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

- Company: [Southern Copper Corp/](/companies/scco.md) (CIK 1001838)
- Form: 10-Q
- Filed: 2023-11-01
- Accepted by EDGAR: Nov 1, 2023, 13:14 ET
- Period: 2023-09-30
- Accession: 0001558370-23-017203
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1001838/000155837023017203/scco-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1001838/000155837023017203/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.51bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $7.60bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.18bn | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.52bn | us-gaap:CostOfRevenue |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $32.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $94.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $1.07bn | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $3.32bn | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $395.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $1.17bn | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $622.0m | us-gaap:ProfitLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $1.99bn | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.80 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.56 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.80 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.56 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 773,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 773,100,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-07-01 to 2023-09-30 | $1.05bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $3.03bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-07-01 to 2023-09-30 | $262.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $753.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-07-01 to 2023-09-30 | $773.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $2.32bn | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-09-30 | $1.97bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $4.75bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $16.96bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.28bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $6.25bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $7.74bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 77,829 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 third quarter of 2023, approximately 74.8% of our revenue came from the sale of copper; 13.7% from molybdenum; 4.2% from silver; 2.8% from zinc; and 4.6% from various other products, including gold, sulfuric acid, and other materials.
- Copper: In the third quarter of 2023, the LME copper price increased from an average of $3.51 per pound in the third quarter of 2022 to $3.79 (+8.0%), reflecting the uncertainty that involves basic metals markets due to the slow recovery of the Chinese economy, a recession in Europe and a soft landing or minor recession in the US.

At this point we see the following factors affecting the copper market:

- The most relevant market intelligence houses for the copper market are now expecting a market in surplus of about 170,000 tons for 2023.
- Even though copper inventories (LME + Comex + Shanghai+ BWChina), are still at a very low level, they have increased from 235,000 tons in June to 292,000 in September.
- A stronger than expected U.S. dollar is reducing copper and other metals prices expressed in the greenback.

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 13.7% of our sales in the third quarter of 2023 and is currently our most important by-product. Molybdenum prices averaged $23.59 per pound in the third quarter of 2023, compared to $16.00 in the same period of 2022, reflecting an increase of 47.4%.

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.

For the short term, we believe molybdenum prices will have good support due to a market deficit and higher demand coming from the aerospace and defense industries.

- Silver: Represented 4.2% of our sales in the third quarter of 2023. We believe that the prices for silver will be supported by intensive level of industrial use.
- Zinc: Represented 2.8% of our sales in the third quarter of 2023, with an average price of $1.10 per pound in the quarter, down 25.7% from the third quarter of 2022.
- Production: For 2023, we expect to produce 917,700 tonnes of copper, an increase of 2.6% over 2022’s final print. This growth will unfold as we get Peruvian production back on track and will be accompanied by new production at our Mexican operations through our Pilares Concentrator project.

We also expect to produce 25,900 tonnes of molybdenum, which represents a decrease of 1.1% over our 2022 production level. In 2023, we expect to produce 19.3 million ounces of silver, an increase of 3.8% compared to 2022 production level. Additionally, we expect to produce 64,200 tonnes of zinc from our mines, which represents an increase of 7.0% over our 2022 production level. This growth will be driven 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 124,900 tonnes of zinc per year.

- Capital Investments: In the nine months of 2023, we spent $753.2 million on capital investments; this represented 38.4% of net income and an increase of 14.5% compared to the amount registered for the same period in 2022.

CYBERSECURITY

Our organization continues to maintain a strong commitment to cybersecurity. It is relevant to highlight that in the third quarter of 2023, there have been no material cybersecurity incidents.

As the cybersecurity landscape continues to evolve, we have observed several notable trends. This quarter, we have witnessed an increase in the sophistication of cyberattacks, emphasizing the importance of maintaining a strong defensive posture.

Our cybersecurity strategy remains agile and adaptable to address these emerging trends. We´re fortifying our controls and security measures, and also working to improve employee training for early threat detection.

We have also conducted a review of our security posture, with a particular focus on proactive risk identification. Our information security culture remains fundamental and is being further strengthened.

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 nine months ended September 30, 2023 and 2022 (in millions, except copper price, percentages and per share amounts):

| ​ ​ ​ | ​ | ​ ​ ​ Three months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ | ​ ​ % Change | ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ | ​ ​ % Change | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Copper price LME | ​ | ​ 3.79 | ​ | ​ 3.51 | ​ | ​ 0.28 |  | 8.0% | ​ | ​ 3.90 | ​ | ​ 4.12 | ​ | ​ (0.22) |  | (5.3)% | ​ |
| Pounds of copper sold | ​ | ​ 495.4 | ​ | ​ 518.6 | ​ | ​ (23.2) |  | (4.5)% | ​ | ​ 1,482.5 | ​ | ​ 1,407.7 | ​ | ​ 74.8 |  | 5.3% | ​ |
| Net sales | ​ | $2,505.6 | ​ | $2,156.9 | ​ | $348.7 |  | 16.2% | ​ | $7,600.2 | ​ | $7,227.6 | ​ | $372.6 |  | 5.2% | ​ |
| Operating income | ​ | $1,069.2 | ​ | $787.2 | ​ | $282.0 |  | 35.8% | ​ | $3,323.6 | ​ | $3,065.7 | ​ | $257.9 |  | 8.4% | ​ |
| Net income attributable to SCC | ​ | $619.5 | ​ | $519.0 | ​ | $100.5 | ​ | 19.4% | ​ | $1,980.2 | ​ | $1,736.1 | ​ | $244.1 | ​ | 14.1% | ​ |
| Earnings per share | ​ | $0.80 | ​ | $0.67 | ​ | $0.13 | ​ | 19.4% | ​ | $2.56 | ​ | $2.25 | ​ | $0.31 | ​ | 13.8% | ​ |
| Dividends per share | ​ | $1.00 | ​ | $0.75 | ​ | $0.25 | ​ | 33.3% | ​ | $3.00 | ​ | $3.00 | ​ | $— | ​ | —% | ​ |

Net sales in the third quarter of 2023 sales increased 16.2% compared to the same period in 2022. This growth was primarily due to higher metal prices, given that prices were up for copper (+8.0% LME), molybdenum (+47.4%), and silver (+23.6%). Additionally, there was an increase in sales volumes for molybdenum (+12.5%). The favorable trend, however, was partially offset by a decrease in the sales volumes of copper (-4.5%), silver (-7.2%), and zinc (-10.8%). Furthermore, zinc (-25.7%) prices declined.

Net income attributable to SCC in the third quarter of 2023 was 19.4% higher than in the same period of 2022. This increase was mainly attributable to the 16.2% growth in sales, which was primarily driven by higher prices for metals this quarter. This effect was slightly offset by an uptick in operating costs.

Net sales in the first nine months of 2023 recorded a 5.3% increase compared to the same period in 2022. This growth was primarily attributable to an uptick in sales volume of copper (+5.3%), molybdenum (+1.1%) and zinc (+1.4%) and to higher prices for molybdenum (+43.6%) and silver (+7.0%). However, this positive trajectory was partially offset by a drop in copper (-5.3% LME) and zinc (-26.1%) prices and by a reduction in sales volumes of silver (-0.4%).

Net income attributable to SCC for the first nine months of 2023 increased14.1% compared to the same period in 2022. This growth was mainly due to higher net sales, driven by an uptick in sales volumes of copper, molybdenum, and zinc. Higher molybdenum and silver prices also contributed to the increase. Despite declines in silver sales and fluctuations in copper and zinc prices, effective cost control and operational efficiency positively influenced the outcome.

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

| ​ ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ ​ ​ Nine months ended September 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ ​ ​ % Change ​ ​ |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Copper (in million pounds) | 498.5 | 508.2 | (9.7) | (1.9)% | 1,492.4 | 1,440.6 | 51.8 | 3.6% |
| Molybdenum (in million pounds) | 15.1 | 13.4 | 1.7 | 12.6% | 43.3 | 43.0 | 0.3 | 0.8% |
| Silver (in million ounces) | 4.4 | 4.9 | (0.5) | (10.0)% | 13.6 | 13.6 | — | —% |
| Zinc (in million pounds) | 35.9 | 32.8 | 3.1 | 9.4% | 107.1 | 98.7 | 8.4 | 8.6% |

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

| ​ ​ ​ ​ Copper (in million pounds): | ​ ​ Three Months Ended September 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ % Change | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ ​ 2022 | ​ ​ Variance | ​ ​ ​ ​ ​ % Change ​ ​ |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: |
| Toquepala | 123.3 | 109.4 | 13.9 | 12.6% | ​ | 353.8 | 320.2 | 33.6 | 10.5% |
| Cuajone | 74.7 | 92.7 | (18.0) | (19.4)% | ​ | 238.5 | 215.2 | 23.3 | 10.8% |
| La Caridad | 61.3 | 60.8 | 0.5 | 0.8% | ​ | 179.1 | 183.7 | (4.6) | (2.5)% |
| Buenavista | 233.6 | 239.7 | (6.1) | (2.5)% | ​ | 705.4 | 706.3 | (0.9) | (0.1)% |
| IMMSA | 5.6 | 5.6 | — | —% | ​ | 15.6 | 15.2 | 0.4 | 2.8% |
| Total mined copper | 498.5 | 508.2 | (9.7) | (1.9)% | ​ | 1,492.4 | 1,440.6 | 51.8 | 3.6% |

Third quarter: Mined copper production in the third quarter of 2023 decreased 1.9%, driven by lower production due to lower ore grades. Production at our Cuajone mine was down due to lower ore grades. Declines were also recorded at our Buenavista and IMMSA operations. The aforementioned was partially offset by higher production at our Toquepala (+12.6%) and La Caridad (+0.8%) mines in quarter-on-quarter terms, as a result of better ore grades.

Molybdenum production increased 12.6% in the third quarter of 2023 compared to the levels registered in the third quarter of 2022. This was attributable to higher production at our La Caridad (+37.8%), Toquepala (+14.7%) and Buenavista (+0.6%) mines, which was mainly driven by an increase in grades and recoveries. This effect was mainly offset by a reduction in production at our Cuajone (-28.8%) mine, which was largely driven by a drop in ore grades and recoveries.

Silver mine production decreased 10.0% in the third quarter of 2023 compared to the same period of 2022. This was attributable to lower production at our Cuajone (-23.5%), Buenavista (-18.3%), IMMSA (-7.5%) and La Caridad (-4.0%) operations in quarter-on-quarter terms. This was slightly offset by higher production at our Toquepala (+13.0%) mine.

Zinc production increased 9.4% in the third 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.

Nine months: Mined copper production in the nine months of 2023 rose 3.6%. This increase was mainly attributable to production at our Toquepala (+10.5%), Cuajone (+10.8%) and IMMSA (+2.8%) operations due to higher ore grades. Production at our La Caridad (-2.5%) and Buenavista (-0.1%) operations decreased in the same period, which reflected lower ore grades and recoveries.

Molybdenum production increased 0.8% in the nine months of 2023 compared to the same period in 2022; this was mainly due to higher production at our La Caridad (+21.2%), Cuajone (11.6%) and Buenavista (+3.4%) operations. This was partially offset by lower production at the Toquepala (-29.7%) mine.

Silver mine production in the nine months of 2023 mirrored those seen over the same period in 2022. This result reflects an uptick in production of the increase at our Toquepala (+16.4%) and Cuajone (+9.7%) mines, which was fully offset by lower production at our Buenavista (-6.5%), La Caridad (-4.0%) and IMMSA (-2.0%) operations.

Zinc production increased 8.6% in the nine 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 nine months ended September 30, 2023 and 2022:

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

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

| ​ ​ ​ | ​ ​ | ​ ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | ---: | --- |
| Total operating cash cost before by‑product revenues | ​ | $1,073.0 | ​ | $1,005.6 | ​ | $67.4 | 6.7% | ​ | $3,120.3 | ​ | $2,794.5 | ​ | $325.8 | 11.7% | ​ |
| Total by‑product revenues | ​ | $(604.3) | ​ | $(501.1) | ​ | $(103.2) | 20.6% | ​ | $(1,752.3) | ​ | $(1,549.9) | ​ | $(202.4) | 13.1% | ​ |
| Total operating cash cost net of by‑product revenues | ​ | $468.7 | ​ | $504.5 | ​ | $(35.8) | (7.1)% | ​ | $1,368.0 | ​ | $1,244.6 | ​ | $123.4 | 9.9% | ​ |
| Total pounds of copper produced(2) | ​ | 478.3 | ​ | 487.8 | ​ | (9.5) | (1.9)% | ​ | 1,435.7 | ​ | 1,388.5 | ​ | 47.2 | 3.4% | ​ |
| **Operating cash cost per pound before by‑product revenues** | **​** | **$2.24** | **​** | **$2.06** | **​** | **$0.18** | **8.7%** | **​** | **$2.17** | **​** | **$2.01** | **​** | **$0.16** | **8.0%** | **​** |
| **By‑products per pound revenues** | **​** | **$(1.26)** | **​** | **$(1.03)** | **​** | **$(0.23)** | **22.3%** | **​** | **$(1.22)** | **​** | **$(1.11)** | **​** | **$(0.11)** | **9.9%** | **​** |
| **Operating cash cost per pound net of by‑product revenues** | **​** | **$0.98** | **​** | **$1.03** | **​** | **$(0.05)** | **(4.9)%** | **​** | **$0.95** | **​** | **$0.90** | **​** | **$0.05** | **5.6%** | **​** |

(1) These are non-GAAP measures. Please see page 56 for reconciliation to GAAP measure.

(2) Net of metallurgical losses.

In the third quarter of 2023, our per-pound cash cost, excluding by-product revenues, rose by 8.7% compared to the same period in 2022. This growth was primarily driven by an increase in production costs and treatment and refining charges. Our cash cost per pound net of by-product revenue for the third quarter of 2023 decreased 4.9% when compared to the same period of 2022. This improvement was attributable to an increase in by-product revenue credits this quarter.

For the nine months ending September 30, 2023, our per-pound cash cost before by-product revenues was 8.0% higher than in the same period of 2022. This increase was mainly driven by higher production costs and treatment and refining charges. This was slightly offset by the unit cost effect generated by an increase in pounds of copper produced. Additionally, the operating cash cost per pound of copper net of by-product revenue represented an increase of 5.6% compared to the $0.90 reported in the same period of 2022. These results were mainly driven by higher production costs and were, slightly offset by an increase in by-product revenue credits and by the unit cost effect generated by an 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 nine 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) | ​ | $32.5 | ​ | $8.0 | ​ | $7.0 | ​ | $3.1 |

**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 $753.2 million in the nine months of 2023, compared to $657.6 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 plant. 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 $413 million, most of which has already been invested. Progress is 99%; we have initiated the commissioning process. The ramping up of the plant, initially scheduled to conclude in the fourth quarter of 2023, has been pushed back to the first quarter of 2024 given that the concentrator requires technical adjustments.

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 $144 million has been invested. Pilares is currently operating and delivering copper ore 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 and we are evaluating different options to improve the same. The basic engineering study has been completed and the Company is engaging in project development and onsite environmental activities. Project engineering is being developed by an external engineering and technology company. 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 $65.2 million as of September 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 September 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 $152.2 million as of September 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 work on the project´s environmental impact assessment.

Project update: As of September 30, 2023, the Company has held talks with representatives of the Tiaparo Community to acquire part of the land required for the project. Simultaneously, we continue to work with the Peruvian authorities to eliminate illegal mining activities at our concession. SCC will initiate hydrogeological and geotechnical studies soon to gather additional information on the characteristics of the Los Chancas deposit.

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. Simultaneously, exploration activities are underway. As of September 30, 2023, we had drilled 46,500 meters and obtained 14,892 core samples, which are currently under evaluation.

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”) PRACTICES

*Investments that transcend*. We are building drinking water infrastructure to remedy shortages in Cananea and Nacozari communities in Sonora, Mexico; approximately 75 thousand residents will benefit from these initiatives. This effort is aligned with our policies and commitment for sustainable development and is part of the $77 million that we have invested in Mexico and Peru over the last 5 years.

*Innovation in the use and efficiency of water*. We are currently recovering about six thousand cubic meters of water per day through the new tailings filtering plant in Quebrada Honda, Peru, which is equivalent to 0.6 m3 of water per ton of tailings. With a design capacity of 10,000 tons/day and an investment of $27 million to date, this dam filter is the largest tailings processing unit of its kind in the market.

*Focus on prevention and risk management.* In September 2023, our Buenavista del Cobre unit in Sonora received “Safe and Healthy Work Environments” (“ELSSA”) recognition from the Mexican government after successfully passing an audit conducted by the Mexican Social Security Institute. All of our other Mexican units also hold this recognition, which is awarded to companies that implement effective strategies and preventive actions for occupational health and safety.

We continue to make progress with our Critical Risk Registry and the performance of the controls in place to prevent or mitigate undesirable events have improved. To this goal, we require the heads of each operating unit to be involved in the process of establishing and continuously monitoring controls. All results are reported to managing executives on a monthly basis to facilitate supervision and subsequent monitoring by the Board of Directors.

*Innovation in climate change mitigation.* In September 2023, Southern Peru received the 2023 National Mining Award in the Mining Economy category within the framework of PERUMIN 36 Mining Convention held in Arequipa, Peru. The winning study “Integration scenarios of renewable electricity generation systems in the mining sector of Peru by 2050”, prepared by Eng. Rolando Jesus Claros, from the Power System area, proposes the use of clean and renewable energy sources as part of the global energy transition process. Southern Copper aims to achieve net-zero emissions by 2050.

*Disclosure, transparency, and accountability.* To provide more clarity regarding Southern Copper's performance on ESG issues, we have published a supplement to the 2022 Sustainable Development Report and have also incorporated new topics on our sustainable development page to address biodiversity, our people, human rights and the supply chain.

At the behest of our investors, we have expanded our responses to the CDP questionnaires to include the “Forests” questionnaire. This information complements responses to our “Climate change” and “Water security” questionnaires, which have been available since 2016 and 2022 respectively.

*From loss to gain: A journey of environmental restoration.* Year to date, we have reforested 3 times the area impacted in the same period (1,398 hectares replanted versus 424 hectares impacted). Additionally, we have implemented efforts to retain 10,722 tons of soil that would have otherwise been lost to erosion in the state of Sonora, Mexico. These actions are within the framework of our strategy to achieve zero net deforestation and generate a net positive impact on biodiversity, particularly in areas close to our operations.

*Harmony and human development in communities where we operate.* Residents of the communities near our operations are highly active in the social programs we offer. To date, we have recorded 170,000 participations in this program, which is a 7% increase from the previous year. One of our most noteworthy efforts, the Youth Orchestras and Choirs program, recently celebrated its fifth year in Nacozari de Garcia, Sonora and is now present in 11 communities with 1,596 students in Mexico and Peru. To date, eight out of ten of our alumni pursue a bachelor´s degree, with 2% choosing music as their life project.

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 nine months ended September 30, 2023 and 2022 (in millions):

| ​ ​ ​ Statement of Earnings Data | ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ ​ ​ ​ % Change ​ | ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ ​ ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Net sales | ​ | $2,505.6 | ​ | $2,156.9 | ​ | $348.7 | ​ | $16.2% | ​ | $7,600.2 | ​ | $7,227.6 | ​ | $372.6 | ​ | $5.2% | ​ |
| Operating costs and expenses | ​ | (1,436.4) | ​ | (1,369.7) | ​ | (66.7) | ​ | 4.9% | ​ | (4,276.6) | ​ | (4,161.9) | ​ | (114.7) | ​ | 2.8% | ​ |
| Operating income | ​ | 1,069.2 | ​ | 787.2 | ​ | 282.0 | ​ | 35.8% | ​ | 3,323.6 | ​ | 3,065.7 | ​ | 257.9 | ​ | 8.4% | ​ |
| Non‑operating income (expense) | ​ | (51.8) | ​ | (37.7) | ​ | (14.1) | ​ | 37.4% | ​ | (155.6) | ​ | (186.1) | ​ | 30.5 | ​ | (16.4)% | ​ |
| Income before income taxes | ​ | 1,017.4 | ​ | 749.5 | ​ | 267.9 | ​ | 35.7% | ​ | 3,168.0 | ​ | 2,879.6 | ​ | 288.4 | ​ | 10.0% | ​ |
| Income taxes | ​ | (395.3) | ​ | ​ (228.5) | ​ | ​ (166.8) | ​ | ​ 73.0% | ​ | ​ (1,170.2) | ​ | ​ (1,137.0) | ​ | ​ (33.2) | ​ | ​ 2.9% | ​ |
| Equity earnings of affiliate | ​ | (0.1) | ​ | ​ (0.1) | ​ | ​ — | ​ | ​ —% | ​ | ​ (10.3) | ​ | ​ 0.3 | ​ | ​ (10.6) | ​ | ​ (3,533.3)% | ​ |
| Net income attributable to non‑controlling interest | ​ | (2.5) | ​ | (1.9) | ​ | (0.6) | ​ | 31.6% | ​ | (7.3) | ​ | (6.8) | ​ | (0.5) | ​ | 7.4% | ​ |
| Net income attributable to SCC | ​ | $619.5 | ​ | $519.0 | ​ | $100.5 | ​ | $19.4% | ​ | $1,980.2 | ​ | $1,736.1 | ​ | $244.1 | ​ | $14.1% | ​ |

#### NET SALES

In the third quarter of 2023, net sales increased 16.2% compared to the same period in 2022. This growth was driven by higher metal prices, with copper prices rising by 8.0% according to the London Metal Exchange (LME), molybdenum prices surging by 47.4%, and silver prices experiencing a notable increase of 23.6%. Additionally, an increase in sales volumes for molybdenum by 12.5% contributed to this growth. However, these positive factors were partially offset by decreased sales volumes of copper (- 4.5%), silver (- 7.2%) and zinc (- 10.8%). Furthermore, zinc prices declined by 25.7%.

In the nine months of 2023, net sales experienced a 5.2% increase compared to the same period in 2022. This growth was primarily driven by an upswing in sales volumes for copper (+5.3%), molybdenum (+1.1%), and zinc (+1.4%). Notably, substantial increases in molybdenum prices (+43.6%) and silver prices (+7.0%) significantly contributed to this positive performance. However, these favorable elements were partially offset by a decrease in copper prices (-5.3% - LME) and zinc prices (-26.1%). Additionally, there was a marginal reduction in sales volumes of silver (-0.4%).

| ​ ​ ​ | ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ % Change ​ | ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ % Change ​ | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Copper price ($per pound—LME) | ​ | $3.79 | ​ | $3.51 | ​ | 8.0% | ​ | $3.90 | ​ | $4.12 | ​ | (5.3)% | ​ |
| Copper price ($per pound—COMEX) | ​ | $3.77 | ​ | $3.50 | ​ | 7.7% | ​ | $3.90 | ​ | $4.12 | ​ | (5.3)% | ​ |
| Molybdenum price ($per pound)(1) | ​ | $23.59 | ​ | $16.00 | ​ | 47.4% | ​ | $25.50 | ​ | $17.76 | ​ | 43.6% | ​ |
| Zinc price ($per pound—LME) | ​ | $1.10 | ​ | $1.48 | ​ | (25.7)% | ​ | $1.22 | ​ | $1.65 | ​ | (26.1)% | ​ |
| Silver price ($per ounce—COMEX) | ​ | $23.60 | ​ | $19.10 | ​ | 23.6% | ​ | $23.46 | ​ | $21.93 | ​ | 7.0% | ​ |

(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 nine months ended September 30, 2023 and 2022:

| ​ ​ ​ ​ Sales as a percentage of total net sales | ​ ​ Three Months Ended September 30, 2023 | ​ ​ ​ ​ 2022 | ​ ​ ​ ​ Nine Months Ended ​ September 30, 2023 | ​ ​ ​ 2022 ​ |
| --- | ---: | ---: | ---: | ---: |
| Copper | 74.8% | 74.6% | 76.4% | 77.0% |
| Molybdenum | 13.7% | 9.9% | 11.8% | 9.5% |
| Silver | 4.2% | 4.1% | 4.2% | 4.0% |
| Zinc | 2.8% | 4.7% | 3.0% | 3.9% |
| Other by‑products | 4.5% | 6.7% | 4.6% | 5.6% |
| **Total** | 100.0% | 100.0% | 100.0% | 100.0% |

The table below provides our copper sales by type of product for three and nine months ended September 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 September 30, 2023 | ​ | ​ 2022 | ​ | ​ Variance | ​ | ​ ​ ​ % Change ​ | ​ | ​ Nine Months Ended September 30, 2023 | ​ | ​ 2022 | ​ | ​ Variance | ​ | ​ ​ ​ % Change ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Refined (including SX‑EW) | ​ | 289.0 | ​ | 277.3 | ​ | 11.7 | ​ | 4.2% | ​ | 824.9 | ​ | 775.3 | ​ | 49.6 | ​ | 6.4% | ​ |
| Rod | ​ | 84.7 | ​ | 101.3 | ​ | (16.6) | ​ | (16.4)% | ​ | 258.8 | ​ | 329.0 | ​ | (70.2) | ​ | (21.3)% | ​ |
| Concentrates and other | ​ | 121.7 | ​ | 140.0 | ​ | (18.3) | ​ | (13.1)% | ​ | 398.8 | ​ | 303.4 | ​ | 95.4 | ​ | 31.4% | ​ |
| **Total** | ​ | 495.4 | ​ | 518.6 | ​ | (23.2) | ​ | (4.5)% | ​ | 1,482.5 | ​ | 1,407.7 | ​ | 74.8 | ​ | 5.3% | ​ |

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 nine months ended September 30, 2023 and 2022:

| ​ ​ ​ Copper Sales by product type | ​ ​ Three months ended September 30, 2023 | ​ ​ ​ 2022 ​ | ​ ​ ​ ​ Nine months ended September 30, 2023 | ​ ​ 2022 |
| --- | ---: | ---: | ---: | ---: |
| Refined (including SX‑EW) | 58.3% | 53.5% | 55.6% | 55.1% |
| Rod | 17.1% | 19.5% | 17.5% | 23.4% |
| Concentrates and other | 24.6% | 27.0% | 26.9% | 21.5% |
| **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 September 30, 2023 | ​ ​ ​ 2022 ​ | ​ ​ ​ Nine months ended September 30, ​ 2023 | ​ ​ ​ 2022 ​ |
| --- | ---: | ---: | ---: | ---: |
| Power | 12.4% | 17.1% | 13.6% | 17.3% |
| Labor | 11.8% | 10.5% | 11.5% | 10.9% |
| Fuel | 16.0% | 17.2% | 15.5% | 17.0% |
| Maintenance | 22.0% | 19.9% | 21.5% | 19.3% |
| Operating material | 18.9% | 20.0% | 19.8% | 19.9% |
| Other | 18.9% | 15.3% | 18.1% | 15.6% |
| Total | 100.0% | 100.0% | 100.0% | 100.0% |

Third quarter: Operating costs and expenses were $1,436.4 million in the third quarter of 2023 compared to $1,369.7 million in the same period of 2022. The increase of $66.7 million was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | ---: |
| ​ | Operating cost and expenses for the third quarter of 2022 |  | $1,369.7 |
| ​ | Plus: ​ | ​ | ​ ​ |
| ​ | • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) mainly attributable to an increase in repairing materials (+$28.3), workers participation (+27.3$), operating contractors (+$20.3), sales expenses (+$20.3) labor costs (+$16.2), operating materials (+$6.1); this was slightly offset by a decrease in energy costs (-$38.0), inventory variance (-$21.8), leacheable material (-$14.5) and other net (-$13.0). | ​ | ​ 31.2 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | 20.5 |
| ​ | • Increase in the volume and cost of metals purchased from third parties. | ​ | 6.6 |
| ​ | • Increase in exploration expense. |  | 5.9 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | ​ 2.5 |
| ​ | Operating cost and expenses for the third quarter of 2023 | ​ | $1,436.4 |

Nine months: Operating costs and expenses were $4,276.6 million in the nine months of 2023 compared to $4,161.9 million in the same period of 2022. The increase of $114.7 million was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | --- |
| Operating cost and expenses for the nine months of 2022 |  | $4,161.9 |
| Plus: ​ | ​ | ​ ​ |
| • Increase in other costs of sales (excluding depreciation, amortization and depletion) primarily attributable to an increase in fuel expenses (+$16.3), labor costs (+$43.7), maintenance and operating materials (+$126.7), operating contractors (+$50.3 ), freight and insurance (+$18.3), water consumption (+$11.5) and other production costs (+$67.7), inventory variance (+$75.1) and higher sales costs (+ $38.2). This was partially offset by lower energy costs (-$71.7), worker participation (-$106.0), exchange rate difference (-$47.4) and other net (-$31.2). | ​ | ​ 191.5 |
| • Increase in depreciation, amortization and depletion expense, mainly in our peruvian operations | ​ | ​ 27.8 |
| • Increase in exploration expense. | ​ | ​ 8.9 |
| • Increase in selling, general and administrative expenses. |  | 2.7 |
| Less: | ​ | ​ |
| • Decrease in the volume and cost of metals purchased from third parties. | ​ | (116.2) |
| Operating cost and expenses for the nine months of 2023 | ​ | $4,276.6 |

#### NON-OPERATING INCOME (EXPENSES)

Non-operating income (expense) represented a net expense of $51.8 million and $155.6 million in the three and nine months ended on September 30, 2023 compared to a net expense of $37.7 million and $186.1 million in the three and nine months ended September 30, 2022.

Third quarter: The $(14.1) million increase in the expense level was due to:

- $(29.8) million decrease in other income, net
- $2.7 million decrease in interest expense, net of capitalized interest and
- $13.0 million increase in interest income.

Nine months: The $30.5 million decrease in the expense level was due to:

- $48.6 million increase in interest income,
- $11.4 million decrease in interest expense, net of capitalized interest and
- $(29.5) million decrease in other income, net.

#### INCOME TAXES

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2023 | ​ ​ ​ ​ 2022 ​ |
| --- | --- | ---: | ---: |
| Provision for income taxes ($in millions) | ​ | $1,170.2 ​ | $1,137.0 ​ |
| Effective income tax rate | ​ | 36.9% | 39.5% |

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 nine months ended September 30, 2023 and 2022:

| ​ ​ Copper Sales (million pounds) | ​ | ​ ​ Three Months Ended September 30, 2023 | ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ 2022 | ​ | ​ ​ Variance | ​ ​ ​ % Change ​ | ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | ---: | --- |
| Peruvian operations | ​ | 197.5 | 192.0 | ​ | 5.5 | 2.9% | ​ | 580.3 | 580.5 | ​ | (0.2) | (0.1)% | ​ |
| Mexican open‑pit | ​ | 298.0 | 308.4 | ​ | (10.4) | (3.4)% | ​ | 901.0 | 868.3 | ​ | 32.7 | 3.8% | ​ |
| Mexican IMMSA unit | ​ | 7.5 | 5.7 | ​ | 1.8 | 33.2% | ​ | 18.7 | 18.3 | ​ | 0.4 | 1.9% | ​ |
| Other and intersegment elimination | ​ | (7.6) | 12.5 | ​ | (20.1) | (161.3)% | ​ | (17.5) | (59.4) | ​ | 41.9 | (70.5)% | ​ |
| Total copper sales | ​ | 495.4 | 518.6 | ​ | (23.2) | (4.5)% | ​ | 1,482.5 | 1,407.7 | ​ | 74.8 | 5.3% | ​ |

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

| ​ ​ By‑product Sales (million pounds, except silver—million ounces) Peruvian operations: | ​ ​ ​ | ​ Three Months Ended September 30, 2023 ​ | ​ ​ | ​ 2022 ​ | ​ ​ | ​ ​ Variance ​ ​ | ​ ​ ​ % Change ​ ​ ​ | ​ ​ ​ | ​ Nine Months Ended September 30, 2023 ​ | ​ ​ | ​ 2022 ​ | ​ ​ | ​ ​ Variance ​ ​ | ​ ​ ​ ​ % Change ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | ---: |
| Molybdenum contained in concentrate | ​ | 5.0 | ​ | 5.3 | ​ | (0.3) | (6.2)% | ​ | 15.3 | ​ | 18.6 | ​ | (3.3) | (18.0)% |
| Silver | ​ | 1.0 | ​ | 1.1 | ​ | (0.1) | (4.0)% | ​ | 3.2 | ​ | 3.2 | ​ | — | —% |
| Mexican open‑pit operations: | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Molybdenum contained in concentrate | ​ | 10.3 | ​ | 8.3 | ​ | 2.0 | 24.6% | ​ | 28.2 | ​ | 24.4 | ​ | 3.8 | 15.6% |
| Silver | ​ | 2.6 | ​ | 2.9 | ​ | (0.3) | (10.9)% | ​ | 7.6 | ​ | 8.3 | ​ | (0.7) | (7.4)% |
| IMMSA unit | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Zinc‑refined and in concentrate | ​ | 54.9 | ​ | 61.5 | ​ | (6.6) | (10.8)% | ​ | 161.5 | ​ | 159.2 | ​ | 2.3 | 1.4% |
| Silver | ​ | 1.7 | ​ | 1.6 | ​ | 0.1 | 5.8% | ​ | 5.2 | ​ | 4.8 | ​ | 0.4 | 6.6% |
| Other and intersegment elimination | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Silver | ​ | (0.9) | ​ | (0.8) | ​ | (0.1) | 8.3% | ​ | (2.5) | ​ | (2.7) | ​ | 0.2 | (8.7)% |
| Total by‑product sales | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
| Molybdenum contained in concentrate | ​ | 15.3 | ​ | 13.6 | ​ | 1.7 | 12.5% | ​ | 43.5 | ​ | 43.0 | ​ | 0.5 | 1.1% |
| Zinc‑refined and in concentrate | ​ | 54.9 | ​ | 61.5 | ​ | (6.6) | (10.8)% | ​ | 161.5 | ​ | 159.2 | ​ | 2.3 | 1.4% |
| Silver | ​ | 4.4 | ​ | 4.8 | ​ | (0.4) | (7.2)% | ​ | 13.5 | ​ | 13.6 | ​ | (0.1) | (0.4)% |

Peruvian Operations:

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ ​ | ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ | ​ % Change | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: |
| Net sales | ​ | $936.0 | ​ | $815.7 | ​ | $120.3 | ​ | ​ | 14.7% | ​ | $2,848.6 | ​ | $2,821.4 | ​ | $27.2 | ​ | ​ | 1.0% |
| Operating costs and expenses | ​ | (597.0) | ​ | (592.1) | ​ | (4.9) | ​ |  | 0.8% | ​ | (1,743.7) | ​ | (1,838.7) | ​ | 95.0 | ​ | ​ | (5.2)% |
| Operating income | ​ | $339.0 | ​ | $223.6 | ​ | $115.4 | ​ | ​ | 51.6% | ​ | $1,104.9 | ​ | $982.7 | ​ | $122.2 | ​ | ​ | 12.4% |

Net sales in the third quarter of 2023 saw an increase of $120.3 million compared with the same period in 2022, primarily driven by higher prices for copper (+8.0% LME), molybdenum (+47.4%) and silver (+23.6%). Sales volumes of copper (+2.9%) were also up this quarter. This positive performance, however, was somewhat tempered by a decline in the sales volumes of silver (-4.0%) and molybdenum (-6.2%).

Operating costs and expenses in the third quarter of 2023 increased by $4.9 million to $597.0 million compared to $592.1 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | ---: |
| ​ | Operating cost and expenses for the third quarter of 2022 |  | $592.1 |
| ​ | Plus: ​ | ​ |  |
| ​ | • Increase in the volume and cost of metals purchased from third parties. | ​ | 39.7 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | 18.5 |
| ​ | • Increase in exploration expenses. | ​ | 4.8 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | ​ 1.9 |
| ​ | Less: | ​ | ​ ​ |
| ​ | • Decrease in other cost of sales (exclusive of depreciation, amortization and depletion), which was mainly attributable to inventory variance (-$78.2) and fuel costs (-$17.1); this was slightly offset by higher costs of reparing materials (+$20.1), workers participation (+$12.0) and other net (+$3.2). | ​ | ​ (60.0) |
| ​ | Operating cost and expenses for the third quarter of 2023 | ​ | $597.0 |

Net sales in the nine months of 2023 registered a $27.2 million increase in comparison to the corresponding period in 2022. This growth was primarily driven by an upturn in molybdenum (+43.6%) and silver (+7.0%) prices, coupled with slightly higher sales volumes for silver. However, these positive factors were partially offset by the decline in copper prices (-5.3% LME) and reductions in the sales volumes of copper (-0.1%) and molybdenum (-18.0%).

Operating costs and expenses in the nine months of 2023 decreased by $95.0 million to $1,743.7 million compared to $1,838.7 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | ---: |
| ​ | Operating cost and expenses for the nine months of 2022 |  | $1,838.7 |
| ​ | Less: ​ | ​ | ​ |
| ​ | • Decrease in the volume and cost of metals purchased from third parties. | ​ | (217.0) |
| ​ | Plus: | ​ | ​ |
| ​ | ​ Increase in other cost of sales (exclusive of depreciation, amortization and depletion) which was primarily due to increases in repair materials (+$68.3), operating contractors (+$18.9), selling expenses (+$15.5), worker participation (+$14.8), operating materials (+$12.5), energy costs (+$12.4), labor costs (+$12.0) and other net (+$2.5); this was partially offset by a exchange rate effect (-$34.4) and lower fuel costs (-$23.7). | ​ | ​ 98.8 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | 15.2 |
| ​ | • Increase in exploration expenses. | ​ | 6.1 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | 1.9 |
| ​ | Operating cost and expenses for the nine months of 2023 | ​ | $1,743.7 |

Mexican Open-pit Operations:

| ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ ​ | ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- |
| Net sales | $1,462.2 | ​ | $1,201.5 | ​ | $260.7 | ​ | ​ | 21.7% | ​ | $4,400.3 | ​ | $4,184.7 | ​ | $215.6 | ​ | ​ | 5.2% | ​ |
| Operating costs and expenses | (709.3) | ​ | (818.6) | ​ | 109.3 | ​ |  | (13.4)% | ​ | (2,126.3) | ​ | (2,255.7) | ​ | 129.4 | ​ |  | (5.7)% | ​ |
| Operating income | $752.9 | ​ | $382.9 | ​ | $370.0 | ​ | ​ | 96.6% | ​ | $2,274.0 | ​ | $1,929.0 | ​ | $345.0 | ​ | ​ | 17.9% | ​ |

Net sales in the third quarter of 2023 totaled $1,462.2 million, reflecting a notable increase of $260.7 million compared to the same quarter in 2022 when the figure stood at $1,201.5 million. The growth in net sales was primarily attributed to the rise in copper (+8.0% LME), molybdenum (+47.4%) and silver (+23.6%) prices. Additionally, there was an uptick in sales volumes of molybdenum (+24.6%). Nevertheless, this positive performance was partially offset by reduced sales volumes of copper (-3.4%) and silver (-10.9%).

Operating costs and expenses in the third quarter of 2023 decreased by $109.3 million to $709.3 million versus $818.6 million in the same period of 2022, primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | ---: |
| ​ | Operating cost and expenses for the third quarter of 2022 |  | $818.6 |
| ​ | Less: | ​ |  |
| ​ | • Decrease in other costs of sales (exclusive of depreciation, amortization and depletion) primarily attributable to a reduction in the fuel and gas costs (-$48.5), leachable material (-$12.4), operating materials (-$2.7) and other net (-$31.2). | ​ | (94.8) |
| ​ | • Decrease in the cost of metals purchased from third parties. | ​ | ​ (16.5) |
| ​ | Plus: | ​ | ​ ​ |
| ​ | • Increase in exploration expenses. | ​ | ​ 1.3 |
| ​ | • Increase in depreciation, amortization and depletion expense. | ​ | ​ 0.4 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | 0.3 |
| ​ | Operating cost and expenses for the third quarter of 2023 | ​ | $709.3 |

Net sales in the nine months of 2023 experienced a $215.6 million increase, reaching $4,400.3 million compared to $4,184.7 million in the same period of 2022. This upturn in net sales was primarily propelled by an increase in sales volumes of copper (+3.8%) and molybdenum (+15.6%) and by, an uptick in prices for in molybdenum (+43.6%) and silver (+7.0%). These positive results, however, were partially offset by a decrease in sales volumes of silver (-7.4%) and a decline in copper prices (-5.3% LME).

Operating costs and expenses in the nine months of 2023 decreased by $129.4 million to $2,126.3 million compared to $2,255.7 million in the same period of 2022. This was primarily due to:

| ​ | ​ ​ | ​ | ​ ​ |
| --- | --- | --- | ---: |
| ​ | Operating cost and expenses for the nine months of 2022 |  | $2,255.7 |
| ​ | Less: | ​ |  |
| ​ | • Decrease in other cost of sales (exclusive of depreciation, amortization and depletion) primarily attributable to a decrease in worker participation (-$103.5), energy and gas costs (-$88.5) and exchange rate effects (-$32.0). This was partially offset by inventory variance (+$51.7), fuel costs (+$37.9), selling expenses (+$20.3) and other net (+$4.5). | ​ | (109.6) |
| ​ | • Decrease in the cost of metals purchased from third parties. | ​ | ​ (23.8) |
| ​ | • Decrease in depreciation, amortization and depletion expense. | ​ | ​ (1.1) |
| ​ | Plus: | ​ | ​ ​ |
| ​ | • Increase in exploration expenses. | ​ | ​ 2.9 |
| ​ | • Increase in selling, general and administrative expenses. | ​ | 2.2 |
| ​ | Operating cost and expenses for the nine months of 2023 | ​ | $2,126.3 |

53

Mexican Underground Operations (IMMSA):

| ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ | ​ ​ Variance | ​ ​ | ​ % Change | ​ ​ ​ | ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: | --- |
| Net sales | $153.6 | ​ | $159.2 | ​ | $(5.6) | ​ | ​ | (3.5)% | ​ | $474.3 | ​ | $503.0 | ​ | $(28.7) | ​ | ​ | (5.7)% | ​ |
| Operating costs and expenses | (154.8) | ​ | (160.6) | ​ | 5.8 | ​ |  | (3.6)% | ​ | (477.0) | ​ | (438.4) | ​ | (38.6) | ​ |  | 8.8% | ​ |
| Operating income | $(1.2) | ​ | $(1.4) | ​ | $0.2 | ​ | ​ | (14.3)% | ​ | $(2.7) | ​ | $64.6 | ​ | $(67.3) | ​ | ​ | (104.2)% | ​ |

Net sales in the third quarter of 2023 registered a $5.6 million decrease, amounting to $153.6 million, compared to $159.2 million in the third quarter of 2022. This decline was primarily attributable to a significant drop in zinc prices (-25.7%). Additionally, a reduction in sales volumes of zinc (-10.8%). However, these negative effects were partially offset by an increase in copper (+8.0% LME) and silver (+23.6%) prices and by, higher sales volumes for copper (+33.2%) and silver (+5.8%).

Operating costs and expenses in the third quarter of 2023 decreased by $5.8 million and reached $154.8 million, versus $160.6 million in the same period of 2022. This was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | --- |
| Operating cost and expenses for the third quarter of 2022 |  | $160.6 |
| Less: ​ | ​ | ​ |
| • Decrease in other cost of sales (exclusive of depreciation, amortization and depletion) mainly due to inventory variance (-$22.1) and exchange rate effects (-$3.1). This was partially offset by higher labor costs (+$5.9), energy expenses (+$2.3), worker participation (+$1.9), operating contractors (+$1.9), and other net (+ $5.1). | ​ | ​ (8.1) |
| • Decrease in selling, general and administrative expenses. | ​ | ​ (0.1) |
| Plus: ​ | ​ | ​ ​ |
| • Increase in depreciation, amortization and depletion expense. | ​ | ​ 1.7 |
| • Increase in exploration expenses. | ​ | ​ 0.4 |
| • Increase in cost of metals purchased from third parties. | ​ | 0.3 |
| Operating cost and expenses for the third quarter of 2023 | ​ | $154.8 |

Net sales in the nine months of 2023 experienced a decrease of $28.7 million, amounting to $474.3 million, compared to $503.0 million in the same period of 2022. The aforementioned decline was primarily driven by the significant drops in zinc (-26.1%) and copper prices (-5.3% LME). This negative effect was partially offset by higher sales volumes of zinc (+1.4%), copper (+1.9%) and silver (+6.6%) and by an uptick in silver prices (+7.0%).

Operating costs and expenses in the nine months of 2023 increased by $38.6 million to $477.0 million compared to $438.4 million in the same period of 2022. This was primarily due to:

| ​ ​ | ​ | ​ ​ |
| --- | --- | --- |
| Operating cost and expenses for the nine months of 2022 |  | $438.4 |
| Plus: ​ | ​ | ​ |
| • Increase in other cost of sales (exclusive of depreciation, amortization and depletion) primarily due to inventory variance (+$33.8), labor costs (+$14.5), operating contractors (+$13.3), exchange rate effects (+$6.2) and other net (+$7.8). | ​ | ​ 75.6 |
| • Increase in depreciation, amortization and depletion expense. | ​ | ​ 10.8 |
| • Increase in exploration expenses. | ​ | ​ 1.9 |
| • Increase in selling, general and administrative expenses. | ​ | ​ 0.4 |
| Less: ​ | ​ | ​ ​ |
| • Decrease in cost of metals purchased from third parties. | ​ | (50.1) |
| Operating cost and expenses for the nine months of 2023 | ​ | $477.0 |

54

#### 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 nine months of 2023 and 2022 (in millions):

| ​ ​ | ​ | ​ ​ 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- |
| Net cash provided by operating activities | ​ | $3,032.1 | ​ | $1,720.6 | ​ | $1,311.5 | ​ |
| Net cash used in investing activities | ​ | $(791.4) | ​ | $(171.0) | ​ | $(620.4) | ​ |
| Net cash used in financing activities | ​ | $(2,325.7) | ​ | $(2,323.3) | ​ | $(2.4) | ​ |

### Net cash provided by operating activities:

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

| ​ ​ | ​ | ​ ​ 2023 | ​ | ​ ​ 2022 | ​ | ​ ​ Variance | ​ | ​ % Change | ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | ---: |
| Net income | ​ | $1,987.5 | ​ | $1,742.9 | ​ | $244.6 | ​ | ​ | 14.0% |
| Depreciation, amortization and depletion | ​ | 625.4 | ​ | 597.6 | ​ | 27.8 | ​ |  | 4.7% |
| (Benefit) provision for deferred income taxes | ​ | (43.3) | ​ | 84.5 | ​ | (127.8) | ​ |  | (151.2)% |
| Loss on foreign currency transaction effect | ​ | 3.7 | ​ | 52.0 | ​ | (48.3) | ​ |  | (92.9)% |
| Other adjustments to net income | ​ | 32.4 | ​ | 25.2 | ​ | 7.2 | ​ |  | 28.6% |
| Operating assets and liabilities | ​ | 426.4 | ​ | (781.6) | ​ | 1,208.0 | ​ |  | (154.6)% |
| Net cash provided by operating activities | ​ | $3,032.1 | ​ | $1,720.6 | ​ | $1,311.5 | ​ | ​ | 76.2% |

Nine months ended September 30, 2023: Net income was $1,987.5 million, which represented approximately 65.5% of the net operating cash flow. The cash flow from operating assets and liabilities increased by $426.4 million due to the following:

- $263.1 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.
- $13.2 million net decrease in inventory; principally at our Mexican operations.
- $53.8 million increase in accounts payable and accrued liabilities at our Peruvian and Mexican operations
- $96.3 million decrease in other operating assets and liabilities, net.

Nine months ended September 30, 2022: Net income was $1,742.9 million, which represented approximately 101.3% of the net operating cash flow. Operating cash flow decreased by $781.6 million due to the following variances in operating assets and liabilities:

- $292.9 million decrease in trade accounts receivable, primarily driven by higher collections at our Peruvian and Mexican operations.
- $(768.6) 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.
- $(248.0) million increase in other operating assets and liabilities, net, principally due to an increase in other accounts receivables at our Mexican operations mainly to workers.
- $(57.9) million net increase in inventory; this was primarily driven by a $36.0 million increase in the work in process inventory, principally at our Mexican operations.

### Net cash used in investing activities:

Nine months ended September 30, 2023: Net cash used in investing activities included $753.2 million for capital investments. The capital investments included:

- $508.9 million of investments at our Mexican operations:
- $102.6 million for the IMMSA unit,
- $55.1 million for Buenavista Zinc project,
- $65.6 million for Bella Union mine,
- $47.2 million for the tailing deposits of new concentrator,
- $31.4 million for the Pilares project,
- $21.7 million for MEXARCO unit,
- $185.3 million for various replacement and maintenance expenditures, and
- $232.5 million of investments at our Peruvian operations:
- $41.8 million for the HPGR optimization at Cuajone,
- $12.6 million for the maintenance workshops at Cuajone,
- $9.8 million for the Quebrada Honda dam expansion,
- $7.2 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,
- $150.9 million for various other replacement and maintenance expenditures, and
- $8.1 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the nine months of 2023 included $38.8 million of net purchase of short-term investments.

Nine months ended September 30, 2022: Net cash used in investing activities included $657.6 million for capital investments. The capital investments included:

- $403.9 million of investments at our Mexican operations:
- $70.8 million for the Buenavista-Zinc project,
- $22.8 million for the Pilares project,
- $20.4 million for the MexArco unit,
- $121.0 million at our IMMSA unit,
- $18.0 million for the Jales Deposits of new concentrator
- $158.3 million for various replacement and maintenance capital expenditures, and
- $7.4 million increase in capital expenditures incurred but not yet paid.
- $248.6 million of investments at our Peruvian operations:
- $21.9 million for the Quebrada Honda dam expansion,
- $4.8 million for the relocation of facilities at Toquepala,
- $5.6 million for projects at the Ilo facilities,
- $199.3 million for various other replacement and maintenance capital expenditures, and
- $17.0 million decrease in capital expenditures incurred but not yet paid.

Investment activities in the nine months of 2022 included $486.7 million of net proceed of short-term investments.

Dividends:

On October 19, 2023, the Board of Directors authorized a dividend of $1.00 per share payable on November 22, 2023 to shareholders of record at the close of business on November 8, 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 third 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 41) 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 September 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Three Months Ended September 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Cost of sales (exclusive of depreciation, amortization and depletion) | ​ | $1,175.7 | ​ | $2.46 | ​ | $1,137.9 | ​ | $2.33 | ​ | $3,517.6 | ​ | $2.45 | ​ | $3,442.3 | ​ | $2.48 | ​ |
| Add: | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |
| Selling, general and administrative | ​ | 32.7 | ​ | 0.07 | ​ | 30.2 | ​ | 0.06 | ​ | 94.1 | ​ | 0.07 | ​ | 91.4 | ​ | 0.06 | ​ |
| Sales premiums, net of treatment and refining charges | ​ | (9.0) | ​ | (0.02) | ​ | (5.7) | ​ | (0.01) | ​ | (17.1) | ​ | (0.01) | ​ | (28.0) | ​ | (0.02) | ​ |
| Less: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Workers’ participation | ​ | (59.2) | ​ | (0.12) | ​ | (31.8) | ​ | (0.07) | ​ | (195.7) | ​ | (0.14) | ​ | (208.2) | ​ | (0.15) | ​ |
| Cost of metals purchased from third parties | ​ | (42.5) | ​ | (0.09) | ​ | (35.9) | ​ | (0.07) | ​ | (144.9) | ​ | (0.10) | ​ | (261.2) | ​ | (0.19) | ​ |
| Royalty charge and other, net | ​ | (15.7) | ​ | (0.03) | ​ | (43.9) | ​ | (0.09) | ​ | (86.0) | ​ | (0.07) | ​ | (269.3) | ​ | (0.19) | ​ |
| Inventory change | ​ | (9.0) | ​ | (0.02) | ​ | (45.2) | ​ | (0.09) | ​ | (47.7) | ​ | (0.03) | ​ | 27.5 | ​ | 0.02 | ​ |
| **Operating Cash Cost before by‑product revenues** | **​** | **$1,073.0** | **​** | **$2.24** | **​** | **$1,005.6** | **​** | **$2.06** | **​** | **$3,120.3** | **​** | **$2.17** | **​** | **$2,794.5** | **​** | **$2.01** | **​** |
| Add: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |
| By‑product revenues(1) | ​ | (595.6) | ​ | ​ (1.25) | ​ | (489.1) | ​ | ​ (1.01) | ​ | (1,713.8) | ​ | ​ (1.19) | ​ | (1,530.6) | ​ | ​ (1.10) | ​ |
| Net revenue on sale of metal purchased from third parties | ​ | (8.7) | ​ | ​ (0.01) | ​ | (12.0) | ​ | ​ (0.02) | ​ | (38.5) | ​ | ​ (0.03) | ​ | (19.3) | ​ | ​ (0.01) | ​ |
| Add: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |
| Total by‑product revenues | ​ | (604.3) | ​ | (1.26) | ​ | (501.1) | ​ | (1.03) | ​ | (1,752.3) | ​ | (1.22) | ​ | (1,549.9) | ​ | (1.11) | ​ |
| **Operating Cash Cost net of by‑product revenues** | **​** | **$468.7** | **​** | **$0.98** | **​** | **$504.5** | **​** | **$1.03** | **​** | **$1,368.0** | **​** | **$0.95** | **​** | **$1,244.6** | **​** | **$0.90** | **​** |
| Total pounds of copper produced (in millions) | ​ | 478.3 | ​ |  | ​ | 487.8 | ​ |  | ​ | 1,435.7 | ​ |  | ​ | 1,388.5 | ​ |  | ​ |

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

| ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended ​ September 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Three Months Ended ​ September 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Nine Months Ended ​ September 30, 2023 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ | ​ ​ Nine Months Ended ​ September 30, 2022 ​ ​ $ millions | ​ ​ | ​ ​ $ per pound | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Molybdenum | ​ | $(343.1) | ​ | $(0.72) | ​ | $(212.6) | ​ | $(0.44) | ​ | $(899.2) | ​ | $(0.63) | ​ | $(686.6) | ​ | $(0.50) | ​ |
| Silver | ​ | (89.3) | ​ | (0.19) | ​ | (71.0) | ​ | (0.15) | ​ | (300.9) | ​ | (0.21) | ​ | (265.4) | ​ | (0.19) | ​ |
| Zinc | ​ | (52.3) | ​ | (0.11) | ​ | (65.8) | ​ | (0.14) | ​ | (165.2) | ​ | (0.12) | ​ | (187.6) | ​ | (0.14) | ​ |
| Sulfuric Acid | ​ | (82.3) | ​ | (0.17) | ​ | (108.5) | ​ | (0.22) | ​ | (245.0) | ​ | (0.17) | ​ | (300.8) | ​ | (0.22) | ​ |
| Gold and others | ​ | (28.6) | ​ | (0.06) | ​ | (31.2) | ​ | (0.06) | ​ | (103.5) | ​ | (0.06) | ​ | (90.2) | ​ | (0.05) | ​ |
| **Total** | **​** | **$(595.6)** | **​** | **$(1.25)** | **​** | **$(489.1)** | **​** | **$(1.01)** | **​** | **$(1,713.8)** | **​** | **$(1.19)** | **​** | **$(1,530.6)** | **​** | **$(1.10)** | **​** |

## Market risk

As filed, 5,981 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 September 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 nine months ended September 30, 2023 and 2022:

| ​ ​ ​ ​ Peru: | ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ ​ ​ 2022 | ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ ​ ​ 2022 |
| --- | --- | ---: | ---: | --- | ---: | ---: |
| Peruvian inflation rate |  | 0.8% | 2.1% |  | 3.3% | 6.7% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Initial exchange rate |  | 3.633 | 3.830 |  | 3.820 | 3.998 |
| Closing exchange rate |  | 3.797 | 3.984 |  | 3.797 | 3.984 |
| Appreciation/(devaluation) |  | (4.5)% | (4.0)% |  | 0.6% | 0.4% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Mexico: |  |  |  |  |  |  |
| Mexican inflation rate |  | 1.5% | 2.1% |  | 2.9% | 6.2% |
| ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ |
| Initial exchange rate |  | 17.072 | 19.985 |  | 19.362 | 20.584 |
| Closing exchange rate |  | 17.620 | 20.306 |  | 17.620 | 20.306 |
| Appreciation/(devaluation) |  | (3.2)% | (1.6)% |  | 9.0% | 1.4% |

### Change in monetary position:

Assuming an exchange rate variance of 10% at September 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 | ​ | $18.3 |
| Devaluation of 10% in U.S. dollar vs. Peruvian sol | ​ | $(22.3) |
| Appreciation of 10% in U.S. dollar vs. Mexican peso | ​ | $(21.0) |
| Devaluation of 10% in U.S. dollar vs. Mexican peso | ​ | $25.7 |

### 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 September 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, 4,278 characters.

#### EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of September 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 September 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 September 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 September 30, 2023, the related condensed consolidated statements of earnings, comprehensive income, cash flows and stockholders’ equity for the three-month and nine-month periods ended September 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, cash flows and stockholders’ equity 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 consolidated 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 | ​ |
| November 1, 2023 | ​ |

## Risk factors

As filed, 1,590 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 on water use; provide of guarantees for closure and remediation of operations, sets 5% contribution of net earnings to indigenous communities for new projects and finally significant changes to exploration activities.

In the future, the aforementioned changes could trigger amendments, additions and repeals to 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 Nov 1, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-017203. Last ingested by Listed: Nov 4, 2026, 00:34 ET. No prices; not investment advice.