Sep 19 2026 02:13 AM EST

Southern Copper Boosts Production Outlook as Copper Prices Remain Elevated

The market reacted to Southern Copper Corp (NYSE:SCCO) after the company lifted its 2026 copper production guidance to 917,000 tons, announced a higher cash dividend of $1.10 per share, and reported earnings that surged more than 60% year‑over‑year. The moves helped the shares outperform their benchmark by over ten percentage points in 2026.

Production Guidance and Operational Highlights

In a July 21 release, Southern Copper announced that its revised 2026 output target of 917 kt of copper is now supported by stronger mine‑level performance, particularly in Mexico where output rose 3.2% quarter‑over‑quarter. The company also reported that it had already surpassed its earlier 2026 production goal, a milestone first noted in a June 23 update.

Financial Results Reinforce Momentum

First‑quarter net earnings climbed to $1,577 million, a 67% increase YoY, while second‑quarter net sales reached $4.29 billion, up 41% YoY. Net income for Q2 rose 71.6% to $1.670 billion, and adjusted EBITDA grew 59.5% to $2.85 billion, delivering a margin of 66.6%. Operating cash flow doubled year‑over‑year to $3.68 billion.

The company’s net cash cost per pound of copper fell dramatically to $0.05/lb from $0.63/lb a year earlier, a 93% reduction driven by by‑product credits that rose 51.4%, especially from silver, molybdenum and zinc.

Copper Market Context

The price environment has been supportive. LME copper traded above $13,200/ton in early 2026, with the average price forecast near $12,075/ton. Analysts project a market deficit of roughly 350 kt for the year, and inventories sit at only 15 days of consumption, tightening the supply side. Global demand growth of about 2.6% per year is being driven by electrification, renewable‑energy deployment, electric‑vehicle uptake and AI‑related data‑center construction.

Strategic Projects and Capital Allocation

Southern Copper confirmed a $551 million budget for the El Pilar project in Sonora, Mexico, with environmental permits secured in July 2026 and construction slated to start in Q1 2027. The project, which will use SX‑EW technology, targets an annual capacity of 36 kt of copper cathodes and is expected to generate cash flow of $357‑$396 million at copper prices of $4.50‑$5.00 per pound. The company also continues to invest in the Tía Maria expansion in Peru, having raised $1.25 billion of senior notes to fund the effort.

Overall capital expenditure for the first half of 2026 rose 79.4% YoY to $422.8 million, reflecting the push to bring new assets online while maintaining the low‑cost profile that underpins the company’s competitive advantage.

Risks and Uncertainties

Geopolitical headwinds remain. In Peru, the revocation of the operating permit for the Tía Maria project on March 19 2026 and election‑related contract risks have introduced uncertainty for future output. In Mexico, the El Pilar project still faces high‑level water‑concession and indigenous‑consultation approvals, which could delay construction. A slowdown in Chinese demand or a sharp correction in copper prices would also erode the earnings upside that has driven the recent share‑price rally.

Investors should monitor the execution of the El Pilar permits, the progress of Tía Maria, and the trajectory of LME copper prices, as these variables will determine whether the current outperformance can be sustained.