Executives

Raul Jacob – Chief Financial Officer, Vice President – Finance

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

Analysts

Carlos de Alba – Morgan Stanley

Thiago Lofiego – Bank of America

Santiago Pérez-Teuffer – Credit Suisse

Alex Hacking – Citigroup

Garrett Nelson – BB&T Capital Markets

John Tumazos – Very Independent Research

Alfonso Salazar – Scotiabank

Southern Copper Corporation (SCCO) Q3 2013 Earnings Call October 28, 2013 1:00 PM ET

Operator

Good morning, and welcome to Southern Copper Corporation’s third quarter and nine months 2013 results conference call. With us this morning, we have Southern Copper Corporation’s Mr. Raul Jacob, Vice President, Finance and CFO who will discuss the results of the company for the third quarter and nine months 2013, as well as any questions that you might have.

The information discussed on today’s call may include forward-looking statements regarding the company’s results and prospects, which are subject to risks and uncertainties. Actual result may differ materially and the company cautions to not place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our results are expressed in all U.S. GAAP.

I will now pass the call on to Mr. Raul Jacob. You may begin.

Raul Jacob – Chief Financial Officer, Vice President

Thank you very much, Darrel and good morning everyone and welcome to Southern Copper’s third quarter 2013 earnings conference call. Participating in today’s conference call are Mr. Oscar Gonzalez Rocha, Southern Copper’s CEO and Mr. Daniel Muniz, Grupo Mexico’s CFO.

In today’s conference call, we will begin with an update of our review in the metal markets. We will then talk about Southern Copper’s key results related to production, sales, operating costs, financial results, expansion projects and capital expenditure program. After that, we will open the session for questions.

Focusing on the copper market. Regarding the copper market, during the past quarter, we have seen the strong fundamentals of this market coming back again to support copper prices. Inventory for the three major warehouses, the London Metal Exchange, Comex and Shanghai decreased by 24% during the quarter. On top of this, we have seen China’s refined copper imports in September increase by 32% month-on-month to about 350,000 tons or 18% year-on-year, clearly indicating to us the end of their destocking process.

Even though the U.S. represents today only about 8% of the world demand for refined copper, the ongoing recovery of its economy is key to copper demand, since the U.S. Is the most important secondary copper consumer, affecting copper demand in other economies. On the supply side, despite some evidence of a possible market oversupply for the coming year, we think that several structural factors such as labor stoppages, technical problems, scrap shortages and other issues are affecting and will continue to affect copper supply, offsetting the net impact of additional production coming from new projects and expansions.

Southern Copper believes that it is positioned to take advantage of the strong fundamentals of the copper market. Our company would benefit of the truly strong investment program of organic growth aimed at increasing production from its current capacity to 1.2 million tons by 2017.

Looking into our production of copper for the third quarter, production decreased by 5,286 tons or 3.4% in the third quarter of this year compared to the third quarter of 2012, due to a lower production at the Buenavista mine caused by a temporary flow disruption. That disruption have been resolved, but we had also some problems with ore grade and recovery at our Toquepala mine. The lower production levels of these operations were partially offset by higher production at the Cuajone mine, mainly due to higher recovery due to the lower production during the last quarter at the Buena Vista operation particularly.

For 2013, we are reducing our current production guidance to 630,000 tons of copper. Of these, approximately 610,000 tons will come from our mines and 20,000 tons from third-party copper concentrates.

Focusing on molybdenum production, it increased by 285 tons or 8.4% in the third quarter when compared with prior quarter of 2012, the same quarter of 2012. It was due to higher production of the Peruvian operations, where we saw the Cuajone operation increase by 17.3% its molybdenum production and the Toquepala 17.9%.

This better production at the Peruvian operation has been and also reinforced by the initial production of the of the Buenavista molybdenum plant that started operations in the past quarter.

This molybdenum plant for the Buenavista concentrator started commercial production as I said this past quarter with 107 tons of molybdenum produced. The plant is expected to have an average annual production of 2,000 tons of molybdenum.

For the year, we plan to produce 19,000 tons of molybdenum 4% more than our 2012 production, including approximately 500 tons from the Buenavista new molybdenum plant.

Regarding silver, silver production increased by 0.7% in the third quarter of 2013, when compared to the same quarter of last year. This was mainly the result of higher production at IMMSA that was partially offset by lower production at the Toquepala, Buenavista and Caridad mines.

Refined production increased by 6.2% in the third quarter to 3.6 million ounces from 3.4 million ounces in the third quarter of 2012.

Zinc production increased by 14.9% in the third quarter 2013 when compared to the same quarter of 2012, mainly as a result of higher ore grade and recovery as well as the full effect of the production recovery at the Santa Eulalia mine after the flowing problems of prior years were resolved.

Focusing on our financial results, for the third quarter of 2013, sales were $1.4 billion, 167.9 lower than sales for the third quarter of 2012. That’s minus 11% of sales. Copper sales volume decreased by 2% and price decreased by 8.3%.

Regarding byproducts, we had higher sales volume of zinc, 32.5% of more zinc volume sales and molybdenum that increased 5.5%. That partially offset lower fewer sales volumes lower prices for all three of these byproducts.

Focusing on operating cost, our total operating cost and expenses decreased by $301 million or 27.2% when compared to the third quarter of 2012. The main cost reduction was in legal fees related to the AMC damage award were $216.2 million a year ago. This was an one-time event that affected last year.

Other cost decreases includes the lower purchases of copper from third-party, lower leachable material inventory consumption and lower workers’ participation. These cost reductions were partially offset mainly by higher inventory consumption, higher energy cost and other variances explain the remaining differences.

Looking at the EBITDA of the company. The EBITDA for the third quarter was $684.1 million. That is 49.4% margin compared with $532.6 million or 34.3% margin for the third quarter of 2012.

Focusing on cash cost. Our operating cash cost for per pound of copper before by-product credits was $1.79 per pound in the third quarter of this year. This figure compares to $2.05 per pound in the second quarter of 2013. There has been a reduction of $0.26 in our cash cost quarter-over-quarter. This 12.8% decrease in operating cash cost reflects the combined effect of an 8% reduction in production cost and a 5% increase in copper production, mainly from our Peruvian operations.

Southern Copper operating cash cost including the benefit of by-product credit was $0.98 per pound in the third quarter of 2013. This cash cost was $0.11 lower than the cash cost of $1.09 for the second quarter of 2013. That is a 10.1% reduction in cash cost.

Regarding by-products. We had a total credit of $269 million or $0.81 per pound in the third quarter of 2013. These figures compare with a credit of $304 million or $0.96 per pound in the second quarter of 201. The increased molybdenum sales volume have been offset by lesser volumes for silver and zinc and lower market prices for by-products. With the exemption of zinc, that increases its price by 1.2%. Molybdenum by-product prices have decreased between the third quarter and the second quarter. In the case of molybdenum, a reduction of 13.3%, for silver 7.4% and for gold, 6.1%.

Net income attributable to SCC shareholders in the third quarter was $344.2 million. That is 24.9% of sales. Per share, that’s $0.41 per share.

Focusing on our expansion and capital projects. The current status of our major capital expenditure projects are as follows. For the Buenavista project, we have continued the development of our $3.1 billion investment program of this unit, which is expected to increase production of copper by approximately 175%, as well as an increase in our molybdenum production. That’s for the year 2017. A. The new concentrator with molybdenum circuit project includes a concentrator with an estimated annual production capacity of 188,000 tons of copper and a second molybdenum plant with 2,600 tons capacity.

The project also is expected to produce annually 2.3 million ounces of silver and 21,000 ounces of gold. The total capital budget of the project is $1,383.6 million and through September 30 of this year, we have 56.4% of progress with an investment of $442.9 million. The project is expected to be completed in the first half of 2015 and we are currently in the process of installing first two of six mills acquired for the project.

Regarding the equipment acquisition for mine operations. Through September 30, we have to spend $464 million of our total budget of $504.8 million on these mine equipments. And we have received 55 of 56 trucks, five of seven shovels and the eight drills required. The SX-EW III project is moving forward with an overall progress of 72.2% at September 30 of the year.

The total capital budget of the project is $444 million of which we have spent $284.7 million through September 30th of the year. The project production capacity is 120,000 tons of copper cathodes per year and it is expected to start operating in the first half of 2014.

On January 2013, the board of directors approved a total budget of $240 million for the construction of Quebalix IV project, which is expected to trash up to 60 million tons of mineral per year, improving the SXEW copper production by increasing recovery and reducing hauling costs as well as processing time. The project expected to be completed in the first half of 2015. The remaining projects to complete $3.1 billion budget program includes several investment, infrastructure and older facilities at Buenavista.

Regarding our Toquepala project, through September 30, we have spent a total of $269.5 million on Toquepala projects. These projects include the construction of the new in-pit crusher and conveyor belt system to replace current mine rail haulage, which we expect will reduce annual operating cost by approximately $5.5 million per year.

Regarding Toquepala expansion, which is expected to increase average annual production by 100,000 tons of copper and 3,100 tons of molybdenum, we continued negotiations with local communities and authorities as part of the process to obtain project approval.

On June 26 of this year, we signed an agreement with the National Water Authority, local authority and became the Candarave Board of Water Users or hydrogeologic study of the Locumba river basin in order to improve the water utilization in the province.

For Cuajone project, through September of this year, we have spent $145 million of a total budget of $157 million on two projects to increase productivity through technological improvements in this unit.

The Variable Cut-Off Ore Grade project and the High Pressure Grinding Rolls project, or HPGR by the initials. Actual production is showing the results of the Variable Cut-Off Ore Grade project which was completed at a cost of $112 million.

The High Pressure Grinding Rolls project, which will produce a more finely crushed material, is expected to start operations during the fourth quarter 2013, and we believe will improve copper production and generate cost savings by reducing power consumption in the crushing process.

The total project budget is $45 million of which we have spent $33 million through the end of the third quarter..

We expect that both projects will be at full capacity by the end of 2013, completing the additional 22,000 tons of copper and 700 tons of molybdenum in annual production. The project to improve slope stability at the south area of the Cuajone mine. We remove approximately 148 million tons of waste material in order to improve the mine design without reducing our actual production level.

The mine equipment to be acquired includes one shovel, five trucks, one drill and auxiliary equipment. Besides preparing the mine for the future, this investment will avoid a reduction in average ore grade between 2014 and 2018, while maintaining current production levels. As of September of this year, we have spent $22.4 million of our total budget of $65.1 million.

Regarding dividends, as you know it is the company policy to review at each board meeting cash resources and expected future cash flow generation from operations. The capital investment plan and all financial needs in order to determine the appropriate quarterly dividend.

Accordingly, as disclosed to the market on October 17th, the board of directors authorized a cash dividend of $0.12 per share of common stock payable on November 21st of this year to shareholders of record at the close of business on November 7th.

With this in mind, ladies and gentlemen, thank you very much for joining us and I would like to open up the forum for questions.

Question-and-Answer Session

Operator

(Operator Instructions). We have a question from Carlos de Alba. Mr. de Alba, you may go ahead with your question.

Carlos de Alba – Morgan Stanley

Thank you very much, Raul. First question for me. Could you comment about the outlook for copper production beyond 2013? What you said for 2014 and 2015, can you also comment on molybdenum volumes for those years? That will be great. That will be my first question.

Raul Jacob – Chief Financial Officer, Vice President

Okay, Carlos. Considering our own production for 2014, we are expecting to produce 650,000 tons of copper, for 2015, 859,000 tons of copper. For moly, next year, we expect to produce the 20,300 pounds of molybdenum. That number should increase in 2015 to 22,800 tons when we have the combined effect of the new molybdenum plant that we just put in commercial operation and the new one that we are building for the new concentrator in Buenavista. The figures for 2014 are currently under review for a more refined adjustment for our annual plan of 2014.

Carlos de Alba – Morgan Stanley

And do these include the Toquepala and I guess they do not include Tia Maria. Right?

Raul Jacob – Chief Financial Officer, Vice President

That’s correct.

Carlos de Alba – Morgan Stanley

Do you have any guidance or outlook for cash cost?

Raul Jacob – Chief Financial Officer, Vice President

Well, we indicated at the beginning of the year that we were expecting our cash cost to decrease through the year and the most important effect that should happen in the second half of 2013. In the third quarter. we have seen some of that already kicking in. We expect this to be at current prices, obviously, stronger during the fourth quarter, since we will have some of the benefit of the new molybdenum production of the Buenavista plant, as well as some of the additional production coming from the Buenavista recovery as well as a high-pressure grinding rolls project in Cuajone that will increase production a little bit in the fourth quarter. So all included, that should improve our cash cost for the fourth quarter.

For the next few years, we are expecting our cash cost to be trending at current prices and costs towards $0.90 in the long-term. Obviously this will be very significantly depending on fuel prices, power prices, et cetera but at current prices that’s what we have for estimate.

Carlos de Alba – Morgan Stanley

And do you have a number for the estimate before by-products?

Raul Jacob – Chief Financial Officer, Vice President

Yes. About $1.50.

Carlos de Alba – Morgan Stanley

$1.50. All right. And my last question, sir.

Raul Jacob – Chief Financial Officer, Vice President

Carlos, long-term that means that we finish with all the projects. We are considering even on these, the contribution of Tia Maria, Toquepala, the Buenavista investment, et cetera.

Carlos de Alba – Morgan Stanley

All right. Thank you, Raul. And just a final question. I don’t know who may be able to answer these in the call but you continue to see the company buying back shares. So I wonder you can comment about what is the strategy of the company or of the parent company towards this continuous purchase in the open market that you are working?

Unidentified Company Representative

Thank you, Carlos, for the question. There is really no strategy from the parent company here. We have been seeing a lot of volatility recently in the copper markets in general and Southern Copper’s share price has been no exception, so we decided to [present word] an increase in our program buyback, but we haven’t bought any relevant size of share in revenues. Otherwise, we have that numbers around here round been comment on for the year for the two years. I think that’s it.

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

We don’t have anything else to add to what (Inaudible).

Operator

Okay. Our next question comes from Thiago Lofiego. You may go ahead.

Thiago Lofiego – Bank of America

Hi. Thank you for the questions. I have two questions. First one, in the press release, we noticed there was slight change in your prediction guidance for Buenavista from 488,000 tons to 495,000 tons and the delivery gauged by 2016 delivery versus 2015 per delivery, so is there any specific reason for this change? Could you just provide an update on where it is coming from?

Second question about the buyback. Could you give us some color on – it’s about the Toquepala expansion. How is the licensing process evolving and how confident are you with the second half 2016 sort of date?

Raul Jacob – Chief Financial Officer, Vice President

Okay. Answer on the first question, we have increased a little bit expected productions for years 2016 and 2017 from Buenavista. The company has to review the ore grades, recoveries, and given the current plans, we think that we will increase the expected production in those years for Buenavista. That’s the reason for the change, Thiago. For your second questions regarding the news on the Toquepala licensing, I am going to ask Mr. Oscar Gonzalez to address that topic.

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

Yes. About the expansion of Toquepala, we are planning to have the public hearing one [standard] one year ago. Maybe in December or January that will give us the possibility, because we already have all the engineering – the possibility to start construction at the beginning of the first quarter of the next year after we have the public hearing and 30 more days for the approval of the environmentally impacted story that the Minister of Mines since two years ago, year and a half ago, we then if that is the case we will take us two years for the construction and that means that we will be ready in 2016 to start production in that.

Operator

Our next question comes from Santiago Pérez-Teuffer. You may go ahead with your question.

Santiago Pérez-Teuffer – Credit Suisse

Hi. Good morning, Oscar, Genaro and Raul. Thanks so much for your time. I wanted to get some color as (Inaudible) Tia Maria and also you could comment on Caridad, if there is anything new there or what should we expect from that project? Thank you.

Raul Jacob – Chief Financial Officer, Vice President

Toquepala, I just mentioned that we would plan – Tia Maria? Okay. Tia Maria, we already gave the first workshop and we are planning to have the second half shop at the end of this week and the public hearing is scheduled toward December. If that is the case, we already gave to the engineering for Tia Maria. We expect to start construction in the first quarter of last year and that is again two year for construction.

Then in year 2016, we will be for this be very – this first production in Tia Maria. If everything, I was mentioned on the approval of the communities over Tia Maria, no?

Santiago Pérez-Teuffer – Credit Suisse

Perfect. Thanks for that. And is there any comment on La Caridad Pilares?

Raul Jacob – Chief Financial Officer, Vice President

I think that right now is not programming to be ready in the near future. I think that we are going to wait until we finish the investment in Buenavista project in order to do something in the Pilares project.

Santiago Pérez-Teuffer – Credit Suisse

Okay, perfect. Thanks. And Raul, just to clarify. The guidance that you gave for your own copper production for 2014? Is it 650?

Raul Jacob – Chief Financial Officer, Vice President

Yes. It is 650. We may adjust a little. Oaky.

Santiago Pérez-Teuffer – Credit Suisse

Okay, so I imagine an increase from Buenavista project coming into the pipeline would be around how much?

Raul Jacob – Chief Financial Officer, Vice President

Well, Buenavista will be at full capacity next year. That’s about between 100,000 and 200,000 tons. Then you have all the other operations plus the new production that we are expecting from the high pressure grinding rolls project in Cuajone. I would like to mention that this is basically our own production that we are considering here.

Santiago Pérez-Teuffer – Credit Suisse

Perfect. Thank you. So from the SX-EW next year in Buenavista, you are expecting to how much promotion from that project?

Raul Jacob – Chief Financial Officer, Vice President

About 50,000 tons for the year.

Santiago Pérez-Teuffer – Credit Suisse

Perfect. Thanks so much, Raul. Thanks, Oscar.

Raul Jacob – Chief Financial Officer, Vice President

You are welcome.

Operator

Our next question comes from Juan López. You may ask your question. And Mr. López, you are online with a question. You may ask your question.

Raul Jacob – Chief Financial Officer, Vice President

Well, let’s move on to the next question.

Operator

Okay. Our next question is from Alex Hacking. You may ask your question.

Alex Hacking – Citigroup

Hi, good morning or good afternoon, Raul and everybody. My question is about Quellaveco. You have expressed some interest, maybe, in plundering with Anglo American on this project. Could you discuss your thought process there, given that you already have a lot of organic opportunities for expansion? Then any update on the process and how it’s going? Thanks.

Raul Jacob – Chief Financial Officer, Vice President

Well, we don’t have any new news. On this matter, Alex, we have no additional news from what has been indicated to the market a month or so ago. We think that there will be synergies if we do this projects together. However, as I said, no, we haven’t had any talks or anything like that related to this project as of now.

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

To this, Alex, I think that the Peruvian government is the one, mainly the Minister of Mines interesting that to talk with Quellaveco trying to expedite the investment in this project because already it has 20 years in the area, Anglo American and they don’t really do not in during that time. And I think that the Minister of Mines is going to try to talk with Mr. Cutifani, the CEO of Anglo American, trying to seek how they can have that project going. And we feel, during that time, they are interested to talk again with us because we talked with them two or three years ago trying to make a joint venture but for some reason, we never agreed on the conditions but we are open to talk again.

Alex Hacking – Citigroup

Okay, it’s clear. And would it be safe to say that your interest in Quellaveco would be increased if Mexico proceeds with the proposal for mining royalties?

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

I think that we will not relate that between one thing and the other. Of course, our investment in Buenavista are important and if we need to do something in Quellaveco. Maybe we will need to do which so much participation of the banks if that is the case.

Operator

Our next question comes from Garrett Nelson. Mr. Nelson, you may ask the question.

Garrett Nelson – BB&T Capital Markets

Thank you. On the $2 billion share repurchase authorization, I was wondering how much availability remains on that. It looks like you repurchased about $59 million in stock in Q3 and then about $65 million in the second quarter.

Oscar Gonzalez Rocha – President, Chief Executive Officer, Director

I mean, 2013, we purchased 5.5 million (Inaudible) third quarter and out of $158.7 million. That’s the correct number.

Garrett Nelson – BB&T Capital Markets

Okay. Thanks. Then, I am not sure if you gave a bit capital expenditure guidance for 2014 and 2015. Has that changed at all?

Raul Jacob – Chief Financial Officer, Vice President

Not significantly. For this year, we are keeping our expectation of spending about $1.6 billion. For next year, we are maintaining our guidance of $2.3 billion in CapEx.

Garrett Nelson – BB&T Capital Markets

Okay. Then $1.4 billion in 2015, I think was the prior year’s guidance.

Raul Jacob – Chief Financial Officer, Vice President

Yes. That’s correct. We are keeping that guidance as well. We will do a full review of them for the first call of the year in January.

Operator

Our next question comes from John Tumazos. You may ask your question.

John Tumazos – Very Independent Research

Thank you. Could you explain a little more the high pressure grinding rolls project at Cuajone for $45 million, so how their cost of mining companies are gold mining companies that much, much bigger amounts of money on the High Pressure Grinding Rolls. Has the cost of that kind of machines fallen? Do you build it yourselves? That you get used equipment maybe you find a steel mill with good flat-rolled sheet rolls and instead of going to the mining engineering company is it just for a little bit of Cuajone and you are maybe pebbles, hard ore or something that some companies spend five or 10 times more than you spend. You seem very splendid and small amount of capital.

Raul Jacob – Chief Financial Officer, Vice President

Well, just to illustrate that we are they are all in as well, but very consistent in passing a portion about a one-third of the ore that is process of we get to the street otherworldliness will deploy growth. we currently have or shown about one third of the ore cabbies process of the Cuajone concentrator two rolls that basically fracture the mineral before going to the grinding part of the cost by doing that we expect to increase the production by increasing the throughput of the concentrator as well as increasing recovery of flow of the concentrator.

Basically, we are were working with the top leader in the technology of these processes that have already made from some applications of this technology some other copper mine, so we are very confident that project will be there. Very successful for the company, as I said, we are currently doing the testing of these the facility affect the need to be at full capacity through the fourth quarter of the year contest.

John Tumazos – Very Independent Research

Who is the contractor supplier?

Raul Jacob – Chief Financial Officer, Vice President

It’s policies.

Operator

Our next question comes from [Martinelli]. You may asked the question.

Unidentified Analyst

Hi. Good morning. My question regarding, first Tia Maria, the first workshop. How do you – the results are going according to look on the year there was some lift by a group (Inaudible) into the project dynamics, where these kind of come onto more of that. And then about your production guidance for next year. I believe, in the last conference call it was around 700 and now you are talking about 650. I don’t know what is the change about.

Raul Jacob – Chief Financial Officer, Vice President

Well, the number that last one, what I mentioned was our own production, excluding third party’s copper processing on that value.

Unidentified Analyst

Okay. Thank you.

Raul Jacob – Chief Financial Officer, Vice President

On the Tia Maria, basically we conducted the first workshop. The meeting was called. People in the meeting made several questions after the presentations of the company officers that were there. However, on the outside, there was a group of (inaudible) mining groups presenting and the police had to intervene at certain point. There was not disruption of the meeting of the workshop. So that’s why it was approved and we are expecting to have better conditions for the next workshop. As it was mentioned before, it’s scheduled for this week.

Unidentified Analyst

Okay. Thank you, Raul.

Raul Jacob – Chief Financial Officer, Vice President

You are welcome.

Operator

And our next question comes from Alfonso Salazar. You may ask your question.

Alfonso Salazar – Scotiabank

Hi. Thank you. Just wanted to see if you can give us an update on the (inaudible) project and other projects that you have in Mexico in the pipeline, especially in (inaudible) and El Arco?

Raul Jacob – Chief Financial Officer, Vice President

Well, in the case of both (inaudible) and El Arco, the company has been conducting investments to prepare these two projects for the future. Currently, they are not in our current pipeline of growth for the company, and they will be considered, looking at the circumstances of operations in Mexico, vis-à-vis what the company could do in some other countries as well.

Alfonso Salazar – Scotiabank

And the same for El Arco?

Raul Jacob – Chief Financial Officer, Vice President

Yes, I meant that for both projects. For both we are doing some investments on engineering, land exploitation, et cetera but they are still on the preparation side of our pipeline. They are not board approved.

Alfonso Salazar – Scotiabank

Okay. Thank you.

Operator

(Operator Instructions). We have a question from Alexandra Buqueda [ph]. You may ask your question.

Unidentified Analyst

Yes. Hello, sorry. Given the statement from Group Mexico this morning, where they suggested that they might have to redirect almost half of their investment commitments over the next three years, if the renewals were approved. How does that affect your capital allocation decisions for Mexico? And have you considered the options? If there are a cause for discontinuing the expansion of Buenavista or, I guess, how material it could then affect your capital allocation going forward?

Raul Jacob – Chief Financial Officer, Vice President

(inaudible). Go ahead.

Unidentified Company Representative

No, I think it is important to bear in mind that when we are (inaudible) the tax load has not been (inaudible) yet. However, we do believe of (inaudible) actions, as you know. We have Peru growing. We have Mexico growing. We will continue to carry on with the (inaudible) project to complete that growth that (inaudible), and we are certainly doing that and we believe we are on time and on budget and we will deliver that growth. However, if there is a (inaudible), we will have to become (inaudible) and sit down at the board level to make some more sense. I mean it is a very, good thing that Southern Copper has been developing in two different countries. But this is really where the fun can be. It was just regarding the other factors like El Arco and (inaudible), the projects that we said that are not really in the pipeline, those are the projects that will be just reanalyzing how they look or would look with a different backdrop.

Unidentified Analyst

Okay, but if you were to sort of discontinue or put Buenavista on hold, is there a holding cost associated with that?

Unidentified Company Representative

No, but I definitely wanted to make (Inaudible). We are not putting (Inaudible). We are going to

Unidentified Analyst

Okay.

Unidentified Company Representative

We are already investing on. I mean, it’s already on its way, so we are going to finish on that expansion and then for these other projects (Inaudible) all the other projects – why don’t we have the largest [referred] in the world. We have probably the best product line in our growth, but so we do have it here in Mexico and we do in Peru and we have been analyzing all the process in (Inaudible).

Unidentified Analyst

Okay. Thank you.

Operator

Our next question comes from Alex Hacking. You may ask your question.

Alex Hacking – Citigroup

Hi, Raul. Sorry, just one follow-up question. I just wanted to double check on me on the guidance for next year and compare it with the previous guidance. I think you said 650,000 tons of copper next year from own production. Last forecast I saw was 725,000 tons next year that will be including third-party sales. I guess, would you be expecting to sell about 20,000 tons of third-party material again next year?

Raul Jacob – Chief Financial Officer, Vice President

Alex, let me start by what I had said, it’s becoming 50,000 tons related to the company production to be sold. Okay? That does not include third-party copper concentrates, between the forecast that you indicated and the current one there are there are two things that has adjusted the figure for 2014. The start-up was the (Inaudible) that it is suffering some delay as well as the SX-EW production that we are expecting for the first year of the SX-EW plant in Buenavista.

Now, we are currently looking into these expected forecasts for 2014, and it may be adjusted, and I believe it could be upward for next year, but at this point this is what we have.

Operator

(Operator Instructions) We have no further questions at this time.

Raul Jacob – Chief Financial Officer, Vice President

Well, thank you very much. With this, we are concluding our conference call for the third quarter. We certainly appreciate your participation and expect to have you back with us when we report the fourth quarter and annual reports of Southern Copper in January of next year. Thank you very much and have a nice day.

Operator

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.