Good morning, and welcome to Southern Copper Corporation's First Quarter 2018 Results Conference Call. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance Treasurer and CFO, who will discuss the results of the company for the first quarter 2018 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 Corporation undertakes no obligation to publicly update or revise any forward-looking statement 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. Raul Jacob.

Thank you very much, Janina, and good morning, everyone, and welcome to Southern Copper's First Quarter of 2018 Earnings Conference Call. Participating with me in today's conference is Mr. Daniel Muñiz, Executive Vice President and board member of Southern Copper. In today's call, we will begin with an update on our view of the copper market. We then will review Southern Copper's key results related to production, sales, operating cost, financial results and expansion projects. After that, we will open the session for questions. Now let's focus on the copper market, the core of our business. During the last quarter, the London Metal Exchange copper price increased significantly from an average of $2.65 per pound in the first quarter of 2017 to $3.16 or 19% higher per pound for the first quarter of this year. We are very positive about the current market outlook. As a result of the synchronized economic growth of the major world economies, refined copper demand has outperformed our initial forecast of a 2.1% growth for 2018 and experts are currently forecasting an increase in demand of 2.5% to 3% for the year. Regarding copper supply, we see a balanced market for this year. However, we expect a weak production response from the industry as a result of the consistent decline in investments that several companies have had in recent years. In addition, labor unrest, an important element in this year, excess government taxation and technical difficulties are further affecting production. As a result, we expect a supply growth of approximately 1.5% in 2018, which will give a strong support for copper prices. Given the current market outlook as well as our continuous commitment to increasing low-cost production, additional growth and a good financial performance, we believe that Southern Copper is uniquely positioned to continue delivering…

[Operator Instructions] And our first question comes from Carlos De Alba from Morgan Stanley.

On Tia Maria, what is delaying the granting of the construction license, if I may ask? And given the change -- the recent change in government in Peru, can you give us an update specifically as to what is ahead between now and getting the construction license? I understand there're still some people in the community, maybe political influence that have opposed recently to any advancement in Tia Maria. And also, if you don't get the license -- the construction license in the next few quarters, is there an expiration date for the environmental permit that has already been granted? And then finally, moving on to Mexico. Can you comment on the risk or the potential risk that a MORENA presidency would mean for the company? And has Southern Copper management approached the AMLO and MORENA people, trying to understand what is the agenda for the mining industry if they were to win?

Sure. Thank you. I mean, thank you, Carlos, for the question. I mean, I'll probably start off with the last question. I mean, as you know, I mean, we are a private company [indiscernible] company. I mean private in the sense that we don't belong to the government or anything like that. So like any other company, we invest to keep on working. We duly comply with all requirements in Mexico. We believe in the institutions and the rule of law in this country. And I mean, clearly, we are not in the business of predicting political influence or influences. I know you guys are mostly outside of Mexico, but Grupo Mexico and us will just clearly define that we are not a party, and we are not participating in any kind of candidates or anything, that's not our role because of -- and we were very clear on that. So I think that's what we have to say here. And I'm sure, as with new President Vizcarra in Peru and whoever becomes President here, I mean, this is a very old company that has been mining and operating a very good asset -- quality assets at the lowest cost possible throughout political and new governments and -- I mean through many, many, many years. So we anticipate that's going to be exactly the same going forward here and in Peru. And regarding Tia Maria, I mean, Raul, do you want to expand a little bit on that? But just as an opening remark, Carlos, I mean, I should say that we view as well very positive and we've been doing a lot of work with communities, which majority approved the project, and with the current and prior government in order to obtain the construction license. And I mean it is the only issue pending there. We got resolved this quarter a couple of legal issues that were pending regarding ownership of a concession there by a third party. So I mean we are ready and we look forward to start constructing the project and start developing it. And I mean, I think it's clear by the fact that we won Michiquillay project that we feel very strongly about Peru and about Mexico, and we keep on investing, and we're happy to keep on doing that. I mean, we believe again in rule of law and institutions. So that's pretty much. I don't know, Raul, if you want to add a couple of details on the work there and the community's feeling down there?

Yes. Thank you very much, Daniel. Well, Carlos, thank you very much for your questions. In the case of Tia Maria, we're currently emphasizing our work with the communities, transmitting or clarifying certain misunderstandings regarding the project. For instance, some people believe that the mine was going to be in the valley, which is not correct. Through a very patient work, we have currently changed that view. Currently, most of the people understand at the valley that the operation will be in a desert. The plan will be 11 kilometers north of the valley. And the mine -- the closest one will be at 3 kilometers north of the valley, which is a very safe distance in order to have a sound operation and also, a very careful environmental management here. We are -- we have a contact and we're contacting the new authorities, President Vizcarra, who has made very specific and positive comments on the mining industry, has inaugurated a new government, a new administration. And he has appointed a new team at the Mining and Energy Ministry. We have -- we are getting in touch with this new administration, and we're very positive on their view regarding our Project of Tia Maria and all the projects that we have in Peru. Daniel indicated on the Michiquillay. We also have Los Chancas, which is also a very positive and very interesting asset for the company for the future.

And our next question comes from Thiago Lofiego from Bradesco.

I have 2 questions on the Buenavista cost impact. Is that likely to impact 2018 numbers and beyond? And if you could give us a cash cost guidance for 2018, '19 and '20, that would be appreciated. And also, the second question, regarding Michiquillay. When will the deforestation study be concluded? You think you could accelerate or are you willing to accelerate this project? And also, not regarding Michiquillay, but just general strategy, if Copper is looking at other potential acquisitions on copper, either in Peru or Mexico or other geographies.

Okay. Let me start by the cash cost guidance. You've seen the current prices where -- well, you've seen our report for the year has been $0.79 per pound of copper. We're expecting that to be the cost for 2018. And as we get the new production from the new Toquepala concentrator, we expect that to hold or even improve, depending or contingent on molybdenum prices for next year. We're looking at, at this point, that with this price environment and cost environment, at cash cost trending towards $0.75 over the long run, let's say in the next 5 years, we should be slightly getting to those $0.75 per pound. Now regarding the -- any acquisitions of new assets, would you like to comment on that, Daniel?

Yes. Thank you, Raul. I mean, obviously, you know the Michiquillay, and I want to be very clear about this, I mean, this is a long-term project, same thing with Los Chancas. I mean, it doesn't mean that we are going to be deploying capital in either this or next year on this project. I mean this is part of being the largest reserves in the world, so to speak, and having the, I mean, the greatest pipeline and assets to be able to develop. So that's -- I mean, I'm putting Michiquillay here because I think it is kind of like, Thiago, kind of like the way you posed the question. And I mean, we're always open to looking at other assets. Unfortunately, the reason we bid for Michiquillay and won it is because there aren't many world-class assets out there in the world for sale, and people that have them and thankfully, the industry is doing great, I mean, nobody can sell them. So I mean, anything that we can find, we will certainly look at, but it's tough to look at that and we are now fully concentrating on developing our greenfields and as well as our brownfields as it is, thankfully, coming to us on-time and on-budget Toquepala expansion, which is really a new concentrator.

And as we get into 2019 and having finished in this year the Toquepala concentrator expansion, we will get into better areas ore-grade-wise in the Toquepala deposits. So that will be an extra, let's say, benefit of initiating this year the Toquepala expansion. So we're expecting a much better production outlook once we can operate Toquepala as a regular mine and having a construction in the middle of the operation as it is. Right now, it has been like that for the last 3 years. So this is a positive development that we have in our own operations at Peru. And I think that's basically on the SX-EW for Buenavista, the impact of the plan that we're developing, it's already embedded in the cost guidance that I provided to you.

And just not sure if you've -- and I don't think you guys answered that about the acquisition. I mean, is there any other geographies you will be looking at or any other potential M&A that Southern Copper would be considering? Or just focusing on the current medium- to long-term investment plan, given the surveys you guys have?

Yes. Thank you, Thiago. Sorry, I wasn't clear. I will take the opportunity to answer or attempt to answer it again. I mean, we obviously are focused on investment-grade countries. As you know we are focused in the Americas. And that's clearly, I mean, our core, particularly copper, of course. And we have a good mix on social and [indiscernible] -wise. I mean, if there's something to explore or to look at, as Michiquillay -- again, with Michiquillay, so to speak, we will be happy to look at it. I haven't seen any opportunities out there. And so the core of our strategy is to develop a mix of brown and green fields that we currently have. And that includes, of course, Michiquillay. But for instance, we acquired Pilares mines. That will enable us to increase the production of Caridad. We're going to have this deposit, which is small compared to Caridad, but which has a much larger ore grade at 8 kilometers only from Caridad. So therefore, we are in the mix, increasing the ore grade, in general, of Caridad, which is, I mean, a more mature asset with this new kind of like very high ore. So this kind of acquisition we're certainly looking at it all the time. A major acquisition, we have nothing on the pipeline, but we're happy to look at that if any assets arise. Thanks. I hope it was clear.

And our next question comes from Jon Brandt from HSBC.

First, Raul, I wanted to ask you about the Buenavista SX-EW and the issues there. Could you just help me understand, it's not real clear to me if the issue is with the ore grade itself or if it's the leach pads that -- where the issue is. And I think it was last year you had some grade issues with some of your other mines. I'm wondering if those have normalized and sort of what the mining plan looks like from the grade standpoint at least at your existing operations over the next couple of years. And then just a follow up on the political question. Now I certainly appreciate that you're a private company and you don't endorse any candidate. But is there a risk to an increase in royalties in Mexico, given some of the spending plans that some candidates have outlined? Do you see a risk that royalty rates will -- could potentially be increasing at the next year or 2?

Thank you. Let me start off with the last one, and then we'll get through ore grades and production, if you will, given that it's a very -- different 2 topics. I mean, we believe -- we expect and hope that we get not an increase in royalties, a decrease in royalties. Because we certainly have devoted a lot of time and work with -- I mean, understanding and comparing with other countries in the world how they look at royalties and how -- when you have all this, let's say, taxes, duties, rights, whatever you want to call this kind of taxes or royalties, when you add them all up -- I mean, for instance, Mexico is very expensive. That is not the greatest, let's say. So I mean, we certainly expect that the new government here and in Peru are able to pass legislations that are just comparable with international standards. So for us, it really doesn't matter who wins. I mean, it's a matter of doing and incentivizing investments, new development of mines, exploration. And that's what we certainly expect from a new government, so that's one. And regarding the production, I will let Raul get into the details of the tax, but I want to remember you -- or remind you guys that, in 2013, in Buenavista, our SX-EW facilities already produced 66,000 tons of copper per year. What we're looking at and seeing this year is a dramatic increase, given that we've built a new 120,000-ton SX-EW facility, which is at least one of the largest of America. And in order to feed that plant that size, we need to build new leach pads, we need to build new ponds, we need to build a whole, I mean, let's say, system that transports the liquid solutions around a huge amount of -- huge size of land. So only because we're seeing this -- I mean, that's kind of like expect on how this is evolving over time, putting into the system a huge new plant. Certainly, and Raul pointed out, we are developing a collective program to avoid clogging to better at the last -- to better [indiscernible]. I mean, we're working on this continuously, but -- I mean, of course, this is mining. It is -- whenever you build a plant this size, all the things that you have to do in the mine and in the pond and in the leach pad, it's a lot of work. And we are working on this, and that's why we're giving you the guidance, of course. But we certainly are looking forward to get back to an improved production [indiscernible] facilities. Raul, do you want to add?

Well, basically, that we have the tax-producing liquor -- or liquid that has copper and a lower grade than we were expecting given the kind of copper oxide and sulfur oxide that we are depositing in our Buenavista plant. And what we're doing is dealing with this process, with this matter, that's one of the things. The other one is that we found at a certain point in the past, we have clogging and the clogging impedes the water with sulfuric acid to pass through the copper ore and produce copper. That's why we mentioned that the blasting has been adjusted to produce the proper size of run rate -- run of mine copper oxide that will be deposited and are being deposited at the past. So basically, with these actions and some others that are much more detailed, we're expecting to overcome this problem and create and generate the copper that this plant has the capacity to provide.

And our next question comes from Andreas Bokkenheuser from UBS.

Just 2 questions from me, one was just an operational clarification. So the tailings issue, you obviously had it at Buenavista this year. You downgraded your guidance there. Any risk to how much of that could basically roll into 2019, 2020 as a potential downside risk for your production guidance? Just one clarification there, please. And secondly, you obviously -- sorry, yes, go ahead. I can take the second question after.

No, no, no. Go ahead, please.

The second question was just on capital allocation. You're obviously quite cash generative at the moment. You've got a lot of projects coming up, but hopefully, Tia Maria won't get delayed any further. But if it is, has there been a talk about potentially raising the dividend payments or anything of that nature, buying back shares for the usage of some of this cash if some of these projects are delayed effectively for any reason? Those are the 2 questions.

I mean, I think, Andreas, I think you were referring not to tailings, as you mentioned in the operational part, but you were referring to present leaching solution out of this production, correct?

Yes. Sorry, leaching. Yes, leaching. Sorry. Yes, you're right.

Right. Well, we're clearly seeing the 12-month program that we're working on in order to get this to full capacity. And that's what Raul explained by blasting and by not clogging by lower high leach pad, et cetera. And I don't know, Raul, do you want to add, please?

Well, yes. Andreas asked for the production guidance. Basically, our view is that we should be overcoming this problem through 2018. So we're not changing our production guidance at this point. It has very little resemblance just to mention what we are looking at right now. Well, we mentioned already for 2018, 901,000 tons; for 2019, 1,023,000 tons; 2020, 1,067,000 tons; for 2021, 1.2 million tons, and that should hold for 2022 as well.

Right. So the 30,000 we lost on 2018, you think we'll get them back in 2019 basically.

Basically, yes. That's our -- our aim is to get that. As I said, the portion of a better production or more production will come from the new concentrator at Toquepala. By the way, I'd like to mention that this -- the concentrator that we have in Buenavista is helping us because it's producing over its expected goals each year. So this is a very positive development for us. We have this difficulty that has been explained through the call on the SX-EW plant that we are expecting to overcome shortly. And your second question?

Yes, the other question it was dividends and how do we see them going forward. And I'd just like to, again, point you to the track record that we have. And in the last -- I'm looking at the 5 quarters -- the 5 last quarters, you could see that as net income has increased because of the increase of prices as well, that the dividends have increased from $0.12 per share to $0.30 per share. So clearly, I mean, we are very aligned with the fact -- with the net income and the copper prices that we're seeing out there when we look at dividends, no? So we should expect that if things stay where they are, we could probably carry on with the same kind of dividend payment. But if things get better because of more production of ore, we could certainly increase as I had just pointed out what happened in this price increase in the last 4 to 5 quarters.

And our next question comes from Caio Ribeiro from JPMorgan.

So the first question that I have is regarding labor contract renegotiations, which, as you mentioned at the beginning of the call, has been an important factor this year for the copper markets. I just wanted to get a sense from you whether you have any upcoming labor contract renegotiations this year and whether you see any risks of disruptions resulting from them? And secondly, on molybdenum. If you could discuss this market a little bit where there has been quite a significant surge in prices recently, and I just wanted to see if you could share with us your views on what is driving this and whether you think that these prices are sustainable going forward, that would be very helpful.

Okay. Let me start by labor negotiations. This is something that we're undertaking right now. Currently, we have 6 unions in Peru at our -- expect that their contracts -- their 3-year contracts are ending this year. We already initiated talks with them. Talks are moving forward very positively. At this point, we don't see any labor stoppage coming from the talks. Actually, we believe that we'll arrive to a much better contract for the company and the labor of the corporation through these negotiations. And on top of that, we -- as we have explained in some other circumstances, the company has an emergency plan that it's deployed anytime that we have a labor disruption. But through this plan, we have pretty much almost eliminated the production losses that are coming from any labor disruption. So we're very confident that we will be operating as usual through these conversations for the new labor contract in Peru.

In a nutshell, let me just go with the labor question. Of course, I was referring to Peru and we don't expect any disturbances. I mean, we view this future negotiation -- near-term renegotiation this year to be very successful, I mean. And in Mexico, just real quick, I mean, we pointed out that we are reopening [ Reed ] mine that was closed and on strike. Just to give, as an example, is the fact that we have a very good relationship with the 2 unions that we operate in Mexico and these guys are the guys that go there and decided to reopen this mine, seeking out the old union, which was very troublesome. So this is a token of the good relationship that we have currently in Mexico and we expect that to continue. As you know, we review collective bargaining agreements in Mexico every year. So we are positive on that. Raul, go ahead on molybdenum, sorry.

Yes. On the moly, what we have is a -- well, last year, we had the circles in the molybdenum market that has been closed. So right now, the market is in balance. And very important for the work supply, China has been decreasing their production basically through environmental restrictions that have shut down certain operations of molybdenum in China. So that has provided the balance and we see no new sources of supply for the coming quarters. So our expectation is that molybdenum prices will have a good performance in the next few quarters.

And our next question comes from Marcos Assumpção from Itaú. Marcos Assumpção: First question here on the supply/demand for copper, if you could elaborate a little bit on that. We have seen prices a bit above their the marginal cost. We haven't seen any shutdowns of capacity at this point, I would guess. And if you see that this is sustainable over the longer term. Also if you could comment a bit on the incentive price for new projects, which is also an interesting variable that we watch -- that we monitor when looking at copper long-term prices. Still on the copper side, if you could comment your views on the potential demand increase coming from electric vehicles and also clean energy investments? And last question on Michiquillay, if you anticipate any difficulties on obtaining licenses for this project.

Okay. Well, Michiquillay, we're currently working with the government to officially receive or take control of the asset. If we offer the winning -- the bidding winning price, it's because we trust that we will be able to deal with any concerns that the project may have. So we're certainly very, very positive about that and we think that there shouldn't be any problems. On the copper market, well, we see the market with very strong support. I mentioned that labor is -- may be a problem for some operations this year. That's a possibility, not necessarily something that should happen. The very positive thing that have happened in the first quarter is that demand has come back very strongly, particularly in Asia, and that includes China and some other Asian countries such as India. For the long term, I think that prices are, at this point, at the level or very close to the level for producing or making boards to go ahead with projects. However, we're still not at the level that is required to most likely close the gap in the future. So we think -- we see this market as a very positive one. We don't like to comment on the price forecast, but in terms of the support that the demand has and the current production has, we are very confident that the market will follow. Marcos Assumpção: Okay. And just, again, on the licenses, what does differentiate like Michiquillay project from Toquepala or Tia Maria, for example? What -- how can we -- like looking from outside see, what are the main difficulties on Tia Maria and on Toquepala? It was easier in Michiquillay, you are also not forecasting any difficulties on obtaining license. Why is that? Like the communities are easier? They are more -- they're already acquainted with other projects?

We have -- we think that we have some positive points regarding Michiquillay. The communities that are close by the deposit are in favor of the project. They have signed an agreement with the national government for moving forward with the project, so that's a positive thing. On top of that, we believe that we have the tools that will be, for us, easy to develop this project on the social side as well as the technical side. On the technical side, we're very confident this is a great deposit as was mentioned by Daniel a while ago. This is one of the few big deposits with very good copper. For instance, very little or no arsenic in its mineral, which is a very good thing for the future. And I believe that makes us very enthusiastic about Michiquillay. In the case of Toquepala that you indicated, it's a brownfield project so it's much easier usually to develop brownfield expansions than a greenfield one. In a greenfield one, there are some concerns usually by the nearby populations.

Yes, and just to conclude in a nutshell. I mean, first of all, Michiquillay is a greenfield project that will take many years to develop. I mean, we will start with the Environmental Impact Assessment. We need to start -- there's a long way already being with the community because of Anglo American, as you know, have that project just not very long ago and there was a social response with the communities already established, et cetera. There has been some work there. But as you know, I mean, permitting, licensing, community development, strong development, bonding development with the community is essential for any project in mining and we'll be working on that. But also, each project has their own issues, their particular issues, no? Tia Maria has dragged. Sometimes the issue has been the communities are asking mining groups with the water issue, so to speak. And Michiquillay, we are working and we're going to start working full speed, but it's a longer-term project. Hence, the government gave us almost 10 years to pay the acquisition price in order to assess what we need to do there. So it's in a very early stage, involve different ones, but we are, as Raul pointed out, positive on obtaining all this. No, there wasn't -- we have not updated everyone for this project.

And our next question comes from Renan Criscio from Credit Suisse.

So my first question is on San Martin. What are the next steps that you need to take to restart the operations? I understand you had a first major, like, milestone to end the strike, but just thinking about the risks of the project not being up and running by the first quarter '19 that you mentioned. And the next question is a follow-up on costs. You mentioned the -- like the target to keep the $0.79 per pound cash cost net of by-products. But just thinking about the cost on -- before the by-products, obviously the price of molybdenum, for instance, has been helping a lot the price performance recently. So just thinking about what do you expect or any targets or guidance that you can provide on the cash cost -- production cash cost before the by-products credits?

Sure. Thank you. I mean, go ahead, Raul. No, no. Go ahead.

Okay. Let me start with your last question. On cash costs before by-product credits, well, we have this year a reduction in production in the first quarter. That's why we have $0.79 as cash cost and $1.57 before by-product credit as cash cost. For the year, we're expecting it to decrease to $1.52. That should come once we have the additional production from Toquepala kicking in. And for the next, 2019 and '20, about $1.45 per ton before credits and then trending towards $1.40. That's basically it.

And just turning in to San Martin, and thank you for the question. I mean, this is a revenue asset, no? We will either increase 25% of zinc production -- current zinc production because, as you know, we're developing Buenavista's zinc as well. This mine, what do we need to do? Thankfully, no more permitting or licensing. We already have that, I mean speaking of the last question. So what we need to do is we're looking at a 6-month program at the most where we're going to start production. And the CapEx is very low because it's just making sure that everything else worked and it will generate for us at these prices, or these zinc prices, EBITDA of around $75 million just only by this underground mine. So we're positive with this and we are working on starting -- as I said, it's a maximum of 6 months.

And our next question comes from Fawzi Hanano from Berenberg.

I just want to go back to Buenavista SX-EW issue. Really quickly, do you see any potential technical risk that could maybe delay the corrective plan or, I mean, that you don't get back to production levels that you had in mind previously? And also could you tell us what is the level of production you expect Buenavista SX-EW to get to once everything is fixed? My second question is with regards to your CapEx. Your 2018 CapEx is down by $100 million compared to the previous guidance. I mean, what is this related to? Is it related to Tia Maria or slight construction delays to Buenavista zinc or to Pilares? If you could give us a bit of -- a bit more light on that and maybe even your near-term CapEx guidance.

Regarding technical issues to expected in Buenavista, the answer would be no. I mean, the reason we are putting in place this SWAT team, so to speak, and move the focus and strategy of all our management, including the board, and the reason we are correcting the guidance so early in the year is because we were able to develop this program to make sure that we solve this technical issue. So this is the -- the technical issues have already happened and this is what we're working on, on solving. So that's what we came up with this plan. The question regarding -- Raul, do you have the productions going forward, please?

Yes, yes. For the SX-EW plant, this year we're forecasting about 115,000 tons of copper production. And for next year, that should go up to 164,000 tons, which is having all of our SX-EW plants running at full speed. The CapEx guidance? Hold on a second here.

Yes, the question was, Raul, that we've lowered the CapEx compared to guidance. And essentially, we are not lowering, we were increasing the CapEx, no? So I don't remember what the guidance was, but can you -- that's the question, Raul, can you just clarify?

Sure, sure. Yes, you are right, Daniel, we're increasing the guidance when compared to our prior quarter. But generally speaking, you have -- but there is a trend in the CapEx expanses of the company. At this point, we're finishing the Toquepala expansion. That's the major project that we have still moving forward and we expect it to finish -- to be finished this year as we mentioned. For the other projects and other capital expenditures, usually the first quarter is slightly lower or slightly low, I should say, than the rest of the quarters of the year. So we're expecting to have a catch-up through this year.

The next question comes from Rodrigo Garcilazo Carreon from GBM.

Just a couple of questions, one in Peru, one in Mexico. Starting with Peru, it appears that you recently won a legal dispute regarding something about Tia Maria. Could you elaborate on that legal battle, which you just won? And the question -- the other question about Peru is when would you have ready the feasibility study of Michiquillay in order to get more detail about the project? Those are my questions with -- regarding Peru.

Okay. The feasibility study should be finished through the next 3 to 4 years, which is the initial time period that we have to work with the local communities and do the technical studies for Michiquillay. Regarding the Tia Maria legal concern that you mentioned, it's basically that we agree with some concession that was overlapping with our Tia Maria concession and we have agreed on a settlement and it's finished already.

Okay, perfect. And regarding Mexico, because you mentioned when your current collective contracts are due at each of your Mexican mines and also if you could mention the average salary of a typical miner at your Mexico mines, please?

I mean, as you know, Rodrigo, under Mexican law, you review every single year salaries and every 2 years you review the collective bargaining agreement in their entirety. So that we do every year. We haven't had any issues. We've been very successful in building this strong relationship with both the unions that we work with in Mexico. So we don't anticipate any issues and it's been in line with the industry and let' say 5% to 6% increase per year. That's also in line with inflation standards here so no particular issues here. We believe we have a very strong labor relationship, I mean, now within Mexico. I mean, salaries depend. I mean, you have truck -- drivers of trucks, shovel guys. We have, I mean, many different people that are working on the mines. I don't know if you have the numbers there, Raul, to just show them or could tell them -- or we'd be happy to send you the exact details by kind of category, Raul, as soon as we hang up.

Yes, I don't have the information with us.

And our next question comes from Alfonso Salazar from Scotia.

Look, I think most of my questions have been answered and it was also regarding labor contracts in Mexico. But let me ask you one more thing. Because not everyone seems -- tends to see all that positives of the mining industry and sometimes they focus more on the negatives like the environment thing. But is the company considering a program to promote a campaign to show all the positives that the company brings in terms of social programs, labor creation, community development in Mexico at this time?

Sure. I mean, well, first of all, we continually do that. There are social development and sustainability, environmental and health and safety departments. One of the things that we've done recently is put all these areas with 1 single head for the whole company. So that has been -- that is working very good. But also -- I mean, this is a job that not only us have to do. I mean, the fact that -- of promoting mining in a country where we operate or in the world, I mean that's why we belong also to mining chambers. We do a lot of work with international copper associations. I mean, that's -- I mean, we have a very active participation in all these let's say, tradings or associations. But I agree with you, I mean, we, as an industry, we need to keep on doing this every single day because I mean, everything comes out of mining. Every single job creates 10 additional jobs out there, given that this is a primary industry. So I agree with you and we take that very seriously and -- yes.

And our next question comes from Lucas Pipes from B. Riley FBR.

And I also want to ask on the cost side. So a number of your peers have reported and there appears to be a little bit of a theme that cost inflation across the mining sector is picking up. And I wondered do you see particular areas where those pressures are maybe a little more severe at this point? I would appreciate your perspective on cost inflation across the portfolio.

Yes, let me mention, first, that we're having a cash cost reduction of $0.11 this quarter -- 11% this quarter, which is a key point to keep in mind. And we are getting that through different sources, not only the better prices of by-products helping, but also our cost control, some programs that we have put in place such as the renegotiation of new energy programs in -- contracts in Peru that has helped us to decrease our operating costs is helping us. And we're consistently looking into different ways of reducing our costs. Among them, for instance, we have formed intentionally a strategic purchase team that is doing buying of key materials and getting very important savings on operating materials through last the year and this year as well. Having said that...

Sorry, I was just -- sorry to interject. I was just going to comment on the power or electricity in Peru. I mean, it's gone down 40% and that was -- I mean, even in our oil increase environment, we are lower 40% compared to last year and this, as you know, is what we mentioned before due to the efforts that we have undertaken years ago to change the way we supplied electricity to Peru, for instance, and this is Peru particularly with the 40% decrease. And we changed the providers, we changed completely the scheme that we have there and this is, of course, helping us offset this price inflation or cost inflation that you're referring.

There is that we see, for instance, in fuel costs, emerging markets, currency's appreciation. In the case of our operations in the Peruvian soil, has depreciated as well as the Mexican peso, that creates some pressure on local costs. But now as I say, there are different ways to handle and to control costs while at the same time I'd like to comment is that we're, for instance, replacing rail haulage by conveyor belt haulage in our Peruvian operations that require this kind of investment and that is certainly helping us to maintain cost under control and the savings that we're getting there are being absorbed -- or absorbing some other cost increases that we're seeing due to prices or some other elements.

Very helpful. And maybe to parlay this conversation into incentive prices on the copper side. When you -- I know you're price agnostic and you have great low-cost projects out there that you can development in pretty much any price environment. But when you think about kind of the global picture and where copper prices ought to be from an incentive price perspective, what's your most recent thought process on that? Would appreciate your thoughts.

Well, I like your definition of asset price agnostic because that's quite correct. We look into cost, we look into the assets that we run, we try to get these assets to be run as the most efficient way and we look into costs. Usually, our projects are evaluated with prices that are much lower as incentive price than the market is expecting. As I recall, the prices -- incentive prices are at about $3.50 per pound, at this point $3.50 per pound. But that's the view of certain companies that do market research and follow what will be the price that copper projects need to move on to get approvals by boards, et cetera, et cetera and a decent return obviously. Recently, one investment bank has been talking about copper going to a much higher price to where it is right now, but that's something that -- it's their view on the market, not ours.

And our next question comes from [ Roberto Vasquez ] from LW Investment Management.

I had 1 question regarding the problems that you are facing with leaching the Buenavista. Besides the lower production, do you expect to have some other cash -- some impact on your cash generation? I mean, some increase in working capital, needs to increase the inventory of leachable material or something like that? Or the only impact will be just related to production?

It's just production. We have been shifting certain -- the way that we are doing certain processes, changing the -- for instance, we still need to move the trucks with the ore, but the ore that each truck will carry will be bigger in size, so that will prevent us to have clogging, that kind of thing. So it's not -- it doesn't have a material cost impact. That's why we haven't reported that as part of the matter related to this SX-EW production problems.

We have no further questions at this time.

Okay. Well, I think with this, we conclude our conference call for Southern Copper's first quarter results. We certainly appreciate your participation and hope to have you back with us when we report the second quarter of this year. 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.