TORONTO (miningweekly.com) – Mexican mining giant Grupo Mexico subsidiary Southern Copper has reported a 12.7% slide in profit for the three months ended March 31, as expenses related to the Sonora river spill last year impacted the bottom line.

The NYSE- and BVL-listed miner reported net income of $282.4-million, which was 22.2% of net sales, lower than the net income of $323.4-million, or 23.9%, of net sales in the comparable quarter last year.

Southern Copper pointed out that earnings were impacted by $5.9-million in expenses related to the Sonora river spill. In August last year, the Buenavista copper mine, in the northern state of Sonora, spilled a significant amount of copper sulphate acid solution into the Bacanuchi and Sonora rivers, for which the company set up a trust for "the environmental remediation and payment of material damages" to affected residents of seven counties.

Since the spill took place, Southern Copper had spent about $97-million on environmental remediation efforts.

“We believe the trust has now fully completed its purpose,” the company said.

First quarter net sales were $1.27-billion, down 5.9% year-over-year, despite an 18% decrease in copper prices, which were offset by increased copper and by-product output.

Copper output rose 8.9% to 177 616 t from 163 168 t in the first quarter last year. This increase was mainly the result of higher production at Buenavista of 26.2% and the Toquepala mine of 9%, despite being partially offset by a 6.9% drop in output at the Cuajone mine. 


By-product output of molybdenum rose 5.2% to 5 856 t in the period, mainly owing to higher production at Toquepala as a result of higher grades and recoveries, partially offset by lower output at the Buenavista and La Caridad mines.

Silver output slid 6.5% to 3.2-million ounces from 3.4-million ounces and zinc output was down 27% to 15 195 t as a result of lower output at the IMMSA facilities, which were hit by flooding in the Santa Eulalia mine, which was in the final stage of being resolved, the miner said.

Southern Copper reported an operating cash cost for every pound of copper, before by-product credits, of $1.66 in the first quarter, a 9.3% improvement compared with the previous year. Operating cash cost a pound of copper net of by-product credits was $0.98. This improvement was the result of increased productivity, operating efficiencies and better cost control, which compensated inflationary pressures in some of the company’s main inputs. 


Meanwhile, Southern Copper earlier this week issued $2-billion in fixed-rate senior unsecured notes. The notes were issued in two tranches, $500-million due in 2025 at an annual interest rate of 3.875% and $1.5-billion due in 2045 at an annual interest rate of 5.875%.

The proceeds would provide the company with additional liquidity to finance its expansion programme, including the Toquepala concentrator expansion from 60 000 t/d to 120 000 t/d and the Tia Maria project, with an investment of $1.4-billion and which, when completed in 2017, would add 120 000 t/y of copper cathode output.

On Wednesday, the board authorised a dividend of $0.10 a share, payable on May 27.

Southern Copper expected to lift its copper output by about 89% from 2013 levels of 617 000 t, to 1.17-billion tons by 2018.