Southern Copper

Refresh delta (since 2026-06-18)

What changed — six material moves:

1. Q2-2026 was a record on every line, and the fourth straight consensus beat. Net sales $4,289.0M (+40.6% YoY), operating income $2,623.2M (+65.3%), net income attributable to SCC $1,670.0M (+71.6%), EPS $2.01 vs a $1.95 estimate. Adjusted EBITDA $2,956M, margin 67% vs 59%.

2. The bear's central mechanism — commodity mean-reversion — ran the opposite way, hard. Q2 average LME copper $6.04/lb, +39.8% YoY (COMEX $6.16, +30.5%); molybdenum $29.44/lb (+43.1%); silver $73.49/oz (+118.6%); zinc +30.8%. Management now estimates a slight copper market deficit for 2026, with world inventories at ~1,123–1,125kt ≈ 15 days of global demand. That is a direct contradiction of the Goldman surplus call the prior dossier leaned on for its bear case (see the conflict flagged in Lens 8).

3. Peru's political risk — the prior dossier's #1 permanent-impairment risk — materially inverted. Keiko Fujimori won the presidency (50.135% vs 49.865%, a ~49,641-vote margin) and was inaugurated 2026-07-28, on a pro-mining platform: cut investment-permit processing times ~40%, fight illegal mining, plus a restored Senate for the first time in 30+ years. On the call the CFO was explicitly "encouraged," naming the illegal-mining crackdown as directly relevant to Los Chancas. Peru mining investment ran +43.6% YoY in the first five months of 2026.

4. Tía María stopped being an option and became a construction project. 42% complete at 2026-06-30; $1,101M committed / $693M invested of a $1.8B total; earthworks 71% done; SX/EW civil works and steel underway; 5,817 jobs created. First production H2-2027, and management stated flatly: "For now, we don't expect a delay". New disclosure: Tía María's cash cost estimate is $1.16/lb with no by-products — pure SX-EW copper.

5. The balance sheet got bigger on both sides, and the growth ladder acquired a second rung. $1.25B of 5.350% notes due 2036 issued 2026-06-24 (order book $4B, 3.2x oversubscribed), earmarked for Tía María; long-term debt $6,750.7M → $7,994.4M, but cash+ST investments rose to $7,329.9M, leaving net debt of just ~$0.66B. El Pilar (Sonora) was board-approved with a real budget: $551M, 36ktpy SX-EW, water licence renewed, site prep Sept-2026, construction Q1-2027, production H2-2029. Decade capital programme now stated at >$20.5B.

6. Capital returns were raised — but increasingly in stock, not cash. Q3 dividend lifted to $1.10 cash (from $1.00) plus a stock dividend of 0.0120 shares (from 0.0085), which management presents as a "$3.23 per share" total. H1 stock dividends were $3.40/share vs $1.50 (+126.7%) and issued 15.2M shares; treasury fell 65.5M → 50.3M shares. See this is the sharpest new bear point.

What held — does the structural thesis stand?

Yes, and it strengthened. Every load-bearing element of the prior dossier survived: largest reserve base on earth, near-total vertical integration, lowest-quartile cash cost, the organic ladder to >1.6Mt by 2033–34, and 88.9% Grupo Mexico control. Two things that were risks in June became facts on the ground in favour: Peruvian politics and Tía María construction progress.

Two structural negatives also held, and one sharpened:

• Grade decline is confirmed, not transient. Mined copper -3.5% in Q2 / -3.8% in H1; Toquepala -14.7% and Cuajone -7.8% in Q2, with Cuajone alone costing ~35,000t of annual output. Cash cost before by-products rose to $2.29/lb (from $2.11). The prior dossier called falling volume "the first crack"; it is now a documented, management-quantified trend.
• The negative cash cost was indeed a spike, and it partly reverted — but only partly. Net-of-by-product cash cost went -$0.11/lb (Q1) → +$0.05/lb (Q2); H1 was -$0.03/lb. The prior dossier's #1 catalyst question is answered: it reverted a little and stayed extraordinary. By-product credits were $2.24/lb in Q2 vs $2.41 in Q1 and $1.48 a year ago.
• Los Chancas slipped and is the one project going backwards. Illegal miners remain inside the project area despite state enforcement; start-up is now stated as 2031 (the prior dossier carried ~2030), capexCapital expenditureMoney spent on long-lived things — buildings, machines, servers — rather than on running costs. $2.6B.

Earnings result

Q2-2026 vs consensus and vs the year-ago quarter:

Consensus EPS was $1.95; the $2.01 print was a 3.1% beat and the fourth consecutive beat. Net income margin 39% vs 32%; adjusted-EBITDA margin 67% vs 59%.

The mechanism is unambiguous: price, not volume. Sales volumes fell across the board — copper -1.5%, moly -13.1%, silver -8.7%, zinc -8.8% — and revenue still rose 40.6%. Operating costs grew 13.8% against sales +40.6%; that gap is the quarter.

Guidance. FY2026 copper production raised to 917,000t from ~910,000t (+1%), moly 27,900t (+7% vs initial plan), silver 24Moz (in line), zinc 163,900t. Note the raise is modest and sits against H1 mined copper of 461.2kt — implying H2 output of ~456kt, marginally below H1. The CFO's own framing was about sales volume improving in H2 on inventory drawdown, not production: "we should do a little bit better, in terms of volume in the second half". Longer-range: 2027 roughly flat, 2028 ~970kt, 2029 ~1,060kt, 2033–34 >1.6Mt.

Balance-sheet flags:

• Liquidity is now enormous. Cash $5,665.0M (from $4,304.6M at YE-25) + short-term investments $1,664.9M (from $604.6M) = $7,329.9M. Against long-term debt of $7,994.4M, net debt is ~$0.66B — effectively an unlevered balance sheet at ~0.1x EBITDA.
• Working capital is clean. Receivables $1,995.7M on 40.6% revenue growth (up only 2.3% from YE-25) — receivables are not outrunning revenue, which is the single best tell that the revenue is real and collected. Inventories flat at $1,060.9M.
• Cash conversion is excellent. H1 operating cash flow $3,683.0M vs $1,698.2M (+117%), against H1 net income of $3,256.5M — OCF > net income, the healthy direction. Q2 FCFFree cash flowCash left after paying to run and maintain the business. Unlike profit, it is hard to flatter with accounting choices. = $1,988.5M OCF − $422.8M capex = ~$1,565.7M.
• Capex is stepping up but stays disciplined. H1 capex $864.7M (+56%); Q2 $422.8M (+79%) = 25% of the quarter's net income.
• One genuine oddity worth naming: retained earnings fell from $5,797.2M to $4,588.1M despite $3,246.8M of H1 net income, while additional paid-in capital rose $7,257.9M → $9,709.0M. That is the stock-dividend mechanic moving ~$2.42B out of retained earnings into APIC — an accounting shuffle, not a loss, but it is why "retained earnings down in a record year" is not a red flag here. See Lens 13 for why the substance of it still matters.

Market reaction. The print (2026-07-21) did not immediately re-rate the stock: the board's own fractional-share reference price was $177.32 on 2026-07-16, below the ~$199 the prior dossier used on 2026-06-17. The move came later and was macro-led — +5.0% on 2026-08-04 to $195.16 and +3.53% on 2026-08-07. As of 2026-08-10 the stock is $203.25, market capMarket capitalisationThe share price multiplied by the number of shares. What the market says the equity is worth. $169.58B, TTM P/E 30.22, forward P/E 28.29, dividend yield 2.17% (cash basis). 52-week range $88.58–$221.67. One outlet framed the August move exactly right: a lift from "higher metals prices and calmer politics".

Earnings call — sentiment shift (re-run; transcript now on disk)

The prior dossier had to run this lens on inference because transcripts/ was empty. That gap is now closed — the Q2-2026 call is ingested verbatim at transcripts/2026-q2.md.

Tone: confident, and for the first time in years, confident about Peru specifically. CFO Raúl Jacob Ruisánchez opened with "another exceptional quarter, registering record-breaking results in sales, adjusted EBITDA, and net income". Versus the prior 3–4 calls, three shifts stand out:

1. From defending the growth ladder to reporting progress on it. For most of the last decade the Peruvian pipeline was a promise gated on permits. This call reported percentage completion, tonnes moved, purchase orders placed, and jobs created. The change in register — from "we expect to" to "we have committed $1,101M, of which $693M is invested" — is the single biggest sentiment shift in the file.

2. From political risk as an overhang to political risk as a tailwind. Jacob volunteered that the company is "encouraged by the initial statements made by President-elect Keiko Fujimori," and when pressed by Bradesco's Rafael Barcellos, went further than a CFO usually does: the incoming priorities are "positive for the mining industry," the illegal-mining fight is "something that is affecting us," and Peru will have "a senate... that we haven't had for over 30 years. Some other changes that will make the political environment much more stable." He was careful to caveat that the real read comes from the 28 July inauguration speech.

3. Cost language got more defensive even as results got better. Note what he said about the cash cost: Q2's +$0.05/lb was "$0.15 higher than the cash cost of -$0.11 for the Q1," immediately followed by "we think that this is an excellent mark for the company". Management is pre-emptively managing the expectation that negative cash cost was not a new normal — which is the honest posture, and matches the prior dossier's warning not to extrapolate it.

What they were asked and how they answered. Four analysts (Barclays, Goldman Sachs, Bradesco BBI, CICC, plus John Tumazos). The Q&A clustered on exactly the right risks:

• Grades (Barclays): answered with a specific number — Cuajone ~35,000t of lost annual output, Peru down ~40,000t in total, offset by Mexican gains.
• Tía María delay risk / desalination plant (Goldman): "For now, we don't expect a delay in the project... If there is a perception that the project will delay a little bit, we'll certainly report that to the market." Purchase orders including the desal plant are being placed.
• Financing the $10.3B Peruvian pipeline (Barclays): the $1.25B bond covers "a significant portion" of Tía María's $1.8B; expect more debt at project milestones, framed as balance-sheet hygiene rather than need.
• El Pilar's 11-year gestation (Tumazos, pointedly): answered candidly — an in-depth technical review of copper recoveries took longer than expected, then permits had to be renewed. Also stated that López Obrador's open-pit restrictions had no impact because concessions, including open-pit, were already held.
• A new Peruvian proposal to distribute up to 40% of the canon minero directly to residents (CICC): management declined to comment pending detail. Worth tracking — it is the one Fujimori-era policy that could cut against the company.

What they still do not say: nothing about M&A (consistent — this remains an organic, controlled vehicle), nothing about restarting the buyback, and nothing from the CEO. Leonardo Contreras was introduced as present on the call and, per the transcript, did not speak at all; the CFO handled every question. Four months into a post-Gonzalez-Rocha era, the new CEO has still not addressed the market directly. That is not a red flag on its own, but it leaves the prior dossier's Lens 14 Q12 (what changes under new leadership?) entirely unanswered.

Stock-price catalysts

What has moved it >5% since the boundary:

• 2026-08-04: +5.0% to $195.16, and 2026-08-07: +3.53% — both attributed to the copper complex rallying on supply constraints and improving industrial demand, not to anything company-specific.
• The Q2 print itself (2026-07-21) was not a >5% event. The stock was ~$177 in mid-July and the beat did not immediately re-rate it. The August move was macro. This confirms and strengthens the prior dossier's finding: SCCO trades on the copper print and the political headline, not on its own earnings.
• Net path since the boundary: ~$199 (2026-06-17) → ~$177 (2026-07-16) → $203.25 (2026-08-10), i.e. a ~11% drawdown and a ~15% recovery inside eight weeks. 52-week range $88.58–$221.67 — a ~150% peak-to-trough spread over a year is the volatility profile you are actually underwriting.

Live catalysts, updated:

• Copper price, still dominant. The company's own H2-2026 sensitivity: $0.10/lb of copper = $59.6M of net earnings (≈$0.072/share for the half); moly $1.00/lb = $18.0M; silver $1.00/oz = $7.1M; zinc $0.10/lb = $13.3M. Note these are explicitly remaining-six-months sensitivities, so roughly double them for an annual figure.
• The 2026 balance is genuinely disputed — surface it, don't resolve it. Management: slight deficit. ICSG: 150kt deficit. J.P. Morgan: 330kt deficit. Goldman Sachs: 160kt surplus. Macquarie: 262kt surplus. Two credible houses are on opposite sides of the single variable that sets this company's earnings. Anyone underwriting SCCO is taking a side in that disagreement whether they say so or not.
• US Section 232 copper policy is an active, unresolved swing factor. The regime imposed 50% duties on semi-finished/derivative copper while deferring refined cathode, tied to a Commerce review that could phase in 15% (2027) and 30% (2028); a subsequent clarification exempting refined copper triggered a sharp COMEX-LME premium reconvergence. Confidence: medium — the dating in available sources is muddled between 2025 and 2026 events and I could not cleanly separate them. Treated as a live uncertainty, not a settled fact. The company's own COMEX-vs-LME realised spread ($6.16 vs $6.04 in Q2) is the reliable primary read.
• Fujimori's first 100 days, especially the canon minero redistribution proposal and permit-time reform.
• Tía María execution milestones toward H2-2027 first cathode; the desalination plant is the named critical path.
• Q3-2026 print — the test of whether by-product credits hold near $2.24/lb.

Management & governance (partial re-run — new material touches it)

Carried from the prior dossier: the Gonzalez Rocha succession, Contreras's insider track record, 88.9% Grupo Mexico control. Three genuine updates:

1. The board was re-elected with a real minority protest vote. At the 2026-05-29 annual meeting, 97.35% of shares voted. All eight directors were elected — but the withheld votes are informative because they separate the controller's slate from the independents. Germán Larrea Mota-Velasco: 25.08M withheld. Leonardo Contreras: 27.94M withheld. Luis Miguel Palomino: 25.57M withheld. Carlos Ruiz Sacristán: 26.13M withheld. Against Vicente Ariztegui: 1.63M and Jose Pedro Valenzuela: 1.00M. Public float is ~11% (~92M shares), so ~25–28M withheld is roughly a quarter to a third of the free float voting against the controller and the new CEO. Say-on-pay passed 785.2M for / 3.58M against. Auditor (Galaz, Yamazaki, Ruiz Urquiza — Deloitte Mexico) ratified 803.3M / 0.75M. Read: minorities cannot change anything, but a measurable slice of them registered dissent specifically at Larrea and Contreras.

2. The related-party control framework is stronger than the prior dossier credited. Article Nine of the certificate of incorporation prohibits any "Material Affiliate Transaction" (>$10.0M aggregate with Grupo Mexico or affiliates) that has not been reviewed by a committee of at least three independent directors; transactions between $8.0M and $10.0M need General Counsel + CFO authorisation; all related-party transactions are reported to the Audit Committee. This partially answers the prior dossier's Lens 14 Q4 — a structural protection does exist, and it is charter-level, not merely policy. It does not eliminate the conflict (the independents are elected by the 88.9% holder), but the prior framing that minorities have "no real check" was too strong.

3. Capital allocation shifted toward stock dividends and away from cash-per-dollar-earned. The $3B buyback remains dormant — no repurchases; treasury shares are being consumed to pay stock dividends rather than replenished. See Lens 13.

Also new: a MX$500M (~$29M) "Solidarity contribution" to SEMARNAT for social and development programmes in Sonora, made 2026-07-24. Sonora is where the 2014 Buenavista/Sonora River spill happened. The filing does not characterise it as remediation or settlement, and I found no source that does — do not read it as an admission or a legal resolution; read it as a continuing cost of social licence in the state where the parent's worst environmental event occurred.

Forensic red flags (partial re-run — new filing)

Re-run against the Q2-2026 10-QForm 10-QThe quarterly version of the annual report. Lighter, and not audited.. No new forensic concerns; earnings quality remains high.

• Revenue quality: strong. Receivables grew 2.3% from YE-25 while revenue grew 38.4% — the opposite of a channel-stuffing or collection-quality problem.
• Cash conversion: strong. H1 OCF $3,683.0M vs H1 net income $3,256.5M. D&A $451.7M is steady and real.
• The non-GAAP metric is disclosed responsibly and management actively deflated it. The cash cost is given both before ($2.29) and net ($0.05) of by-products, with a GAAP reconciliation, and the CFO explicitly walked the market off the Q1 −$0.11 figure on the call. This is the right behaviour on the metric the prior dossier called "the most dangerous number in the deck."
• Related parties: stable and small. Accounts payable to related parties $122.5M (down from $138.4M at YE-25) against total payables of $871.9M.
• Debt structure: clean. All fixed-rate USD; the new $1.25B tranche at 5.350% is below the 5.93% weighted average, so the marginal cost of debt is falling. Issued at a $2.5M discount with $6.3M of deferred costs — immaterial.
• Tax: no surprises. Effective rate ~36.4% for H1 (1,836.3 / 5,043.5). Mexican mining royalty accrual $175.2M vs $94.7M, tracking sales. OBBBA "did not materially affect" the statements; Pillar Two is not yet enacted in Peru or Mexico and currently has no impact — a live watch item, not a current one.
• Pension: the frozen Retirement Benefit Plan termination completed 2026-04-30 with no material impact; settlement charges were taken in Q4-2025.

Regulatory findings (re-verified 2026-08-10): Zero SEC Litigation Releases and zero AAERs naming Southern Copper in the 2021-08-10 → 2026-08-10 window, per EDGAR EFTS. Unchanged from the prior pass.

Litigation deltas — two that matter:

• Tía María lawsuits went from seven to eight. A new action by Néstor Eloy Arocena Canazas (filed 2025-12-02) joins the existing seven. More importantly, the Gobierno Regional de Arequipa case — the most institutionally serious of them, because a regional government is the plaintiff — went SCCO's way twice (lower court 2026-01-23, Superior Court affirmed 2026-05-05) and then the plaintiff filed an extraordinary appeal (recurso de casación) on 2026-06-04, sent to the Supreme Court on 2026-06-16. Still pending. Net: the company is winning these, but the Arequipa regional government is escalating rather than conceding, and construction is now 42% sunk.

• Peruvian Labor Shares: the company disclosed its quantum argument for the first time in this filing, and it is enormous. SCC's position is that "it is incorrect to treat a labor share as equivalent in value to a current investment share, given that the applicable conversion ratio is actually 10,000,000 labor shares for one current investment share". That is the whole case in one sentence. If the courts accept the 1:1 reading, the 8,488,383 investment shares ordered transferred under Resolution No. 686 are worth ~$1.7B at $203.25/share. If the company's 10,000,000:1 ratio is accepted, the exposure is de minimis — under a dollar. The gap between those two outcomes is the entire risk. Status: the Ninth Constitutional Court's 2026-02-11 amparo ruling went SCC's way and nullified the enforcement resolutions; on 2026-02-24 it provisionally barred any transfer; on 2026-04-08 the First Civil Court suspended Resolution 686 accordingly. But the Superior Court annulled Resolution No. 736 (which had dismissed SCC's nullity motion), so SCC's challenge to Resolution 686 is unresolved, and the plaintiffs have appealed the amparo. Pending as of 2026-06-30. This is a binary, unquantified, unreserved contingency of up to ~$1.7B and it is not in consensus numbers.

Forward projection

Model integrity — read this before any number below. our model was re-run for this refresh. Its state:

• Quarters of history: 2 (2026-Q1 → 2026-Q2). The CSV was empty at the boundary; this pass populated it, so there is no longer-run history to seed from.
• "Opening balance sheet sourced: yes" — this is an improvement; the full balance-sheet block was populated from the Q2 10-Q, so the model no longer depends on hand-typed opening balances.
• Share price: blank. WACC/CAPM: blank.
• our model reports: "No computed values. The workbook has 51 formulas and no cached results."
• The builder itself warned: "only 2 quarter(s) of financials — LTM figures are partial" and "fewer than 8 quarters — revenue growth seeded at 8%." An 8% generic growth seed is meaningless for a price-taking commodity miner whose revenue just moved 40% on price.

Therefore I cite no model outputs. There are none to cite, and the ones it would produce on a generic 8% seed would be misleading. The projection below is with arithmetic shown, anchored on the company's own disclosed price sensitivities.

Anchors. H1-2026 actual EPS $3.93. Q2 run-rate annualises to ~$8.04. Implied consensus FY2026 EPS from the forward multiple: $203.25 ÷ 28.29 = ~$7.18. TTM EPS ≈ $6.73 (P/E 30.22). Note what that implies: the Street is modelling a materially weaker H2 (~$3.25) than H1 ($3.93) — i.e. consensus already embeds by-product normalisation. That is important; the "bulls are extrapolating the spike" critique applies less to consensus than the prior dossier assumed.

Sensitivity toolkit (company-disclosed, H2-2026 basis, ÷829.1M shares):

• Copper ±$0.10/lb → ±$59.6M → ±$0.072/share
• Molybdenum ±$1.00/lb → ±$18.0M → ±$0.0217/share
• Silver ±$1.00/oz → ±$7.1M → ±$0.0086/share
• Zinc ±$0.10/lb → ±$13.3M → ±$0.016/share

FY2026:

• Bear ~$6.75. H2 = $2.82. Copper fades $6.04 → $5.00 (−10.4 × $0.072 = −$0.75); silver $73.49 → $45 (−28.49 × $0.0086 = −$0.24); moly $29.44 → $20 (−9.44 × $0.0217 = −$0.21). From a flat-price H2 of $4.02: 4.02 − 0.75 − 0.24 − 0.21 = $2.82. FY = 3.93 + 2.82.
• Base ~$7.55. H2 = $3.62. Copper eases to ~$5.75 (−$0.21), by-products ease modestly (−$0.19), volumes flat per the 917kt guide. 4.02 − 0.21 − 0.19 = $3.62. FY = 3.93 + 3.62. Sits ~5% above the implied consensus $7.18.
• Bull ~$8.60. H2 = $4.67. Copper to ~$6.75 (+$0.51), by-products hold near Q2 levels, and the CFO's H2 sales-volume step-up from inventory drawdown materialises (+$0.14). FY = 3.93 + 4.67.

FY2027. Management guides copper production roughly flat (~917kt), with Tía María contributing only in the later part of the year. So FY2027 is almost purely a price call with a small Tía María tail. Annualised sensitivity ≈ 2× the H2 figures (±$0.144/share per $0.10/lb copper).

• Bear ~$5.75 (copper reverts to ~$4.50: −15.4 × $0.144 = −$2.22 off a ~$7.5 flat-price base, by-products normalise toward the $1.40/lb credit of 2025).
• Base ~$7.75 (copper ~$5.75–6.00, by-products ease off the spike, flat volumes, first Tía María pounds late in the year).
• Bull ~$9.75 (deficit persists, copper >$6.50, silver holds >$60).

FY2028. This is the first year the volume thesis pays: guided ~970kt (+5.8%) as Tía María fills in. Tía María's economics are the key new input — 120ktpy at a $1.16/lb cash cost with no by-products. At $6.00/lb copper that is a ~$4.84/lb gross cash margin on ~264M lb ≈ $1.28B of incremental pre-tax cash margin, ≈ $0.98/share after ~36.4% tax. At $4.50/lb copper the same volume yields ~$0.68/share. Note this cuts both ways: because Tía María has no by-product credits, it is more copper-price-levered than the existing book, not less.

• Bear ~$6.25 · Base ~$8.75 · Bull ~$11.00.

The honest summary of this lens: the three-year EPS band is roughly $5.75–$11.00, and essentially all of that width is the copper and silver price, not execution. Anyone who tells you they have a point estimate for SCCO's 2028 EPS is quoting you a copper forecast with extra steps. (Per unattended-run rules: no our model base case logged.)

Bull vs bear (updated)

Bull case — strengthened materially since June. The two things that could have killed this thesis in the next 24 months both resolved in the company's favour inside eight weeks: Peru elected a pro-mining government with the strongest congressional backing in recent memory, and Tía María crossed 42% completion with management stating no expected delay. Underneath that, the asset quality is exactly as advertised: adjusted-EBITDA margin 67%, net-of-by-product cash cost $0.05/lb, net debt of $0.66B against $2.96B of quarterly EBITDA, and a bond book 3.2x oversubscribed at a rate below the existing average — the market will fund this growth cheaply. The demand side is tightening on the company's own read: a 2026 deficit with inventories at 15 days of global consumption. And the volume story finally has dates attached — 917kt (2026) → ~970kt (2028) → 1,060kt (2029) → >1.6Mt (2033–34), all organic, all on owned reserves, no M&A and no equity issuance required.

Bear case (permanent-impairment risks) — three of four survive, one is retired.

1. RETIRED (for now): "a hostile Peruvian government cancels the pipeline." Fujimori's inauguration and the restored Senate invert this for at least one presidential term. But it is retired, not eliminated — she won by 49,641 votes out of ~18 million, roughly half the country voted the other way, and Peruvian presidents have a habit of not finishing terms. Local social licence in Islay/Arequipa is a separate question from the national result, and the Arequipa regional government is still litigating to the Supreme Court.
2. Grade decline is now proven and quantified. Toquepala −14.7%, Cuajone −7.8% in Q2, Cuajone alone −35kt/yr; cash cost before by-products up to $2.29/lb. Production does not exceed 2026 levels until 2028. That is two more years of flat-to-down volume in which the entire result is the metal price.
3. The by-product spike is doing an enormous amount of work. By-product credits are $2.24/lb against a pre-credit cash cost of $2.29/lb — i.e. by-products are covering 98% of cash cost. Silver at $73.49/oz (+119%) and moly at $29.44/lb (+43%) are not a normal state of the world. If the credit reverts to the 2025 level of ~$1.38–1.48/lb, net cash cost goes back to roughly $0.85/lb and roughly $0.45–0.50/share of half-year EPS disappears.
4. The valuation and the governance overhang both persist. ~30x TTM / ~28x forward against an 18-analyst "Sell" consensus and a $168.25 average target — ~17% below the current $203.25. And 88.9% control is unchanged.

Pre-mortem (18 months out, thesis broke). Copper resolved toward the Goldman/Macquarie surplus rather than the ICSG/JPM deficit as Section 232 clarity pulled the COMEX premium out of the price; silver mean-reverted from $73 toward $40 and moly from $29 toward $18, taking by-product credits from $2.24/lb back to ~$1.40 and net cash cost from $0.05 to ~$0.85; grades kept sliding at Toquepala and Cuajone so there was no volume offset before 2028; Fujimori's canon minero redistribution raised the effective community/fiscal take; the Peruvian Supreme Court took the 1:1 reading on labor shares and handed plaintiffs ~$1.7B of stock; and a ~28x multiple on peak-cycle earnings compressed to ~15x on trough earnings. Stock halves. Note this pre-mortem needs no political catastrophe and no operational failure — just mean reversion in three metals and one adverse court ruling.

Contrarian view (what the market refuses to see). The Street has been "Sell"-rated on this name through a +40% copper move, a 72% earnings increase, four consecutive beats, a favourable regime change in Lima, and a growth project going from permit-limbo to 42% built — and its average target ($168.25) still sits below a price the stock has held for months. That is not analysis, it is an anchor. The genuine insight is not that copper goes up; it is that you cannot build a new Tier-1 copper mine in a democracy any more, and Tía María — 15 years and eight lawsuits to get to 42% — is the proof, not the counterexample. SCCO owns the reserves and has demonstrated it can push one through. But that is a 2030s argument, and you are paying a 2026 price for it.

Devil's advocate (updated — one genuinely new attack)

The new attack: the dividend is increasingly a stock split wearing a dividend's clothes, and the mechanism that funds it runs out in about five quarters.

Management headlines a "total estimated dividend of $3.23 per share". Decompose it: $1.10 is cash. $2.13 is newly issued stock, valued at the $177.32 reference price. A stock dividend transfers nothing to shareholders — every holder's proportional claim is unchanged; it is a split, and the company's own accounting says so, since EPS is retroactively restated for it. Presenting $3.23 as the dividend overstates the actual cash return by ~3x. At $203.25, the honest cash yield is ~2.2%, not the ~6.4% that $3.23/quarter would imply.

Now the mechanism. The stock dividend is paid out of treasury shares, and the rate is escalating: 0.0085 (Feb) → 0.0100 (May) → 0.0120 (Aug). H1 alone consumed 15,222,224 shares, taking treasury from 65,497,804 to 50,267,580. At the new 0.0120 rate on ~834M shares, that is ~10.0M shares per quarter, so the remaining treasury supports roughly five more quarters — into late 2027. After that the company must either issue genuinely new shares (real dilutionDilutionIssuing new shares, so each existing share owns a smaller slice of the same company. against a fixed reserve base), cut the stock dividend (a headline "dividend cut" for a company that markets a 31-year dividend record), or buy stock back to refill treasury — which would mean restarting a buyback that has been dormant since 2016, at ~28x earnings, precisely when management has spent a decade not doing so at far lower multiples.

Meanwhile share count is rising: 826.1M (Apr) → 834.3M (Jul), ~1.9% in a single quarter, ~4.9%/yr annualised at the current rate. Per-share earnings growth is being taxed by roughly 5 points a year by a "dividend" that delivers no cash. In a record profit year with $7.3B of liquidity and $0.66B of net debt, the company chose to pay a substantial part of its "return" in paper.

The rest of the short case, updated:

• Where the incremental margin actually comes from. By-product credits of $2.24/lb against pre-credit cash cost of $2.29/lb. Strip silver and moly back to 2025 levels and the "lowest-cost producer on earth" becomes a solidly-mid-$0.80s producer. The copper business, standalone, is a $2.29/lb-cost business with declining grades.
• The volume story is a 2028 story being priced in 2026. Nothing management guided adds a pound before Tía María's late-2027 tail. Two years of flat output at ~28x forward.
• Tía María is more price-levered, not less. $1.16/lb cash cost with no by-products means no credit cushion when copper falls. The new growth is the most cyclical part of the book.
• The Arequipa regional government escalated to the Supreme Court after losing twice, and an eighth Tía María suit was filed — with $693M already sunk and $1.8B committed. Sunk capital is the definition of a hostage.
• The labor-shares contingency is binary, unreserved and potentially ~$1.7B, and rests on a court accepting a 10,000,000:1 conversion ratio the plaintiffs dispute.
• The controller is unchallenged, and a third of the float knows it — 25–28M shares withheld from Larrea and Contreras out of a ~92M float.
• What has to hold for $203.25: copper stays ≥~$5.75; silver stays far above its own historical mean; moly stays near $29; Fujimori's agenda survives a 49,641-vote mandate; Tía María lands on time and on budget; the Peruvian Supreme Court rules for SCC on labor shares; and a ~28x multiple persists on cycle-peak metal prices. Seven "ands," and the sell-side's average target sits 17% below.
• The pair trade is unchanged and now more attractive: FCX offers copper torque at roughly half SCCO's EV/EBITDA. If the thesis is "own copper," SCCO is the expensive expression of it.

Lenses carried by reference (unchanged)

• Company Overview: unchanged, see the previous dossier. (Minor refresh: Q2-2026 sales mix — copper 72.7%, moly 11.1%, silver 8.8%, zinc 3.5%, other 3.9%. Moly is now explicitly "our first by-product," silver second.)
• Supply Chain: unchanged, see prior file. (One material addition: a 200MW, 10-year power purchase agreement with Orygen Perú S.A.A. signed May-2026 — 120MW from 2027-05-01, stepping to 200MW from 2029-05-01 through 2037-04-30, projected to cut Peruvian power costs ~22%. Power is a top-three cost line and this is a real, contracted, multi-year structural offset to grade-driven unit-cost inflation. It goes some way to answering why management thinks it can hold costs while grades fall.)
• Competitive Advantages: unchanged, see prior file. The three legs (cost, reserves, integration) all held; the Orygen PPA and Tía María progress reinforce legs 1 and 2.
• Segments: refreshed data now in our figures. Q2-2026 external sales / operating income: Mexican open-pit $2,505.5M / $1,610.7M; Peruvian $1,584.4M / $935.9M; IMMSA $199.0M / $88.0M; consolidated $4,289.0M / $2,623.2M. Mix ~58.4% Mexico / 36.9% Peru / 4.6% IMMSA. Structural read unchanged from the prior dossier: Mexico is the profit pool, Peru is the growth pool. Peru's operating income still rose 60.5% YoY despite copper volumes −6.5% — price did all of it.
• Comps: unchanged, see prior file. Not re-sourced in this pass — no fresh peer multiples were gathered, so the June table stands as-is and should be treated as stale. SCCO's own multiple did move: TTM P/E 36.7 → 30.22, forward 27.7 → 28.29. The trailing multiple compressed because earnings rose faster than the price, not because the stock got cheap. Peer EV/EBITDA spread vs FCX/ANTO: n/a — not re-sourced.
• Management Questions: the 15 questions in the prior dossier stand. Q1 (durability of negative cash cost) is now partly answered — it reverted to +$0.05/lb and management disclaimed extrapolation. Q2 (grade trajectory) is partly answered — Cuajone −35kt/yr, flat output through 2027, ~970kt in 2028. Q3 (Tía María de-risking) is substantially answered — 42% complete, no expected delay, favourable regime. Q4 (minority governance) is partly answered — Article Nine's independent-committee requirement for >$10M affiliate transactions. Q12 (what changes under the new CEO) remains completely unanswered — Contreras did not speak on the call. Add three new questions: (a) What happens to the stock dividend when treasury shares run out in ~2027 — cut it, issue new shares, or restart the buyback? (b) What is the company's reserved liability, if any, for the labor-shares case, and what happens if the 10,000,000:1 conversion ratio is rejected? (c) Tía María carries a $1.16/lb cash cost with no by-product credits — at what copper price does it stop clearing its cost of capital?