Grupo Mexico SAB de CV

BMV:GMEXICOB

Earnings Call Transcript 2018-Q3

[Operator]

Good afternoon, and thank you for holding, and welcome to Grupo México's Third Quarter Earnings Conference Call.

With us this afternoon is Mr. Xavier Garcia de Quevedo; Mr. Fernando López Guerra; Mr. Oscar González; Mr. Octavio Ornelas; Ms. Marlene Finny; and other executives, who will discuss the financial performance of the company during the quarter, giving you a summary of the latest news and address any questions you might have at the end of the call.

Before we begin, I would like to remind you that 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 not to place undue reliance on these forward-looking statements. Grupo México undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All results are expressed in full U.S. GAAP.

[Operator Instructions]

Now I will pass the call on to Ms. Marlene Finny.

[Marlene de la Torre, executive]

Good afternoon, everyone, and thank you for joining us today for Grupo Mexico's Third Quarter Earnings Conference Call, and the ones who joined also our GMXT -- and Southern Copper Corporate conference call. Thank you very much.

Here we are with all the top executives from all of our major subsidiaries. And I would like you -- I would like to remind that for today's conference call, we're going to be following a presentation. You can find this presentation in our website, grupomexico.com, or you can download it as well from our website or access our webcast if you prefer to follow the presentation through the webcast, as you prefer. So either way, we're going to go into the numbers and into the different slides.

So first, on today's conference call, we're going to be following the schedule on Page #3. I'm going to quickly comment on Grupo Mexico's main financial highlights. Then Mr. Oscar González will be commenting on the mining economic environment and the main highlights of that division, our Mining Division. Fernando López Guerra then will explain the financial results of the Transportation Division. And finally, Octavio Ornelas will comment on the main highlights of the Infrastructure Division. After that, we will open the call for question and answers. We also -- joining us today is also Mr. Xavier Garcia de Quevedo, the Vice Chairman of the Board, who will be here to answer the -- all the questions you might have as well.

Another -- the announcement is that, as of today, Mr. Fernando López Guerra is now the CEO of GMXT. So we are very happy and we congratulate him for this new job position, and we wish you all the best luck. We know you're going to do a very good job.

So going back to the presentation, turning back to Page #5, going into the numbers. We are happy to announce strong numbers for this first 3 quarters, the accumulated numbers that support shareholders return. We will approach the numbers in a minute. But first, I would like to highlight that committed to our shareholders, we continue to increase or give higher dividend. So this quarter, the board approved a quarterly dividend payment of $0.80 per share. This is the same number that we approved last quarter, but this was practically double than what we have last year. And this is about a 7.8 dividend yield. So as we finished -- or we recently finished with the expansions here in Mexico with Buenavista. And now, we're going to -- we recently finished also with Toquepala. And we are generating more cash. We're going to hopefully continue to increase or, at least, maintain discipline depending on cash generation and cash needs.

In addition, we continue to invest for the future and to deliver great performance, sustainable growth and superior value. As you know, we have the largest copper reserves, and we operate high-quality world-class assets in investment-grade countries, such as Mexico, Peru, U.S.A. and Spain. We are currently developing our next phase of growth with a program aimed to reach our copper production capacity of roughly 1.8 million tons by 2025 -- around 2025, with a very competitive cash flow. This is almost an 80% increase of our expected numbers for 2018, so it's an interesting growth plan.

We are also investing in another divisions and posted excellent results from new prospects from our new Infrastructure Division.

And going into the main thing, financial highlights, the ones you can see on Page #5 and then 6. Our consolidated revenue was 13% higher than the first 3 quarters of 2017. This was mainly driven by higher metal prices and in addition to strong results in our Transportation and Infrastructure Division.

Our EBITDA grew 17% and reached $3.73 billion in the first 9 months of 2018, with a margin of 47%. The net profit reached $1.07 billion. This is 16% less than the same period of last year due to a decrease in the value of our treasury shares and changes in the U.S. tax policy.

We are also now finishing with our expansion project in Toquepala that will start operations next quarter. And we finished with Buenavista last year, so we are very excited, and this increased the CapEx we invested.

We are facing an optimistic mining industry environment. And in a couple of minutes, Oscar will comment on that.

Turning to Slide #7. We will reconsider that by the strong capital structure, and this generates value. So our balance sheet continues to be very solid. This has been one of the main things we have had over the -- over time. We continue with a very strong balance sheet, and we have a net debt to EBITDA ratio of 1.3, with 80% of our debt in dollars and 20% in pesos, which is consistent with the breakdown that we have within our revenues from different divisions.

We also have a very comfortable debt payment schedule, so we are very comfortable. And with all the cash we generate, we are more than covered for that.

You can see on the next slide, Page #8, we have no very big maturities until 2035, so very comfortable on that side.

In addition to that, we already mentioned the dividend. So I think it's very important to highlight the dividend yield we have been -- we are giving as we are generating more operations through the year -- more operating cash flow from our operation, and we continue to deliver very good results.

I will now pass the call to Oscar, who will comment on the Mining Division. We already had our Southern Copper's conference call, so we are going to comment on the full division. But if you have any questions, you can -- after the call we can gladly answer. Mr. Raul is also joining us.

[Oscar González Rocha, executive]

Okay. Talking about the Mining Division, we're going to slide -- moving into the Mining Division, the U.S. sales were $5.99 billion, translating to an increase of 10% in comparison to the first 9 months of last year, with greater production in the Mexican and Peruvian operations that reached 733,895 tons as of September and with an EBITDA of $2.75 billion, a 46% increase from the last 9 months of 2017. And we will reach -- and we reached a 46% margin. And our net profit was $811 million in 2018.

Our -- In our outlook of copper, during the months -- during these months, higher metal prices were recorded. LME copper price grew significantly from an average of $2.70 per pound in the first 3 months of '17 to $3.01 per pound on the -- at the average of 2018. Recently, during the last quarter, LME prices have decreased from an average of $3.12 per pound in the second quarter to $2.77, or minus 3.8% per pound in the third quarter. We view this fall in copper prices as a result of the marking -- market concern regarding the trade war between the U.S. and China. We expect a recovery of the copper prices in the coming months because copper fundamentals are solid. As a result of the synchronized economic growth of the major economies, refined copper demand grew, outperforming our initial forecast, and industry experts are forecasting an increase of the demand from 2.5% to 3% for the year. In addition, we expect a supply growth approximately of 2%. We expect supply growth of 2% in 2019, which we'll see a support of the metal prices.

Regarding our projects, we have a $1.25 billion project that includes the state-of-the-art concentrator that will expand our production in Toquepala of 100,000 tons of copper, translating to an increase of 74%. Up to September 2018, we had invested $1.19 billion, and we have completed the expansion of Toquepala. We are operational -- in operational testing phase, and we will expect to be at full production on the first quarter of 2019.

We are working with the government to -- of Peru to obtain the construction license for the project of Tia Maria worth 120,000 tons of copper production of SX/EW metallic copper and with an investment of $1.4 billion. The company expects the project to generate 3,600 jobs during the construction phase. And when operational, Tia Maria will directly employ 600 workers and 4,200 indirect workers. We expect license to be issued on December of 2018.

We expect an El Pilar -- Pilares project, excuse me, to increase capacity to 3,500 (sic) [ 35,000 ] tons of copper due to higher grades and -- from our current feed on La Caridad that we expect Pilares to generate 0.78% of grade from a 34% grade of -- at La Caridad -- 0.34% grade at La Caridad. The investment for this project was $159 million, and we expect to start producing in 2020. In the third quarter, we finalized the modernization of our Hayden smelting facility, and it's complete and operational. And with this, the capacity -- we will be smelting up to 630,000 tons per year.

So the permitting process. On Aznalcóllar project, we continued to do our investment in exploration. And the project investment estimated $290 million and will increase our production of zinc by 105,000 tons.

Finally, we will go to the highlights -- to the financial highlights. So the highlights of the Mining Division, as we already talked of the sales, we have an EBITDA of $2.75 billion and net profit of $122 million and with a production of 233,800 (sic) [ 733,800 ] tons.

And that said, we -- let me now pass the call to Fernando López Guerra.

[Fernando Guerra, executive]

Thank you, Oscar.

[Marlene de la Torre, executive]

Going into Page #15.

[Fernando Guerra, executive]

Going into Page 15. We achieved $1.7 billion in sales for the third quarter. It is 11% higher in volume versus the first 9 months for 2017. In EBITDA, we reached 755 -- $756 million, which is an 18% increase versus the first 9 months of the year. On a net profit margin, we have also an increase of 16% versus the first 9 months.

On -- per segment basis, I'll go to the top of the line on the revenue. I'll start with the segment that has grown the most, it's Intermodal, where we have grown for the first 9 months for 73%. This increase is mainly due to domestic routes and volume consolidation from the new Florida operations. That is the case as well on the mineral sand when we -- where we have some volumes -- new volumes from Florida, incremental volumes for frac sand, briquette and iron ore. In this last quarter, some of the volumes from frac sand have diminished to new origins -- closer origins to the consumption areas that have been impacted all of -- most of the U.S. carriers.

On cement, we're also growing with a new conversion from truck and some specific routes we won from the construction of the new airport in Mexico City.

On the medium growth segments, which is -- they're not so medium. They're not so small. We're delivering double digits on energy with a 13% increase. The new routes with imports from diesel, gasoline, LPG and coal exports that are now being taken through the port of Lima from U.S. Gulf into Mexico and then exported to Lima. This segment continues to grow aggressively. This past -- just this past quarter was 15% of growth. The numbers we're delivering, as we were mentioning on the transportation call, it is only with small terminals. There are no large unit train terminals. Yet on our line, however, we have managed to deliver on this growth. We have some -- we have coverage now in Hermosillo; in Chihuahua; in Torreón, Torreón is about to be open; in Monterrey; in Guadalajara. And third parties continue to open terminal storage -- transfer and storage terminals for liquid and refined products in our network.

Just as of yesterday, the first unit train was loaded from one of our customers and it's on route now to Guadalajara. So this is one of segments where we are very bullish for the years to come.

On industrials, the beer exports continue to increase. We continue to gain market on consumer goods. And as you might know, there's an increase in demand for the new railcars, so constructions and the plant in Mexico are working full speed again.

On chemicals, we have grown 11% due to new recovered volumes that we have lost with theft and vandalism.

On agricultural, we have gained market share, specifically on wheat and soybean. And we -- as of this quarter -- the year-to-date is 9% growth, just for this quarter it's 13%, and it's significant, not just we're growing in our most important segment.

In automotive, we have decreased in vehicle exports to the U.S. and a shift in demand for smart vehicles in the U.S. into SUVs and large vehicles. So Mexican plants, some of them are adapting the new products and some of them are shut down due to maintenance. Volume -- the revenue for the first 9 months was only increased by 1%. For the last quarter, it increased 12%. So -- and for the next year, we also see this coming back strongly.

On metals. We have a decrease in steel exports to the U.S. due to the custom tariffs and is partially offset by some important scrap and new routes we have continued to gain.

Going into the next page. We are presenting the board just approved a new CapEx -- the 2019 CapEx, and we have broken it down into 4 main categories. First -- the first one being maintenance. There, we will be spending just over MXN 4,300 million in new rail and ties. We're strengthening our central corridor between Piedras Negras to Torreón, down to Irapuato. We're also putting money into rail maintenance, locomotive overhauls, tools and bridges.

On the efficiency end, we will be putting in just under MXN 1,300 million. We -- the main project we have there is, it's called CTC, which is the signaling of our network. We're going to start signaling from Piedras Negras into Torreón. This is one of the projects that we should have delivered in 2018. We had to -- a bit of a slowdown. We were finding the right technology and the right cost, so that we could implement in a larger sector of our network. But we will be implementing in 2019. The fact that the board has authorized these CapEx plans so early, so that we have timing of -- to prepare, to purchase and to get all the permits in place and deliver on time.

We also have technology and equipment on this segment, and the construction and reconfiguration of some of our main yards. On growth, the board has authorized also MXN 1,600 million. We will acquire 24 new locomotives. As of today, we're operating our entire fleet. We have to pull out from storage all locomotives we have, so these are not as fuel efficient as they should be. And with the volume growth that we've had, we have to do this. So these 24 new engines will come in starting midyear of next year.

We will go also into Phase III and -- of Monterrey yard and Phase -- also Phase III of Piedras Negras yard. As I was mentioning, this is one of our main corridors. And specifically, Monterrey as a location -- this origin and destination has been one of our most important growth within our -- with our Altamira and Piedras Negras corridor serving it. We will also invest in intermodal ramps and other smaller projects.

Going into the strategic projects, we will put in about just over MXN 1,700 million. We will finish now Celaya bypass, the Monterrey bypass, which will also enhance our capacity in Monterrey as a location. We -- we're also going to open up our Chihuahua to Ojinaga corridor. This lane will be another channel for us that brings capacity to connect to the U.S. carrier. So we are now going to be able to take full advantage from our 3 gateways going into the East Coast of the U.S. This is Piedras Negras, El Paso, Ciudad Juárez and now Ojinaga. And we have some strategic land acquisition to deploy.

For the year's end, we have invested just under MXN 4,500 million. This is 60% of what we had in budget. We have also committed just over MXN 2,000 million more, and that are to be delivered and installed and deployed during this next quarter. This will take us to 87% of our budgeted CapEx for 2018.

[Marlene de la Torre, executive]

We are giving those numbers in pesos because GMXT board approved these numbers. That's the reason why. Now we're going to go into the Infrastructure Division. But gladly, we will answer any questions you have at the end. So I'll let Octavio explain the highlights the Infrastructure Division.

[Octavio J. Esquinca, executive]

Thank you very much, Marlene. Good afternoon, everyone.

I will first go over the financial highlights of the Infrastructure Division. The first one, the consolidated revenues reached $468 million, which reflected 7% more than in the first 3 quarters of the previous year. EBITDA in the division reached $200 million during 2018, which represents another 10% increase from the same period of last year. Net profit in the first 3 quarters of this year reached $33.5 million, which represents a very important increase with respect to the figure of last year.

I'll go now to the relevant details of the subdivisions of infrastructure. First, we have in energy, new record in energy generation.

During the third quarter of this year, more than 1 million megawatt hours were generated with an average power of 487 megawatts. The net sale price of electricity to Minera Mexico during this third quarter was $0.0419 kilowatt hour, which is a figure 33% lower than that of the third quarter of last year. This I think also represents a very important discount with regards to the price of CFE. It's CFE minus 50 -- more than 50% of discount. As of June 1, the sale of electricity energy to the Wholesale Electricity Market began. The volume sales in this third quarter in that market totaled 27,673 megawatt hours during this quarter.

Next we have a new record for both the Salamanca-Leon Highway. During the third quarter, the highway reported revenues of MXN 193 million, and that's weighted average daily traffic of 12,593 units. The equivalent traffic was 19,364 vehicles. This increase in traffic equivalent is a 6.3% increase with respect of the third quarter of last year. By October 3, we -- there was an inauguration of the entrance to Leon, which is the last tranche of the La Salamanca-Leon Highway. Next, we have Mexico Compañia Constructora. Progress has reached 72% against 60% scheduled on the construction of the new Tailings Deposit at Buenavista del Cobre. Likewise, 32% progress has been achieved on the Expansion on the levee of Mexicana de Cobre No. 7 Tailings Dam. With Ferromex works continue on the Celaya Railway Bypass with a 40% progress achieved.

Silao Bypass. During this third quarter, the construction of the Silao Bypass began. On September 17, MXN 322.5 million were drawn on our bank loan for the construction of the project. Right now, 100% of the right-of-way of the tranche II of this bypass has been currently released.

Finally, we have the trailing platforms. The third quarter of last year ended with only the Campeche rig in operation. Since then the Chihuahua, Tabasco, Tamaulipas and Veracruz rigs have restarted operation. Thus during the third quarter of this year, a total of 5 rigs were operational, achieving an efficiency of 97.7%. We're still awaiting the notice from PEMEX regarding the date to restart operation with Zacatecas oil rig. It is important to mention that PEMEX is currently the Mexican company with most rigs in operation. With this, could you open the Q&A session. Thank you and goodbye.

[Operator]

[Operator Instructions] Our first question comes from Alfonso Salazar with Scotiabank.

[Alfonso Salazar, analyst]

The question I have is regarding Asarco. You mentioned a new design capacity at Hayden smelter of 630,000 tons per year, and you mentioned that it increased. So I was wondering what was the size of the increase? And also I was wondering if you can give us some color on the operating structure of Asarco. For example, we took your mines -- the mines that you operate, produce concentrate and how much once production normalizes at Mission, for example. I understand that Silver Bell leach and SX-EW operations, and it produces around 20,000 tons of scatter. So I would imagine that then the feed of the smelter comes from both Ray and Mission, and probably some concentrate that you buy through third parties, so if you can confirm this? And finally if you can tell us what's the average grade of the concentrates from your mines in Asarco.

[Oscar González Rocha, executive]

Okay. Let me see if I got all that. First, the tons. The smelter was working around 580,000 tons a year. So it's about 50,000 more tons. Regarding the productions of concentrate, on -- let me give you -- one second. Concentrate year-to-date, we have in -- we have mentioned -- no, I don't have the total concentrate. I have the copper and concentrate, 29,000 and 28,000, and not concentrate. One second.

[Marlene de la Torre, executive]

We will send you that number after this.

[Oscar González Rocha, executive]

Yes, because we don't have...

[Marlene de la Torre, executive]

The concentrate.

[Oscar González Rocha, executive]

The concentrate. We have copper content in our projections right now.

[Alfonso Salazar, analyst]

Okay. Do you know what is the concentrate grade, just to get an idea?

[Oscar González Rocha, executive]

Well, yes, from 22% to 25% is the grades that we have in our operation.

[Alfonso Salazar, analyst]

Okay. Okay, perfect. And do you -- are you doing so or you plan to do some purchases to third parties to fill the Hayden smelter?

[Oscar González Rocha, executive]

Yes, that's what we do. Currently, we're doing about 100,000 tons of tolling. What we do there is we toll. So we receive the concentrate. We charge them a fee for transforming that to -- through either anodes or cathodes. In this case, we do the service all the way to cathodes. And so far -- what we're contemplating for next year is to increase our tolling for third parties, in that way you [indiscernible] our smelter capacity.

[Operator]

[Operator Instructions] Our next question comes from Isabella Vasconcelos with Bradesco BBI.

[Isabella Vasconcelos, analyst]

I have two questions here. The first one on Asarco. If you could provide a cash cost guidance following the normalization of operations in the fourth quarter of this year. And also, and I'm sorry if you talked about this before, but if you could share more details on the 2019 investment plan? What are the main investments and how they can improve your efficiency in operations, average gains and gains and costs? So these are my 2 questions.

[Marlene de la Torre, executive]

Isabella, your second question was only for Asarco, you're referring, for the investments in the...

[Isabella Vasconcelos, analyst]

No, I'm sorry, I'm sorry. No, I'm sorry, I didn't explain. The second question is on the Transportation Division. So on the investment plan that you had approved, the MXN 9 billion, if you could share the -- more details on the main projects.

[Marlene de la Torre, executive]

Okay. The topic on the Transportation Division and the main projects. We comment that on the presentation. But our main projects, I will let Fernando, our...

[Fernando Guerra, executive]

Yes, we're focusing -- as we were mentioning before, we're focusing mainly on -- I will discard the maintenance. That's particularly the cost of doing business and what we do every year. But the efficiency growth and strategic, and the efficiency side, the one that moves the needle for us, it's the signaling system, the CTC implementation. And this is -- instead of -- this is also controlling automatically from the control center in Guadalajara, the entire -- well, the certain corridors. Right now our network is operated, it is called in the industry a star territory where the control center cannot see where the trains are and cannot move the signals and cannot move the trains into a siding. They just authorize, like on airplanes, they authorize from kilometer X to kilometer Y. And when the crew arrives -- before the crew arrives to kilometer Y, then they need to ask for a clearance again. And when they need to be put into a siding, a brake man comes down, pulls the brake and one train moves into a siding for the other one to go by. This means that we need incremental crew members. Difference between a crew in Mexico and a crew in the United States is, in the U.S. you have crew -- the trains run with 1 -- with 2 crew members and in Mexico it's 4 or 5 also. So this is productivity on that end. And also it allows us to gain speed because the fact that we need to physically come down and stop the train which weighed between 6,000 and 8,000 tons, and it's 3 kilometers or 2 kilometers long. It takes time. By doing this automatically, it will allow us to enhance our speed significantly. The other part is the construction and reconfiguration of our yards, and this is between efficiency and growth. We've managed to increase with -- the faster we become, the more capacity we have and the less money we need to put out on actual track to gain capacity. The faster you release each stretch of network, then another train can go by. However, you need to put money back into the yards. These are practically our airports, so we need to grow on parallel with the rest.

In the locomotives, it's also for growth and for efficiency, as I was mentioning. We have to pull out engines that were stored, that we thought and we didn't want to see them again ever, and thought they were there for a reason and they helped us come out through this quarter where demand exceeded our capacity with newer fleet. So new engines are coming in. The bypasses will then also allow us to gain speed. Bear in mind, in the transportation and in the railroad system, everything is about speed. The faster you become, the less engines, the less crew members, the less railcars, the less investments you need out on the tracks. So for us, everything is focused on speed and diesel consumption, and on labor. I don't know if I answered your question.

[Isabella Vasconcelos, analyst]

No, absolutely, great color.

[Octavio J. Esquinca, executive]

And Isabella, regarding [indiscernible]. we're still working on the numbers. Our best estimate right now is breakeven at $2.40 with credits -- with total credits of $0.20 for [indiscernible] for 2019.

[Operator]

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

[Carlos de Alba, analyst]

Going back to Asarco. Oscar, how much did you say is the cash cost before byproducts? If I heard you correctly, you said $2.40 per pound, is that right?

[Oscar González Rocha, executive]

Yes, that's correct. That's our best estimate for 2019, $2.40 [indiscernible] and credits of $0.20.

[Carlos de Alba, analyst]

All right, excellent. And then the way we calculate implicitly the results of Asarco, we are seeing a big, big negative EBITDA number. And it expanded from the negative number that we calculated for the second quarter, and so it has rapidly deteriorated, obviously, with lower copper prices. Could you tell us what are the plans for that business? Why does the company keep it? Can you really turn it around? Why don't you shut it down and further enhance the supply/demand conditions for the sector? I just -- I mean, I understand why you had to acquire it back in the day out of bankruptcy, but the performance really hasn't been there. And so I just want to know what the plans are for the company. Does management and the concerned shareholders have a concrete plan to make this operation viable?

[Oscar González Rocha, executive]

Yes, that's what I was saying that that's our best estimate on 2019. We're evaluating right now all our units, as we speak, and we're trying to see if we can manage them more efficiently or see if there are other options. But we don't have right now a decision yet on that. But we are analyzing what you just explained.

[Marlene de la Torre, executive]

We are deeply analyzing all of our different operations in Asarco to see what are the investments required or what we can do in the future to improve these operations.

[Xavier García de Quevedo Topete, executive]

In the mines for 2019, we will move less weight. That's an important issue. The other -- the grade -- the copper grade in Mission and Ray will increase a little bit. We will have also best recoveries with delayed maintenance because with accidents that we have in each year, for 2019, we will not have these accidents or the problems that we have in the mines for the reaching of the goals. So we have been analyzing each one, and we are quite confident that we will be able to reach the $2.40 that Oscar was reiterating for cash costs.

[Carlos de Alba, analyst]

Just maybe, Oscar, what was the cash cost of Asarco before byproducts in the third quarter?

[Marlene de la Torre, executive]

It's $3?

[Oscar González Rocha, executive]

Yes, $3. Yes, it's $3.

[Carlos de Alba, analyst]

Okay, understood. And then moving on a little bit to infrastructure. What are the -- in the press release, you mentioned that you are awaiting the notice or communication from PEMEX on where the location for Zacatecas already will be. But what exactly is delaying the...

[Xavier García de Quevedo Topete, executive]

For Zacatecas PEMEX, we already started to work on the drilling of one well. Unfortunately, this well was -- has water, so we are still going through the newer seismic from PEMEX group. But very interesting that we continue because we have reached almost 98% of efficiency.

[Carlos de Alba, analyst]

Okay. But what is delaying the assignment of the Zacatecas oil rig? Is the PEMEX is one that had low ...

[Xavier García de Quevedo Topete, executive]

The production plans of PEMEX? As we said, we are working with PEMEX for the next year to -- looking really to help them to improve production. You have shared that PEMEX will have a goal to increase 600,000 barrels per day. And probably, they can make better. We are working through everything.

[Operator]

And our next question comes from Alfonso Salazar with Scotiabank.

[Alfonso Salazar, analyst]

Just was wondering if you could have considered, going back to Asarco and the high cash cost. I remember that you were facing a problem with rock hardness at Ray years ago, and probably it's something that continues. So have you considered, for example, the installation of a pre-closure to get the highest throughput?

[Fernando Guerra, executive]

Well, we are considering not only the pre-closure, but we are right now evaluating how to increase our throughput, especially in Ray. As you know, Ray, [indiscernible] hardness of the ore.

[Operator]

And I'm not showing any further questions in the queue. I would like to turn the call back to Marlene Finny for any final remarks.

[Marlene de la Torre, executive]

Well, thank you, everybody, for joining us. If you have any further questions afterward, please let us know. You can always write us an email or whatever you need. We'll keep in touch, and thank you so much.

[Operator]

And ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day.