− Southern Copper Corporation digs copper out of two of the world's largest ore systems in Peru and Mexico, processes it through its own smelters and refineries down to refined metal and copper rod, and sells it at prices set by the global commodity market — so the entire economic model rests on producing a price-taking product at a cash cost management believes is among the lowest of any copper pro

− The company is one of the largest integrated copper producers globally, with material by-product output of molybdenum, zinc and silver, and management believes it holds the largest copper reserves in the world. Every mining, smelting and refining asset sits in Peru or Mexico; exploration extends to Argentina and Chile. The business is vertically integrated from ore extraction through refined coppe

− The workforce is majority-unionized in both countries and largely hired locally; in Peru, the company signed long-term extensions of its collective bargaining agreements with all of its unions during the year, with no-stoppage commitments intended to keep operations running normally through at least 2027. The stock has been listed on both the New York and Lima exchanges since 1996. The company is

− | Report Date | 2026-06-07 |

− | Most Recent FY Revenue | 13,420.0M |

− | Diluted Shares (FY2025 weighted avg) | 827M |

− *Source: verified workbook (SCCO_Portfolio.xlsx), figures traceable via lineage.json to the cited filings.*

− Southern Copper reports three segments, which the chief operating decision maker evaluates primarily on operating income and total assets — reviewing production, net sales and operating income variances against budget and prior periods, plus capital expenditure execution, to allocate capital between them.

− **Peruvian operations.** The Toquepala and Cuajone open-pit complexes high in the Andes, plus the smelting and refining plants at the coastal city of Ilo — including a precious metals plant, the industrial railroad and port facilities that serve both mines. The segment produces copper with molybdenum and silver by-products, and refined copper via SX-EW. The single variable that drives this segment

− **Mexican open-pit.** The La Caridad and Buenavista complexes with their smelters, refineries, a precious metals plant, a copper rod plant and shared support facilities. Buenavista sits on one of the world's largest copper ore deposits. This segment now produces copper *and* zinc: the new Buenavista zinc concentrator ran at full capacity in the most recent year and was the principal driver of a sh

− **IMMSA (Mexican underground).** Five underground mines producing zinc, copper, lead, silver and gold, together with a zinc refinery. This is the polymetallic tail of the portfolio — small relative to the open-pit segments, with economics driven by zinc and silver prices and by the grade and throughput of the underground operations rather than by copper. One IMMSA asset, the Taxco mine, has been o

− **How the system fits together.** The flywheel is by-product economics feeding cost leadership: molybdenum, zinc, silver and gold revenue credits absorb a substantial share of fixed costs, pushing the net cash cost of producing a pound of copper toward the bottom of the industry curve. Vertical integration — own smelting, refining, rail and port — captures margin that pure miners surrender to thir

− The asset base is entirely binational: every producing mine, smelter and refinery is in Peru or Mexico, with exploration extending to Argentina and Chile. Revenue, by contrast, is deliberately diversified by region and customer through the end-user contract model, so geographic risk in this company is asset-side, not demand-side. The company holds extensive mining concessions in both countries — i

− The U.S. dollar is the functional currency and revenue is primarily dollar-denominated, but meaningful portions of operating costs are denominated in Peruvian soles and Mexican pesos; both currencies appreciated against the dollar during the year, a cost headwind that recurs whenever local appreciation outruns local inflation relief. The concentrated jurisdictional footprint carries real political

− ## 1.4 Management Team

− The anchor of this management structure is not an individual executive — it is the controlling shareholder. Grupo Mexico holds a super-majority of the capital stock through its wholly-owned subsidiary Americas Mining Corporation, determines the outcome of substantially all shareholder votes, and shares officers and directors with the company. The filing itself cautions explicitly that the parent's

− The execution record under this structure is, on the operating evidence, disciplined: a consistent multi-decade strategy of cost control and organic growth, no disclosed CEO change during the year, long-dated labor agreements secured in Peru, and a record-revenue, record-net-income year delivered on by-product expansion rather than copper volume. The governance trade-off is equally consistent: ext

− Southern Copper's capital allocation has two simultaneous and unusually large commitments: heavy cash dividends — the company has distributed a significant share of net income as dividends since 1996 — and an expanding organic growth program aimed at substantially higher copper production by 2033. There is no third leg: the share repurchase program, although still authorized with no expiration dat

− | FY2021 | -2,473.8M | — | -892.3M |

− | FY2022 | -2,705.8M | — | -948.5M |

− | FY2023 | -3,092.4M | — | -1,008.6M |

− | FY2024 | -1,637.2M | — | -1,027.3M |

− | FY2025 | -2,485.1M | — | -1,325.3M |

− *Source: Company 10-K filings FY2021–FY2025, consolidated statements of cash flows, as compiled in the Data sheet of the SCCO workbook. Share repurchase program inactive since Q3 2016.*

− The signal in the mix is confidence in the asset base over financial engineering. Capital is being pushed into the business at an accelerating rate: the Board approved an enlarged capital investment program for the coming year, with spending concentrated in the Buenavista tailings facility, the new zinc concentrator, IMMSA mine development and the ramp-up of Tia Maria — the flagship Peruvian proje

− Two caveats temper the shareholder-return story. First, the stock-dividend mechanism is dilutive by construction — treasury shares are being handed out rather than retired, expanding the per-share denominator. Second, with Grupo Mexico holding a super-majority of the shares, the overwhelming bulk of every cash dividend flows to the parent; the dividend policy should be read partly as a parent-fund

− **§1.6.1 Industry structure.** Copper is a pure commodity industry: competition is based primarily on price and service, and the filing is explicit that price dominates when supplies are ample. Products also compete with substitute materials, principally aluminum and plastics. In such a structure, no producer has pricing power; returns accrue to whoever sits lowest on the cost curve and owns the l

− **§1.6.2 Competitive advantages.** Southern Copper's moat is geological and structural, and each claimed element is anchored in the filing. First, reserves: management believes the company holds the largest copper reserves in the world, with Buenavista alone sitting on one of the world's largest copper ore deposits — in a depleting industry, reserve life is the scarcest asset. Second, cost positio

− **§1.6.3 Competitive vulnerabilities.** The vulnerabilities are as structural as the strengths. The company is a price-taker on effectively its entire revenue base, and its by-product cushion is itself commodity-priced. Ore grades are declining at the core Peruvian pits and at Buenavista's copper circuit — the most recent year's copper production fell on grades, and management guides lower copper

− **§1.6.4 Verdict.** Southern Copper holds a genuine, asset-based moat — reserve scale, by-product-subsidized cost leadership and full integration — of the only kind that matters in a commodity industry, and it should keep the company profitable through the trough of any plausible copper cycle. But the moat protects margins against competitors, not against the copper price, and not against the poli

− The risk landscape at Southern Copper is dominated not by the commodity cycle — which every copper producer shares — but by governance: a super-majority controlling shareholder whose commercial relationships with the company are extensive, growing, and verified as arm's-length only by the company's own internal processes. Around that core sit a newly escalated legal exposure in Peru, an earnings b

− ### The Grupo Mexico relationship — minority shareholders inside a controlled vehicle

− This is the highest-priority risk in the filing, and the forensic review of the related-party footnote flags it as a red-level governance concern. Grupo Mexico, through its wholly-owned subsidiary Americas Mining Corporation, holds a super-majority of the capital stock and determines the outcome of substantially all shareholder votes — board composition, dividends, capital projects, asset sales. T

− Two adjacent findings reinforce the pattern and are noted here as watch items. First, the Mexican defined-benefit pension plan's allocation to Grupo Mexico's own shares increased again year-over-year — a related-party concentration decided by plan fiduciaries that ties the plan's funded status to the controlling shareholder's equity, and a governance signal more than a balance-sheet risk given the

− The financial consequence is structural: the small public float bears a pro-rata share of every dollar paid to parent affiliates at prices that cannot be independently verified from the filing, and the cash dividend — raised again in the most recent year — flows overwhelmingly to the parent, consistent with the risk factor's own warning about parent funding needs. The trigger for materialization i

− **Probability:** High (the structure is in place and the transaction volume is growing; the question is degree, not existence) | **Timeframe:** Immediate and continuous | **Quantified potential impact:** Not quantifiable from the filing — which is precisely the problem. The cost to minority holders is the unobservable spread between affiliate pricing and market pricing, applied to a growing volume

− ### Peruvian "labor shares" litigation — escalated enforcement orders, unquantified exposure

− The forensic review flags this as a red-level legal risk, and it deserves prominence because it changed materially during the year. The decades-old Garcia Ataucuri lawsuit over Peruvian labor shares, which was absent from the prior year's litigation disclosure entirely, re-emerged in the FY2025 filing at the judgment-execution stage: in December 2025 the company learned that a Lima civil court had

− Two features warrant skepticism toward the "cannot be reasonably estimated" posture. The courts have already specified share quantities — the exposure is not formless. And an adverse final ruling would do more than transfer the named shares: it would set the valuation precedent for the broader class of labor-share claims against the Branch. The fact that this matter went from undisclosed in one an

− **Probability:** Medium (the company prevailed at the constitutional stage, but provisionally and at first instance) | **Timeframe:** Immediate — appellate rulings expected during 2026 | **Quantified potential impact:** Not quantified by the company; an adverse outcome would transfer economic interests in the Peruvian Branch to plaintiffs and establish a conversion precedent for the wider class, m

− ### Copper price dependence amplified by mark-to-market earnings quality

− The structural risk is familiar — financial performance depends on copper, molybdenum, zinc and silver prices set by forces outside the company's control, with Chinese demand singled out and extended price declines capable of triggering inventory writedowns, impairments and curtailment. What is specific to this year is how much of the reported result is itself a price mark. The forensic review fla

− Two further yellow-flagged items belong in the same earnings-quality frame. The asset-retirement-obligation estimate has now been revised downward two years running — principally at Buenavista, in a jurisdiction where the company itself notes no enacted closure law exists — with the revision credited to cost of goods sold each time; a portion of the reported cost improvement is therefore estimate-

− **Probability:** High for the price-mark reversal mechanism operating in some degree (it is mechanical); Medium for a reversal large enough to dent reported results visibly | **Timeframe:** Immediate — H1 2026 settlement windows | **Impact:** A copper retracement would simultaneously reverse provisional-pricing gains, deflate the receivable, and compress margins on new sales — the same variable hi

− ### Social license and project execution in Peru — the growth plan's single point of failure

− The organic growth plan to 2033 runs disproportionately through Peruvian ground that has already proven contestable. Tia Maria — the flagship, targeted for 2027 start-up with heavy capital committed and construction well advanced — now faces a longer list of lawsuits seeking to nullify its environmental approval, its construction license, or the project itself, with new claims filed during the yea

− Overlaying all of this is Peruvian political instability of an unusual intensity even by local standards: congressional removal of the president in late 2025, the impeachment of the interim successor within months, a transitional government, and general elections due in April 2026. A meaningful share of net sales and effectively all of the near-term growth pipeline depend on the post-election gove

− **Probability:** Medium for material Tia Maria delay or cost escalation; High for continued Los Chancas blockage | **Timeframe:** 1–2 years (Tia Maria to 2027; elections April 2026) | **Impact:** Delay converts committed capital into a non-earning asset and pushes out the production growth that justifies the elevated investment program; outright cancellation — the precedent the lawsuits seek — wou

− ### Mexican fiscal and regulatory tightening — and a filing error on the company's own tax rate

− The forensic review identified a red-level contradiction between consecutive filings on the Mexican special mining duty: the prior-year 10-K disclosed an increase in the royalty rate effective January 1, 2025, while the FY2025 filing's tax footnote describes the 2025 rate at the lower, pre-increase level with no explanation of any repeal — and the filing's own tax-reconciliation dynamics do not co

− The royalty sits within a broader tightening trend: the recent Mining Law amendments shortened concession terms, added water-use conditions, closure and remediation guarantees, and a contribution from new projects' earnings to indigenous communities — changes now under Supreme Court review, with the company expecting no negative impact, a characterization that is management's view rather than a se

− **Probability:** High that the fiscal direction in both jurisdictions remains tighter; Low–Medium for a further step-change within the forecast horizon | **Timeframe:** Immediate (the higher royalty is already enacted) to 3–5 years (mining-law litigation, judicial reform) | **Impact:** The royalty operates as a permanent margin haircut on the Mexican segments — the larger half of the asset base —

− The catalyst picture is thinner than the risk picture, and that asymmetry should be stated plainly: five identified risks against three catalysts, of which only one is a discrete, dateable event. The catalysts are real — one is already in the run-rate — but they are operational and macro in nature, not binary re-rating events, and the largest of them (Tia Maria) is simultaneously the locus of the

− ### Tia Maria commissioning — the first new production unit in years

− Construction is advancing after a decade of delay: earthworks, access infrastructure, the electrical substation and transmission line are progressing, and management targets operations in 2027. As a low-cost SX-EW cathode operation with desalinated process water, Tia Maria would add copper volume precisely where the existing Peruvian pits are losing it to grade decline — converting the heaviest li

− **Probability:** Medium-High for start-up broadly on the 2027 timeline | **Timeframe:** 1–2 years | **Monitoring trigger:** Quarterly construction-progress disclosures; resolution of the pending nullification lawsuits; any recurrence of community disruption in Islay province; explanation of the unquantified project write-off in subsequent filings.

− ---

− ### The by-product engine — zinc, molybdenum and silver compressing net cash cost

− This catalyst is already materializing and has room to run. The Buenavista zinc concentrator operated at full capacity in its first complete year, driving zinc output sharply higher; molybdenum and silver production rose across most operations; and the net unit cash cost of copper fell sharply as by-product credits absorbed fixed costs. The structural point is that by-product revenue diversifies t

− **Probability:** High (the assets are built and running) | **Timeframe:** Immediate and ongoing | **Monitoring trigger:** Quarterly by-product volumes and the net cash-cost-per-pound trend; zinc and molybdenum prices, which determine how much of the volume gain reaches the credit line.

− ---

− ### Copper market deficit and structurally tight inventories

− Management estimates a copper market deficit for the coming year, with global inventories covering only days of demand, against a demand backdrop structurally supported by electrification and the energy transition — a dynamic the filing itself highlights, alongside rising buyer preference for responsibly certified copper, which the company has pledged to deliver across its entire production. For t

− **Probability:** Medium (deficit forecasts are management's view of a notoriously cyclical market) | **Timeframe:** Immediate to 1–2 years | **Monitoring trigger:** Exchange inventory levels; Chinese refined-copper demand indicators; the trajectory of U.S. tariff policy on copper products, which the filing flags as a live volatility channel in both directions.

− | 1 | Grupo Mexico related-party economics and controlled-board discretion | Risk | High | Immediate / continuous | Active | Related-party purchase and payable trends in each 10-K; further discretionary payments approved by the board; pension allocation to parent shares |

− | 2 | Peruvian labor-shares litigation (Garcia Ataucuri enforcement) | Risk | Medium | Immediate (rulings due 2026) | Active | Superior Court and constitutional appeal rulings in Lima during 2026 |

− | 3 | Copper price reversal amplified by provisional-pricing marks; estimate-driven cost credits | Risk | Medium-High | Immediate (H1 2026 settlements) | Active | Q1–Q2 2026 provisional-pricing settlement effects; receivable balance; any further ARO credits or leach-pad assumption changes |

− | 4 | Peruvian social license and project execution (Tia Maria, Los Chancas, elections) | Risk | Medium | 1–2 years | Active | Tia Maria lawsuit outcomes and construction milestones; Los Chancas site control; April 2026 election result and mining policy of the incoming government |

− | 5 | Mexican fiscal and regulatory tightening; royalty-rate disclosure error | Risk | High (enacted) | Immediate to 3–5 years | Active | FY2026 10-K correction of the royalty disclosure; Supreme Court ruling on Mining Law amendments; judicial-reform implementation |

− | 6 | Tia Maria commissioning toward 2027 start-up | Catalyst | Medium-High | 1–2 years | Monitoring | Construction progress disclosures; legal docket; community relations in Islay |

− | 7 | By-product engine compressing net cash cost | Catalyst | High | Immediate / ongoing | Active | Quarterly by-product volumes and net cash-cost trend |

− | 8 | Copper market deficit and tight inventories | Catalyst | Medium | Immediate to 1–2 years | Monitoring | Exchange inventories; Chinese demand; U.S. tariff developments |

− These risks do not sit in separate compartments — they share transmission channels, and the governance risk sits upstream of all of them. A copper price retracement is the single most connective event: it would mechanically reverse the provisional-pricing gains and deflate the receivable (Risk 3), arrive precisely as the capital program peaks into Tia Maria's final construction phase (Risk 4), and

− The ESG profile is genuinely two-sided, and both sides are specific to this filing. On the credit side: the company reports a meaningful reduction in lost-time injuries versus the prior year, running well below the comparable U.S. industry benchmark; its open-pit mines in both countries hold The Copper Mark accreditation including compliance with the ICMM Global Industry Standard on Tailings Manag

− On the debit side, the same filing records workforce fatalities during the year; a tailings-dam risk disclosure that is candid about catastrophic potential; a legacy environmental docket including dozens of pending civil, collective and constitutional actions from the 2014 Buenavista spill (all characterized by the company as without merit and immaterial in aggregate — its view, not a settled outc

− The regulatory exposure map is concentrated and live: the enacted higher Mexican mining royalty (with the filing's own erroneous disclosure of it); the Mining Law amendments under Supreme Court review; Mexican judicial reform with effects the company says cannot be determined; Peru's progressive-closure guarantee regulation opening a funding-requirement window; the April 2026 Peruvian elections; a

− - Net Income ties (Income Statement → Cash Flow Statement): confirmed via the recalculated workbook. Net income throughout this section is income attributable to Southern Copper Corporation (i.e., net of the non-controlling interest in subsidiaries), consistent with the figure that opens the consolidated cash flow statement reconciliation.

− - Cash ties (Balance Sheet → Cash Flow Statement): confirmed via the recalculated workbook — year-end cash and equivalents on the balance sheet agree with the ending cash position of the cash flow statement in each year presented.

− - Retained Earnings reconciliation (Beg RE + NI − Dividends = End RE): confirmed via the recalculated workbook, noting that distributions include both cash dividends and the stock dividends paid from treasury shares beginning in 2024, both of which are charged against retained earnings. This is why retained earnings decline across the period even as the company earns record profits — a capital-ret

− | **Revenue ($M)** | 10,934.1M | 10,047.9M | 9,895.8M | 11,433.4M | 13,420.0M |

− | Cost of Goods Sold ($M) | 3,894.4M | 4,649.1M | 4,687.7M | 4,841.4M | 5,359.2M |

− | **Gross Profit ($M)** | 7,039.7M | 5,398.8M | 5,208.1M | 6,592.0M | 8,060.8M |

− | D&A ($M) | 806.0M | 796.3M | 833.6M | 845.9M | 868.4M |

− | **EBITDA ($M)** | 6,871.1M | 5,232.1M | 5,025.9M | 6,400.6M | 7,870.1M |

− | EBITDA Growth | 76.4% | -23.9% | -3.9% | 27.4% | 23.0% |

− | **EBIT ($M)** | 6,065.1M | 4,435.8M | 4,192.3M | 5,554.7M | 7,001.7M |

− | Interest Expense ($M) | 387.9M | 387.1M | 376.3M | 376.5M | 416.7M |

− | Pre-Tax Income ($M) | 5,696.8M | 4,247.8M | 3,955.8M | 5,357.4M | 6,784.3M |

− | Tax Expense ($M) | 2,299.2M | 1,596.1M | 1,518.9M | 1,975.3M | 2,470.1M |

− | **Net Income ($M)** | 3,397.1M | 2,638.5M | 2,425.2M | 3,376.8M | 4,334.9M |

− | Net Income Growth | 116.4% | -22.3% | -8.1% | 39.2% | 28.4% |

− | Diluted EPS | $4.39 | $3.41 | $3.05 | $4.21 | $5.24 |

− | EPS Growth | 116.3% | -22.3% | -10.6% | 38.0% | 24.5% |

− | Diluted Shares (M) | 773 | 773 | 795 | 803 | 827 |

− *Source: Southern Copper Corporation Form 10-K filings, consolidated statements of operations, FY2021–FY2025, as compiled in the verified workbook. Net income is attributable to Southern Copper Corporation. Per-share basis note: FY2023–FY2025 per-share figures and share counts are retroactively adjusted for the stock dividends paid since 2024, per the FY2025 10-K; FY2021–FY2022 figures are as prin

− | Revenue | 10.1% | 10.9% | 10.3% |

− | EBITDA | 14.6% | 15.1% | 15.1% |

− | Net Income | 18.0% | 22.5% | 19.4% |

− | Diluted EPS | 15.4% | 20.9% | — |

− | FCF | 22.7% | 9.3% | — |

− *Source: verified workbook (SCCO_Portfolio.xlsx), figures traceable via lineage.json to the cited filings.*

− **The revenue story is a price story with a volume kicker — and the volume is not copper.** The five-year arc traces a full commodity cycle: the FY2021 copper price surge produced 36.9% growth to 10,934.1M, the FY2022–FY2023 retracement took revenue down -8.1% and then -1.5% to a trough of 9,895.8M, and the recovery delivered record net sales of 11,433.4M and then 13,420.0M. The composition of the

− **Margins are recovering toward — but have not regained — the FY2021 cycle peak, and not all of the recovery is operational.** Gross margin traced the cycle from 64.4% at the FY2021 peak down to 52.6% at the trough and back to 60.1%, with EBITDA margin following the same path from 62.8% to 50.8% to 58.6%. The mechanism is classic mining operating leverage: cost of sales grew from 3,894.4M to 5,359

− **Major Movers**

− 1. **Metal prices and the provisional-pricing swing — cyclical, and partly unsettled.** The single largest driver of the 17.4% top-line gain was price, and within it the swing on provisionally priced sales: FY2025 net sales include a positive provisional-pricing adjustment where the prior year's was negative, with copper marked near the year's record price on volumes settling January–June 2026. Th

− 2. **The Buenavista zinc concentrator and the by-product engine — structural.** Zinc production rose sharply on the concentrator's first full year at capacity, and molybdenum and silver output increased across most operations. This is the one component of the FY2025 record that does not depend on the copper price: it adds volume, diversifies the revenue mix, and — through by-product credits — drov

− 3. **Cost-of-sales inflation, including a growing related-party component — partly structural.** COGS rose from 4,841.4M to 5,359.2M, led by workers' participation, purchased copper, repair materials, sales expenses, exchange-rate effects and energy. The forensic review flags, at red level, that a material and growing share of this cost base flows to Grupo Mexico affiliates — captive power for the

− 4. **ARO estimate credits to cost of sales — non-operational and recurring in the same direction.** The forensic review flags, at yellow level, that updates to Mexican mine-closure estimates (mainly the Buenavista life-of-mine update) produced a credit to cost of goods sold in FY2025, following a similar and slightly larger credit in FY2024, with a further small Peruvian credit in late 2025 — in a

− 5. **The tax line — structurally heavy, and with an unresolved disclosure contradiction.** The effective tax rate has sat far above the U.S. federal statutory rate throughout the period (40.4% at the FY2021 peak, 36.4% in FY2025), driven by Peruvian and Mexican rate differentials, mining royalties, the special mining tax and non-deductible interest. The forensic review (yellow) is explicit that th

− **Quality of earnings.** Beyond the ARO credits and the provisional-pricing mark already covered, three further items condition the FY2025 result. First, non-operating results deteriorated on a swing in other income that included an unquantified write-off of certain Tia Maria project expenses (versus an insurance recovery the prior year) — flagged by the forensic review as a soft signal of scope o

− **⚠ Items to Watch.** If gross margin falls back below the 52.6% trough level, the cyclical margin recovery has fully reversed and the by-product cost cushion has been overwhelmed — trough-cycle earnings assumptions would need rebasing. If the effective tax rate rises above the 40.4% FY2021 level, the Mexican royalty escalation is biting harder than the structural mid-30s base and forward FCF mode

− | Cash & Equivalents ($M) | 3,002.0M | 2,069.7M | 1,151.5M | 3,258.1M | 4,304.6M |

− | Receivables ($M) | 1,358.7M | 1,394.1M | 1,141.1M | 1,189.6M | 1,951.2M |

− | Inventory ($M) | 972.9M | 1,014.0M | 1,016.9M | 1,048.9M | 1,058.1M |

− | Total Current Assets ($M) | 6,139.6M | 5,188.0M | 4,429.5M | 6,174.3M | 8,352.5M |

− | PP&E, net ($M) | 9,464.4M | 9,597.0M | 9,782.9M | 9,883.3M | 10,272.2M |

− | Goodwill & Intangibles ($M) | 138.1M | 135.0M | 130.2M | 124.6M | 122.4M |

− | **Total Assets ($M)** | 18,297.6M | 17,277.0M | 16,725.3M | 18,713.5M | 21,381.4M |

− | Short-term Debt ($M) | 299.7M | 0.0M | 0.0M | 499.8M | 0.0M |

− | Total Current Liabilities ($M) | 2,250.0M | 1,236.0M | 1,388.5M | 2,248.1M | 2,145.1M |

− | Long-term Debt ($M) | 6,247.9M | 6,251.0M | 6,254.6M | 5,758.5M | 6,750.7M |

− | Total Debt ($M) | 6,547.6M | 6,251.0M | 6,254.6M | 6,258.3M | 6,750.7M |

− | Net Debt ($M) | 3,545.6M | 4,181.3M | 5,103.1M | 3,000.2M | 2,446.1M |

− | Total Liabilities ($M) | 10,089.8M | 9,130.8M | 9,244.1M | 9,475.3M | 10,276.5M |

− | Shareholders' Equity ($M) | 8,149.2M | 8,084.2M | 7,418.1M | 9,171.6M | 11,038.1M |

− | Retained Earnings ($M) | 7,769.7M | 7,702.0M | 7,033.5M | 6,839.6M | 5,797.2M |

− | Book Value / Share | $10.54 | $10.46 | $9.33 | $11.42 | $13.35 |

− *Source: Southern Copper Corporation Form 10-K filings, consolidated balance sheets, FY2021–FY2025, as compiled in the verified workbook. Short-term debt of zero in FY2023 and FY2025 reflects the balance sheet as printed — no current portion of long-term debt was outstanding at those year-ends.*

− **Asset composition: a capital-intensive organic story, with one judgment-heavy balance inside it.** This is a miner's balance sheet built by drilling, not dealmaking: PP&E of 10,272.2M is the largest asset, goodwill and intangibles are immaterial at 122.4M and shrinking, and the asset base has grown from 16,725.3M to 21,381.4M over two years almost entirely through retained cash and capital proje

− **Leverage: gross debt static, net leverage melting, structure clean — with one typographical caveat.** Total debt has been essentially flat for five years (6,547.6M to 6,750.7M); the deleveraging is entirely a cash phenomenon, with net debt falling from a 5,103.1M peak to 2,446.1M and Net Debt/EBITDA from 1.0x to 0.3x. The forensic review's structural assessment is favorable: all debt is USD fixe

− **Working capital: the receivables build is the flag, and it is a price mark, not a collection problem.** Receivables jumped from 1,189.6M to 1,951.2M — growth several times the 17.4% revenue growth rate — concentrated in the Mexican open-pit segment, and the forensic review (yellow) traces it to provisionally priced copper marked near the year's record price, with the embedded-derivative receivab

− **⚠ Items to Watch.** If Net Debt/EBITDA returns above the 1.0x FY2023 peak, the deleveraging narrative has reversed — most plausibly through a copper downturn coinciding with the enlarged capital program — and the absence of a committed revolver becomes a live constraint rather than a footnote. If DSO holds above the FY2022 level of 50 days after the H1 2026 provisional-pricing settlements wash t

− | Cash from Operations ($M) | 4,292.4M | 2,802.5M | 3,573.1M | 4,421.7M | 4,752.1M |

− | Capital Expenditures ($M) | -892.3M | -948.5M | -1,008.6M | -1,027.3M | -1,325.3M |

− | **Free Cash Flow ($M)** | 3,400.1M | 1,854.0M | 2,564.5M | 3,394.4M | 3,426.8M |

− | FCF / Share | $4.40 | $2.40 | $3.22 | $4.23 | $4.15 |

− | Dividends Paid ($M) | -2,473.8M | -2,705.8M | -3,092.4M | -1,637.2M | -2,485.1M |

− *Source: Southern Copper Corporation Form 10-K filings, consolidated statements of cash flows, FY2021–FY2025, as compiled in the verified workbook. The share repurchase program has registered no activity since 2016; quarterly stock dividends paid from treasury shares since 2024 are a non-cash distribution and do not appear in this table.*

− **Operating cash flow is genuinely strong, but FY2025 conversion tells you where the earnings quality sits.** Cash from operations reached a record 4,752.1M, capping a recovery from the 2,802.5M FY2022 trough, and across the five years FCF conversion has averaged near or above 100% — the signature of a low-cost producer with real cash earnings. The FY2025 wrinkle is instructive: conversion fell to

− **CapEx: the harvest period is over.** Capital expenditure rose from -1,027.3M to -1,325.3M, taking CapEx/D&A from 1.2x to 1.5x — comfortably in growth-investment territory and the highest of the five years. The filing identifies where it went: the new tailings deposit and concentrator at Buenavista, IMMSA mine development, and the ramp-up of Tia Maria and Los Chancas spending in Peru, with the Bo

− **Capital allocation: a dividend machine with no second gear.** Over the five years, cash dividends — -2,473.8M, -2,705.8M, -3,092.4M, -1,637.2M, -2,485.1M — absorbed the large majority of cumulative free cash flow, with payout ratios swinging from 48.5% at the FY2024 low to above-earnings levels of 102.6% and 127.5% in the trough years, when the company paid out more than it earned and ran down c

− **⚠ Items to Watch.** If FCF conversion stays below the 70.3% FY2022 trough level for a second consecutive year, cash generation is structurally lagging reported earnings rather than timing-lagging them, and the dividend is being funded from the balance sheet. If the payout ratio returns above the 127.5% FY2023 level while the enlarged capital program is running, something must give — the dividend

− ROIC is the headline finding of this section: at 34.7%, returns on invested capital sit far above any plausible cost of capital for a Latin American miner — the WACC derived in Section 4 will quantify the spread, but no defensible discount rate approaches this level — and critically, even the FY2023 cyclical trough of 20.8% would clear the hurdle comfortably. That trough reading is the more analyt

− The DuPont decomposition shows ROE of 42.9% built as net margin of 32.3% × asset turnover of 0.67x × an equity multiplier of 1.98x. The structure is unambiguous: margin is both the level driver and the swing factor. Asset turnover is low and stable — the physics of a capital-intensive miner, ranging only between 0.56x and 0.67x across the cycle — and the equity multiplier has *declined* from 2.29x

− *Source: verified workbook (SCCO_Portfolio.xlsx), figures traceable via lineage.json to the cited filings.*

− | **Z-Score** | **2.71** | **2.93** | **3.08** |

− | Zone | Gray | Gray | Safe |

− The Z-Score of 3.08 crosses back into the safe zone in FY2025 after two years in the upper gray zone (2.71 in FY2023, 2.93 in FY2024), and the trend is moving decisively away from the boundary. The component detail matters more than the headline, because the gray-zone readings were never a distress signal: the soft component throughout is X2 (retained earnings to assets), which is falling — 0.421

− | Risk-Free Rate (10Y UST) | 4.47% | US Treasury daily yield curve, dual-verified vs. Fed H.15 |

− | Equity Risk Premium | 4.18% | Damodaran implied ERP (US, trailing, adjusted payout) |

− | Beta (Levered) | 1.11 | 5-year monthly regression, cross-checked across four sources; used raw, not relevered |

− | Size Premium | 0.00% | Not applied — mega-cap issuer |

− | Company-Specific Risk Premium | 2.25% | Damodaran country risk premium dataset (January 2026), Peru/Mexico revenue-weighted |

− | **Cost of Equity (Ke)** | **11.61%** | CAPM: Rf + β × (ERP + CRP) |

− At 11.61%, the cost of equity is demanding for a mega-cap natural-resources issuer — comfortably above what a US-domiciled industrial of comparable scale would carry — and that is by design. With effectively no leverage in the capital structure, the dominant driver of Ke is the premium stack itself: a beta of 1.11 applied to the sum of the equity risk premium and the country risk premium. Beta is

− The country risk premium of 2.25% is not a discretionary add-on. It is taken from the Damodaran country risk premium dataset published in January 2026 and weighted by the company's revenue split between its two operating geographies, Peru and Mexico, with Peru carrying the larger weight. Every dollar of Southern Copper's cash flow is generated in these two jurisdictions; pricing the equity off a U

− | Marginal Tax Rate | 38.25% |

− | **After-tax Cost of Debt** | **3.96%** |

− The pre-tax cost of debt is derived from actuals: FY2025 interest expense divided by average total debt across FY2024–FY2025, both taken from the verified workbook. This actuals-based approach was chosen deliberately over a coupon build-up because the debt footnote in the FY2025 filing states the coupon on the newest notes inconsistently in two places — a forensic watch item — and deriving Kd from

− | Equity Weight (market value) | 98.3% |

− | Debt Weight (market value) | 1.7% |

− | **WACC** | **11.48%** |

− *Source: approved valuation assumptions (valuation_assumptions.json) and market_data.json; capital-structure weights at market values using net debt — market capitalization 142,890.5M against net debt of 2,446.1M (total debt 6,750.7M less cash 4,304.6M).*

− At 98.3% equity and 1.7% debt at market values, the capital structure is near-zero leverage for discounting purposes — a consequence of the market capitalization dwarfing a modest net debt position. The practical implication is that the WACC of 11.48% is, to within rounding, the cost of equity: the cheap after-tax debt is too small a sliver to pull the blended rate down meaningfully, and the WACC

− The DCF uses a five-year explicit projection period plus a terminal value. Five years is the right window for this asset: reserve life is multi-decade, but the only dated, fully committed catalyst is the Tía María project with its targeted 2027 start-up; beyond the ramp of that project the business is steady-state and the terminal value captures it, so a longer explicit window would add assumption

− | Revenue Growth — each year | Base − 2pp | 6.0% (Y1) → 3.0% (Y5) | Base + 2pp |

− | EBITDA Margin — each year | Base − 1pp | 55.0% (Y1) → 56.0% (Y5) | Base + 1pp |

− | CapEx / Revenue | unchanged | 12.0% (Y1–Y2) → 10.0% (Y4–Y5) | unchanged |

− | D&A / Revenue | unchanged | 6.5% (Y1–Y2) → 7.0% (Y3–Y5) | unchanged |

− | Δ NWC / Incremental Revenue | unchanged | 15.0% | unchanged |

− | Effective Tax Rate | unchanged | 38.2% | unchanged |

− | Terminal Growth Rate | Base − 0.5pp | 2.5% | Base + 0.5pp |

− | Exit EV/EBITDA Multiple | 9.0x | 9.0x | 9.0x |

− | WACC | 11.48% | 11.48% | 11.48% |

− *Note: Bear and Bull use the standard adjustments above (per the valuation-agent methodology), applied to every projection year. The resulting fair values appear in Section 6.2 ($44.83 / $59.86).*

− **Revenue growth path.** Year-1 growth of 6.0% sits well below the trailing three-year revenue CAGR documented in Section 3 and dramatically below sell-side consensus for FY2026 — a deliberate and, relative to the street, aggressive act of conservatism that should be understood as such. The reasoning: FY2025 revenue was set at record copper prices and, as Section 3 details, included a positive mar

− **Margin path.** The base case carries EBITDA margin from 55.0% in Year 1 to 56.0% by Year 3 and holds it there. This is set near the trailing three-year average margin and deliberately below the FY2025 record, for reasons the forensic review makes concrete: the FY2025 margin was flattered by the positive provisional-pricing marks noted above and by a second consecutive year of downward asset-reti

− **Terminal growth rate.** The terminal rate of 2.5% sits comfortably below long-run nominal GDP growth of either operating geography — the hard ceiling for any perpetuity assumption — and at the bottom of the range this framework would allow for a commodity producer with multi-decade reserve life. The bottom of the band is chosen for three reasons, stated plainly: copper mining is a finite-resourc

− | | Base (FY2025) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |

− | Revenue ($M) | 13,420.0M | 14,225.2M | 15,221.0M | 16,134.2M | 16,779.6M | 17,283.0M |

− | EBITDA ($M) | — | 7,823.9M | 8,447.6M | 9,035.2M | 9,396.6M | 9,678.5M |

− | EBIT ($M) | — | 6,899.2M | 7,458.3M | 7,905.8M | 8,222.0M | 8,468.7M |

− | NOPAT ($M) | — | 4,260.3M | 4,605.5M | 4,881.8M | 5,077.1M | 5,229.4M |

− | Unlevered FCF ($M) | — | 3,357.1M | 3,619.0M | 4,180.1M | 4,476.9M | 4,635.4M |

− | PV of UFCF ($M) | — | 3,011.4M | 2,912.0M | 3,017.2M | 2,898.6M | 2,692.2M |

− The shape of the cash flow profile is worth a sentence: unlevered free cash flow steps up most sharply in Year 3, not because of margin, but because the Tía María construction capex rolls off at the same time as the project's volume arrives — the projection deliberately makes the shareholder pay for the growth before receiving it, which is how the cash flows will actually sequence.

− | Sum of PV of UFCFs ($M) | 14,531.3M |

− | Terminal Value — Perpetuity Growth ($M) | 52,909.6M |

− | Terminal Value — Exit Multiple ($M) | 87,106.2M |

− | Selected Terminal Value ($M) | 52,909.6M |

− | PV of Terminal Value ($M) | 30,729.1M |

− | **Enterprise Value ($M)** | **45,260.4M** |

− | Less: Net Debt ($M) | 2,446.1M |

− | Less: Minority Interest ($M) | 66.8M |

− | **Equity Value ($M)** | **42,747.5M** |

− | Shares Outstanding (M — market count used in the per-share bridge) | 826 |

− | **DCF Fair Value / Share (Base)** | **$51.75** |

− | Upside / Downside vs. Current Price | -70.1% |

− The perpetuity-growth method is selected. The choice matters enormously here and is the single most contestable judgment in the model after the terminal growth rate itself: the exit-multiple terminal value of 87,106.2M is materially higher than the perpetuity value of 52,909.6M, because the 9.0x exit multiple is anchored to a peer group currently trading at cycle-elevated valuations. Selecting the

− The price target is sensitive to both the WACC and the terminal growth rate — unavoidably so, with 68% of enterprise value sitting in the terminal period. The table below shows the implied fair value per share across combinations of these two inputs; the base case is the center cell, at the 11.48% WACC derived in 4.1 and the 2.5% terminal growth rate, producing $51.75.

− **WACC × Terminal Growth Rate → DCF Fair Value (Base Case)**

− | WACC \ TGR | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |

− |---|---|---|---|---|---|

− | 10.48% | 53.6 | 56.0 | 58.8 | 62.0 | 65.6 |

− | 10.98% | 50.5 | 52.6 | 55.1 | 57.8 | 60.9 |

− | **11.48%** | **47.7** | **49.6** | **51.7** | **54.1** | **56.8** |

− | 11.98% | 45.2 | 46.9 | 48.8 | 50.9 | 53.2 |

− | 12.48% | 42.9 | 44.4 | 46.1 | 48.0 | 50.0 |

− The striking feature of this grid is not the range within it but the distance of the entire grid from the market. Across a full percentage point of WACC in either direction and a two-percentage-point span of terminal growth, the fair value moves within a band whose most generous corner — the lowest discount rate paired with the highest terminal growth — remains far below the current share price of

− Because the terminal-method choice in 4.2.3 carries so much weight, the same grid is shown under the exit-multiple method as a cross-check. This is what the valuation becomes if the reader rejects the perpetuity discipline and instead assumes the business sells in Year 5 at a peer-anchored multiple:

− **WACC × Exit EV/EBITDA Multiple → DCF Fair Value (Cross-Check)**

− | WACC \ Exit EV/EBITDA | 7.0x | 8.0x | 9.0x | 10.0x | 11.0x |

− |---|---|---|---|---|---|

− | 10.48% | 64.9 | 72.0 | 79.1 | 86.2 | 93.3 |

− | 10.98% | 63.5 | 70.5 | 77.4 | 84.4 | 91.3 |

− | **11.48%** | **62.2** | **69.0** | **75.8** | **82.6** | **89.4** |

− | 11.98% | 60.9 | 67.5 | 74.2 | 80.9 | 87.5 |

− | 12.48% | 59.6 | 66.1 | 72.7 | 79.2 | 85.7 |

− The cross-check raises fair value meaningfully at every node — that is the arithmetic of capitalizing terminal EBITDA at peer multiples rather than at the rate implied by an 11.48% discount rate — yet even its most aggressive corner, the lowest WACC against the richest exit multiple in the peer range, still sits far below $172.97. The conclusion of the sensitivity work is therefore robust to the m

− *Source for all tables in this section: approved valuation assumptions as written to the Valuation sheet; every figure traceable via lineage.json.*

− The peer set comprises four listed copper producers with Americas-weighted asset bases: Freeport-McMoRan, Teck Resources, Hudbay Minerals and Capstone Copper. Freeport-McMoRan is the anchor comparison — the only other large-capitalization, copper-dominant producer reporting under US GAAP on a 10-K, which makes it the single peer against which Southern Copper Corporation's margins and returns can b

− The set's limitations need to be stated as plainly as its logic. Three of the four peers — Teck, Hudbay and Capstone — report under IFRS while Southern Copper Corporation and Freeport report under US GAAP, and the differences are not cosmetic in FY2025: both Hudbay and Capstone booked impairment reversals into operating income that US GAAP prohibits outright, and all three IFRS reporters classify

− | Freeport-McMoRan Inc. | FCX | NYSE | 10-K | US GAAP | December | Cleanest comp by scale and standard; large noncontrolling interests depress all attributable-income metrics (5.7, C006) |

− | Teck Resources Limited | TECK | TSX / NYSE | 40-F | IFRS | December | CAD reporter, USD figures translated; printed net-cash position excludes QB partner advances (5.7, C002/C003) |

− | Hudbay Minerals Inc. | HBM | TSX / NYSE | 40-F | IFRS | December | FY2025 operating income includes a material IFRS impairment reversal (5.7, C004) |

− | Capstone Copper Corp. | CMMC | TSX (trades as CS) | Annual FS (SEDAR+) | IFRS | December | IFRS, SEDAR+ filer; FY2025 includes an impairment reversal and the Mantoverde ramp-up base effect (5.7, C004) |

− | Metric | Southern Copper Corporation | Freeport-McMoRan Inc. | Teck Resources Limited | Hudbay Minerals Inc. | Capstone Copper Corp. |

− | Revenue ($M) | 13,420.0M | 25,915.0M | 7,694.9Mᶠ | 2,211.0Mᶠ | 2,359.9Mᶠ |

− | Gross Margin | 60.1% | 28.2% | 24.7%ᶠ | 33.6%ᶠ | —ᶠ |

− | EBITDA Margin | 58.6% | 33.8%ᶜ | 37.2%ᶠᶜ | 61.3%ᶠ | 50.3%ᶠ |

− | EBIT Margin | 52.2% | 25.2% | 20.9%ᶠ | 41.5%ᶠ | 29.9%ᶠ |

− | Net Margin | 32.3% | 8.5% | 13.0%ᶠ | 25.7%ᶠ | 13.4%ᶠ |

− | FCF Margin | 25.5% | 4.3% | -3.3%ᶠ | 10.9%ᶠ | 7.0%ᶠ |

− *Flag legend (applies to all tables in this section): ᶠ = IFRS-reported (Teck additionally CAD-translated) — directional only; ᵐ = market-sourced; ᶜ = computed from filing components. Source: Freeport-McMoRan Inc. (10-K, FY2025); Teck Resources Limited (40-F, FY2025); Hudbay Minerals Inc. (40-F, FY2025); Capstone Copper Corp. (annual financial statements via SEDAR+, FY2025).*

− The cross-sectional finding is unambiguous: Southern Copper Corporation sits at or near the top of the set on every profitability line, and the gap is mostly genuine. The structural drivers are the ones established in Sections 1 and 3 — high-grade, long-life Peruvian and Mexican ore bodies, vertical integration through smelting and refining, and a by-product engine (zinc, molybdenum, silver) that

− Three accounting artifacts qualify, but do not reverse, that conclusion — each developed fully in 5.7. First, the gross margin row is the least comparable line in the table: Southern Copper Corporation prints no gross profit subtotal and presents cost of sales exclusive of depreciation, so its computed gross margin is structurally flattered against Freeport (whose cost of sales includes DD&A) and

− | Metric | Southern Copper Corporation | Freeport-McMoRan Inc. | Teck Resources Limited | Hudbay Minerals Inc. | Capstone Copper Corp. |

− | ROIC | 34.7% | 11.7%ᶜ | 5.8%ᶠᶜ | 15.4%ᶠᶜ | 11.2%ᶠᶜ |

− | ROE | 42.9% | 11.7% | 5.6%ᶠ | 17.6%ᶠ | 9.3%ᶠ |

− | ROA | 21.6% | 3.8% | 3.1%ᶠ | 9.1%ᶠ | 4.4%ᶠ |

− | Asset Turnover | 0.63x | 0.45x | 0.24xᶠ | 0.36xᶠ | 0.33xᶠ |

− The returns table is where the peer comparison stops being close. Southern Copper Corporation's ROIC of 34.7% is a multiple of every peer's, runs roughly three times the 11.48% cost of capital derived in Section 4, and — the more durable observation — its FY2023 cyclical trough ROIC of 20.8% still exceeds the FY2025 ROIC of every company in this set. No peer earns at its cycle peak what Southern C

− Separating signal from artifact: the gap is overwhelmingly an operating phenomenon, but each peer's figure needs an adjustment in the reader's head. Hudbay's and Capstone's ROE, ROA and ROIC all carry the FY2025 impairment-reversal credits in their numerators — exclude those non-recurring, non-cash items and their returns fall further behind. Freeport's ROE and ROA are computed on income attributa

− | Metric | Southern Copper Corporation | Freeport-McMoRan Inc. | Teck Resources Limited | Hudbay Minerals Inc. | Capstone Copper Corp. |

− | Net Debt / EBITDA | 0.3x | 0.6xᶜ | -0.3xᶠᶜ | 0.3xᶠᶜ | 0.6xᶠᶜ |

− | Total Debt / Equity | 0.6x | 0.5x | 0.2xᶠ | 0.3xᶠ | 0.3xᶠ |

− | Interest Coverage | 16.8x | 17.7x | 2.5xᶠ | 15.1xᶠ | 4.8xᶠ |

− | Current Ratio | 3.9x | 2.3x | 2.5xᶠ | 0.9xᶠ | 1.2xᶠ |

− | FCF Margin | 25.5% | 4.3% | -3.3%ᶠ | 10.9%ᶠ | 7.0%ᶠ |

− The whole set is conservatively levered by mining standards, so the differentiation lies in the details — and the table's most eye-catching figure is also its least reliable. Teck's printed net-cash position rests on a total-debt definition that excludes CAD 4.7B of interest-bearing advances from its Quebrada Blanca JV partners; treated as the economic financing obligations they are, Teck flips fr

− | Metric | Southern Copper Corporation | Freeport-McMoRan Inc. | Teck Resources Limited | Hudbay Minerals Inc. | Capstone Copper Corp. |

− | EV/EBITDA | 18.5x | 11.0xᵐ | 10.3xᵐᶠ | 7.8xᵐ | 6.8xᵐ |

− | P/E | 33.0x | 41.7xᵐ | 30.5xᶠᵐ | 17.8xᶠᵐ | 23.4xᶠᵐ |

− | FCF Yield | 2.4% | 1.2%ᵐ | -0.9%ᵐᶠ | 2.4%ᵐᶠ | 2.3%ᵐᶠ |

− *All peer valuation multiples combine market prices as of the June 5, 2026 close with FY2025 filing fundamentals. June 5 was a sharply negative session for the entire copper group, so these multiples are depressed relative to the prior day and volatile; they are subject to change with price movements.*

− **Historical: Southern Copper Corporation EV/EBITDA — today's share price applied to each year's capital structure, against that year's EBITDA**

− | 20.0x | 26.4x | 28.4x | 22.2x | 18.5x |

− Southern Copper Corporation is the expensive name in the group on enterprise value — its EV/EBITDA of 18.5x stands at a clear premium to every peer — and the preceding subsections explain why the market pays it: the widest margins, the highest returns on capital, the strongest balance sheet, and the only ROIC profile that clears the cost of capital at the bottom of the cycle. The P/E column, by co

− The historical table reframes the premium as cyclical risk. Period-end historical multiples are not computed in the workbook, so the table applies today's share price to each year's capital structure (that year's share count and net debt) against that year's EBITDA — a stress-test framing rather than a price history. Read that way: today's price represents 18.5x the record FY2025 EBITDA, but 28.4x

− | Metric | Southern Copper Corporation | Freeport-McMoRan Inc. | Teck Resources Limited | Hudbay Minerals Inc. | Capstone Copper Corp. |

− | Days Sales Outstanding | 43 days | 14 days | 87 daysᶠ | 62 daysᶠ | 55 daysᶠ |

− | Days Inventory Outstanding | 72 days | 147 days | 124 daysᶠ | 50 daysᶠ | 55 daysᶠ |

− | Days Payables Outstanding | 50 days | 90 days | 153 daysᶠ | 85 daysᶠ | 101 daysᶠ |

− | Cash Conversion Cycle | 64 days | 71 days | 57 daysᶠ | 27 daysᶠ | 8 daysᶠ |

− | CapEx / Revenue | 9.9% | 17.3% | 17.1%ᶠ | 21.1%ᶠ | 22.0%ᶠ |

− The working-capital rows should be read as approximate, not as a ranking — the definitional ground shifts under every column. Southern Copper Corporation's inventory and payables days are computed on cost of sales exclusive of depreciation, which shortens its apparent days relative to peers; several peers' payables lines bundle accrued and other liabilities, which stretches their apparent DPO and

− The CapEx/Revenue row is the analytically loaded one. Southern Copper Corporation spent the least of the set relative to revenue in FY2025 — roughly half the intensity of the heaviest spenders — while simultaneously posting the set's highest returns on capital. That combination is the financial signature of an installed, long-life, high-grade asset base that does not need heavy reinvestment to hol

− The following material comparability issues, identified in the peer-researcher's reconciliation work, condition every cross-sectional table in this section. None of them, individually or in aggregate, reverses the section's central finding — Southern Copper Corporation's profitability and returns lead is genuine — but several of them change the magnitude of specific gaps, and two of them change th

− **1. Accounting-standard split (Teck, Hudbay, Capstone — all metrics).** Teck, Hudbay and Capstone report under IFRS; Southern Copper Corporation and Freeport-McMoRan report under US GAAP. Three differences bind in FY2025: IFRS permits reversal of prior impairments into operating income, which US GAAP prohibits and which both Hudbay and Capstone recognized this year; IFRS cash-flow classification

− **2. Teck currency translation (revenue, EV-based and per-share multiples).** Teck reports in Canadian dollars. Its revenue was translated at the FY2025 Bank of Canada average rate of 1.3978 CAD per USD; balance-sheet items used in enterprise value were translated at the year-end closing rate of 1.3706; the cross-currency market-cap bridges use the June 5, 2026 spot rate. Teck's margins and ratios

− **3. Teck's debt definition and the QB partner advances (net debt, leverage).** Teck's balance sheet carries CAD 4,745M of interest-bearing advances from its Quebrada Blanca JV partners (Sumitomo group), plus lease liabilities, neither of which is included in the total-debt definition behind the net-cash figure shown in 5.4. Treating the QB advances as the economic debt they resemble would flip Te

− **4. Hudbay and Capstone impairment reversals (margins, returns, earnings multiples).** FY2025 operating income includes IFRS impairment reversals of $322.3M at Hudbay (Copper World/Nevada-related assets) and $209.5M at Capstone (mineral properties) — non-cash, non-recurring credits unavailable under US GAAP. As documented in the peer-researcher's figure notes, Hudbay's EBIT margin excluding the r

− **5. IFRS interest-paid classification (operating and free cash flow).** Teck, Hudbay and Capstone all classify interest paid within financing activities, whereas Southern Copper Corporation and Freeport deduct it inside operating cash flow. The IFRS peers' OCF, FCF margins and FCF yields are therefore structurally overstated relative to the two GAAP filers by the amount of their cash interest; Te

− **6. Freeport's noncontrolling interests (net margin, ROE, ROA, P/E).** Roughly 47% of Freeport's consolidated FY2025 net income accrues to noncontrolling interests — principally the Indonesian ownership of PT Freeport Indonesia and the Cerro Verde minorities — so attributable-income metrics computed against consolidated revenue, assets and market value look structurally weak. Southern Copper Corp

− Three further informational items qualify specific rows. Freeport's consolidated debt includes subsidiary-level borrowings non-recourse to the parent, modestly overstating its parent-level leverage in 5.4. Cost-of-sales presentation differs across the entire set — Southern Copper Corporation prints no gross-profit subtotal and excludes depreciation from cost of sales — so the gross margin row in 5

− ---

− The price target is built from four independent methods — a three-scenario DCF, relative P/E, relative EV/EBITDA, and an FCF-yield capitalization — combined as an equal-weighted average (25% each) within each scenario. The Bear, Base and Bull composites are each the simple mean of the four methods under that scenario's assumptions; $95.50 is the central reference and the Bear and Bull composites b

− Each method earns its quarter of the weight by covering a blind spot in the others. The DCF is the only method that prices what Sections 2 through 4 actually documented — the country-loaded discount rate, the structurally high effective tax burden with no foreign-tax-credit relief assumed, the enacted Mexican royalty, and a growth pipeline whose largest projects are legally or socially obstructed.

− | DCF (3 scenarios) | 25% | Intrinsic value; the only method pricing the country risk, fiscal burden and blocked pipeline directly; most sensitive to terminal assumptions |

− | P/E Relative | 25% | Earnings-based market anchor; least reliable in this peer set, where minority leakage and impairment reversals distort peer denominators |

− | EV/EBITDA Relative | 25% | Capital-structure-neutral; the sector's standard currency and the cleanest cross-company line in Section 5 |

− | FCF Yield | 25% | Cash-generation quality; tests the price an owner pays per dollar of distributable cash |

− | Scenario | Fair Value / Share | Upside / Downside vs. Current Price ($172.97, June 5, 2026 close) |

− | Bear | $44.83 | Far below the market price — the deepest discount of any cell in this report |

− | Base | $51.75 | -70.1% |

− | Bull | $59.86 | Still a fraction of the market price — the bull case does not close the gap |

− The result is stark and should be stated without hedging: the base-case DCF of $51.75 sits -70.1% below the market, and the relevant sanity check fails in the opposite direction from the usual one. The question is normally whether the current price holds above the bear-case floor; here the current price of $172.97 stands far above the *bull* case of $59.86. The spread between Bear and Bull — $44.8

− | Method | Company Metric (FY2025) | Target Multiple (Base) | Implied Price (Base) |

− | P/E × EPS | $5.24 | 22.0x | $115.28 |

− | EV/EBITDA × EBITDA | 7,870.1M | 12.0x | $111.28 |

− | EV/EBIT × EBIT | 7,001.7M | 13.5x | — |

− | P/FCF × FCF | 3,426.8M | 25.0x | — |

− | FCF Yield → Price | 3,426.8M | — | $103.70 |

− Three of these methods — P/E, EV/EBITDA and FCF yield — carry into the composite alongside the DCF; the EV/EBIT and P/FCF targets serve as corroborating cross-checks on the multiple levels rather than as composite inputs. The anchoring deserves emphasis because every target here is set *generously*. The 12.0x EV/EBITDA target stands above the trading multiple of every peer in the Section 5 set — F

− | DCF | $44.83 | $51.75 | $59.86 |

− | P/E Relative | $97.99 | $115.28 | $132.57 |

− | EV/EBITDA Relative | $94.13 | $111.28 | $128.43 |

− | FCF Yield | $90.18 | $103.70 | $122.00 |

− | **Composite Fair Value** | **$81.78** | **$95.50** | **$110.72** |

− *Each scenario's composite is the equal-weighted average of the four methods (25% each). The Base case is the central reference; Bear and Bull bound the range.*

− **Composite Fair Value (Base):** $95.50

− **Current Price:** $172.97 | **Implied Upside / Downside:** -44.8%

− The dispersion in this matrix runs across methods, not across scenarios, and that is the analytically important reading. Within any single method, the Bear-to-Bull spread is contained — the operating assumptions move the answer, but not dramatically. Between methods, the gap is wide: the DCF column sits at roughly half the relative-value columns. The driver has a name. The relative methods import

− What the matrix removes all doubt about is the relationship to the market. Not one of the fifteen cells reaches the current price. The single most generous figure in the table — the bull-case P/E value, a premium earnings multiple on a bull operating scenario — still sits well below $172.97. When the most aggressive defensible combination of method and scenario cannot justify the quote, the valuat

− The sensitivity of the base-case DCF fair value to WACC and terminal growth is shown below; the bolded row is the base-case discount rate derived in Section 4.1. The exercise of locating the current share price of $172.97 in this grid fails by construction: the price is not implied at any node. Even the most generous corner — the lowest discount rate in the grid paired with the highest terminal gr

− | WACC \ TGR | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |

− |---|---|---|---|---|---|

− | 10.48% | 53.6 | 56.0 | 58.8 | 62.0 | 65.6 |

− | 10.98% | 50.5 | 52.6 | 55.1 | 57.8 | 60.9 |

− | **11.48%** | **47.7** | **49.6** | **51.7** | **54.1** | **56.8** |

− | 11.98% | 45.2 | 46.9 | 48.8 | 50.9 | 53.2 |

− | 12.48% | 42.9 | 44.4 | 46.1 | 48.0 | 50.0 |

− **Rating:** SELL | **12-Month Price Target:** $95.50 | **Conviction:** Medium

− The recommendation is SELL with a target of $95.50 — the base-case composite — inside a Bear-to-Bull fair-value range of $81.78 to $110.72, against a market price of $172.97. The thesis in one paragraph: this is a genuinely excellent business trading at a price that requires the buyer to ignore four documented defects, each of which transfers value away from the minority holder who pays that price

− **First — minority value leakage through the controlling shareholder (forensic RED flag).** The footnotes disclose a pervasive web of related-party transactions with Grupo México and Larrea-family entities — services, rail freight, construction, and long-dated captive power contracts with parent-owned generators whose pricing is not independently benchmarked in the filing. Related-party purchasing

− Conviction is Medium, not High, for one honest reason: the scarcity premium has no arbitrage mechanism and no expiry date. A float this small in the sector's flagship pure-play can stay expensive indefinitely, and a sharp copper rally would widen, not close, the gap this report measures. The rating says the price is wrong; the conviction level concedes that nothing forces it to correct on a twelve

− **Key Catalyst:** Any event that converts scarcity into supply — a Grupo México secondary placement, issuance-funded stock dividends once treasury shares are exhausted, or index/flow changes that reprice the float — removing the principal prop under the premium.

− **Key Risk:** The premium persists or expands — a copper-price surge on deficit conditions lifts cycle earnings and the scarcity bid simultaneously, sustaining the market price far above any cash-flow-derived fair value for years.

− | 1 | Price–value convergence | Share price falls below the bull composite of $110.72 → revisit toward HOLD; approaches the base composite of $95.50 → consider upgrade to BUY | Any point over 12 months |

− | 2 | Tía María delivers | First commercial cathode production declared on or ahead of the targeted 2027 start-up, with ramp metrics confirming the volume case | 12–24 months |

− | 3 | Volume-led earnings beat | FY2026 reported EBITDA exceeds the base-case Year-1 projection of 7,823.9M, driven by production volume rather than realized price | Next four quarters |

− | 4 | Litigation tail removed | Final, non-appealable resolution of the labor-shares case with no share delivery and no class-wide valuation precedent | 6–18 months |

− | 5 | Mexican fiscal relief | Next 10-K resolves the royalty contradiction in favor of the lower stated rate, via documented repeal or reversal of the enacted increase | Next filing cycle (~12 months) |

− | 1 | Float event | Grupo México secondary placement, or stock dividends funded by new issuance after treasury depletion → scarcity premium unwinds; raise conviction to High, target unchanged or cut toward $81.78 | Any time |

− | 2 | Labor-shares delivery executed | Appellate or constitutional courts uphold physical delivery of investment shares, or the one-for-one valuation precedent extends to the broader class | 6–12 months |

− | 3 | Copper-cycle rollover | FY2026 reported EBITDA falls below the FY2024 level of 6,400.6M → bear composite $81.78 becomes the working target | Next four quarters |

− | 4 | Tía María stoppage | Renewed community or political suspension of construction in Arequipa as Peru's post-election governing direction clarifies | 12 months |

− | 5 | Related-party leakage accelerates | FY2026 related-party purchases again grow faster than revenue, or affiliate payables expand further without independent benchmarking of captive power pricing | Next annual filing |

− *Format: metric breaches threshold within the stated timeframe → revise rating or target as indicated.*

− *Source for all tables in this section: Valuation sheet of the verified workbook (approved assumptions); peer anchors per Section 5; every figure traceable via lineage.json.*

− # Section 7 — Quarterly Update: Q1 2026

− *This quarterly update assumes the reader has Sections 1–6. Quarter notation: Q1 2026 = the quarter under review; comparisons are year-over-year (vs Q1 2025) and sequential (vs Q4 2025).*

− ---

− **REDUCE**

− | **Action** | REDUCE |

− | **Reason** | Q1 2026 revenue of $4,251.4M (+36.2% YoY) was entirely price-driven — copper sales volume fell 4.9% and mined copper production fell 4.0%, while cash cost before by-product credits rose 12.3% to $2.31/lb — confirming the SELL thesis that earnings are a commodity-price windfall on a flat-to-declining volume base; the quarter's strength offers exit liquidity. |

− | **Thesis intact?** | YES — the SELL thesis (price far above composite fair value) was confirmed: every driver of the 66.7% net income jump was a metal price (LME copper +37.5%, silver +157.9%, molybdenum +24.2%, zinc +14.0%), none was volume or cost improvement, and royalty/tax leakage grew faster than sales (Mexican royalty +75.1% YoY). |

− | **Trigger to revisit** | Copper settling materially above the $5.59/lb provisional price on the 236.5 million lbs open at March 31, 2026 (each $0.10/lb = $89.2M of net income per the 10-Q sensitivity table), combined with a copper volume recovery above the 511.0M lbs sold in Q1 2026, would force a fair value re-check. |

− | Metric | Q1 2026 | Q1 2025 | YoY Δ | Q4 2025 | QoQ Δ |

− | **Revenue ($M)** | 4,251.4M | 3,121.9M | +36.2% | 3,869.8M | +9.9% |

− | **Gross Profit ($M)** | 2,752.6M | 1,802.7M | +52.7% | 2,398.3M | +14.8% |

− | Gross Margin | 64.7% | 57.7% | +7.0 pp | 62.0% | +2.8 pp |

− | **EBITDA ($M)** | 2,706.1M | 1,759.3M | +53.8% | 2,341.1M | +15.6% |

− | EBITDA Margin | 63.7% | 56.4% | +7.3 pp | 60.5% | +3.2 pp |

− | **EBIT ($M)** | 2,480.4M | 1,535.5M | +61.5% | 2,110.4M | +17.5% |

− | EBIT Margin | 58.3% | 49.2% | +9.2 pp | 54.5% | +3.8 pp |

− | **Net Income ($M)** | 1,576.9M | 945.9M | +66.7% | 1,307.9M | +20.6% |

− | Net Margin | 37.1% | 30.3% | +6.8 pp | 33.8% | +3.3 pp |

− | **Diluted EPS** | $1.92 | $1.19 | +61.3% | $1.53 | +25.5% |

− Computation conventions for this subsection: YoY Δ = (CQ − PYSQ) / |PYSQ| × 100, e.g. Revenue (4,251.4 − 3,121.9) / 3,121.9 × 100 = +36.2%. QoQ Δ = (CQ − PQ) / |PQ| × 100, e.g. Revenue (4,251.4 − 3,869.8) / 3,869.8 × 100 = +9.9%. Margins = line item / Revenue × 100, e.g. Gross Margin CQ = 2,752.6 / 4,251.4 × 100 = 64.7%. Margin deltas in percentage points (pp). EPS deltas computed on the data-pack

− *Source: Southern Copper Corporation Form 10-Q for the quarterly period ended March 31, 2026 — Condensed Consolidated Statements of Earnings (10-Q p. 4).*

− **Revenue:** The +36.2% YoY increase to $4,251.4M was entirely price- and by-product-driven: LME copper averaged $5.83/lb vs $4.24 (+37.5%), silver $83.33/oz vs $32.31 (+157.9%), molybdenum $25.37/lb vs $20.43 (+24.2%) and zinc +14.0%, with silver volume +11.6% and zinc volume +16.4%, while copper sales volume fell 4.9% to 511.0M lbs and molybdenum volume fell 2.8% (10-Q pp. 39, 46). Mined copper

− **Cost and margin:** COGS rose to $1,498.8M in Q1 2026 from $1,319.2M in Q1 2025 (+13.6%), driven by a $28.7M Sonora "solidarity contribution," +$20.7M labor, +$18.0M workers' participation, +$17.0M leachable material and +$94.9M higher volume/cost of third-party metal purchases at the Mexican open-pit segment (10-Q pp. 48, 51). D&A was $225.7M vs $223.8M (+0.8%). Operating cash cost before by-pro

− **Below the line:** Interest expense was $104.5M (vs $102.3M PYSQ); non-operating net expense fell to $36.3M from $57.0M, partly because the Q1 2025 base included a $9.9M Tia Maria asset impairment, while equity earnings of affiliate (Coimolache gold) jumped to $28.7M from $3.3M and the effective tax rate rose to 36.5% from 36.0% (10-Q pp. 4, 48). EPS of $1.92 rose +$0.73 (+61.3%) YoY on data-pack

− | Metric | Q1 2026 | Q1 2025 | YoY Δ | Q4 2025 | QoQ Δ |

− | Cash ($M) | 4,915.4M | 4,116.3M | +19.4% | 4,304.6M | +14.2% |

− | Net Debt ($M) | 1,836.5M | 3,130.7M | −41.3% (a) | 2,446.1M | −24.9% (a) |

− | Net Debt / LTM EBITDA | 0.2× | — | — | — | — |

− | Total Assets ($M) | 21,929.9M | 19,791.2M | +10.8% | 21,381.4M | +2.6% |

− | Equity ($M) | 11,787.6M | 9,568.3M | +23.2% | 11,038.1M | +6.8% |

− | OCF ($M) | 1,694.5M | 721.4M | +134.9% | 1,494.3M | +13.4% |

− | CapEx ($M) | -441.9M | -317.8M | −39.1% (b) | -422.6M | −4.6% (b) |

− | FCF ($M) | 1,252.6M | 403.6M | +210.4% | 1,071.7M | +16.9% |

− | Dividends Paid ($M) | -819.2M | -553.3M | −48.1% (b) | -731.1M | −12.1% (b) |

− Computation conventions for this subsection: YoY Δ = (CQ − PYSQ) / |PYSQ| × 100, e.g. Cash (4,915.4 − 4,116.3) / 4,116.3 × 100 = +19.4%. QoQ Δ = (CQ − PQ) / |PQ| × 100, e.g. Cash (4,915.4 − 4,304.6) / 4,304.6 × 100 = +14.2%.

− (a) Net Debt deltas and the leverage ratio are verified directly against the 10-Q: long-term debt $6,751.9M − cash and cash equivalents $4,915.4M = $1,836.5M (10-Q p. 6), consistent with the Excel net-debt convention (total debt − cash) verified against Q4 2025 ($6,750.7M − $4,304.6M = $2,446.1M). YoY: (1,836.5 − 3,130.7) / 3,130.7 × 100 = −41.3%; QoQ: (1,836.5 − 2,446.1) / 2,446.1 × 100 = −24.9%.

− (b) CapEx and dividends are stored as negative outflows; the deltas show the change in the signed value per the formula (a more negative number = a larger outflow): CapEx outflow grew 39.1% YoY, dividend outflow grew 48.1% YoY.

− *Net Debt / LTM EBITDA: LTM EBITDA = Q2 2025 $1,793.2M + Q3 2025 $1,976.6M + Q4 2025 $2,341.1M + Q1 2026 $2,706.1M = $8,817.0M (Q2/Q3 2025 standalone EBITDA taken from the data pack's source workbook, Data sheet row 20, cols 19–20, as the section-7 data pack carries only CQ/PYSQ/PQ). Net Debt $1,836.5M / LTM EBITDA $8,817.0M = 0.2×.*

− *Source: Form 10-Q for the quarterly period ended March 31, 2026 — Condensed Consolidated Balance Sheets (10-Q p. 6) and Condensed Consolidated Statements of Cash Flows (10-Q p. 7).*

− **Balance sheet note:** Cash rose $610.8M QoQ to $4,915.4M with no debt issuance this quarter (Q1 2025 had included $993.8M of debt proceeds), long-term debt essentially flat at $6,751.9M vs $6,750.7M, and short-term investments drawn down $170.5M (10-Q pp. 6–7, 9). Accrued income taxes fell from $634.4M to $460.5M on tax payments at the Peruvian and Mexican operations, and treasury stock fell $16

− **Cash flow note:** FCF conversion = FCF / Net Income = 1,252.6 / 1,576.9 × 100 = 79.4%, with net income equal to 93.1% of OCF — cash flow tracked earnings closely this quarter. The working-capital drag was only $56.1M vs $504.9M in Q1 2025, because the receivables build was just $65.1M (vs $358.6M) and payables/accrued liabilities fell $109.9M on income tax payments (10-Q pp. 7, 52–53).

− **Footnote 1 — Description of the Business (10-Q p. 9)**

− Grupo México, through wholly-owned subsidiary Americas Mining Corporation, owned 88.9% of SCC's capital stock at March 31, 2026; accounting policies are unchanged from the 2025 10-K. Confirmed unchanged vs. Q1 2025 in substance (ownership was also 88.9% range; policies identical) (10-Q p. 9). Significance: the controlled-company structure that drives the related-party risk in the thesis is fully i

− **Footnote 2 — Short-Term Investments (10-Q pp. 9–10)**

− Trading securities of $434.0M (weighted average rate 3.9%) plus $0.1M available-for-sale, total $434.1M vs $604.6M at December 31, 2025 — a $170.5M drawdown that funded part of the quarter's cash build. Interest earned on trading securities was $15.3M vs $9.6M in Q1 2025 (10-Q p. 10). No analytical concern; portfolio remains plain-vanilla public bonds.

− **Footnote 3 — Inventories (10-Q p. 10)**

− Current inventory fell to $959.2M from $1,058.1M at year-end 2025, mainly work-in-process ($263.3M vs $327.9M); long-term leach-pad inventory was $1,116.0M vs $1,114.5M. Leaching costs capitalized were $55.9M vs $69.2M in Q1 2025, while leaching inventory recognized in cost of sales rose to $69.3M from $58.0M — leach-pad inventory is now being consumed slightly faster than it is built, a modest he

− **Footnote 4 — Income Taxes (10-Q pp. 10–11)**

− Total provision $891.0M vs $532.8M (+67.2%); effective tax rate 36.5% vs 36.0%. Inside it: Mexican mining royalty $83.0M vs $47.4M (+75.1%), Peruvian royalty $33.5M vs $15.1M, Peruvian special mining tax $43.8M vs $25.0M (combined Peruvian royalty+SMT accrual $77.3M vs $40.1M). The filing attributes the increases to higher taxable mining profits on higher metal prices; it does not disclose the Mex

− **Footnote 5 — Related Party Transactions (10-Q pp. 11–15)**

− See the mandatory related-party block below — fully documented with CQ and comparative dollar amounts.

− **Footnote 6 — Leases (10-Q pp. 15–16)**

− Operating lease expense $29.4M vs $28.8M in Q1 2025, essentially all in cost of sales; weighted average remaining term ~6 years, discount rate 4.93%; total undiscounted lease payments $759.1M, present value $649.7M (10-Q pp. 15–16). Confirmed substantially unchanged vs. Q1 2025 (10-Q p. 15). Note the lessor overlap with related parties (power facilities — see Note 5).

− **Footnote 7 — Asset Retirement Obligation (10-Q pp. 15–16)**

− ARO rose to $485.0M from $471.1M at January 1, 2026 (+$9.2M changes in estimates, +$5.8M accretion, −$1.1M payments), vs $532.9M a year earlier; Peruvian closure guarantees provided total $110.3M (26% pledged Lima office complex, 74% stand-by letter of credit). The December 2025 Mexican ARO reduction ($106.7M obligation decrease, $57.9M credited to COGS) does not recur this quarter; Law 31347 prog

− **Footnote 8 — Benefit Plans (10-Q pp. 16–17)**

− Net periodic pension benefit of $(0.8)M vs $(0.2)M; the Expatriate Plan termination (effective December 1, 2025, settled via annuity purchase) is expected to complete by April 30, 2026 with no material impact; retiree health care cost $0.6M vs $0.5M (10-Q pp. 16–17). Confirmed immaterial and unchanged vs. Q1 2025 except the disclosed plan termination (10-Q p. 16).

− **Footnote 9 — Commitments and Contingencies (10-Q pp. 17–27)**

− Environmental capital spend $45.5M vs $42.0M in Q1 2025 (10-Q p. 17). The litigation and commitment content is covered in the dedicated contingencies block below. Two quarter-specific items: (i) the Board approved in January 2026 a "voluntary and solidarity contribution" of up to MXN 1.5 billion (~$87M) for Sonora state programs, of which MXN 500M (~$29M) was paid to the Mexican Institute of Socia

− **Footnote 10 — Stockholders' Equity (10-Q pp. 28–30)**

− Treasury held 58,531,045 SCC shares at March 31, 2026 vs 65,497,804 at year-end; the February 27, 2026 stock dividend of 0.0085 shares per share consumed 6,961,959 treasury shares ($172.8M). Treasury also holds 51,328,315 Grupo México shares ($418.0M) — SCC capital parked in parent stock. Directors' Stock Award Plan expense $1.0M vs $0.3M; employee stock purchase plans (2018 plan at MXN 37.89 and

− **Footnote 11 — Fair Value Measurement (10-Q pp. 31–33)**

− Long-term debt carrying value $6,751.9M vs fair value $6,800.7M (Level 1 except $51.2M Yankee bonds at Level 2). Provisionally-priced receivables (embedded derivatives, Level 1): copper $1,248.2M, molybdenum $425.4M, zinc $46.5M — $1,720.1M of receivables marked to forward prices, vs $1,761.6M at December 31, 2025 (10-Q p. 32). Significance: nearly a third of total assets' current receivables ride

− **Footnote 12 — Revenue (10-Q pp. 33–35)**

− Geographic mix: Mexico $1,081.2M, U.S. $584.7M, Switzerland $472.2M, China $330.7M, all up YoY. By product: copper $2,982.6M (70.2% of sales vs 77.9%), silver $531.5M (12.5% vs 5.7%), molybdenum $445.5M (10.5%), zinc $145.0M (3.4%). Open provisionally priced sales at March 31, 2026: copper 236.5M lbs at $5.59/lb (settling April–August 2026), molybdenum 16.5M lbs at $26.50/lb, zinc 47.9M lbs at $1.

− **Footnote 13 — Segment and Related Information (10-Q pp. 35–36)**

− Operating income: Mexican open-pit $1,427.5M (vs $965.5M), Peruvian operations $923.7M (vs $561.5M), IMMSA $140.8M (vs $18.4M — +663.4% on silver/zinc prices). Peruvian copper sales volume fell 15.6% while Mexican open-pit rose 3.6% (10-Q pp. 36, 49). Significance: the Peruvian volume decline (grade-driven at Toquepala/Cuajone) is the quarter's clearest operational negative.

− **Footnote 14 — Earnings Per Share (10-Q p. 37)**

− Basic and diluted EPS $1.92 vs $1.15 as restated; Q1 2025 EPS was retroactively adjusted for the stock dividends of May 19, 2025 (0.0099), September 4, 2025 (0.0101), November 28, 2025 (0.0085) and February 27, 2026 (0.0085 shares per share). Weighted average shares 821.7M vs 821.6M. Changed vs. PYSQ presentation only through the retroactive share adjustment; methodology unchanged (10-Q p. 37). Th

− **Footnote 15 — Subsequent Events (10-Q p. 37)**

− Covered in the subsequent events block below.

− **Related-party transactions (10-Q pp. 11–15)**

− All amounts in $M, Q1 2026 vs Q1 2025 unless noted. Purchases from Grupo México and affiliates totaled **$93.8 vs $106.2** (totals as printed in the 10-Q; the component lines below sum to $106.0, the remainder being minor affiliates/rounding in the filing's own table): MGE power purchases 51.3 vs 59.7; Parque Eólico de Fenicias power 10.7 vs 8.6; México Compañía Constructora (construction) 9.5 vs

− **Contingencies and litigation (10-Q pp. 17–27)**

− - *Peruvian labor shares (García Ataucuri)* (10-Q pp. 19–20): the most active matter. In execution stage on 10,501,857 investment shares. On December 22, 2025 the First Civil Court of Lima ordered physical delivery of 8,488,383 investment shares held by Compañía Minera Los Tolmos and instructed CAVALI to register them to plaintiffs; SCC appealed December 30, 2025. On February 11, 2026 the 9th Cons

− - *Tia Maria* (10-Q pp. 20–21): eight lawsuits pending (the newest, Arocena Canazas, served March 4, 2026 and answered March 18, 2026); the Gobierno Regional de Arequipa case was won at first instance on January 23, 2026 but appealed March 19, 2026; all others pending resolution; contingency not estimable. Construction progress 32.5% with $948M committed and start-up targeted Q3 2027 (10-Q p. 43).

− - *Pasto Grande tailings-dam demolition claim* (10-Q pp. 21–22): pending after the Superior Court reinstated the proceeding in 2023; no change this quarter; amount not estimable.

− - *Buenavista 2014 spill* (10-Q pp. 22–23): the 2018 dismissal of PROFEPA's criminal complaint remains under appeal; the 2023 SEMARNAT criminal complaint is outstanding; 3 collective actions, 40+ civil actions and several constitutional lawsuits remain pending, all unchanged ("remain in the same stage" as of March 31, 2026); the Company states none would be material individually or in aggregate.

− - *Labor* (10-Q pp. 23–24): Peruvian CBAs locked with all six unions, expiries 2027–2033, after signing payments of ~$62M (Q4 2024) and ~$6.3M (February 2025); San Martín strike termination order is under an amparo pending resolution; Taxco strike (since July 2007) pending at the Supreme Court with a non-material impairment recognized.

− - *Guaymas sulfuric acid spill* (10-Q p. 18): partial shutdown of the marine terminal storage/transport continues; SCC expects to restart in the future. Confirmed unchanged vs. Q1 2025 (10-Q p. 18).

− - *Michiquillay* (10-Q p. 25): $375.0M residual purchase price deferred three years under the April 2025 extension ($21.0M paid for the extension, plus $15M committed social investment); not a present obligation.

− - *2023 Mexican Mining Law amendments* (10-Q p. 19): still before the Supreme Court; the Company expects no negative impact.

− **Subsequent events (10-Q p. 37)**

− Two events disclosed: (1) President and CEO Oscar González Rocha passed away unexpectedly on April 7, 2026; on April 23, 2026 the Board appointed Leonardo Contreras Lerdo de Tejada as CEO (he signs this 10-Q, p. 65) — a leadership transition at a company already controlled 88.9% by Grupo México. (2) On April 23, 2026 the Board authorized a quarterly cash dividend of $1.00 per share plus a stock di

− - **The earnings record is pure price beta:** revenue +36.2% to $4,251.4M and net income +66.7% to $1,576.9M while copper sales volume fell 4.9% (511.0M lbs) and mined production fell 4.0% (508.3M lbs) on lower ore grades at Cuajone (−11.9%) and Toquepala (−8.4%) (10-Q pp. 39–40). The SELL thesis's core claim — that the market is capitalizing a commodity-price windfall, not growth — was confirmed,

− - **By-product dependence reached an extreme:** silver at $83.33/oz (+157.9%) became the top by-product at 12.5% of sales, flipping cash cost net of by-products from $0.77/lb to a credit of $(0.11)/lb even as gross cash cost rose 12.3% to $2.31/lb (10-Q pp. 41–42). Underlying cost inflation is running double digits and is currently masked by silver.

− - **Fiscal and quasi-fiscal leakage accelerated:** Mexican royalty accrual $83.0M (+75.1% YoY), Peruvian royalty + special mining tax $77.3M (vs $40.1M), ETR up to 36.5%, plus a discretionary $29M Sonora "solidarity contribution" paid in February 2026 out of an approved ~$87M, with $28.7M expensed in COGS this quarter (10-Q pp. 10–11, 27, 48). Government take is climbing faster than revenue.

− - **Peru labor-shares litigation turned, but is not closed:** a December 2025 order to physically deliver 8,488,383 investment shares was neutralized by the February 11, 2026 constitutional ruling and the February 24, 2026 suspension of transfers, but the defendant's appeal and the Superior Court's 2026 ruling are pending (10-Q pp. 19–20). The tail risk is suspended, not removed.

− - **Provisional pricing exposure is large and now marks against the company:** 236.5M lbs of copper open at $5.59/lb settling April–August 2026, with Q1 already absorbing a −$31.6M copper mark; each $0.10/lb move in copper is $89.2M of annual net income (10-Q pp. 35, 42).

− - **Tia Maria advanced to 32.5% completion** with $948M committed, $90.2M spent this quarter, and start-up guided to Q3 2027 (10-Q pp. 43, 53) — on-track execution, the one genuine positive for future volume.

− - **Leadership change at the top:** CEO Oscar González Rocha died April 7, 2026; Grupo México-aligned Leonardo Contreras Lerdo de Tejada was appointed CEO April 23, 2026 (10-Q p. 37) — continuity of parent control, no strategy change signaled.

− - **Distributions stepped up into strength:** $819.2M cash dividends paid ($1.00/sh vs $0.70), a further $1.00 cash + 0.0100 stock dividend declared April 23, 2026, funded comfortably by $1,252.6M FCF, leaving net debt at $1,836.5M and leverage at 0.2× (10-Q pp. 7–8, 37).

− **Why REDUCE:**

− The quarter validated the SELL thesis rather than challenging it. The 66.7% net income increase to $1,576.9M decomposes entirely into metal prices (LME copper +37.5%, silver +157.9%, molybdenum +24.2%) and by-product volumes, while the copper engine itself shrank — sales volume −4.9%, production −4.0%, Peruvian segment volume −15.6% — and gross cash cost rose 12.3% to $2.31/lb. The footnote review

− - Upgrade condition: two consecutive quarters of copper sales volume above the prior-year quarter (i.e., genuine volume recovery), with cash cost before by-products back below $2.05/lb and Tia Maria still tracking its Q3 2027 start — that combination would force the fair-value estimate up and the action back to HOLD or ADD.

− - Downgrade condition: a Superior Court reversal of the February 11, 2026 constitutional ruling reinstating the order to deliver 8,488,383 investment shares, or copper settling materially below the $5.59/lb provisional price driving negative revenue marks on the 236.5M open pounds in Q2 2026 — either would move the action to EXIT.