our operations. Production at our Cuajone mine was up 22% in quarter-on-quarter terms, fueled by higher recoveries and by the return to full operating capacity this year. Production at our Toquepala mine increased 19.5%, which was mainly attributable to higher ore grades. Additionally, production at our Mexican operations increased 2.7% in quarter-on-quarter terms.

Molybdenum production increased 0.2% in the second quarter of 2023 compared to the levels registered in the second quarter of 2022. This was attributable to higher production at our Cuajone (+22.9%), La Caridad (+22.2%) and Buenavista (+10.5%) mines which was mainly driven by an increase in grades and recoveries. This effect was mainly offset by a reduction in production at our Toquepala (-38.5%) mine, which was largely driven by a reduction in ore grades and recoveries.

Silver mine production increased 8.0% in the second quarter of 2023 compared to the same period of 2022. This was attributable to a higher production at all of our operations. Production at our Peruvian operations increased 26.1% and at our Mexican operations, 2.7%, in quarter-on-quarter terms

Zinc production increased 13.8% in the second quarter of 2023 compared to the same period in 2022. This result was mainly attributable to a rise in mineral production at the Charcas and Santa Barbara units, which was partially offset by a decrease in production at the San Martin mine.

Six months: Mined copper production in the first six months of 2023 rose 6.6%. This increase was mainly attributable to higher production at our Peruvian operations (+18.3%) due to higher ore grades and the Cuajone mine operating at full capacity. Production at our Mexican operations increased 0.1% in the same period despite lower production at La Caridad (-4.2%) mine due to a drop in ore grades and recoveries.

Molybdenum production decreased 4.6% in the first six months of 2023 compared to the same period in 2022; this was mainly due to lower production at our Toquepala (-42.5%) mine and reflects a decrease in grades. This was partially offset by higher production at the Cuajone (+42.5%), La Caridad (+13.3%) and Buenavista (+4.9%) mines.

Silver mine production increased 5.6% in the first six months of 2023 principally due to higher production at our Peruvian operations (+25.2%) and at IMMSA (+1.1%) mines. This result was partially offset by lower production at La Caridad (-4.1%) and Buenavista (-0.1%) mines.

Zinc production increased 8.1% in the first six months of 2023 due to an increase in production at our Santa Barbara and Charcas mines, principally due to higher grades.

**Operating Cash Costs:** An overall benchmark that we use, which is a common industry metric to measure performance is operating cash costs per pound of copper produced. Operating cash cost is a non-GAAP measure that does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies. This non-GAAP information should not be considered in isolation or as substitute for measures of performance determined in accordance with GAAP. A reconciliation of our operating cash cost per pound of copper produced to the cost of sales (exclusive of depreciation, amortization and depletion) as presented in the consolidated statement of earnings is presented under the subheading, “Non-GAAP Information Reconciliation” on page 57. We disclose operating cash cost per pound of copper produced, both before and net of by-product revenues.

We define ***operating cash cost per pound of copper produced before by-product revenues*** as cost of sales (exclusive of depreciation, amortization and depletion), plus selling, general and administrative charges, treatment and refining charges net of sales premiums; less the cost of purchased concentrates, workers’ participation and other miscellaneous charges, including royalty charges, and the change in inventory levels; divided by total pounds of copper produced by our own mines.

In our calculation of operating cash cost per pound of copper produced, we exclude depreciation, amortization and depletion, which are considered non-cash expenses. Exploration is considered a discretionary expenditure and is also excluded. Workers’ participation provisions are determined on the basis of pre-tax earnings and are also excluded. Additional exclusions from operating cash costs are items of a non-recurring nature and the mining royalty charge as it is based on various calculations of taxable income, depending on which jurisdiction, Peru or Mexico, is imposing the charge. We believe these adjustments allow our management and stakeholders to more fully visualize our controllable cash cost, which we believe is one of the lowest of all copper-producing companies of similar size.

We define ***operating cash cost per pound of copper produced net of by-product revenues*** as operating cash cost per pound of copper produced, as defined in the previous paragraph, less by-product revenues and net revenue (loss) on sale of metal purchased from third parties.

In our calculation of operating cash cost per pound of copper produced, net of by-product revenues, we credit against our costs the revenues from the sale of all our by-products, including, molybdenum, zinc, silver, gold, etc. and the net revenue (loss) on sale of metals purchased from third parties. We disclose this measure including the by-product revenues in this way because we consider our principal business to be the production and sale of copper. As part of our copper production process, much of our by-products are recovered. These by-products, as well as the processing of copper purchased from third parties, are a supplemental part of our production process and their sales value contribute to covering part of our incurred fixed costs. We believe that our Company is viewed by the investment community as a copper company, and is valued, in large part, by the investment community’s view of the copper market and our ability to produce copper at a reasonable cost.

We believe that both of these measures are useful tools for our management and our stakeholders. Our cash costs before by-product revenues allow us to monitor our cost structure and address areas of concern within operating management. The measure operating cash cost per pound of copper produced net of by-product revenues is a common measure used in the copper industry and is a useful management tool that allows us to track our performance and better allocate our resources. This measure is also used in our investment project evaluation process to determine a project’s potential contribution to our operations, its competitiveness and its relative strength in different price scenarios. The expected contribution of by-products is generally a significant factor used by the copper industry to determine whether to move forward or not in the development of a new mining project. As the price of our by-product commodities can have significant fluctuations from period to period, the value of its contribution to our costs can be volatile.

Our operating cash cost per pound of copper produced, before and net of by-product revenues, is presented in the table below for the three and six months ended June 30, 2023 and 2022:

### Operating cash cost per pound of copper produced (1)

### (In millions, except cost per pound and percentages)

| ​ ​ ​ | ​ ​ | ​ ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | ---: | --- |
| Total operating cash cost before by‑product revenues | ​ | $1,059.5 | ​ | $951.2 | ​ | $108.3 | 11.4% | ​ | $2,047.2 | ​ | $1,788.9 | ​ | $258.3 | 14.4% | ​ |
| Total by‑product revenues | ​ | $(517.3) | ​ | $(465.3) | ​ | $(52.0) | 11.2% | ​ | $(1,147.9) | ​ | $(1,048.8) | ​ | $(99.1) | 9.4% | ​ |
| Total operating cash cost net of by‑product revenues | ​ | $542.2 | ​ | $485.9 | ​ | $56.3 | 11.6% | ​ | $899.3 | ​ | $740.1 | ​ | $159.2 | 21.5% | ​ |
| Total pounds of copper produced(2) | ​ | 484.4 | ​ | 442.9 | ​ | 41.5 | 9.4% | ​ | 957.4 | ​ | 900.7 | ​ | 56.7 | 6.3% | ​ |
| **Operating cash cost per pound before by‑product revenues** | **​** | **$2.19** | **​** | **$2.15** | **​** | **$0.04** | **1.9%** | **​** | **$2.14** | **​** | **$1.99** | **​** | **$0.16** | **7.8%** | **​** |
| **By‑products per pound revenues** | **​** | **$(1.07)** | **​** | **$(1.05)** | **​** | **$(0.02)** | **1.9%** | **​** | **$(1.20)** | **​** | **$(1.16)** | **​** | **$(0.04)** | **3.4%** | **​** |
| **Operating cash cost per pound net of by‑product revenues** | **​** | **$1.12** | **​** | **$1.10** | **​** | **$0.02** | **1.8%** | **​** | **$0.94** | **​** | **$0.82** | **​** | **$0.12** | **14.1%** | **​** |

(1) These are non-GAAP measures. Please see page 57 for reconciliation to GAAP measure.

(2) Net of metallurgical losses.

As seen in the table above, our per pound cash cost before by-product revenues in the second quarter of 2023 was 1.9% higher than in the same period of 2022. This increase was mainly attributable to an increase in production, the aforementioned was primarily offset by the unit cost effect generated by a 9.4% increase in pounds of copper produced. Our cash cost per pound net of by-product revenue for the second quarter of 2023 increased 1.8% compared to the same period of 2022. This was mainly driven by an uptick in the production cost.

For the six months ended June 30, 2023, our per pound cash cost before by-product revenues was 7.8% higher than in

the same period of 2022. This increase was mainly driven by higher production costs and was slightly offset by the unit cost effect generated by a 6.3% increase in pounds of copper produced. The operating cash cost per pound of copper net of by product revenue was $0.94 in the six months ended June 30, 2023. This represented an increase of 14.1 % compared to the $0.82 reported in the same period of 2022. These results were mainly due to higher production costs and slightly offset by the unit cost effect generated by a 6.3% increase in pounds of copper produced.

**Metal Prices:** The profitability of our operations is dependent on, and our financial performance is significantly affected by, the international market prices for the products we produce, and for copper, molybdenum, zinc and silver in particular.

We are subject to market risks arising from the volatility of copper and other metal prices. For the remaining six months of 2023, assuming that expected metal production and sales are achieved, tax rates remain unchanged and no effects are generated by potential hedging programs, metal price sensitivity factors would indicate the following change in estimated net income attributable to SCC resulting from metal price changes:

| ​ ​ | ​ | ​ ​ Copper | ​ | ​ ​ Molybdenum | ​ | ​ ​ Zinc | ​ | ​ ​ Silver |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Change in metal prices (per pound except silver—per ounce) | ​ | $0.10 | ​ | $1.00 | ​ | $0.10 | ​ | $1.00 |
| Change in net earnings (in millions) | ​ | $63.8 | ​ | $15.2 | ​ | $13.2 | ​ | $6.5 |

**Business Segments:** We view our Company as having three reportable segments and manage it on the basis of these segments. These segments are (1) our Peruvian operations, (2) our Mexican open-pit operations and (3) our Mexican underground operations, known as our IMMSA unit. Our Peruvian operations include the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities that service both mines. The Peruvian operations produce copper, with significant by-product production of molybdenum, silver and other material. Our Mexican open-pit operations include La Caridad and Buenavista mine complexes, the smelting and refining plants and support facilities, which service both mines. The Mexican open pit operations produce copper, with significant by-product production of molybdenum, silver and other material. Our IMMSA unit includes five underground mines that produce zinc, lead, copper, silver and gold, and several industrial processing facilities for zinc, copper and silver.

Segment information is included in our review of “Results of Operations” in this item and also in Note 14 “Segment and Related Information” of our condensed consolidated financial statements.

**Inflation and Exchange Rate Effect of the Peruvian Sol and the Mexican Peso:** Our functional currency is the U.S. dollar and our revenues are primarily denominated in U.S. dollars. Significant portions of our operating costs are denominated in Peruvian sol and Mexican pesos. Accordingly, when inflation and currency devaluation/appreciation of the Peruvian currency and Mexican currency occur, our operating results can be affected. In recent years, exchange rate volatility has been high but has had a limited effect on our results. Please see Item 3. “Quantitative and Qualitative Disclosures about Market Risk” for more detailed information.

**Capital Investment Programs**: We made capital investments of $490.6 million in the first six months of 2023, compared to $429.7 million in the same period of 2022. In general, the capital investments and investment projects described below are intended to increase production, decrease costs or address social and environmental commitments.

Set forth below are descriptions of some of our current expected capital investment programs. We expect to meet the cash requirements for these projects by utilizing cash on hand; internally generated funds and additional external financing. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy and market conditions.

**Projects in Mexico:**

Buenavista Zinc - Sonora: This project is located within the Buenavista deposit, where we have built a new concentrator. This facility has a production capacity of 100,000 tonnes of zinc and 20,000 tonnes of copper per year. When operating, the concentrator will double the Company’s zinc production capacity and will provide more than 2,000 jobs on the operating front.

Project update: the capital budget for the project is $416 million, most of which has already been invested. Progress is 98%; we have initiated vacuum testing at the plant and we expect to initiate operations in August of 2023.

Pilares - Sonora: Located six kilometers from La Caridad, this project consists of an open-pit mine operation with an annual production capacity of 35,000 tonnes of copper in concentrate. This project will significantly improve the overall mineral ore grade (considering the 0.78% expected from Pilares with 0.29% from La Caridad).

Project update: The budget for Pilares is $176 million, of which $131 million has been invested. Pilares is currently operating and delivering copper mineral to the Caridad operation.

El Pilar - Sonora: This low-capital intensity copper greenfield project is strategically located in Sonora, Mexico,

approximately 45 kilometers from our Buenavista mine. Its copper oxide mineralization contains estimated proven and

probable reserves of 317 million tonnes of ore with an average copper grade of 0.249%. We anticipate that El Pilar will

operate as a conventional open-pit mine with an annual production capacity of 36,000 tonnes of copper cathodes. This

operation will use highly cost efficient and environmentally friendly SX-EW technology. The budget for El Pilar is $310

million.

Project update: The results from experimental pads in the leaching process have confirmed adequate levels of copper recovery. The basic engineering study has been completed and the Company continues developing the project and engage in onsite environmental activities. Project engineering is being developed by an external engineering and technology corporation. We expect production to begin in 2025 and mine life is estimated at 13 years.

Lime plant - Sonora: As part of our cost improvement projects, we built a new lime plant with a production capacity of 600 metric tonnes per day, which will be the largest lime plant of Mexico. This facility will allow us to reduce to approximately 50% our current lime cost at our Mexican operations. The total budget for the plant is $79.4 million, of which we have invested $64.5 million as of June 30, 2023. The furnace of the plant started operations in the second quarter of 2022, complying with the performance tests.

**Projects in Peru:**

Quebrada Honda dam expansion – Tacna: This project aims to enlarge the main and lateral dams in Quebrada Honda and

includes the relocation and repowered of some facilities due to dam growth and implementation of other facilities for water recovery, among other factors. As of June 30, 2023, the drainage works and removal of Eolic material for the main and lateral dam, as well as complementary operational works had been completed. We expect to install two cyclone nests for the main dam in the second half of the year and intend to build the implementation of administrative facilities. This project has a total budget of $165.0 million, of which we have invested $149.9 million as of June 30, 2023.

Tia Maria - Arequipa: This greenfield project, located in Arequipa, Peru, will use state of the art SX-EW technology with the highest international environmental standards to produce 120,000 tonnes of SX- EW copper cathodes per year. The estimated capital budget for the project is $1.4 billion.

The Company has been consistently working to promote the welfare of the Islay province population. As part of these efforts, we have implemented successful social programs in education, healthcare and productive development to improve the quality-of-life in the region. We have also promoted agricultural and livestock activities in the Tambo Valley and supported growth in manufacturing, fishing and tourism in Islay.

We reiterate our view that the initiation of construction activities at Tia Maria will generate significant economic opportunities for the Islay province and the Arequipa region. Given the current Peruvian economic situation, it is crucial to move ahead on projects that will stimulate a sustainable growth cycle. We will make it a priority to hire local labor to fill the 9,000 jobs that we expect to generate during Tia Maria’s construction phase. Additionally, from day one of our operations, we will generate significant contributions to revenues in the Arequipa region.

Potential projects

We have a number of other projects that we may develop in the future. We continuously evaluate new projects on the basis of our long-term corporate objectives, expected return on investment, environmental concerns, required investment and estimated production, among other considerations. All capital spending plans will continue to be reviewed and adjusted to respond to changes in the economy and market conditions.

El Arco - Baja California: This is a world-class copper deposit located in the central part of the Baja California peninsula with ore reserves of over 1,230 million tonnes with an average ore grade of 0.40% and 141 million tonnes of leach material with an average ore grade of 0.27%. The project includes an open-pit mine with a combined concentrator and SX-EW operations. Annual production is expected to total 190,000 tonnes of copper and 105,000 ounces of gold.

Project update: The Company has completed the environmental baseline study for the mine, concentrator and industrial facilities and will proceed to submit the Environmental Impact Statement (Manifestacion de Impacto Ambiental “MIA”) to the Secretary of Environment and Natural Resources “SEMARNAT” to request the respective environmental impact permits. The Company is currently preparing studies for the port, power pipelines, townsites and auxiliary facilities.

Los Chancas - Apurimac: This greenfield project, located in Apurimac, Peru, is a copper and molybdenum porphyry deposit. Current estimates of indicated copper mineral resources are 98 million tonnes of oxides with a copper content of

0.45% and 52 million tonnes of sulfides with a copper content of 0.59%. The Los Chancas project envisions an open-pit mine with a combined operation of concentrator and SX-EW processes to produce 130,000 tonnes of copper and 7,500 tonnes of molybdenum annually. The estimated capital investment is $2,600 million and the project is expected to be in operation in 2030. We continue to engage in social and environmental improvements for the local communities and worked on the project´s environmental impact assessment.

Project update: As of June 30, 2023, part of the project´s land continued to be occupied by illegal miners, 75 of whom have irregularly registered their stakes in the "Integral Registry of Mining Formalization" (REINFO). The Company requested, and the Authority subsequently ordered, that the aforementioned miners be excluded from REINFO and be qualified as “illegal” miners. The Company has also filed criminal complaints and other legal remedies to physically expel the illegal miners from the Project and confiscated illegal mined ore.

Michiquillay Project - Cajamarca: In June 2018, Southern Copper signed a contract for the acquisition of the Michiquillay project in Cajamarca, Peru. Michiquillay is a world class mining project with inferred mineral resources of 2,288 million tonnes with an estimated copper grade of 0.43%. When developed, we expect Michiquillay to produce 225,000 tonnes of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years and at a competitive cash-cost. We estimate an investment of approximately $2.5 billion will be required and expect production start-up by 2032. Michiquillay will become one of Peru´s largest copper mines and will create significant business opportunities in the Cajamarca region; generate new jobs for the local communities; and contribute with taxes and royalties to the local, regional and national governments.

Project update: In 2023, in accordance with our social agreements with the Michiquillay and La Encañada communities, the Company has hired unskilled labor and is paying for the use of surface land. We are also supporting social programs in both communities. In addition, we continue exploration activities on this project and currently we have installed 10 exploration platforms.

The above information is based on estimates only. We cannot make any assurances that we will undertake any of these projects or that the information noted is accurate.

ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE (“ESG”)

*Focus on risk prevention and management.* During the second quarter of this year, all of SCC’s operating units had hit a milestone set in 2018 to obtain ISO 14001 certification for environmental management and ISO 45001 for occupational health and safety management. Our efforts to prevent environmental and security risks are supported by our ISO systems and are align with best international practices. The aforementioned efforts represents a significant step in our mission to obtain accreditation for responsible copper production in the framework of Copper Mark certification.

We continue to make progress in the development of our Critical Risk Registry. This tool strengthens environmental and safety risk management by making them visible at all levels of the organization. The registry creates a database for informed decision making and ensures rigorous follow-up on the controls in place to prevent and mitigate undesired events.

In line with our corporate environmental policy, this quarter we formalized our protocols for Sustainable Management of Water, Biodiversity and Operation Closure to set priorities and determine the direction our operations will take to manage the increasingly demanding environmental challenges faced by the Company.

In the ambit of biodiversity, in the second quarter of 2023, we had reforested 464 hectares of land in the state of Sonora, Mexico. The number of hectares that were replanted tops the number impacted in the period by 10-fold. As a result, we have successfully met our objective set two years ago to reduce our environmental footprint by exceeded our goal to reverse the net loss of biodiversity and achieve a net positive impact for the area. In the first half of 2023, the reforested area totaled 934 hectares, 5.6 times the affected area in this period.

The implementation and promotion of sustainable practices such as the aforementioned reforestation project has helped SCC secure and maintain a place on the S&P/BVL Peru General ESG Sustainability Index of the Stock Exchange of Lima.

On April 28, 2023, Grupo Mexico issued its 2022 Sustainability Development Annual Report, which includes detailed information about Southern Copper’s efforts on the social, environmental and corporate governance fronts.

*Positive impact on the communities in which we operate.* We have served more than 900 women from the communities surrounding to our operations in southern Peru via our Community Wellbeing Program, by which we conducted a mobile health campaign to prevent breast and uterine cancer.

SCC has been recognized by the state agency “Pro Inversion” for its execution of a Drinking Water and Rural Sanitation Program in Poblado Yacango, district of Torata. This project, which has benefitted 137 families, entailed an investment of $2.8 million. Similarly, in Mexico, we invested $5.8 million this quarter to improve water distribution in Nacozari and Cananea, which benefits 53,800 residents.

The Youth Orchestras promoted by SCC were recognized at the Mexican Polymetallic Seminar in 2023. These orchestras support 1,646 students in Mexico and Peru. Additionally, in collaboration with the “Instituto de Cultura del Estado”, we held our first exhibition of work from the Traveling Workshop for Documentary Film at the Cineteca in the State of Sonora, Mexico. During this event, 17 original short films, which were produced by some of the 747 students from communities that participated in the workshop, were viewed.

ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations, as well as quantitative and qualitative disclosures about market risks, are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We make our best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: ore reserves, revenue recognition, ore stockpiles on leach pads and related amortization, estimated impairment of assets, asset retirement obligations, determination of discount rates related to the financial lease liabilities, classification of operating leases versus financial leases, valuation allowances for deferred tax assets, unrecognized tax benefits and fair value of financial instruments. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

RESULTS OF OPERATIONS

The following highlights key financial results for the three and six months ended June 30, 2023 and 2022 (in millions):

| ​ ​ ​ Statement of Earnings Data | ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ ​ ​ ​ % Change ​ | ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ ​ ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Net sales | ​ | $2,300.7 | ​ | $2,306.9 | ​ | $(6.2) | ​ | $(0.3)% | ​ | $5,094.6 | ​ | $5,070.7 | ​ | $23.9 | ​ | $0.5% | ​ |
| Operating costs and expenses | ​ | (1,400.0) | ​ | (1,498.4) | ​ | 98.4 | ​ | (6.6)% | ​ | (2,840.2) | ​ | (2,792.1) | ​ | (48.1) | ​ | 1.7% | ​ |
| Operating income | ​ | 900.7 | ​ | 808.5 | ​ | 92.2 | ​ | 11.4% | ​ | 2,254.4 | ​ | 2,278.6 | ​ | (24.2) | ​ | (1.1)% | ​ |
| Non‑operating income (expense) | ​ | (52.8) | ​ | (77.0) | ​ | 24.2 | ​ | (31.4)% | ​ | (103.7) | ​ | (148.4) | ​ | 44.7 | ​ | (30.1)% | ​ |
| Income before income taxes | ​ | 847.9 | ​ | 731.5 | ​ | 116.4 | ​ | 15.9% | ​ | 2,150.7 | ​ | 2,130.2 | ​ | 20.5 | ​ | 1.0% | ​ |
| Income taxes | ​ | (294.5) | ​ | ​ (296.4) | ​ | ​ 1.9 | ​ | ​ (0.6)% | ​ | ​ (774.9) | ​ | ​ (908.5) | ​ | ​ 133.6 | ​ | ​ (14.7)% | ​ |
| Equity earnings of affiliate | ​ | (3.8) | ​ | ​ (0.9) | ​ | ​ (2.9) | ​ | ​ 322.2% | ​ | ​ (10.2) | ​ | ​ 0.4 | ​ | ​ (10.6) | ​ | ​ (2,650.0)% | ​ |
| Net income attributable to non‑controlling interest | ​ | (2.1) | ​ | (1.9) | ​ | (0.2) | ​ | 10.5% | ​ | (4.9) | ​ | (5.0) | ​ | 0.1 | ​ | (2.0)% | ​ |
| Net income attributable to SCC | ​ | $547.5 | ​ | $432.3 | ​ | $115.2 | ​ | $26.6% | ​ | $1,360.7 | ​ | $1,217.1 | ​ | $143.6 | ​ | $11.8% | ​ |

#### NET SALES

Net sales in the second quarter of 2023 were 0.3% lower than in the same period of 2022. This decrease was mainly driven by a reduction in metal prices for copper (-10.9% LME) and zinc (-35.4%) and by a decline in the sales volumes for silver (-6.8%). This effect was mostly offset by an increase in the sales volumes of copper (+12.1%) and zinc (+12.9%) and by an increase in molybdenum (+14.0%) and silver (+7.1%) prices.

Net sales in the first six months of 2023 were 0.5% higher than in the same period of 2022. This result was driven by higher sales volume of copper (+11.0%), silver (+3.4%) and zinc (+9.2%), as well as an increase in silver (+0.2%) prices. This effect was substantially offset by the drop in copper (-10.8% LME) and zinc (-25.9%) prices and by the reduction of sales volumes of molybdenum (-4.1%).

| ​ ​ ​ | ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ % Change ​ | ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Copper price ($per pound—LME) | ​ | $3.85 | ​ | $4.32 | ​ | (10.9)% | ​ | $3.95 | ​ | $4.43 | ​ | (10.8)% | ​ |
| Copper price ($per pound—COMEX) | ​ | $3.85 | ​ | $4.34 | ​ | (11.3)% | ​ | $3.97 | ​ | $4.44 | ​ | (10.6)% | ​ |
| Molybdenum price ($per pound)(1) | ​ | $20.87 | ​ | $18.30 | ​ | 14.0% | ​ | $26.45 | ​ | $18.64 | ​ | 41.9% | ​ |
| Zinc price ($per pound—LME) | ​ | $1.15 | ​ | $1.78 | ​ | (35.4)% | ​ | $1.29 | ​ | $1.74 | ​ | (25.9)% | ​ |
| Silver price ($per ounce—COMEX) | ​ | $24.26 | ​ | $22.65 | ​ | 7.1% | ​ | $23.40 | ​ | $23.35 | ​ | 0.2% | ​ |

(1) Platts Metals Week Dealer Oxide

The table below provides our metal sales as a percentage of our total net sales for the three and six months ended June 30, 2023 and 2022:

| ​ ​ ​ ​ Sales as a percentage of total net sales | ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ ​ Six Months Ended ​ June 30, 2023 | ​ ​ ​ 2022 ​ |
| --- | ---: | ---: | ---: | ---: |
| Copper | 77.5% | 77.9% | 77.1% | 78.0% |
| Molybdenum | 11.1% | 8.6% | 10.9% | 9.3% |
| Silver | 4.3% | 4.3% | 4.2% | 4.0% |
| Zinc | 2.7% | 3.5% | 3.0% | 3.5% |
| Other by‑products | 4.4% | 5.7% | 4.8% | 5.2% |
| **Total** | 100.0% | 100.0% | 100.0% | 100.0% |

The table below provides our copper sales by type of product for three and six months ended June 30, 2023 and 2022. The difference in value between products is the level of processing. At the market price, concentrates take a discount since they require smelting and refining processes, while refined and rod copper receive premiums due to their purity and presentation.

| ​ ​ Copper Sales (million pounds) | ​ | ​ Three Months Ended June 30, 2023 | ​ | ​ 2022 | ​ | ​ Variance | ​ | ​ ​ ​ % Change ​ | ​ | ​ Six Months Ended June 30, 2023 | ​ | ​ 2022 | ​ | ​ Variance | ​ | ​ ​ ​ % Change ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Refined (including SX‑EW) | ​ | 254.8 | ​ | 246.0 | ​ | 8.8 | ​ | 3.6% | ​ | 535.9 | ​ | 498.1 | ​ | 37.8 | ​ | 7.6% | ​ |
| Rod | ​ | 83.9 | ​ | 115.5 | ​ | (31.6) | ​ | (27.4)% | ​ | 174.1 | ​ | 227.7 | ​ | (53.6) | ​ | (23.5)% | ​ |
| Concentrates and other | ​ | 144.1 | ​ | 69.2 | ​ | 74.9 | ​ | 108.2% | ​ | 277.1 | ​ | 163.4 | ​ | 113.7 | ​ | 69.6% | ​ |
| **Total** | ​ | 482.8 | ​ | 430.7 | ​ | 52.1 | ​ | 12.1% | ​ | 987.1 | ​ | 889.2 | ​ | 97.9 | ​ | 11.0% | ​ |

The table below provides our copper sales volume by type of product as a percentage of our total copper sales volume for the three and six months ended June 30, 2023 and 2022:

| ​ ​ ​ Copper Sales by product type | ​ ​ Three months ended June 30, 2023 | ​ ​ ​ 2022 ​ | ​ ​ ​ ​ Six months ended June 30, 2023 | ​ ​ 2022 |
| --- | ---: | ---: | ---: | ---: |
| Refined (including SX‑EW) | 52.8% | 57.1% | 54.3% | 56.0% |
| Rod | 17.4% | 26.8% | 17.6% | 25.6% |
| Concentrates and other | 29.8% | 16.1% | 28.1% | 18.4% |
| **Total** | 100.0% | 100.0% | 100.0% | 100.0% |

#### OPERATING COSTS AND EXPENSES

The table below summarizes the production cost structure by major components as a percentage of total production cost:

| ​ ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2023 | ​ ​ ​ 2022 ​ | ​ ​ ​ Six months ended June 30, ​ 2023 | ​ ​ ​ 2022 ​ |
| --- | ---: | ---: | ---: | ---: |
| Power | 14.0% | 17.6% | 14.3% | 17.5% |
| Labor | 11.6% | 10.9% | 11.3% | 11.2% |
| Fuel | 14.9% | 17.6% | 15.2% | 17.0% |
| Maintenance | 21.2% | 18.5% | 21.2% | 19.0% |
| Operating material | 19.9% | 19.6% | 20.3% | 19.8% |
| Other | 18.4% | 15.8% | 17.7% | 15.5% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% |

Second quarter: Operating costs and expenses were $1,400.0 million in the second quarter of 2023 compared to $1,498.4 million in the same period of 2022. The decrease of $98.4 million was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | --- |
| ​ | Operating cost and expenses for the second quarter of 2022 |  | $1,498.4 |
| ​ | Less: | ​ | ​ ​ |
| ​ | • Decrease in the volume and cost of metals purchased from third parties. | ​ | ​ (94.1) |
| ​ | • Decrease in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to the reduction in workers participation (-118.3), energy (-17.8); partially offset by higher reparing materials (+41.6), inventories change (+19.3), labor costs (+15.7) operating contractors (+14.2), reagents (+9.6) and others (+30.8) | ​ | (4.9) |
| ​ | Plus: ​ | ​ | ​ ​ |
| ​ | • Increase in exploration expense. | ​ | ​ 0.3 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | ​ 0.2 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | ​ 0.1 |
| ​ | Operating cost and expenses for the second quarter of 2023 | ​ | $1,400.0 |

Six months: Operating costs and expenses were $2,840.2 million in the first six months of 2023 compared to $2,792.1 million in the same period of 2022. The increase of $48.1 million was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | ---: |
| Operating cost and expenses for the first six months of 2022 |  | $2,792.1 |
| Plus: | ​ | ​ ​ |
| • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to increases in inventories change (+133.1), repairing materials (+82.3), operating contractors (+30.0), labor costs (+27.5), reagents (+20.8), sales expenses (+17.9), fuel (+14.2), freights (+11.1) and others (+37.0); this was partially offset by a reduction in workers participation (-133.3), foreign currency effect (-39.5), leachable material (-21.7), energy (-19.0). | ​ | ​ 160.4 |
| • Increase in depreciation, amortization and depletion expense. | ​ | ​ 7.3 |
| • Increase in exploration expense. |  | 3.1 |
| • Decrease in selling, general and administrative expenses. | ​ | 0.2 |
| Less: ​ | ​ | ​ ​ |
| • Decrease in the volume and cost of metals purchased from third parties. | ​ | (122.9) |
| Operating cost and expenses for the first six months of 2023 | ​ | $2,840.2 |

#### NON-OPERATING INCOME (EXPENSES)

Non-operating income (expense) represented a net expense of $52.8 million and $103.7 million in the three and six months ended on June 30, 2023 compared to a net expense of $77.0 million and $148.4 million in the three and six months ended June 30, 2022.

Second quarter: The $24.2 million decrease in the expense level was principally due to:

- $18.9 million increase in interest income,
- $2.6 million decrease in interest expense,
- $1.7 million increase in miscellaneous expense and
- $1.0 million increase in capitalized interest.

Six months: The $44.7 million decrease in the expense level was principally due to:

- $35.6 million increase in interest income,
- $7.0 million decrease in interest expense,
- $0.4 million increase in miscellaneous expense and
- $1.7 million increase in capitalized interest

#### INCOME TAXES

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ ​ 2022 ​ |
| --- | --- | ---: | ---: |
| Provision for income taxes ($in millions) | ​ | $774.9 ​ | $908.5 ​ |
| Effective income tax rate | ​ | 36.0% | 42.6% |

In addition to the income taxes of Peru, Mexico and the United States, the provision for income taxes also includes the mining royalties from Peru and Mexico and the Peruvian special mining tax.

#### SEGMENT RESULT ANALYSIS

We have three segments: the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations.

The table below presents information regarding the volume of our copper sales by segment for the three and six months ended June 30, 2023 and 2022:

| ​ ​ Copper Sales (million pounds) | ​ | ​ ​ Three Months Ended June 30, 2023 | ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ | ​ ​ Six Months Ended June 30, 2023 | ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: | --- |
| Peruvian operations | ​ | 195.0 | 201.4 | ​ | (6.4) | (3.2)% | ​ | 382.8 | 388.5 | ​ | (5.7) | (1.5)% | ​ |
| Mexican open‑pit | ​ | 287.1 | 265.3 | ​ | 21.8 | 8.2% | ​ | 603.0 | 559.9 | ​ | 43.1 | 7.7% | ​ |
| Mexican IMMSA unit | ​ | 5.9 | 7.0 | ​ | (1.1) | (15.7)% | ​ | 11.2 | 12.6 | ​ | (1.4) | (11.1)% | ​ |
| Other and intersegment elimination | ​ | (5.2) | (43.0) | ​ | 37.8 | (87.9)% | ​ | (9.9) | (71.9) | ​ | 62.0 | (86.2)% | ​ |
| Total copper sales | ​ | 482.8 | 430.7 | ​ | 52.1 | 12.1% | ​ | 987.1 | 889.1 | ​ | 98.0 | 11.0% | ​ |

The table below presents information regarding the volume of sales by segment of our significant by-products for the three and six months ended June 30, 2023 and 2022:

| ​ ​ By‑product Sales (million pounds, except silver—million ounces) Peruvian operations: | ​ ​ ​ | ​ Three Months Ended June 30, 2023 ​ | ​ ​ | ​ 2022 ​ | ​ ​ | ​ ​ Variance ​ ​ | ​ ​ ​ % Change ​ ​ ​ | ​ ​ ​ | ​ Six Months Ended June 30, 2023 ​ | ​ ​ | ​ 2022 ​ | ​ ​ | ​ ​ Variance ​ ​ | ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | ---: |
| Molybdenum contained in concentrate | ​ | 4.9 | ​ | 6.2 | ​ | (1.3) | (21.0)% | ​ | 10.3 | ​ | 13.3 | ​ | (3.0) | (22.6)% |
| Silver | ​ | 1.1 | ​ | 1.1 | ​ | — | —% | ​ | 2.2 | ​ | 2.1 | ​ | 0.1 | 4.8% |
| Mexican open‑pit operations: | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Molybdenum contained in concentrate | ​ | 9.0 | ​ | 7.6 | ​ | 1.4 | 18.4% | ​ | 17.9 | ​ | 16.1 | ​ | 1.8 | 11.2% |
| Silver | ​ | 2.2 | ​ | 2.6 | ​ | (0.4) | (15.4)% | ​ | 5.1 | ​ | 5.4 | ​ | (0.3) | (5.6)% |
| IMMSA unit | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Zinc‑refined and in concentrate | ​ | 48.3 | ​ | 42.8 | ​ | 5.5 | 12.9% | ​ | 106.7 | ​ | 97.7 | ​ | 9.0 | 9.2% |
| Silver | ​ | 1.6 | ​ | 1.6 | ​ | — | —% | ​ | 3.5 | ​ | 3.2 | ​ | 0.3 | 9.4% |
| Other and intersegment elimination | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Silver | ​ | (0.8) | ​ | (0.9) | ​ | 0.1 | (11.1)% | ​ | (1.6) | ​ | (1.8) | ​ | 0.2 | (11.1)% |
| Total by‑product sales | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Molybdenum contained in concentrate | ​ | 13.9 | ​ | 13.8 | ​ | 0.1 | 0.7% | ​ | 28.2 | ​ | 29.4 | ​ | (1.2) | (4.1)% |
| Zinc‑refined and in concentrate | ​ | 48.3 | ​ | 42.8 | ​ | 5.5 | 12.9% | ​ | 106.7 | ​ | 97.7 | ​ | 9.0 | 9.2% |
| Silver | ​ | 4.1 | ​ | 4.4 | ​ | (0.3) | (6.8)% | ​ | 9.2 | ​ | 8.9 | ​ | 0.3 | 3.4% |

Peruvian Operations:

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ ​ | ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ | ​ % Change | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: |
| Net sales | ​ | $886.9 | ​ | $910.9 | ​ | $(24.0) | ​ | ​ | (2.6)% | ​ | $1,912.6 | ​ | $2,005.7 | ​ | $(93.1) | ​ | ​ | (4.6)% |
| Operating costs and expenses | ​ | (570.2) | ​ | (684.6) | ​ | 114.4 | ​ |  | (16.7)% | ​ | (1,146.7) | ​ | (1,246.6) | ​ | 99.9 | ​ | ​ | (8.0)% |
| Operating income | ​ | $316.7 | ​ | $226.3 | ​ | $90.4 | ​ | ​ | 39.9% | ​ | $765.9 | ​ | $759.1 | ​ | $6.8 | ​ | ​ | 0.9% |

Net sales in the second quarter of 2023 decreased $24.0 million, mainly due to lower sales volume of copper (-3.2%) and molybdenum (-21.0%) and a drop in copper price (-10.9% LME). This result was also affected by a reduction in molybdenum production due to lower grades. The negative effect in net sales was partially offset by the increase in molybdenum (+14.0%) and silver (+7.1%) prices.

Operating costs and expenses in the second quarter of 2023 decreased by $114.4 million to $570.2 million compared to $684.6 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | --- |
| ​ | Operating costs and expenses for the second quarter of 2022 |  | $684.6 |
| ​ | Less: | ​ |  |
| ​ | • Decrease in cost of metals purchased from third parties. | ​ | ​ (244.1) |
| ​ | • Decrease in depreciation, amortization and depletion expense. | ​ | (7.3) |
| ​ | • Decrease in selling, general and administrative expenses. | ​ | ​ (0.5) |
| ​ | Plus | ​ | ​ ​ |
| ​ | • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to higher inventories change (+85.8), repairing materials (+24.0), foreign currency effect (+7.1), operating materials (+5.9), energy (+4.7) and others (+21.2); this was partially offset by lower fuel costs (-14.7). | ​ | ​ 134.0 |
| ​ | • Increase in exploration expenses. | ​ | ​ 3.5 |
| ​ | Operating costs and expenses for the second quarter of 2023 | ​ | $570.2 |

Net sales in the first six months of 2023 decreased $93.1million compared to the same period of 2022. This decrease was mainly driven by a drop in copper (-1.5%) and molybdenum (-22.6%) sales volumes and a lower copper price (-10.8% LME). This was partially offset by the increase in molybdenum (+41.9%) and silver (+0.2%) prices, as well as higher silver (+4.8%) sales volumes.

Operating costs and expenses in the first six months of 2023 decreased by $99.9 million to $1,146.7 million compared to $1,246.6 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | --- |
| ​ | Operating costs and expenses for the first six months of 2022 |  | $1,246.6 |
| ​ | Less: | ​ | ​ |
| ​ | • Decrease in cost of metals purchased from third parties. | ​ | ​ (256.8) |
| ​ | • Decrease in depreciation, amortization and depletion expense. | ​ | ​ (3.3) |
| ​ | Plus: ​ | ​ | ​ ​ |
| ​ | • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to higher inventories change (+74.6), repairing materials (+48.2), sales expenses (+15.0), energy (+10.8), operating contractors (+7.8), operating materials (+6.4) and others (+33.1); this was partially offset by foreign currency effect (-29.7) and lower fuel costs (-7.3). | ​ | ​ 158.9 |
| ​ | • Increase in exploration expenses. | ​ | 1.3 |
| ​ | Operating costs and expenses for the first six months of 2023 | ​ | $1,146.7 |

Mexican Open-pit Operations:

| ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ ​ | ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- |
| Net sales | $1,311.2 | ​ | $1,337.0 | ​ | $(25.8) | ​ | ​ | (1.9)% | ​ | $2,938.1 | ​ | $2,983.2 | ​ | $(45.1) | ​ | ​ | (1.5)% | ​ |
| Operating costs and expenses | (706.0) | ​ | (774.9) | ​ | 68.9 | ​ |  | (8.9)% | ​ | (1,417.1) | ​ | (1,437.1) | ​ | 20.0 | ​ |  | (1.4)% | ​ |
| Operating income | $605.2 | ​ | $562.1 | ​ | $43.1 | ​ | ​ | 7.7% | ​ | $1,521.0 | ​ | $1,546.1 | ​ | $(25.1) | ​ | ​ | (1.6)% | ​ |

Net sales in the second quarter of 2023 decreased $25.8 million to $1,311.2 million compared to $1,337.0 million in the second quarter of 2022. The decrease in net sales was mainly driven by a drop in copper prices (-10.9% LME) and by a reduction in the sales volumes of silver (-15.4%). This was mostly offset by higher molybdenum (+14.0%) and silver (+7.1%) prices and by an improvement in the sales volumes of copper (+8.2%) and molybdenum (+18.4%).

Operating costs and expenses in the second quarter of 2023 decreased by $68.9 million to $706.0 million versus $774.9 million in the same period of 2022, primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | --- |
| ​ | Operating costs and expenses for the second quarter of 2022 |  | $774.9 |
| ​ | Less: | ​ |  |
| ​ | • Decrease in worker participation expense. | ​ | ​ (101.8) |
| ​ | • Decrease in cost of metals purchased from third parties. | ​ | (18.5) |
| ​ | Plus: | ​ | ​ ​ |
| ​ | • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to a higher inventories change (+29.0), repairing materials (+16.0), fuel (+9.2), reagents (+8.0) and others (+1.7); this was partially offset by a decrease in energy (-23.6) and foreign currency effect (-12.3). | ​ | ​ 28.0 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | ​ 21.0 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | ​ 1.6 |
| ​ | • Increase in exploration expenses. | ​ | 0.8 |
| ​ | Operating costs and expenses for the second quarter of 2023 | ​ | $706.0 |

Net sales in the first six months of 2023 decreased $45.1 million to $2,938.1 million compared to $2,983.2 million in the same period of 2022. The decrease in net sales was mainly driven by a drop in copper prices (-10.8% LME) in addition to a decrease in silver (-5.6%) sales volumes. This was partially offset by the increase in molybdenum (+41.9%) and silver (+0.2%) prices, as well as higher sales volumes of copper (+7.7%) and molybdenum (+11.2%).

Operating costs and expenses in the first six months of 2023 decreased by $20.0 million to $1,417.1 million compared to $1,437.1 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | --- |
| ​ | Operating costs and expenses for the first six months of 2022 |  | $1,437.1 |
| ​ | Less: | ​ | ​ ​ |
| ​ | • Decrease in worker participation expense. | ​ | ​ (115.8) |
| ​ | • Decrease in cost of metals purchased from third parties. | ​ | ​ (7.3) |
| ​ | • Decrease in depreciation, amortization and depletion expense. | ​ | (1.5) |
| ​ | Plus: | ​ | ​ |
| ​ | • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to a higher inventories change (+70.7), repairing materials (+30.3), fuel (+20.1), reagents (+16.5), labor (+13.4), operations contractores (+10.9) and others (+6.0); this was partially offset by a decrease in the foreign currency effect (-35.0) and energy (-31.9). | ​ | ​ 101.0 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | 2.0 |
| ​ | • Increase in exploration expenses. | ​ | ​ 1.6 |
| ​ | Operating costs and expenses for the first six months of 2023 | ​ | $1,417.1 |

52

Mexican Underground Operations (IMMSA):

| ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ | ​ ​ Six Months Ended June 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- |
| Net sales | $141.2 | ​ | $166.3 | ​ | $(25.1) | ​ | ​ | (15.1)% | ​ | $320.7 | ​ | $343.8 | ​ | $(23.1) | ​ | ​ | (6.7)% | ​ |
| Operating costs and expenses | (144.1) | ​ | (131.3) | ​ | (12.8) | ​ |  | 9.7% | ​ | (322.2) | ​ | (277.9) | ​ | (44.3) | ​ |  | 15.9% | ​ |
| Operating income | $(2.9) | ​ | $35.0 | ​ | $(37.9) | ​ | ​ | (108.3)% | ​ | $(1.5) | ​ | $65.9 | ​ | $(67.4) | ​ | ​ | (102.3)% | ​ |

Net sales in the second quarter of 2023 decreased $25.1 million to $141.2 million compared to $166.3 million in the second quarter of 2022. The decrease in net sales was mainly driven by a drop in copper (-10.9% LME) and zinc (-35.4%) prices and by a reduction in the sales volumes of copper (-15.7%). This was primarily offset by higher silver (+7.1%) prices; as well as an improvement in the sales volumes of zinc (+12.9%).

Operating costs and expenses in the first quarter of 2023 increased by $12.8 million and reached $144.1 million, versus $131.3 million in the same period of 2022. This was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | --- |
| Operating costs and expenses for the second quarter of 2022 |  | $131.3 |
| Plus: ​ | ​ | ​ |
| • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to higher expenses in inventory change (+18.2), operating contractors (+5.5), foreign currency effect (+4.4), labor costs (+4.4) and others (+5.7); slightly offset by a decrease in workers participation (-8.0). | ​ | 30.2 |
| • Increase in depreciation, amortization and depletion expense. | ​ | ​ 2.9 |
| • Increase in exploration expenses. | ​ | ​ 0.4 |
| Less: ​ | ​ | ​ ​ |
| • Decrease in cost of metals purchased from third parties. | ​ | ​ (20.6) |
| • Decrease in selling, general and administrative expenses. | ​ | (0.1) |
| Operating costs and expenses for the second quarter of 2023 | ​ | $144.1 |

Net sales in the first six months of 2023 decreased $23.1 million to $320.7 million compared to $343.8 million in the same period of 2022. The decrease in net sales was mainly driven by a drop in copper (-10.8% LME) and zinc (-25.9%) prices and by a decrease in copper (-11.1%) sales volumes. This was partially offset by the increase in silver (+0.2%) prices, as well as higher sales volumes of zinc (+9.2%) and silver (+9.4%).

Operating costs and expenses in the first six months of 2023 increased by $44.3 million to $322.2 million compared to $277.9 million in the same period of 2022. This was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | --- |
| Operating costs and expenses for the first six months of 2022 |  | $277.9 |
| Plus: ​ | ​ | ​ |
| • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to higher expenses in inventory change (+55.9), operating contractors (+11.4), foreign currency effect (+9.3), labor costs (+8.6) and others (+12.9); slightly offset by a decrease in workers participation (-14.5). | ​ | ​ 83.6 |
| • Increase in depreciation, amortization and depletion expense. | ​ | ​ 9.1 |
| • Increase in exploration expenses. | ​ | ​ 1.5 |
| • Increase in selling, general and administrative expenses. | ​ | ​ 0.5 |
| Less: ​ | ​ | ​ ​ |
| • Decrease in cost of metals purchased from third parties. | ​ | (50.4) |
| Operating costs and expenses for the first six months of 2023 | ​ | $322.2 |

53

#### Intersegment Eliminations and Adjustments:

The net sales, operating costs and expenses and operating income discussed above will not be directly equal to amounts in our condensed consolidated statement of earnings because the adjustments of intersegment operating revenues and expenses must be taken into account. Please see Note 14 “Segment and Related Information” of the condensed consolidated financial statements.

### LIQUIDITY AND CAPITAL RESOURCES

### Cash flow:

The following table shows the cash flow for the first six months of 2023 and 2022 (in millions):

| ​ ​ | ​ | ​ ​ 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- |
| Net cash provided by operating activities | ​ | $1,982.3 | ​ | $1,130.6 | ​ | $851.7 | ​ |
| Net cash used in investing activities | ​ | $(282.5) | ​ | $(185.5) | ​ | $(97.0) | ​ |
| Net cash used in financing activities | ​ | $(1,550.5) | ​ | $(1,743.2) | ​ | $192.7 | ​ |

### Net cash provided by operating activities:

The change in net cash from operating activities for the first six months of 2023 and 2022 include, in millions, the following significant items:

| ​ ​ | ​ | ​ ​ 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ % Change | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: |
| Net income | ​ | $1,365.6 | ​ | $1,222.1 | ​ | $143.5 | ​ | ​ | 11.7% |
| Depreciation, amortization and depletion | ​ | 412.9 | ​ | 405.6 | ​ | 7.3 | ​ |  | 1.8% |
| Provision for deferred income taxes | ​ | 6.3 | ​ | 31.9 | ​ | (25.6) | ​ |  | (80.3)% |
| Loss on foreign currency transaction effect | ​ | 11.1 | ​ | 51.8 | ​ | (40.7) | ​ |  | (78.6)% |
| Other adjustments to net income | ​ | 25.1 | ​ | 17.0 | ​ | 8.1 | ​ |  | 47.6% |
| Operating assets and liabilities | ​ | 161.3 | ​ | (597.8) | ​ | 759.1 | ​ |  | (127.0)% |
| Net cash provided by operating activities | ​ | $1,982.3 | ​ | $1,130.6 | ​ | $851.7 | ​ | ​ | 75.3% |

Six months ended June 30, 2023: Net income was $1,365.6 million, which represented approximately 68.9% of the net operating cash flow. The cash flow from operating assets and liabilities increased by $161.3 million due to the following:

- $326.2 million decrease in trade accounts receivable at our Peruvian and Mexican operations. These accounts were affected by the accounting adjustment for price variation on sales made and not yet collected.
- $15.6 million net decrease in inventory; principally at our Mexican operations.
- $(172.8) million decrease in accounts payable and accrued liabilities at our Peruvian and Mexican operations, mainly due to a decrease in accrued income taxes at our Mexican operations and to a decrease in accrued worker’s participation at both operations.
- $(7.7) million increase in other operating assets and liabilities, net.

Six months ended June 30, 2022: Net income was $1,222.1 million, which represented approximately 108.1% of the net operating cash flow. The cash flow from operating assets and liabilities decreased by $597.8 million due to the following:

- $294.1 million decrease in trade accounts receivable, primarily driven by higher collections at our Peruvian and Mexican operations.
- $(743.7) million decrease in accounts payable and accrued liabilities, which was mainly driven by a decrease in accrued income taxes at our Mexican and Peruvian operations.
- $(59.4) million increase in other operating assets and liabilities.
- $(88.8) million net increase in inventory; this was primarily driven by a $50.4 million increase in the work in process inventory.

### Net cash used in investing activities:

Six months ended June 30, 2023: Net cash used in investing activities included $490.6 million for capital investments. The capital investments included:

- $334.2 million of investments at our Mexican operations:
- $62.6 million for the IMMSA unit,
- $38.6 million for Buenavista Zinc project,
- $35.1 million for Bella Union deposit,
- $30.1 million for the tailing deposits of new concentrator,
- $18.8 million for the Pilares project,
- $16.9 million for El Arco unit,
- $126.1 million for various replacement and maintenance expenditures, and
- $6.0 million increase in capital expenditures incurred but not yet paid.
- $156.4 million of investments at our Peruvian operations:
- $33.3 million for the HPGR optimization at Cuajone,
- $12.9 million for the maintenance workshops at Cuajone,
- $6.0 million for the Quebrada Honda dam expansion,
- $4.6 million for the Quebrada Honda filter plant,
- $0.9 million for the relocation of facilities at Toquepala,
- $1.2 million for projects at the Ilo facilities,
- $94.4 million for various other replacement and maintenance expenditures, and
- $3.1 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the first six months of 2023 included $208 million of net proceed of short-term investments.

Six months ended June 30, 2022: Net cash used in investing activities included $429.7 million for capital investments. The capital investments included:

- $268.9 million of investments at our Mexican operations:
- $45.9 million for the Buenavista-Zinc project,
- $5.6 million for the Pilares project,
- $18.8 million for the El Arco unit,
- $81.6 million at our IMMSA unit,
- $121.6 million for various replacement and maintenance expenditures, and
- $4.6 million increase in capital expenditures incurred but not yet paid.
- $160.8 million of investments at our Peruvian operations:
- $17.2 million for the Quebrada Honda dam expansion,
- $3.4 million for the relocation of facilities at Toquepala,
- $3.8 million for projects at the Ilo facilities,
- $122.6 million for various other replacement and maintenance expenditures, and
- $13.8 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the first six months of 2022 included $244.2 million of net proceed of short-term investments.

Dividends:

On July 20, 2023, the Board of Directors authorized a dividend of $1.00 per share payable on August 23, 2023 to shareholders of record at the close of business on August 9, 2023.

Capital Investment and Exploration Programs:

A discussion of our capital investment programs is an important part of understanding our liquidity and capital resources. We expect to meet the cash requirements for these capital investments from cash on hand, internally generated funds and from additional external financing if required. For information regarding our capital investment programs, please see the discussion under the caption “Capital Investment Programs” under this Item 2.

Contractual Obligations:

There have been no material changes in our contractual obligations in the second quarter of 2023. Please see item 7 in Part II of our 2022 annual report on Form 10-K.

NON-GAAP INFORMATION RECONCILIATION

Operating cash cost: Following is a reconciliation of “Operating Cash Cost” (see page 40) to cost of sales (exclusive of depreciation, amortization and depletion) as reported in our consolidated statement of earnings, in millions of dollars and dollars per pound of copper in the table below:

| ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | --- | ---: | --- | ---: | --- |
| Cost of sales (exclusive of depreciation, amortization and depletion) | ​ | $1,147.7 | ​ | $2.37 | ​ | $1,246.7 | ​ | $2.82 | ​ | $2,341.9 | ​ | $2.45 | ​ | $2,304.4 | ​ | $2.56 | ​ |
| Add: | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |
| Selling, general and administrative | ​ | 31.0 | ​ | 0.06 | ​ | 30.9 | ​ | 0.07 | ​ | 61.4 | ​ | 0.06 | ​ | 61.2 | ​ | 0.07 | ​ |
| Sales premiums, net of treatment and refining charges | ​ | (0.5) | ​ | — | ​ | (16.2) | ​ | (0.04) | ​ | (8.1) | ​ | ​ (0.01) | ​ | (22.3) | ​ | (0.02) | ​ |
| Less: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ |
| Workers’ participation | ​ | (63.7) | ​ | ​ (0.13) | ​ | (88.6) | ​ | (0.20) | ​ | (136.5) | ​ | ​ (0.14) | ​ | (176.4) | ​ | (0.20) | ​ |
| Cost of metals purchased from third parties | ​ | (40.1) | ​ | (0.08) | ​ | (134.3) | ​ | (0.30) | ​ | (102.4) | ​ | ​ (0.11) | ​ | (225.3) | ​ | (0.25) | ​ |
| Royalty charge and other, net | ​ | (25.3) | ​ | (0.05) | ​ | (112.8) | ​ | (0.26) | ​ | (70.4) | ​ | ​ (0.07) | ​ | (225.4) | ​ | (0.25) | ​ |
| Inventory change | ​ | 10.4 | ​ | 0.02 | ​ | 25.5 | ​ | 0.05 | ​ | (38.7) | ​ | ​ (0.04) | ​ | 72.7 | ​ | 0.08 | ​ |
| **Operating Cash Cost before by‑product revenues** | **​** | **$1,059.5** | **​** | **$2.19** | **​** | **$951.2** | **​** | **$2.15** | **​** | **$2,047.2** | **​** | **$2.14** | **​** | **$1,788.9** | **​** | **$1.99** | **​** |
| Add: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |
| By‑product revenues(1) | ​ | (497.5) | ​ | ​ (1.03) | ​ | (465.1) | ​ | ​ (1.05) | ​ | (1,118.1) | ​ | ​ (1.17) | ​ | (1,041.5) | ​ | ​ (1.16) | ​ |
| Net revenue on sale of metal purchased from third parties | ​ | (19.8) | ​ | ​ (0.04) | ​ | (0.2) | ​ | ​ — | ​ | (29.8) | ​ | ​ (0.03) | ​ | (7.3) | ​ | ​ — | ​ |
| Add: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |
| Total by‑product revenues | ​ | (517.3) | ​ | (1.07) | ​ | (465.3) | ​ | (1.05) | ​ | (1,147.9) | ​ | (1.20) | ​ | (1,048.8) | ​ | (1.16) | ​ |
| **Operating Cash Cost net of by‑product revenues** | **​** | **$542.2** | **​** | **$1.12** | **​** | **$485.9** | **​** | **$1.10** | **​** | **$899.3** | **​** | **$0.94** | **​** | **$740.1** | **​** | **$0.83** | **​** |
| Total pounds of copper produced (in millions) | ​ | 484.4 | ​ |  | ​ | 442.9 | ​ |  | ​ | 957.4 | ​ |  | ​ | 900.7 | ​ |  | ​ |

(1) By-product revenues included in our presentation of operating cash cost contain the following:

| ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended ​ June 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Three Months Ended ​ June 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Six Months Ended ​ June 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Six Months Ended ​ June 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Molybdenum | ​ | $(254.4) | ​ | $(0.53) | ​ | $(198.2) | ​ | $(0.45) | ​ | $(556.1) | ​ | $(0.58) | ​ | $(474.1) | ​ | $(0.53) | ​ |
| Silver | ​ | (99.4) | ​ | (0.21) | ​ | (85.7) | ​ | (0.19) | ​ | (211.7) | ​ | (0.22) | ​ | (194.4) | ​ | (0.22) | ​ |
| Zinc | ​ | (42.5) | ​ | (0.09) | ​ | (58.2) | ​ | (0.13) | ​ | (112.9) | ​ | (0.12) | ​ | (121.8) | ​ | (0.14) | ​ |
| Sulfuric Acid | ​ | (73.2) | ​ | (0.15) | ​ | (92.7) | ​ | (0.21) | ​ | (162.7) | ​ | (0.17) | ​ | (192.4) | ​ | (0.21) | ​ |
| Gold and others | ​ | (28.0) | ​ | (0.05) | ​ | (30.3) | ​ | (0.07) | ​ | (74.7) | ​ | (0.08) | ​ | (58.8) | ​ | (0.06) | ​ |
| **Total** | **​** | **$(497.5)** | **​** | **$(1.03)** | **​** | **$(465.1)** | **​** | **$(1.05)** | **​** | **$(1,118.1)** | **​** | **$(1.17)** | **​** | **$(1,041.5)** | **​** | **$(1.16)** | **​** |

## Market risk

As filed, 5,946 characters.

### Commodity price risk:

For additional information on metal price sensitivity, refer to “Metal Prices” in Part I, Item 2 of this quarterly report on Form 10-Q for the period ended June 30, 2023.

### Foreign currency exchange rate risk:

Our functional currency is the U.S. dollar. Portions of our operating costs are denominated in Peruvian soles and Mexican pesos. Given that our revenues are primarily denominated in U.S. dollars, when inflation or deflation in our Mexican or Peruvian operations is not offset by a change in the exchange rate of the sol or the peso to the dollar, our financial position, results of operations and cash flows could be affected by local cost conversion when expressed in U.S. dollars. In addition, the dollar value of our net monetary assets denominated in soles or pesos can be affected by an exchange rate variance of the sol or the peso, resulting in a re-measurement gain or loss in our financial statements. Recent inflation and exchange rate variances are provided in the table below for the three and six months ended June 30, 2023 and 2022:

| ​ ​ ​ ​ Peru: | ​ ​ | ​ ​ Three Months Ended June 30, 2023 | ​ ​ ​ 2022 | ​ ​ | ​ ​ Six Months Ended June 30, 2023 | ​ ​ ​ 2022 |
| --- | --- | ---: | ---: | --- | ---: | ---: |
| Peruvian inflation rate |  | 0.7% | 2.5% |  | 2.5% | 4.4% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Initial exchange rate |  | 3.765 | 3.701 |  | 3.820 | 3.998 |
| Closing exchange rate |  | 3.633 | 3.830 |  | 3.633 | 3.830 |
| Appreciation/(devaluation) |  | 3.5% | (3.5)% |  | 4.9% | 4.2% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Mexico: |  |  |  |  |  |  |
| Mexican inflation rate |  | (0.1)% | 1.6% |  | 1.4% | 4.0% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Initial exchange rate |  | 18.105 | 19.994 |  | 19.362 | 20.584 |
| Closing exchange rate |  | 17.072 | 19.985 |  | 17.072 | 19.985 |
| Appreciation/(devaluation) |  | 5.7% | 0.0% |  | 11.8% | 2.9% |

### Change in monetary position:

Assuming an exchange rate variance of 10% at June 30, 2023, we estimate our net monetary position in Peruvian sol and Mexican peso would increase (decrease) our net earnings as follows:

*($ in millions)*

| ​ ​ ​ ​ | ​ | ​ ​ Effect in net earnings |
| --- | --- | ---: |
| Appreciation of 10% in U.S. dollar vs. Peruvian sol | ​ | $11.2 |
| Devaluation of 10% in U.S. dollar vs. Peruvian sol | ​ | $(13.7) |
| Appreciation of 10% in U.S. dollar vs. Mexican peso | ​ | $(30.6) |
| Devaluation of 10% in U.S. dollar vs. Mexican peso | ​ | $37.4 |

### Open sales risk:

Our provisional copper and molybdenum sales contain an embedded derivative that is required to be separate from the host contract for accounting purposes. The host contract is the receivable from the sale of copper and molybdenum concentrates at prevailing market prices at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to settlement. See Note 13 to our condensed consolidated financial statements for further information about these provisional sales.

### Short-term Investments:

For additional information on our trading securities and available-for-sale investments, refer to “Short-term Investments” in Part I, Item 1 of this quarterly report on Form 10-Q for the period ended June 30, 2023.

### Derivative Instruments:

From time to time, we use derivative instruments to manage our cash flows exposure to changes in commodity prices. We do not enter into derivative contracts unless we anticipate that the possibility exists that future activity will expose our future cash flows to deterioration. Derivative contracts for commodities are entered into to manage the price risk associated with forecasted purchases of the commodities that we use in our manufacturing process.

### Cash Flow Hedges of Natural Gas

Our objective in using natural gas derivatives is to protect the stability of natural gas costs and manage exposure to natural gas price increases. To protect natural gas costs from estimated price increases in 2021, we acquired two derivative instruments that began in November 2021 and ended in March 2022.

We assessed these derivative instruments as Cash Flow Hedges. As such, the effective portions of said hedges were initially reported in Other Comprehensive Income (OCI) and were reclassified as earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affected earnings. The Company did not identify any ineffective portions of these derivatives.

As of June 30, 2023, we held no derivative instruments.

Cautionary Statement:

Forward-looking statements in this report and in other Company statements include statements regarding expected commencement dates of mining or metal production operations, projected quantities of future metal production, anticipated production rates, operating efficiencies, costs and expenditures as well as projected demand or supply for the Company’s products. Actual results could differ materially depending upon factors including the risks and uncertainties relating to general U.S. and international economic and political conditions, the cyclical and volatile prices of copper, other commodities and supplies, including fuel and electricity, availability of materials, insurance coverage, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, lower than expected ore grades, water and geological problems, the failure of equipment or processes to operate in accordance with specifications, failure to obtain financial assurance to meet closure and remediation obligations, labor relations, litigation and environmental risks as well as political and economic risk associated with foreign operations. Results of operations are directly affected by metal prices on commodity exchanges that can be volatile.

## Controls and procedures

As filed, 4,225 characters.

#### EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of June 30, 2023, the Company conducted an evaluation under the supervision and with the participation of the Company’s disclosure committee and the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness and the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of June 30, 2023, to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is:

1\. Recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and

2\. Accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

### Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Southern Copper Corporation:

### Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Southern Copper Corporation and subsidiaries (the “Company”) as of June 30, 2023, the related condensed consolidated statements of earnings, comprehensive income and cash flows for the three-month and six-month periods ended June 30, 2023, and 2022, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of earnings, comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

### Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the condensed consolidated interim financial statements taken as a whole. Accordingly, we do not express such an opinion.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited

|  |  |
| --- | --- |
|  | ​ |
| /s/ Paulina Ramos Ramirez | ​ |
| C.P.C. Paulina Ramos Ramirez | ​ |
| Mexico City, Mexico | ​ |
| August 1, 2023 | ​ |

## Risk factors

As filed, 1,585 characters.

The Company's operations and financial results are subject to various risks and uncertainties, including those described in “Risk Factors” included in Part I, Item 1A of our Annual report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023. The following supplements and updates the risk factor previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Mexican economic and political conditions, as well as drug related violence, may have an adverse impact on our business

On April 29 2023, Mexican Senate approved a fast-track bill that would impact the mining industry. The main aspects that will be affected by the legislation are changes in mining concession period from 50 to 30 years; new restrictions and conditions for water use; provide of guarantees for closure and remediation of operations, 5% contribution of net earnings to indigenous communities for new projects and finally significant changes to exploration activities.

Down the line, the aforementioned changes could trigger amendment, additions and repeals of provisions of a number of laws, including the Mining Law, the National Water Law, the General Law for Ecological Balance and Environmental Protection and the General Law for the Prevention and Management of Mine Waste.

Although the Company believes that there would be no material impact on the Company's operations or financial condition, we cannot assure you that future developments in these laws will not affect our current business as well as our organic growth portfolio.

Filed Aug 1, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-012746. Last ingested by Listed: Nov 2, 2026, 13:24 ET. No prices; not investment advice.