Good morning, and welcome to the Southern Copper Corporation's Second Quarter 2014 Results Conference Call. With us this morning, we have Southern Copper Corp., Mr. Victor Pedraglio, Financial Planning Manager, who will discuss the result of the company for the second quarter of 2014, as well as answer 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 results may differ materially, and the company cautions to not place undue reliance on these forward-looking statements. Southern Copper Corp. Undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. Now I will pass the call on to Mr. Victor Pedraglio, please go ahead.

Thank you very much, Bequitha [ph], and good morning, everyone, and welcome to Southern Copper Corporations's Second Quarter 2014 Earnings Conference Call. Participating with me in today's conference are Mr. Oscar Gonzalez Rocha, Southern Copper's CEO; and Mr. Daniel Muñiz, Grupo Mexico's CFO. In today's call, we will begin with an update on our view of the copper market. We will then talk about Southern Copper's key results related to production, sales, operating cost, financial results, expansion projects and capital expenditure program. After that, we will open the session for questions. Regarding the copper market, during the second quarter of 2014, we have seen relative softness in copper prices, which have decreased by about 4%, when compared to the first quarter of the year. Simultaneously, however, we have seen -- we have been seeing the copper markets future fundamentals improving positively. As of July 23, 2014, inventories at the 3 major warehouses, that is, LME, COMEX -- Shanghai, have decreased by 221,000 tons or 46% from the position at the beginning of 2014. As we have indicated in the past, we believe copper demand is improving -- it's improving due in large part to the synchronized economic recovery of the U.S., Europe and Japan, which together, represents about 54% of the world GDP and consume directly above 31% of the world's refined copper production. Regarding the world's main copper consumer, China, we believe that recent Chinese strategic reserve purchases, as well as an expected copper demand rebound of this country for the second half of this year, will support global copper demand growth in 2014. On the supply side, we think that several structural factors such as scrap scarcity, delays in project startup, technical problems, labor unrest and other difficulties will continue to affect supply for new projects and existing…

[Operator Instructions] And our first question comes from comes Carlos de Alba.

First question is regarding the cost, the cash cost of copper before by-products. We have seen some volatility in recent quarters, and they increased about 6% quarter-on-quarter. Could you comment, perhaps, Victor or Don Oscar, on how you see this trend going forward? Clearly, that remains very low, but it does affect the cash flow generation and margins of the company. And the second question is, if you can comment a little bit more on the status of the Tia Maria project. I remember that company was expecting to receive final approval during the summer. So if you can give us an update of what is happening exactly? Where are the priorities at, right now? And provided that you receive approval, final approval in the coming months, what else will be pending, before you can start production -- construction, and when that will be.

Thank you very much, Carlos. Regarding cash cost, well, as this has been mentioned, it has such incremented due to higher prices on -- well on its main components. Now if looking forward with the -- due to the fact that the new SXEW 3 in Buenavista will start full production shortly. And that adds a low-cost copper. That -- we expect that it will improve the -- well its -- where our cash cost before by-products.

Do you have any level -- where cost could be after their ramp up?

Well, what we will expect is that the affect of the new SXEW III production will mean that our cash cost before by-products will go down. I mean, if this is the lower trend will be reassumed.

And about Tia Maria, we are expecting to receive a -- either at the end of this week, by Friday the approval, official approval, because it gives a speech to the nation, because of the Independence Day of Peru, the President already mentioned something about Tia Maria. But we don't have the official paper. And we are expecting that either Friday or next Monday, we will have the official approval. Then what is going to happen after that, we are going to try to get the construction license, that is another procedure that we need to comply. And for that, we are already starting the possibility to have water for construction, because that is requisite in order to get the approval of the construction license. And soon as we get that, we will ask for proposals in order to do the starting of the escalation of the pit, in order to get all the waste material out. For that, we are trying to get a contractor, because we are not going to have the equipment -- mining equipment delivery on time, so do it by ourselves at the beginning. And at the same time, we have started requesting the purchase orders for the main equipment, that is including the SXEW plant. We already have 8 proposals, and that we are waiting to study that and decided what is going to be the best one. And that will be lump sum proposal in order that includes the engineering, the supply and the construction, supervising, in order to do all the plan at similar to the one that we sold to Buenavista, Cananea plants that is already in operations. That is what we have for start and were requesting because we already have the equipment for the conveyor system going from the mine to the SXEW plants. Where we need to get the purchase order of the new crusher, because we transfer that crusher to the expansion of Toquepala.

Okay. And if indeed, the company gets the permit late this week or early next week, when can -- I'm assuming that everything else goes well, when can the company start construction of the project and when would it be ready?

I think that we can start by the end of the year, or beginning of mid-year. And that is going to take between 20 to 24 months, all depending on the delivery of the mine ore equipments. That means that we are going to be ready for production definitely by the beginning of 2017.

Thank you. And then our next question is going to come from Thiago Lofiego.

I have 2 questions. First on the CapEx numbers for 2014 and '15. If you look at the first-half numbers, you spent $660 million versus your official budget for the year at $2.4 billion. So just wanted to ask, if you could give us some more color on, how the evolution of the CapEx should be from here on? Should we expect a lower spending this year versus your official budget? And then, additional CapEx for next year. So how should we see that evolving, and if you could just outline the numbers for 2014 and '15. And then, the second question is on cost, regarding the Buenavista projects. Could you give us more color on what's the average cost for the new facilities, and how should you -- should they contribute to dilute costs going forward? So what's the cost advantage of these new facilities as they ramp up?

Thanks a lot, Thiago. Your first question, regarding CapEx. Well, at this point, we are rescheduling approximately $200 million of our 2014 capital budget and increasing with the Tia Maria budget to $1.4 billion. For the remaining years, our CapEx expenses will be as follows: for this year, $2.1 billion; for 2015, $1.5 billion; for 2016, $950 million; for 2017, $950 million; and for 2018, $350 million. So in essence, yes, we are doing some rescheduling of our CapEx from 2014 to 2015. If they -- well, having said that, if we consider the -- while we have already spent, plus what we have already committed, we reach around 60% of our guidelines. Now regarding cost, the reason why Buenavista, SXEW 3, and the new concentrator will improve our cash cost before by-product is because this -- both projects will input, will at low-cost per production, leaching operation is a low cost. And also, the expansion of a concentrator adds more material, which has a lower cost because they were -- well, I mean, we need a brownfield expansion. There are some costs, which you don't need to incur again. Because they are already embedded in Buenavista's operations.

Yes. Let me add about the Buenavista SXEW plant. If we are going to produce 120,000 tons by the end of this year or beginning of next year, at around $0.40 cost, then definitely, we are going to improve our cash cost for the rest of the company. Because it's a -- about 20% more production at low cost, now, that is the reason that we expected, that will be lower of the $0.92 that we have right now.

And then our next question is going to come from Santiago Perez Teuffer. Santiago Perez Teuffer - Crédit Suisse AG, Research Division: My first question is related to the zinc. Could you please elaborate on what happened in the Charcas and Santa Eulalia, and what do you expect for zinc of this year and the next one please.

Okay, Santiago. Thanks a lot for your question. What has happened is that in Charcas, an accident which happened by the end of the first quarter is affected production temporarily. Well, that has already been solved. And then, there has been a flood in Santa Eulalia. And Santa Eulalia expects to be recovered by the fourth quarter. Now with those affects, we will -- we expect for this year to produce 82,000 tons of zinc from our mines. That is a change from our prior forecast of 95,200 tons. Santiago Perez Teuffer - Crédit Suisse AG, Research Division: Perfect. Victor. And then secondly, can you give us some light on, how much CapEx has been spent in Tia Maria or in relation with Tia Maria?

Yes. Well, relation with Tia Maria, it has already been invested, around $345 million.

Thank you. And then our next question is going to come from Leonardo Correa.

My first question is regarding the tax rate. Looking at the numbers I mean, if the tax rate came out at around 40% in the quarter. I understand that the Mexican royalties have been inflating the tax numbers a little bit. But just wanted to get a sense from you on the trend going forward, if we should see these levels as sustainable or we should revert back to something around 35%, 36% of an effective tax rate, that's my first question. And the second one, if you can please just refresh on the copper production target for 2014 and '15, please? And finally, if I may, just a very quick detail here. I think looking back at the first quarter conference call, I wasn't sure, exactly, if you were talking about Toquepala, the brownfield expansion of 110,000 tons. Now you're moving back to the target of 100,000 tons. So I'm just wanted to clarify, if I had maybe misunderstood back then, or it actually has reduced the production target for Toquepala at around 100,000 tons.

Well, thanks, very much for your question, Leonardo. First, regarding tax rates. You're right, so it's around 40%. And we would expect it to be maintained. Then on our production guideline, let me get the numbers. Because we have changed it slightly where -- well, I mean, our guideline for 2014 and 2015 remains at 672,000 tons for this year and 840,000 tons for next year. But due to the fact that we are now considering the ramping up of Tia Maria and Toquepala expansion would be late 2016. I mean, on the last quarter, then we have lowered our production guidelines for that year. In -- for 2016, we are expecting now a production guideline of 995,000 tons.

And about Toquepala production. It's supposed to be 100,000 tons, mainly in the first quarter. We mentioned 110,000 tons, but it was a mistake because since the beginning, our production was 100,000 tons for Toquepala. Expansion, 120,000 tons for Tia Maria new project.

Thank you. And then our next question is going to come from Marcelo Aguiar.

2 questions. First, on the cost that you guys expect to have at Tia Maria and Toquepala. Can you elaborate a little bit, what level of cash cost before by-products would you expect on those operations, when it's fully operational by 2017? And the second question will be more local to the longer term CapEx. I mean, you mentioned about $350 million in 2018. Does that level of investment is that the -- what you see as a normalized in this level of investment already, includes CapEx for to avoid depletion? Or you don't expect any CapEx on that front for several decades?

Okay. Thanks, Marcelo. Well first, regarding cash cost. Well, we don't disclose cash cost by operations. But let me mention that the -- in the case of Tia Maria and Toquepala expansion, the figure is going to be very similar to what we have explained a few moments ago regarding Buenavista. This is because Tia Maria is a leaching of -- it's the operation -- copper oxide leaching operation. It's low cost, I mean, the cost is below $1 a pound. So that adds an important low cost production to the equation. And then, in the case of Toquepala expansion, in a similar manner to what is going to happen in Buenavista expansion, you get an added production and you have already incurred, in some costs, it's because -- it's a brownfield operation, which you don't need to incur again. So the additional production from either Toquepala's expansion and Buenavista expansion, comes at a lower cost than coolant [ph] production at both sites.

Thank you. Our next question is going to come from Wilfredo Ortiz.

Just wanted to get a little bit more clarity, as far as Tia Maria is increasing the CapEx budget. What is really triggering that? And then, as far as all the other projects, is there a room for the CapEx to creep up, or do you feel fairly comfortable with the kind of levels? And then secondly, as far as the Buenavista concentrator expansion for next year, how should we see the progression of the quarterly production for the company as a whole, as the ramp up is in the first half, but essentially, how should we see that production on a quarterly basis for 2015 with your target levels?

About the Tia Maria. The reason is that the price that we have or the cost that we have for the project, and that was for the year 2010, 2011 close to $1 billion. The reason that we are estimating $1.4 billion for this time in 2014 is because all -- we think that all the equipments are getting higher prices and because the construction companies are quoting with higher prices too, mainly here in Peru. And that is the reason that we are estimating $1.4 billion. We hope that we can get it for less. But right now, the feasibility is solely that we revise from the beginning is given all that $1.4 billion.

And then is there a level of contingency better than this $1.4 billion, if so, how much is that level?

Yes. We have about $70 million contingency. We hope that we will not use it. But that is what we gave in the story.

And in payroll, regarding your question on Buenavista, well, what we expect is to have the ramping up by the end of the first half of next year, which will mean that by the second half, then after, we should start getting the expected production.

But the ramp would be gradual or would it be fairly quick? How should we look, kind of envision the quarter-to-quarter progression in the second half?

Well, usually, they are at a gradual to ramp-up. So it should take around, it's the most of the second quarter of next year, or maybe even the first month of the third quarter of next year.

Thank you. And then our next question is going to come from Alex Hacking.

My question is on the Toquepala expansion. The feedback that you received, was there anything in the -- that was sort of material or problematic? I know in the past, that some of the local communities there have been asking for use of desalinated water and things like that. So I guess, overall, are you comfortable with the EIA process on Toquepala and how it's proceeding.

Well, yes. We already have some agreements with Candarave area and the [indiscernible] and we had already answering the observations or questions that the Minister of Mines transferred to us at the beginning of this month. And we expected to finish that by the 20 of September, because they gave us 60 working days for answering that. And we hope that we can do it in shorter time. Soon we have that, we're going to be in the same timing that Tia Maria, in order to get the working license and will be faster, the start-off because it's a expansion inside the -- our own lands, and we don't have any problems with water for the construction license. Then, we expect that may be at the beginning of next year, we kind of start construction. At the same time that Tia Maria for the expansion of Toquepala.

Okay. And given that Tia Maria, probably, starting up sometime like the beginning of '17, the $1.2 million tons target, I mean, I think in the beginning of the call, you talked about that being a capacity for 2015. But I think that was a mistake. That 1.2 million tons target, like 2018 seems like a realistic timeframe for that, right? If it's the 2 Peruvian projects are ramping up during 2017.

What we are considering for Tia Maria and also for Toquepala expansion is ramping up on the last quarter of 2016. That's why we have diminished our production guideline for that year. But we are still considering that for 2015. We would be, with both projects at full production.

And sorry -- in what year maybe in full production?

Those are in the '17.

No, sorry -- it's for 2017, I mean, for the last quarter of 2016, we will have both projects on the ramping up stages. And then, in 2017, we would have the full benefit of both of them, Tia Maria and Toquepala expansion.

Thank you. And then our next question is going to come from Sasha Bukacheva.

Victor, and everyone, thank you so much for provide this update. I had a question, since you are now completing using contractors for pre-strip at Tia Maria, is that a part of your $1.4 billion CapEx or might that be a cost in addition to that?

Okay. No, that's included on the CapEx. And yes, we are exploring the -- well, most likely, the way the project will flow is that we would use -- we will not build our own desalination plant. But we would contract the services for the desalinated water on-site.

Okay. And then, what's the rough amount that you've assigned to it for to complete the pre-strip, as well as install the ore -- utilize their diesel plant, how much of that is in the $1.4 billion?

Well, I'm sorry -- but, no, we don't disclose the detailed information. But, well, I assure that it's included on the $1.4 billion.

Okay, and then on a high level to the extent that you can provide, what's the breakdown between the mine equipment versus the plant equipment in that 1.4 billion number?

I think it was around $400 million for the mine equipment and the desalination plant, the first quarter we have 2 years ago, was about $70 million.

Okay, and so...

We answered with your question?

Yes. So then, I would you say -- would you then say like $6,800 million is for the plant, because there is another $70 million contingency in there. Yes, yes. Sorry. So what's the -- so then I'm just looking, so I'm taking $1.4 billion, I'm taking out $400 million for the mining equipment and then $70 million for the diesel plant and then $70 million contingency. So I would, for the SXEW circuit construction, I would assign about $600 million to $800 million?

Yes, it sounds reasonable. Yes.

Okay.

Yes. And we're talking about $1,400 million, and we're talking about 120,000 tons of production then, really, we are having a cost per ton of 120,000, no?

Yes, great. Okay. And then, just to move around here. When do you expect Cuajone pushback to be completed, the current waste removal program?

Okay, that waste removal in Cuajone is, well, is in process. Now that's an ongoing process which, we went, well, at least for this year, you're talking about the improvement of the slope?

The slope utility. Yes, yes, yes, exactly.

Yes, that's -- while that's -- now ongoing process for the whole of this year. It should be finished by the first quarter of next year.

Okay. Thank you very much. And just on the production guidance. Because there were few numbers going around. So the guidance for this year is still 670,000 tons?

Yes. For this year, it's 672,000 tons. For next year, it's 840,000 tons and then for 2016, due to -- to this delay on Tia Maria and Toquepala expansion, we have lowered from our previous guideline and the new guidance is 995,000 tons.

Okay. And then for 2017, we're still at $1.2 million?

Yes. From 2017 and 2018, we are at $1,175,000.

Thank you. And then our next question is going to come from Alfonso Salazar.

I just have 1 clarification on the Tia Maria CapEx, please. Is this $345 million that you already spent included in the $1.4 billion or is it apart?

No. It is included on the $1.4 billion. so it means, $1.4 billion is the cost of the whole project, of which we have already invested $350 million -- sorry, $345 million.

Okay. And then, I see that you have signed 2 energy contracts in Peru. And I think this is starting in 2017, one is the -- an assured contract ends. So I don't know if you can talk about, what you expect in terms of cost reductions in energy after that.

Yes, well, as you are aware, our current power purchase agreement has the price of energy with a major component of coal. That -- that is going to change with the new power purchase contract, which have been signed. And they will go into effect in April 2017. At that time, we will have a significant reduction on our power cost, which -- that will be...

40%

Yes, which should be around 35% to 40%. That's what we expect.

And then our last question is going to come from Rodrigo Garcilazo. Rodrigo Carreon Garcilazo - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: I got a couple of questions. The first one is regarding energy in Peru. Are you actively looking for new contracts to support the expansions, say currently, or are you -- are even considering to develop a new project there in Peru? And the second question it's a -- as you know, Humala announced several measures to boost the economy in the past days. Anything in particular in this program to facilitate your expansions in any front?

Well, thanks a lot, Rodrigo. First, regarding energy, the 2 power purchase agreements we have just signed are -- well, each one of them is for 120 megawatts, they add up to 240 megawatts, and that's our -- the expected energy requirement for our cooling operations. Once we get approval for our expansion projects, which in essence, Tia Maria will require around 72, 75 of the megawatts and Toquepala expansion well a little less. Once we get approval for them, then we would actually, actively seek for, for the -- for ensuring that additional energy, not bad. But currently, the 2 power purchase agreements we have already signed are for 240 megawatts, which is what we expect will be required by our current operations from 2017 onwards.

But we already have the compromise from Kallpa to supply at the same price that the first 120 megawatts for the third project that will be on their way. That means, Tia Maria definitely, I think, will be the best, the first one, and the 75 or 72 megawatts are going to be at the same price that the contract, as we already signed with Kallpa for the 120 megawatts. And that is about 40% lower than the prices that we are getting right now from Enersur.

And regarding your second question, Rodrigo. These measures to reactivate the proven economy, which has been passed by -- is to avoid to Congress -- well, we have to take a good look at them, and see if we could take advantage of some of them for our projects. The first advantage would be -- would see is these intention of streamlining the Environmental Impact Assessment studies approval process, that which is, obviously, something is -- very good for us.

Thank you. And then we have a question from Santiago Perez Teuffer. Santiago Perez Teuffer - Crédit Suisse AG, Research Division: I want to follow-up on the desalination process. If I heard correctly, you're not going to release yourself. So I wanted to ask this, how much OpEx will lead at Tia Maria, around how much OpEx? And also, I mean, is this service already exists? Or would your provider need to develop it, while you develop the project?

Okay. Regarding Tia Maria, the desalination plant. Well, we're exploring the possibility, as you say, of having somebody else build the desalination plant and supply us the water at Tia Maria. That reduces the CapEx for the project, and then, increases marginally the operational costs. It should increase the cost around, well, a $0.05 or $0.08 more per pound. No, but that's something which we look after, right now. Santiago Perez Teuffer - Crédit Suisse AG, Research Division: Perfect. Then does anyone else, already, lease this service or would this we're -- will this service need to be developed, as you develop a project or this already exist?

No, not yet. I mean, there is not a -- a desalination plant, which we could use right now, in the area.

Thank you. Then we have a question from Carlos de Alba.

I mean, about verification on the desalination plant. But can you comment just why the decision of not building your own plant? I mean, what changed? It's only about say $70 million to $100 million in CapEx. Why did you change your mind?

No, no. We are not changing our mind. We are going to get the proposals for operation and supply to mirror for some price, and if that price is good, we will take it. But at the same time, they are going to supply because for supplying the plant and will be operated by us, if any of the 2 alternatives, we will choose the best.

And so...

Yes, no. It will just -- it is just to finish a issue on that. We have not decided, either to build or is to get what -- we are exploring, both alternative and as Mr. Gonzalez just said, is that we will choose, whatever is best for the project.

All right. And then, so it's fair to assume that the CapEx of the desalination plant is not included then in the $1.4 billion estimate?

Is included. It's included. The last time, we will choose to get the approval of supply by major cost and that will be in the OpEx, then we will reduce the $70 million from the CapEx of $1.4 billion.

Thank you. And then we have a question coming from Roderigo. Rodrigo Carreon Garcilazo - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: I got one more question regarding energy. I wonder, if there has been any change in your projections for energy demand in Mexico, coming from the Buenavista expansion?

That is going to be supplied by our area plants that are build in La Caridad.

Yes, right now, we have one of the plants, which has generated 240 megawatts for our operations. And then, the second plant has already been completed. It will have an output of 265 megawatts, and it's on the final commission stage. Rodrigo Carreon Garcilazo - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: That was to say 500 megawatts will be sufficient to cover all of your operations in Mexico?

Yes, yes. That is correct. They will cover our current and expansion in Mexico. Rodrigo Carreon Garcilazo - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: Okay. And I believe that the second plant, as you mentioned, it's a already finished and started commissioning right now. But the energy that will be sold, will be used for the Buenavista concentrator, right? So what will happen in the next 6 months that you already have the plant, already built, already commissioning, but the concentrator will be ready only by next year. What will happen in the next 6 months without plant and that energy?

Yes. Well, any excess energy production from those plants on top of what we need will be sold to the Federal Mexican Energy Commission. Rodrigo Carreon Garcilazo - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: And you have all the -- like the permits to sell already that energy? Because I remember that in the first plant, there was like some permit missing that doesn't allow you to actually sell the energy. Are we set with all that? Or I think it was just like an inspection.

Yes. I understand that, that still an ongoing process. But we can sell to the energy or to, let's say, still there are other projects.

Thank you. And Victor, we have no additional questions at this time.

Okay. Thanks, thanks a lot, Bequitha [ph]. Well, with this, we conclude our conference call for SCC second quarter 2014 results. We certainly appreciate your participation and hope to have you back with us when we report the third quarter 2014 results. Thank you very much and have a nice day.

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