Southern Copper: Record Q3, Near-Zero Costs, 1M Ton Target

Southern Copper reported record net sales and net income for the third quarter of 2026, driven by strong operational performance and favorable metal prices. The company highlighted a dramatic reduction in its net cash costs, which fell to just $0.01 per pound for the first nine months of 2026, compared to $0.61 in the same period last year.

Management attributed this near-zero cost to high by-product credits from selling molybdenum, silver, and zinc. These secondary minerals provide a significant revenue offset that insulates the company from inflation in fuel, power, and labor costs.

Looking ahead, Southern Copper is advancing two key growth projects: Tia Maria in Peru and El Pilar in Mexico. These projects are expected to add 156,000 tons of refined copper annually, pushing total production past 1 million tons per year.

Additionally, the company is evaluating a 33% increase in milling capacity at its Cuajone facility in Peru, from 90,000 to 120,000 tons per day. This low-capital expansion would further enhance operational scale and efficiency.

Overall, the earnings call conveyed quiet confidence in the company's ability to execute on its organic growth pipeline while maintaining industry-leading cost positions.

Southern Copper's near-zero net cash cost is a game-changer. It means the company can remain highly profitable even if copper prices fall, providing a significant margin of safety. This cost advantage stems from high-grade by-product credits, which are a structural feature of its assets, not a one-time fluke.

The planned production growth to over 1 million tons annually is substantial. It represents a roughly 15% increase from current levels and is achieved through organic projects rather than expensive acquisitions. This should drive revenue and earnings growth without straining the balance sheet.

The potential milling expansion at Cuajone is another low-cost, high-return opportunity. Increasing throughput by one-third would boost production and spread fixed costs over more output, further improving margins.

Copper demand is structurally supported by electrification, renewable energy, and infrastructure spending. Southern Copper's low-cost, long-life reserves position it as a prime beneficiary of this trend. The company's focus on internal refining also captures downstream margin and reduces reliance on volatile treatment charges.

While there are risks—such as project execution and regulatory approvals—the company's track record and financial strength mitigate these concerns. For long-term investors, Southern Copper offers a compelling combination of growth, cost leadership, and exposure to a critical metal.