Southern Copper Corporation is an integrated company, a subsidiary of Grupo Mexico, engaged in the production of copper. Through its subsidiary in Peru, it is one of the three main copper producers in the country. With consolidated operations in Peru and Mexico, it is one of the main copper producers and one of the producers with the lowest cost per pound treated worldwide. Its strategy is based on efficiency, the continuous search for cost reduction, the increase of reserves, and the increase of its production through the modernization and expansion of its operations. It is the main shareholder of Minera México (MM), with 99.96% of shares.
What happened in 2020?
In early 2020, the demand for copper and molybdenum decreased due to the scenario caused by COVID-19, decreasing the prices of these materials. However, Southern Copper Corporation's production was not affected because its productive operations were maintained. In fact, during 2020, copper production exceeded one million tons.
In regard to the COVID-19 pandemic, the company implemented timely and well-designed measures such as: the implementation of rigorous hygiene and sanitation protocols in all its facilities to protect the health of its employees; the continuation of essential economic activities during the State of Emergency, although with less capacity; workers comply with their duties, keeping more than 100 meters distance between them; only 40% of the workforce is working; conducting clinical monitoring before work, cleaning and disinfection in work areas and restricting access to contractors, suppliers, and non-essential personnel.
Although the pandemic impacted the world economy, affecting the demand for metals such as copper and molybdenum, the copper trend has now recovered and is expected to begin to gradually reverse in 2021.
Net sales in 2020 increased 9.6% over 2019, rising from $7,285.6 to $7,984.9 million, an increase of $699.3 million. This increase was mainly due to higher sales volumes of copper, silver, molybdenum, and zinc. In addition, from 2019 there has been an increase in net sales of approximately 2.7% compared to the previous year
Net income attributable to Southern Copper Corporation amounted to $1,570.4 million in 2020, increasing $84.6 million compared to 2019. This increase was mainly due to higher sales.
They plan to achieve the goal of reaching production of 1.8 million tons of copper in 2028. This is why, in 2020, capital expenditures amounted to $592.2 million, representing 37.7% of net income. This is to help continue with the low cost of production that will provide the operating strength and liquidity for them to continue with their growth program.
They are one of the lowest cost producers in the industry. In addition, the company has been positively impacted by its expansion and cost reduction programs. In 2020, there was a 21.7% improvement in operating cash cost per pound of copper with by-product revenue, from $0.88 per pound in 2019 to $0.69 per pound in 2020.
Thanks to the increase in copper and precious metals prices, higher sales volumes, and the high efficiency in cost control, Southern Copper was able to generate good cash flow in its operations. This resulted in cash flow from operating activities in 2020 of $2,782.8 million, representing an increase of 45.6% over the $1,911.9 million recorded in 2019.
All of this caused the EBITDA margin to increase from 48.3% in 2019 to 48.8% in 2021. The corresponding EBITDA was $3,896.3 million in 2020 and $3,517.4 million in 2019.
At the end of December 2020, the company had a total of 884,596,086 common shares issued and 57,649,479 investment shares (SPCCPI1 and SPCCPI2), corresponding to the Peruvian branch. Both types of shares were listed on the Lima Stock Exchange (BVL). Within the Stock Exchange, Southern Copper is listed on the S&P/BVL Peru Select index, considered the most representative indicator of the Lima Stock Exchange, as it groups only the most important stocks of the market due to its high level of negotiation and size of the company. It is also the mining company with the highest market capitalization in the BVL.
At the end of 2020, Southern Copper recorded a solid rebound in the price of its shares from the lows recorded at the beginning of the health crisis. This is due to the fact that copper has been rising for eight months and that the company's results in 2020 were better than anticipated by market expectations. Currently, Southern Copper's shares are the best performer in the S&P/BVL Peru Select index.
What has happened so far in 2021?
Since the beginning of 2021, an encouraging scenario has been observed in regard to the COVID-19 pandemic, as vaccines have been developed and approved for distribution around the world. This raises hopes for an end to the health crisis and an early economic recovery worldwide, which will also lead to a rebound in copper consumption. Consequently, the copper market will evolve positively.
The positive trend in copper prices reflects the reactivation of economies such as China, which is operating almost at pre-pandemic levels, resulting in a significant increase in demand for copper. Likewise, this trend is strongly linked to the nascent electric car industry, whose demand is on the rise.
In addition, projects developed by the Peruvian government, such as the construction of an ambitious railroad from a mineral-rich Andean area to the central coast of the country, where it is seeking the participation of mining companies such as Southern Copper, will help the company's results to improve significantly.
