SCCO Southern Copper Corporation 10-Q 2026-09-30 section summaries

Southern Copper (SCCO) — Q3 and nine months ended September 30, 2026

Consolidated results

Sales increased 39.1% in Q3 and 38.6% in 9M; operating income rose 59.1% and 61.9%, respectively. Q3 operating margin expanded to about 59.9% from 52.4%. Higher metal prices and sales growth contributed to higher mining royalties. Nine-month income taxes, including royalties and mining taxes, increased to $2,827.2 million from $1,728.4 million, while the effective tax rate was broadly stable at 36.1% versus 36.4%. EPS comparisons reflect retroactive adjustment for stock dividends.

Segment results

Nine-month operating income was $4,775.9 million for Mexican open-pit ($3,017.3 million in 9M 2025), $305.1 million for IMMSA ($82.5 million), and $2,871.7 million for Peru ($1,815.3 million); corporate, other and eliminations reduced operating income by $34.1 million versus $23.8 million. IMMSA’s nine-month revenue was $642.7 million versus $395.0 million, with growth substantially stronger than in Q3.

Product sales

Copper remained the largest product-sales source; silver’s nine-month increase was particularly strong compared with its quarterly growth.

Cash flow and investment

Nine-month operating cash flow benefited from a $594.8 million source from accounts payable and accrued liabilities, compared with a $25.9 million use in 9M 2025; increased receivables used $395.9 million. The Company invested a net $2,634.6 million in short-term investments. Committed capital investment projects totaled approximately $1,733 million at September 30.

Balance sheet, financing and capital returns

The Company issued $1,250 million of 5.350% fixed-rate senior unsecured notes due 2036 in June. The notes were issued at a $2.5 million discount; estimated issuance costs were $6.3 million. Proceeds are restricted to SPCC for Tía María development, capital expenditures and/or general corporate purposes. Debt fair value was $7,617.2 million, below its $7,995.9 million carrying value. Cash dividends paid to common stockholders were $2,563.2 million in 9M 2026 versus $1,754.0 million. Treasury shares declined from 65.498 million at December 31, 2025 to 40.253 million at September 30, 2026. After quarter-end, the Board authorized a $1.30-per-share cash dividend and a 0.0106-share-per-share stock dividend.

Business, obligations and risks

SCC is an integrated copper and other-minerals producer operating mines, smelters and refineries in Peru and Mexico. Grupo México, through AMC, owned 88.9% at September 30, 2026. Nine-month purchases from Grupo México affiliates were $286.2 million versus $350.1 million, and sales were $47.0 million versus $83.1 million. Related-party transactions are expected to continue; those above $10 million require Audit Committee or independent-director subcommittee review. Related-party receivables were $22.9 million and payables $101.1 million at September 30.

The Company’s $495.8 million asset-retirement obligation increased from $471.1 million at the start of 2026, including a $9.2 million Toquepala estimate increase and $19.9 million of accretion. Operating lease liabilities had a present value of $601.6 million. Environmental capital investment was $215.0 million in 9M 2026 versus $158.6 million. The Company reports that Peru’s revised particulate standards and Mexican environmental compliance requirements are not expected to have a significant operational or financial effect.

Important unresolved legal and development risks include former Peruvian employees’ labor-share litigation, with potential transfer exposure involving 8,488,383 shares; litigation challenging Tía María permits and development, for which management cannot reasonably estimate a contingency; and the Pasto Grande dispute concerning the tailings dam used by Toquepala and Cuajone. Multiple proceedings related to the 2014 Buenavista spill remain pending, although the Company considers them without merit and does not expect a material financial effect. Mexican mining-law amendments, including shorter concession terms and new closure, water and community-contribution requirements, remain under Supreme Court review.

Michiquillay offers a longer-term growth option: the remaining $375 million purchase payment is due only if the Company elects to develop the project. The 2025 extension deferred that payment by three years and required a $21 million payment plus a $15 million social-investment commitment. Separately, the Company reported $29.7 million of present obligations for Tacna commitments. In Mexico, the Board approved a voluntary Sonora contribution of up to 1.5 billion pesos (about $87 million); two contributions of 500 million pesos each were made in 2026.

Southern Copper (SCCO) — Q3 and first nine months of 2026

Consolidated results

Higher metal prices drove strong sales growth, while costs rose more slowly than sales, lifting operating income and earnings. Copper accounted for 73.6% of Q3 sales (72.5% in Q3 2025); molybdenum was 12.1%, silver 7.3%, zinc 3.6%, and other products 3.4%. Higher silver prices raised its share of 9M sales to 9.4% from 6.6%.

Average Q3 prices increased year over year: LME copper was $6.41/lb (+44.4%), COMEX copper $6.48/lb (+34.2%), molybdenum $32.93/lb (+35.5%), silver $62.80/oz (+58.7%), and zinc $1.74/lb (+35.9%). For 9M, LME copper averaged $6.09/lb (+40.6%), molybdenum $29.24/lb (+34.3%), silver $73.21/oz (+108.2%), and zinc $1.59/lb (+26.2%). Management estimated a slight copper-market surplus in 2026; worldwide inventories were 1,105,000 tonnes on October 9, equivalent to about 14 days of global demand.

Segment results

Segment figures are before intersegment eliminations and adjustments. Higher metal prices supported all segments. In Peru, this more than offset Q3 declines in copper and silver sales volumes; Mexican open-pit copper sales volume increased 6.0%. IMMSA’s 9M revenue and operating-income growth substantially exceeded its Q3 growth.

Production, sales volumes and cash costs

Copper sales mix shifted toward refined products and away from concentrates. Lower ore grades were a recurring production headwind: Q3 mined copper declined 1.1%, while 9M production declined 2.9%. Buenavista partly offset declines at Toquepala, Cuajone and La Caridad. 2026 production guidance is 918,000 tonnes of copper, 163,400 tonnes of zinc, 29,000 tonnes of molybdenum and 24M oz of silver.

For 9M, pre-credit cash cost was $2.35/lb versus $2.13/lb; net cash cost was $0.01/lb versus $0.61/lb. Higher fuel, labor and operating-material costs pressured costs, while larger by-product credits—especially from silver and molybdenum—substantially reduced net cash costs. These credits are volatile and materially influence reported unit economics.

Cash flow and investment

Working-capital changes provided $233.8M, compared with a $479.0M use in 9M 2025; higher payables and accruals and lower inventory were partly offset by increased receivables as metal prices rose. Capital investment included $505.9M for Tía María in Peru and $576.5M across Mexican operations. Peruvian investment was $804.0M, including an increase in Tía María spending from $46.0M in 9M 2025 to $505.9M. Management expects to fund investment with cash, internally generated funds and external financing.

Projects, exposure and other developments

Tía María was 49.6% complete at September 30, 2026, with $884.3M invested and $1.101B committed. The project is designed to produce 120,000 tonnes of copper cathodes annually, with operations expected in H1 2028. El Pilar, a planned $551M project in Mexico, began site preparation; construction is expected to start in Q1 2027 and production in H2 2029. The broader Peru project pipeline could exceed $10.3B over the next decade, and SCC is discussing $10.2B of Mexican investments with the current administration. These projects face permitting, government, community, financing and execution risks; Los Chancas also faces illegal-mining security challenges.

Metal-price sensitivity remains significant: for the final three months of 2026, a $0.10/lb copper-price movement is estimated to change SCC-attributable net income by $29.6M, assuming planned production and sales and unchanged costs and taxes. A 10-year Peruvian power agreement beginning May 2027 is projected to reduce power costs at Peruvian operations by approximately 22%.

On October 15, the board authorized a quarterly cash dividend of $1.30 per share and a stock dividend of 0.0106 shares per share, estimated at $2.10 per share using the October 15 share price. Q3 cash dividends paid were $1.10 per share versus $0.80; stock dividends were $2.13 versus $1.00.

Foreign-exchange exposure

The U.S. dollar is Southern Copper’s functional currency and primary revenue currency, while some operating costs in Peru and Mexico are denominated in soles and pesos. Local inflation not offset by exchange-rate movements can increase U.S.-dollar costs and affect results and cash flows. Currency movements can also produce remeasurement gains or losses on net monetary positions.

At September 30, 2026, the company’s monetary-position sensitivity was asymmetric: a hypothetical 10% appreciation of the U.S. dollar against the sol would increase net earnings by $27.3 million, while a 10% dollar devaluation against the sol would decrease net earnings by $33.4 million. The corresponding impacts for the peso were an increase of $37.0 million and a decrease of $45.3 million, respectively, indicating greater sensitivity to peso exposure.

Metal-price exposure and other risks

Provisional copper and molybdenum sales contain embedded derivatives that are separated from the sales receivable for accounting purposes. These derivatives do not qualify for hedge accounting and are marked to market through earnings each period until settlement, exposing reported earnings to metal-price changes before final pricing. Results are also directly sensitive to volatile exchange-traded metal prices.

The section identifies additional risks from commodity and input-price volatility, including fuel and electricity; operating and supply constraints; permitting and financing; weather and geological conditions; ore grades; equipment or process failures; water availability; labor; closure and remediation assurance; litigation and environmental exposure; and political and economic conditions in foreign operations. It refers readers elsewhere in the report for metal-price sensitivities and short-term investment details.

Controls and interim financial review

As of September 30, 2026, management, including the CEO and CFO, concluded that disclosure controls and procedures were effective. No changes in internal control over financial reporting during Q3 2026 materially affected, or were reasonably likely to materially affect, those controls.

The independent auditor reviewed the interim financial information for Q3 and the nine months ended September 30, 2026 and 2025, and found that no material modifications were needed for the information to conform with U.S. GAAP. This was a review—not an audit—and the auditor expressed no audit opinion on the interim financial statements. The auditor had previously issued an unqualified opinion on the FY2025 audited financial statements.

Risk Factors

The filing supplements the risks described in the 2025 Form 10-K with geopolitical and cybersecurity risks; it reports no quantified financial impacts.

• Geopolitical conflict and trade disruption: Persistent or escalating conflicts, including Israel–Iran tensions and instability in Eastern Europe, could disrupt shipping through critical routes such as the Strait of Hormuz, increase fuel and energy costs, or restrict access to operational raw materials, raising costs and pressuring margins. Sanctions, export controls and other trade restrictions could also affect operations. Related market volatility and currency fluctuations, reduced access to capital, and weaker demand for the company’s products could affect financing costs, operations and the stock price. Existing risk-management measures may not prevent or mitigate these effects.

• Cybersecurity and IT-system risks: The company relies on IT systems that may be disrupted or fail, or be affected by malicious software, security breaches and cyberattacks. It specifically notes risks from AI- and machine-learning-enabled attacks, including compromised, misused or autonomous AI systems and agents, which could make attacks faster, broader and harder to detect. A breach or system failure could delay operations, cause data theft or corruption, damage reputation and stakeholder trust, and incur remediation costs—potentially materially harming cash flows, competitiveness, operations, financial condition or results. The company uses an information-security management system with ongoing monitoring and controls that are regularly reviewed and tested.