Southern Copper Corporation (SCCO) | The Buildout — AI Infrastructure
The Verdict
Southern Copper is a fully integrated copper producer. It mines ore in Peru and Mexico, concentrates it, smelts it, refines it and, in Mexico, casts it into copper rod, then sells the metal into global markets. Copper cathodes and concentrates are the upstream input into busbars, transformers, cabling and the rest of the electrical layer that the AI buildout needs. The company's own link to that buildout is indirect: management does not name data centers, hyperscalers or AI on its calls, and the AI-attributable share of its copper sales is not disclosed anywhere in the evidence.
| Market Cap | — |
| Revenue (TTM) | $15.8B |
| Revenue Growth | +32.8% |
| EBITDA Margin (TTM) | 62.5% |
| Net Debt | $1.2B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Full integration shows when the mine dips: mined copper fell 4.0% in 1Q26, but because the company concentrates, smelts, refines and casts rod itself, the downstream chain does not idle with the mine.
- By-product credits of $1,106M, or $2.24/lb, held Q2 2026 net cash cost at $0.05/lb against a $2.29/lb pre-credit cost base. The CFO called it an excellent mark for the company.
- Record profitability: 1H26 adjusted EBITDA of $5,569M, up 58%, at a 65% margin; Q2 2026 net income of $1,670M, up 72%, at a 39% margin.
- Tia Maria was 42% complete at June 30, 2026, up from 24% at end-2025, with $1,101M committed and $693M invested of a $1.8B budget, and earthworks 71% done.
- Funding was cheap and heavily covered: $1.25B of 10-year notes at 5.35% drew $4B of demand, 3.2x oversubscribed, ring-fenced for Tia Maria. Cash was $5,665.0M and short-term investments $1,664.9M at June 30, 2026.
What We’re Watching
- The by-product cushion thinned: credits fell 7% to $1,106M in Q2 2026 from $1,189M in Q1 2026, lifting net cash cost $0.15/lb on a flat pre-credit base, while molybdenum production fell 11% and silver 4% year over year and zinc 14% quarter on quarter.
- Tia Maria start-up language moved to 'second half of 2027' from the 'third quarter of 2027' an analyst recalled from the prior quarter, and the change was not flagged. The desalination plant is on the critical path and its purchase order was not definitively confirmed as placed.
- Peru copper fell 12% year over year in Q2 2026, with Cuajone alone about 35,000 t lower. Management expects a recovery in ore grades by the end of 2026.
- The decade capital programme exceeds $20.5B against a record of slippage: El Pilar took 11 years from acquisition to board approval, Los Chancas is blocked by illegal miners, and 2025 capex came in at $1.3B against a ~$1.6B budget.
The case is intact on cash generation and mixed on volume. The records are printed, not projected: 1H26 adjusted EBITDA of $5,569M at a 65% margin, operating cash flow of $3,683M up 117%, and a balance sheet that funded the flagship at 5.35%. But copper output is falling, the by-product credit that produces the near-zero cash cost is already thinning, and the volume step-change has been pushed to 2033-2034. The open question is whether ore grades recover on the stated end-2026 timetable and whether molybdenum and silver prices hold, because those two lines, not volume, underwrite both the 2026 guide and the near-term model.
Earnings Beat
Q2 2026 sales were $4.3B, up 41% year over year, on average LME copper of $6.04/lb, up 40%. The company reported adjusted EBITDA of $2,856M, up 60% at a 67% margin, and net income of $1,670M, up 72% at a 39% margin. Copper production fell 3.5% to 230,662 t, with Peru down 12% on lower grades and Mexico up 3.2%.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $4.3B | $4.3B | $3.1B | +40.6% |
| Gross margin | 62.0% | 64.7% | 53.1% | +890bps |
| EBITDA | $2.8B | $2.7B | $1.8B | +58.9% |
| EPS | $2.01 | $1.92 | $1.21 | +67.1% |
| Copper production | 230,662 t | n/a | n/a | −3.5% y/y |
| Cash cost including by-product credits | $0.05/lb | −$0.11/lb | n/a | +$0.15 q/q |
we should do a little bit better in terms of volume in the second half. The reason for that is that we have been increasing a little bit our material in process at our operations in the first half of the year. So I expect that metal to show up and be available for sales at a certain point in the second half of this year.— Raul Jacob, Vice President, Finance, Treasurer and CFO, 2026-07-22
Management tone: Tone was steady across the two calls in evidence, with results consistently framed as records. The shifts between the calls were substantive rather than tonal: copper guidance nudged up, molybdenum was named the first by-product ahead of silver, the long-term volume target was re-dated, and the Tia Maria start-up window widened. Management declined to give cost guidance, declined comment on COMEX sales mix and on Mexico open-pit approvals, and declined to comment on the 40% mining-canon proposal. CEO Leonardo Contreras appeared on the Q2 2026 call but did not speak in the Q&A excerpt provided.
Management Guidance
Management guides 2026 production of 917,000 t of copper, raised about 1% over the initial plan of 911,400 t; 27,900 t of molybdenum, raised from the 27,400 t printed in the 1Q26 10-Q; 24 Moz of silver, held; and 163,900 t of zinc, restored after silence on the January call but below the 166,800 t printed in the 1Q26 10-Q. Beyond 2026: copper output in 2027 is expected to be 'more or less the same' as 2026, about 970,000 t in 2028, 1,060,000 t in 2029, and above 1.6 Mt by 2033-2034. On projects, Tia Maria is guided to first production of about 30,000 t in the second half of 2027 and full capacity of 120,000 t/year from 2028, at a cash cost estimate of $1.16/lb with no by-products; El Pilar is guided to early site works in September 2026, construction in Q1 2027 and production in H2 2029 at 36,000 t/y. Tia Maria 2026 cash out was guided at $508M. No cost guidance was given: asked for cost guidance on the January call, the CFO answered 'No,' describing costs only as expected to be 'relatively flat on a per pound basis.'
Trajectory
Revenue has risen for four straight quarters, from $3,377M to $3,870M to $4,251M to $4,289M, but the composition is the story. Copper production fell 3.5% year over year in Q2 2026 while sales rose 41%, so price and by-product credits carried the growth rather than volume. Gross margin was 62.0% in Q2 2026 against 53.1% in Q2 2025 and 64.7% in Q1 2026 — up sharply year over year, down sequentially. The sequential margin move tracks the cash-cost line: by-product credits fell to $2.24/lb from $2.41/lb sequentially, lifting net cash cost from −$0.11/lb to $0.05/lb even though pre-credit cost was flat at $2.29/lb. Management attributes the sales-versus-production gap to a material-in-process build it expects to convert into sales in the second half.
The Model
The model projects FY+1 revenue of $17,364M and EBITDA of $11,339M, a 65.3% margin, and FY+2 revenue of $17,934M and EBITDA of $11,783M, a 65.7% margin. The near year anchors on management's 2026 copper guide of 917,000 t, the expected recovery in ore grades by the end of 2026, and the conversion of the first-half material-in-process build into second-half sales. FY+2 leans on Tia Maria reaching full capacity of 120,000 t/year from 2028, with copper output around 970,000 t that year and El Pilar not producing until H2 2029.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $13.4B | $17.4B | $17.9B |
| YoY Growth | — | +29.4% | +3.3% |
| EBITDA | $7.9B | $11.3B | $11.8B |
| EBITDA Margin | 58.6% | 65.3% | 65.7% |
Projections are the median of 5 independent model runs. The model’s revenue sits 7.6% above analyst consensus.
Management guides 2026 production of 917,000 t of copper, raised about 1% over the initial plan of 911,400 t; 27,900 t of molybdenum, raised from the 27,400 t printed in the 1Q26 10-Q; 24 Moz of silver, held; and 163,900 t of zinc, restored after silence on the January call but below the 166,800 t printed in the 1Q26 10-Q. Beyond 2026: copper output in 2027 is expected to be 'more or less the same' as 2026, about 970,000 t in 2028, 1,060,000 t in 2029, and above 1.6 Mt by 2033-2034. On projects, Tia Maria is guided to first production of about 30,000 t in the second half of 2027 and full capacity of 120,000 t/year from 2028, at a cash cost estimate of $1.16/lb with no by-products; El Pilar is guided to early site works in September 2026, construction in Q1 2027 and production in H2 2029 at 36,000 t/y. Tia Maria 2026 cash out was guided at $508M. No cost guidance was given: asked for cost guidance on the January call, the CFO answered 'No,' describing costs only as expected to be 'relatively flat on a per pound basis.'
What Could Go Right — and Wrong
- Ore grades recover by the end of 2026 as the company expects, adding Peru volume back and putting the 917,000 t copper guide within reach.
- Copper holds near Q2 2026's $6.04/lb while molybdenum and silver stay near $29.44/lb and $73.49/oz, keeping the by-product credit large enough to hold net cash cost near zero.
- Tia Maria reaches first production in the second half of 2027 at about 30,000 t and full capacity of 120,000 t/year from 2028, lifting 2028 copper toward the targeted ~970,000 t.
- El Pilar begins site works in September 2026 and construction in Q1 2027, staying on the schedule that points to H2 2029 production of 36,000 t/y of cathodes.
- Second-half 2026 sales catch up with production as the material-in-process build converts, closing the gap between what is mined and what is sold.
- Molybdenum and silver prices normalise from $29.44/lb and $73.49/oz, compressing the by-product credit toward the $2.29/lb pre-credit cost base and pulling the adjusted EBITDA margin down from 67%.
- Peru grades do not recover on the stated timetable; copper output keeps declining and 2027's 'more or less the same' becomes a decline.
- Tia Maria slips past 2027. The desalination plant is on the critical path and its order was not confirmed as placed, which would push the 120,000 t/year fill, the 2028 copper target and the 2029 target.
- Cost inflation continues: Q2 2026 operating costs and expenses rose $202M, or 14% year over year, on operating materials, purchased copper, diesel and fuel, workers' participation and translation.
- Execution slips again across the decade capital programme exceeding $20.5B, with El Pilar's 11-year history and a management caveat that future project financing is not assured.
Looking Ahead
The next 12 months turn on whether volume catches up with price. Management expects second-half sales to improve as the material-in-process build converts and ore grades to recover by the end of 2026. El Pilar's September 2026 site works and Q1 2027 construction start are the first dated tests of the newly issued project schedule, while the Tia Maria desalination order is the specific item that would settle its second-half 2027 start. Peru policy after the July 28 inauguration matters for Los Chancas, which remains blocked by illegal miners, and for the Peruvian side of a capital programme worth about $10.3B.
- 2H 2026In-process material converts — Management expects better sales volumes as metal in process becomes sellable.
- September 2026El Pilar site works begin — Early works start for the $551M, 36,000 t/y cathode project in Sonora.
- End of 2026Ore grade recovery — Company expects grades to recover at Toquepala and Cuajone by end-2026.
- Q1 2027El Pilar construction begins — Full construction start, on the path to H2 2029 production.
- H2 2027Tia Maria first production — About 30,000 t guided; desalination plant sits on the critical path.
- 2028Tia Maria at full rate — 120,000 t/y capacity; copper output targeted at about 970,000 t.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $11.4B | $13.4B | $15.8B | +17.4% |
| Gross Margin | 49.5% | 56.3% | 62.3% | +673bps |
| EBITDA | $6.4B | $7.9B | $9.9B | +23.0% |
| EBITDA Margin | 56.0% | 58.6% | 62.5% | +266bps |
| Net Income | $3.4B | $4.3B | $5.7B | +28.4% |
| Free Cash Flow | $3.4B | $3.4B | $6.0B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)62.3%
- EBITDA Margin (TTM)62.5%
- Net Margin (TTM)35.9%
- ROIC51.3%
- FCF Conversion60.4%
- SBC / Revenue0.0%
The Company
Southern Copper self-describes as one of the largest integrated copper producers in the world. It produces copper, molybdenum, zinc and silver, and the 10-K also lists gold, lead, sulfuric acid and copper rod. Copper was 73% of Q2 2026 sales, with molybdenum at 11%, silver at 9% and zinc at 4%. Management calls molybdenum 'currently our first by-product' and silver 'our second by-product', a change from the earlier framing in which silver held the second slot.
The company is vertically integrated: it mines, concentrates, smelts, refines and, in Mexico, casts copper rod. Every mining, smelting and refining facility sits in Peru and Mexico, with exploration in Argentina and Chile. Parent Grupo Mexico, through its wholly owned subsidiary Americas Mining Corporation, owned 88.9% of the capital stock as of March 31, 2026, and several of the company's electricity suppliers are Grupo Mexico affiliates, making power a partly related-party input.
Business Segments
Competitive Landscape
Copper itself is a global commodity, and the source material treats the product as fungible — but not the position. The evidence points to integration, by-product breadth and social licence as the differentiators: when mined copper fell 4.0% in 1Q26, smelted copper rose 22.2% because the company bought third-party concentrate and kept its own smelters full, something a pure miner could not do. Social licence is described in the material as the scarce asset in Peruvian and Mexican mining, and the company points to 5,817 jobs created at Tia Maria with 1,254 filled by local applicants. The supply-chain wiring graph lists FCX, Teck and Hudbay as both suppliers and competitors, which the intel file flags as inferred rather than documented.
- Freeport-McMoRan (FCX)Named in the supply-chain wiring graph as both supplier and competitor; not discussed in SCCO filings.
- Teck Resources (TECK)Named in the supply-chain wiring graph as both supplier and competitor; not discussed in SCCO filings.
- Hudbay Minerals (HBM)Named in the supply-chain wiring graph as both supplier and competitor; not discussed in SCCO filings.
Supply Chain
Southern Copper sits at the upstream end of the electrical chain. It buys power, fuel and third-party concentrate, much of it from Grupo Mexico affiliates or state suppliers, and sells copper cathodes and concentrates onward. No neighbour in the evidence names the company.
More on SCCO: Earnings recap