Grupo Mexico SAB de CV

BMV:GMEXICOB

Earnings Call Transcript 2018-Q4

[Operator]

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

With us this afternoon is Mr. Xavier Garcia de Quevedo; Mr. Fernando López Guerra, Mr. Ramón Leal, 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 will 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 risk 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]

Hi, good afternoon, everybody, and thank you for joining us today on Grupo Mexico's Fourth Quarter and Full Year 2018 Conference Call. Here with me are all the top executives from all of our major subsidiaries. I would like to remind you that for today's conference call, we are going to be following the presentation. You can find it on our website or you can download it from our website or you can access the webcast if you prefer to follow the presentation in whichever way you want.

So first for the day, on Slide #3, so we are going to be following this schedule. I will first briefly comment on Grupo México's main financial highlights, then Mr. Oscar and Mr. Xavier will be commenting on the mining economic environment main highlights and financial highlights of our Mining Division. After that, Fernando López will then explain the financial results of our Transportation Division. And finally, Mr. Octavio Ornelas will comment on the main highlights of the infrastructure division. We will open the call for questions and answers afterwards.

So going into Page #5 of the presentation, we feel glad to announce some numbers for 2018 that support shareholder returns. So our main financial highlight is that our accumulated consolidated sales reached $10.5 billion. This is a record figure for us within a good year and implies a 7% increase from 2017. Our EBITDA was $4.9 billion, which was 8% higher than 2017.

I'm going to go deeply -- deeper into our dividend in a couple of pages, but it's very important to highlight that our board has approved an $0.80 per share dividend during the last board meeting. It's going to be payable on February 28.

And then investing. In addition, we continue to invest for the future and so we [ led ] to deliver great performance, sustainable growth and superior value. As you know, we have the largest copper reserves and we operate high-quality worldwide assets in investment-grade countries, such as Mexico, Peru, the United States and Spain.

We continue to invest, and we are currently developing the next phase of our growth [ forward ] in our Mining Division, aiming to reach roughly 2 million tons of copper production by 2027. These are long-term plans for the Mining Division.

In the Transportation Division, we feel very confident and we continue to invest in various projects for capacity expansion for signaling, infrastructure and the efficiency improvements in Mexico and in our varied operations as well.

And through our new subsidiary in the Infrastructure Division, we are investing in fuel terminals that we will build and operate, storage and facilities in Guadalajara and Monterrey. We'll go into further details afterward.

Going into Page #6. As I mentioned before, the main highlights is a 7% growth in our revenue, our EBITDA that grew 8% during the year. Our net profit was $1.1 billion, this is 25% lower than the previous year. This was due to our non-cash accounting mark-to-market valuation on financial instruments in our treasury, so it's important to have that in mind. Without this effect, the profit would have been $1.63 billion, which would be 43% higher than in 2017. We invested a total of $1.7 billion during 2018, which was 12% higher than during 2017, proving our commitment to growth and value generation.

We were able to finish our big expansion in Toquepala -- our biggest expansion in Toquepala. And 2019 will mark another infection point that will bring extraordinary growth for our company as we expect to reach maximum capacity of our Toquepala concentrator and recover the production from the San Martin mine. We will go into those details when we go into the Mining Division.

Going to Page #7, we have a breakdown of our revenue, EBITDA and CapEx overview during the year regarding each division. So you can see that our Mining Division has contributed 75% of the revenue of the group, 73% of EBITDA and 73% of the CapEx. Transportation accounts for roughly 22% of revenue, 21% of EBITDA and 22% of CapEx. And Infrastructure, 3% of revenue, 6% of EBITDA and 3% for our CapEx.

Turning into Slide #8 and going more into our capital structure. We feel very confident of our strong capital structure. Our balance sheet is very solid. We have a net debt-to-EBITDA ratio of 1.4, with 80% of our debt in dollars and 20% in pesos. This is consistent with our revenue. As you know, roughly 80% of our total revenues are in US dollars. We have also 78% of our debt in a fixed rate. We have a very comfortable debt payment schedule that you will be in the next page -- you're going to see in the next slide.

Even though I was speaking to dividend, I want to highlight that the $0.80 per share dividend that was approved that implies a 7.1% dividend yield. This is one of the highest dividend yields in a Mexican company as of now. This translates all of the investments in the growth we have had into the -- into a constant -- I'm sorry, into constant value for our shareholders.

Going into the buyback. This was, for us, a very long time of not doing buybacks at Grupo Mexico level. And given our trust in the outlook for all of our divisions, during the fourth quarter, we carried out stock buybacks for the first time since 2011. We will keep -- we will continue to constantly assess the best time to keep going on with this program, so we will look very closely to the market to continue with this program in the future months.

In the next Page, #9, you can see our debt maturity profile, in which we don't have any big maturities in the next couple of years. We are generating a lot of cash flow, so this should not be anything complicated for us. We are very confident about this.

At this time, we wanted to highlight some of the social things we have been doing in Grupo México, which we think is very important and one of the core of our -- it is the core of our business. And so last year, through Fundación Grupo México, we implemented social, educational, environmental, cultural and health care programs, among which is a hospital in Juchitan. It provides medical care to the population of the community with a total investment of MXN 178 million.

Sustainable development is also one of the most important things in our view and in our business model. And we have invested more than USD 520 million in social, health care and security programs. And we continue to seek the wellbeing for our collaborators and the people and families that work with us in the communities in which we operate.

So moving on to Page 11, also, as the others [ seem ] to communicate. So we have strengthened our team. We had some organizational changes that we think it's important for you to know. But we are very glad to have Ramón Leal as the CFO of the Mining Division. Ramón has a lot of experience. He has been CFO of very big groups before Grupo Mexico. And we're very glad that he joined our group, and we know he will do a very good job with us. He will be responsible, in the Mining Division, of corporate finance and treasury, M&A, new business and financial strategic planning, among other things.

In our Transportation Division, we have the reintegration of Isaac Franklin as the Chief Commercial Officer. Isaac has been with us before. He will be in charge of our commercial team, overseeing marketing, sales, fleet management and customer service. And he also served as CEO of other companies, such as Ferrovalle and CFO of TUMEX a couple of years ago.

Now I will pass the call to Mr. Xavier and Mr. Oscar, who will comment on the Mining Division.

[Xavier García de Quevedo Topete, executive]

Okay. Thank you, Marlene. Moving on to the Mining Division on Slide 12. Sales reached USD 7.88 billion, which translates in a 4% yearly increase. We increased production in Mexican and Peruvian operations. We have reached over 1 billion tons as of December 2018. EBITDA was USD 3.55 billion, a 3% increase, reaching a 45% margin. And our [ attributable ] net profit was $907 million. Investments were 7% higher than in 2017, reaching USD 1.3 billion.

In our copper outlook, in Slide #14, during 2018, higher metal prices were reported. LME copper price grew significantly from an average $2.80 per pound in 2017 to $2.93 per pound in 2018. Recently, during the last quarter, LME copper prices have remained flat regarding the third quarter.

We view these higher copper prices as a result of market [ conflicts ], sorting out on the trade war between the U.S. and China and an expectation of supply shortage in the following years. Inventory [indiscernible] in the past years are at 10 years lows. For 2019, we believe refined copper demand will grow at about 2.5%. That means an additional 600,000 tons of refined copper and supply at only 1.5%, creating a clear first year of market deficit that will put upward pressure on copper prices. We expect a recovering of the copper prices in the coming months because the copper fundamentals are solid.

We'll go to the next slide on our projects, Slide #15. We have finished our USD 1.25 billion project that includes a state-of-the-art concentrator that will expand annual production by 100,000 tons, translating into a 40% (sic) [ 52% ] increase, totaling 258,000 tons of copper, yes, from 168,000 actual. Up to December 2018, we have invested $1.24 billion on which have completed the expansion of Toquepala that is ramping up production. We expect to be fully in production in April of this year.

Tia Maria, we completed engineering and environmental requirements, including responding to the recent 14 observations received from the Ministry of Energy and Mines in the fourth quarter of '18. We expect to receive the construction license for this 120,000 tons annual SX/EW copper [indiscernible] with a total capital budget of $1.4 billion in the first half of 2019.

In addition to our ongoing social work in the communities of the Tambo valley, the company is currently deploying its successful labor program named Forge Your Future to train 700 people from this province in 2019. After training, the participants will be eligible to apply for one of the [ significant ] 9,000 jobs required in the Tia Maria construction phase. We believe that the initiation of construction activity for Tia Maria will generate significant economic opportunity for the Islay province and the Arequipa region. When in operation, we think that Tia Maira will produce 120,000 tons of refined copper, will generate a significant contribution through mining royalties and taxes from day 1 and will directly employ 600 workers and indirectly provide jobs for more than 4,200.

We have continued efforts to restart operation at the San Martin mine with a good progress. And we have invested $87 million for the first half of 2019. We estimate the mine to restart by the second quarter of this year with an expected annual production of 20,000 tons of zinc and 7,500 tons of copper and 2.8 million ounces of silver.

Buenavista Zinc, we are continuing with engineering work and will be in operation by 2021. We'll bring 100,000 tons of zinc, which is more than double the actual production of zinc and an additional 20,000 tons of copper, doubling. With an investment of $413 million.

Regarding more organic projects in the pipeline, I'd like to mention Pilares, an open-pit mine close to the La Caridad mine with an annual production capacity of 35,000 tons of copper concentrate. The [indiscernible] will be transported to feed the needs of the crushers of La Caridad concentrator at only 6 kilometers from the Pilares pit, improving the average ore grade. The investment budget for Pilares is [ $159 million ], and we expect it to start production in 2020.

Finally, we are developing the next stage of growth to achieve a copper production capacity of 2 million tons by 2027. This represents a 76% growth against this year productions, which we believe will be 1,127,800 tons of copper. These new projects, as you probably know, includes the [indiscernible] in Pilares; of course, Tia Maria; and Los Chancas; and Michiquillay.

We will -- I will now pass it on to Fernando, who will comment from the Transportation Division. Thank you.

[Fernando Guerra, executive]

Thank you, Xavier. Moving on to the Transportation Division, I will now go to the highlights and numbers for the 2018. So if you could go to Slide 17.

Total revenues reached $2.36 billion, which translates into a 15% increase year-over-year. Transportation volume was up 10% higher than 2017. Year-end, fourth quarter (sic) [ full year ] 2018, we reached an EBITDA of $1.01 billion, which is 16% more than the cumulative of fourth quarter '17 (sic) [ full year '17 ] with a 43% margin. Due to continued operating improvements, consolidation of the changes in organizational structure and the rest of operations, and -- our net profit also grew 14% to -- compared to 2017, reaching $362 million.

If you go to Slide 18, you will get to see various segments that increased substantially, starting with metals, where we grew 26%, thanks to over-the-world conversions. We keep converting, gaining market share versus truck. We grew 21% in ag products, this is mainly from grain imports, including a record volume of shuttle trains coming into Mexico. 19% growth in chemicals was -- as we recovered traffic as when -- once we controlled security breaches we had in certain corridors. And 16% in energy, with our new routes, due to imports of refined products, diesel, gasoline, LPG and also coal export from the U.S. through the port of Guayma.

There are certain segments that are growing on a single digit. In automotive, which was a neutral segment, and this is mainly due to automotive -- to consumers in the United States switching into small vehicles instead -- into big vehicles, SUVs, instead of small vehicles, some production plants in Mexico are shifting towards -- with new market demands.

If you switch to Page 19, it's a quick full year overview. We managed to -- as we managed to deliver on the top line revenue estimate that we gave out with the $2.4 billion, which is an increase of 15%; and $1.01 billion or 16% versus '17. We managed to do this regardless of external challenges of theft and vandalism. However, we have achieved significant improvements operationally-wise, and our responses have strengthened as well as our capabilities to mitigate similar events.

We came very close to achieving our targeted operating efficiencies, and we remain confident that through the deployment of several improvement programs that I will quickly talk in the next slide, we will continue to achieve these metrics that we have put out in a faster manner.

Now I will go to Slide 20 and talk very briefly on the -- on how we are changing the way we run our railroad. And this is the strictly process it. We are focusing on a precision-scheduled railroad. And this is no nuclear science. This is what all the railroads across North America are doing. And it's -- it has 5 main levers. And the first one being increasing train length, it gives us network fluidity and speed.

Number two, as we decrease dwell time at the terminals, it doesn't -- as we move forward, it doesn't matter if -- it does not do any good if we gain speed on the network if we do not gain speed at the terminals, so we're focusing there to improve our asset utilization as well.

Number three, maximize horsepower utilization. These are our engines, are we -- we're enhancing the HPT, horsepower per [ traveling ] ton, that we use on every train that we run.

Number four, we're balancing the trains in each direction. This allows us not to have to the reposition locomotives, nor crews and not have to create taxis and certain ancillary expenses.

And number five, and this is, by creating a clear workflow process in all of our terminals and all of our corridors, we have managed to get all of the -- to make it more clear for our crews that are out there to deliver on the metrics.

We applied these process. We started with the Torreon-Piedras Negras corridor. And even though that we had grown to 20-plus percent versus last year, on the second semester, we have managed to improve our metrics significantly. Also bear in mind that, on the Transportation Division, the faster we become, the better utilization of our assets, and that translates directly into an adjustment of our CapEx program.

Going into our CapEx program, and I will talk briefly on the coming slides, but we have adjusted our CapEx program accordingly. For 2019, and this is Page 21, we have a volume forecast growth of between 4% and 6% and a revenue growth between 9% and 12%. Our operating ratio with these changes in our processes, our team and the infrastructure, we're confident that we could deliver between 150 and 200 basis points. The new capital expenditure will be adjusted -- or is already adjusted to $406 million, down from $460 million that we had asked for in the fourth quarter -- at the end of -- in October of 2019 -- 2018.

Turning into Page 22, it's a brief summary of what our CapEx plans are. And from the MXN 9,050 million, which is $464 million, this has now been adjusted to $406 million due to these new efficiencies that we are getting and the asset utilization that we are getting.

And nothing more from us. Thank you. And I will now pass the call to Octavio from the Infrastructure Division.

[Octavio J. Esquinca, executive]

Thank you very much, Fernando. Good afternoon, everyone. I will first go over the financial highlights of the Infrastructure Division in Slide 24.

As we gladly announce, we achieved very strong numbers. During the last year, we reached record high net sales, a total $625 million and EBITDA rebounded 24% as compared to the previous year, which went from $2,017 million (sic) [ $217 million ] to $270 million. Net profit rose 305%, reaching $47.3 million.

On the energy side, a new record in energy generation was achieved as you can see in the Slide 25. During 2018, 3.9 million megawatt hours were generated with an average power of 433 megawatts. As of June, the first sales of electricity on the wholesale electricity market began. Sales to CFE and the electricity market translated into roughly $40 million in revenue. We also have the board approval to invest USD 410 million in 2 new wind farm projects with a total capacity of approximately 270 megawatts located in the north of the country and the east-most region.

On the toll roads, a new record was achieved in traffic and revenues during 2018 for the Salamanca Highway. During last year, the highway reported MXN 768 million in revenue and had traffic equivalent to over 20,000 vehicles per day. The traffic increase of last year as against 2017 was 10%.

On our Construction Division, we saw significant progress, with revenues of $156.8 million, translating into a 13.5% increase versus 2017. EBITDA reached $40 million, which means a 40.4% increase.

During 2018, the deed of concession of the Silao -- for the Silao Bypass was to build, operate, exploit and maintain the bypass for a period of 30 years. The bypass shall be a high-spec highway spanning 17.4 kilometers and will connect the Bajio and Silao internal ports with the Guanajuato city highway.

In oil and gas, the drilling company ended the year with 5 equipments in operation with PEMEX and an average annual efficiency of 98.4%. Our Zacatecas Jackup will start operations with PEMEX by the end of this month.

Through our new subsidiary of fuel terminals, fuel transfer services are being provided to different customers. Additionally, the board approved an investment of $108 million (sic) [ $180 million ] to build and operate 2 fuel storage terminals in Guadalajara and in Monterrey during this year.

Operator, could you please open the session for questions and answers? Thank you, and goodbye.

[Operator]

[Operator Instructions] And our first question comes from Thiago Lofiego with Bradesco BBI.

[Thiago Lofiego, analyst]

I have 2 questions. The first one, if you guys could comment on how the conversation with the Mexican government on mining and rail concessions are evolving? So what's the level of conviction that there won't be any negative developments from that end? And the second question, on Asarco, costs surprised on the positive side in the last quarter, in the fourth quarter. So what do you expect going forward? Should we continue to see a relatively positive cost performance going forward? And also, if you could mention what the production levels you expect for Asarco for 2019?

[Marlene de la Torre, executive]

Thiago, Xavier will comment on the mining.

[Xavier García de Quevedo Topete, executive]

We have been having several meetings with the new government officials. And of course, what we are interested is that investment in mining projects continue. There are several ones in the pipeline. And frankly, we don't really change in concessions for any [indiscernible]. What they have announced last week is that [indiscernible] is going to proceed with the cancellation of 5,000 concessions that has already requested. But it's not an action from the government, it's a normal proceeding from the concessionaires. We won't see anything. Probably one thing that you see but is not really relevant is that they will use the mining royalties to support the local communities around our mine. But we won't see any [indiscernible] as we see positive things. Regarding Asarco, I mean, Asarco will start a new plant. Last year, as you probably remember, we had problems with the break of some of the equipment and then [indiscernible] in the [ Michi ] mines. And we are in the process of making a new mining plan and a new investment in exploration, as well, we have things in the modernization of a copper facility. Today, by example, we have been able to review the -- for the month of January, the cash breakeven point from $2.73 to around [indiscernible]. So we are in the process really to improve the financial of Asarco and, of course, the progression.

[Operator]

And our next question comes from Carlos De Alba with Morgan Stanley.

[Carlos de Alba, analyst]

Xavier, just following up on the prior question. So the -- what is of the cost before byproducts that you expect for Asarco in 2019, if I may ask? And then what is the trajectory that you see after that?

[Xavier García de Quevedo Topete, executive]

You mean for this year?

[Carlos de Alba, analyst]

Yes, please.

[Xavier García de Quevedo Topete, executive]

What we have projected originally for the [indiscernible] is $2.61.

[Carlos de Alba, analyst]

$2.61. I don't know...

[Xavier García de Quevedo Topete, executive]

We had about [ $0.75 ] or so of [indiscernible], okay?

[Carlos de Alba, analyst]

And then the next question, maybe for Octavio. Octavio, could you give us some details about the expectation for revenues and EBITDA from the few terminals, the new subsidiary as well as the new wind farms? What is the type of revenue and EBITDA generation that you expect from these 2 ventures, the new subsidiary and the wind farms? And then if I may ask, while definitely the Grupo México has a very strong balance sheet, when I looked at the Mexico project of y Desarrollos, it is running around 4, maybe 4.5x net debt to EBITDA. What is it -- can you comment, maybe Marlene or Octavio, on the financial situation of this subsidiary? And while there doesn't seem to be any pressing maturities in the next few years for this subsidiary, the leverage seems to be a little bit high. It is obviously an infrastructure business and it probably supports a higher gearing than a typical business like mining, but nonetheless, seems to be a little bit higher for what we are used to in terms of Grupo México's balance sheet. So could you comment on that, please?

[Octavio J. Esquinca, executive]

Thank you very much, Carlos. First, I will go through the wind farms. The wind farms, we are expecting a $410 million CapEx. This CapEx is going to be done by 18 months. So for this year, we're going to spend half of this amount. We expect to spend this year around $200 million from these wind farms. So the EBITDA that we'll see -- the increasing EBITDA that we'll see in the division will be for 2020, by the end of 2020 or 2021, okay? That's regarding the wind farms. Second, midstream. On midstream, we are planning this year to have $108 million of CapEx. This is mainly due to the biggest terminal is going to be Guadalajara, which is going to be around $60 million, and $48 million will pertain to Monterrey. These terminals will be constructed in 18 months. We are expecting that the midstream division will bring EBITDA for this year around $3 million, by the end of -- by next year, right, like $5 million. And then, when we begin to operate there, the terminals in Monterrey and Guadalajara, we're expecting to have EBITDA from $10 million to $12 million per year, okay?

Next, about the debt structure ratio in the infrastructure division. It is important to mention that almost all the debt that we have in the division is from project finance, okay? All the debt that we have right now, let's say, in oil and gas, they have all the financing of the jackup rigs that we bought during 2012 and 2018. The other debt is related to the toll road, the Salamanca toll road, which are, right now, we have about MXN 3.5 billion facility, which is 23 years' loan. And we have also the combined cycle plants with $500 million...

[Marlene de la Torre, executive]

A 20-year bond.

[Octavio J. Esquinca, executive]

Which is a 20-year bond. In all of the cases, they have a project which is being financed, this -- the currency of the project, okay? So this has -- I mean, it has no problem. If there will be a problem paying them, they have -- they guaranteed the specific guarantees of the project are being financed by these facilities, okay? So we have -- we don't see any problem with the debt servicing of this debt.

[Marlene de la Torre, executive]

In addition to that, Carlos, in our consolidated Infrastructure Division, we have a 3.3 net debt-to-EBITDA ratio, which is actually not very high compared with other infrastructure companies. We are not worried about this. You have to bear in mind that right now -- or over the 5 years, we have done a lot of investments. They are just reflecting and been starting to generate a lot of -- it's just starting to generate cash flow and EBITDA. So this should go down as the projects mature, and we are not -- we don't have -- we're not worried about this case. With the new projects, we will find the best way to finance them through project finance, and then we will give you further details once we have all the details of the new project.

[Carlos de Alba, analyst]

So there's no recourse on infrastructure debt to Grupo México, right?

[Octavio J. Esquinca, executive]

No.

[Marlene de la Torre, executive]

No.

[Octavio J. Esquinca, executive]

So the specific project, they are financing, okay?

[Marlene de la Torre, executive]

Each project in this division, under the Infrastructure Division, has its own way, as Octavio was mentioning. The Energy Division has the bond for 20 years, and we are the ones that are project finance.

[Operator]

[Operator Instructions] And our next question is from Alfonso Salazar with Scotiabank.

[Alfonso Salazar, analyst]

I have 2 questions. The first one is regarding the Infrastructure Division. If you can provide an update on all the contracts for platforms with PEMEX, just to see what is going on there? And also, the second question is regarding Asarco, and it has to do more with the long-term strategy because I remember that when it went out of bankruptcy, you were very optimistic about resuming exploration, start a new drilling campaign, even planning a second concentrator at Ray. What is the strategy today? What is the plan -- long-term plan for Asarco? I'm pretty sure that it's more than just to expect the copper price to rebound. So if you can share with us what is that long-term strategy for Asarco.

[Marlene de la Torre, executive]

If you want, you can first start with us regarding Asarco.

[Xavier García de Quevedo Topete, executive]

With Asarco, as I mentioned, we are reviewing all our long-term mining plans and increasing our exploration. What I compare with that, right now, we are making the analysis for [indiscernible] and for a new concentrator in Ray [indiscernible] in capacity versus to beat the new one in Hayden, where we're not just making the tradeoff of this. We're analyzing the opportunity in the future to incorporate in our mines, the [ Chelito ] mine. The [ Chelito ] mine in [indiscernible] are in [ some ] 20 kilometers from Hayden. And we're in the process really to make the analysis to increase production there.

[Octavio J. Esquinca, executive]

Okay. Alfonso, this is Octavio. Right now, we have 7 -- 6 different contracts with PEMEX. All these contracts have been changed during the second semester of last year. So the best way to answer your question is for me to view -- to send you or provide this contract, to send you them after this call. Okay, Alfonso?

[Alfonso Salazar, analyst]

That would be very useful.

[Operator]

And our next question is from Rodrigo Garcilazo with GBM.

[Rodrigo Garcilazo, analyst]

Just have 2 questions. The first one is who will be the offtaker of the new capacity in the [ term ] for the wind farm and the storage facilities? If you already have an offtaker for that capacity, that will be great. And the second question is about Asarco. Comparing the free cash flow of American Mining Corporation versus Southern Copper's free cash flow, it seems that, this quarter, you invested a lot in Asarco. Could you clarify how much you invested in terms of working capital and CapEx in Asarco? And what are the plans for -- in terms of CapEx for this year for Asarco as well?

[Octavio J. Esquinca, executive]

Rodrigo, this is Octavio Ornelas. [indiscernible] is Francisco Zinser, which is the CEO of the Energy Division and the Midstream Division, okay? He will now take the first question.

[Francisco Gonzalez, executive]

So regarding your first question, what we've been doing is that we've been analyzing what are the different projects that are currently in the country under sale supply agreement, which is a fairly interesting theme because, as you know, you have the [ Bank of Energy ]. You have no willing targets. And so we've been scanning all the different projects and analyzing which ones are interesting for us. And we've been having conversations and signing NDAs with different companies that would be interested in having this capacity. We still have not signed something as of today, so we cannot specify those details. But we have a very large pipeline of business with companies because the advantage here is that we have a window of opportunity where we have the sale supply law that, as I've said before, has disadvantages, and at the same time, the wind farms has been becoming very competitive in costs and in CapEx. So we are sure that this will be a very successful project with long-term [ TPAs ].

[Rodrigo Garcilazo, analyst]

And in the case of the storage facilities, the terminals in Monterrey and Guadalajara, do you already have an offtaker there?

[Francisco Gonzalez, executive]

Yes, we already have an offtaker. It's also a long-term contract, and it is a 20-year contract for 100% of the capacity.

[Rodrigo Garcilazo, analyst]

Okay. To a private company or it's government related?

[Xavier García de Quevedo Topete, executive]

Private or government?

[Octavio J. Esquinca, executive]

Private.

[Francisco Gonzalez, executive]

Sorry, private company, this is not [ business ].

[Octavio J. Esquinca, executive]

Private.

[Rodrigo Garcilazo, analyst]

Private. Okay.

[Marlene de la Torre, executive]

And regarding your second question about Asarco, can you repeat that question, please, Rodrigo, because we didn't get it.

[Rodrigo Garcilazo, analyst]

Sure. It -- comparing the free cash flow of the quarter of AMC compared to Southern Copper's free cash flow, the difference is it's important and it seems that you invested a lot in Asarco this quarter, some -- a lot of CapEx. Is that true? Or -- and how much you are going to invest this year in Asarco?

[Xavier García de Quevedo Topete, executive]

Okay. Last year, we invested $143 million to finish with the [indiscernible] modernization. This year, our budget, our CapEx full year changes $4 million only. And for the future, what we are expecting for new projects is to be a new tailing dam for Ray to really -- to take advantage of the sales that we have in Ray. So we have been able to send the permitting for [ regional ] escalation. And also, new parts for the future reset is obtaining parts and obtaining form considered very courageous. And we are continuing, of course, with our [indiscernible] for this for new concentrators either in Ray or Hayden. Okay, Rodrigo?

[Rodrigo Garcilazo, analyst]

Okay. Then that's clear.

[Operator]

Our next question is from Alfonso Salazar with Scotiabank.

[Alfonso Salazar, analyst]

Just a quick follow-up. If you can clarify how many buybacks you made in the fourth quarter because, in the report, it appears that the number of share repurchase was 0, I can see according to the filings in the Mexican Stock Exchange. I just wanted to clarify the amount.

[Marlene de la Torre, executive]

Yes, Alfonso. We -- the buybacks were around 5 million shares of Grupo México during the first quarter. We continue to analyze the market to see if there's another opportunity. [indiscernible]

[Alfonso Salazar, analyst]

Okay. These 5 million shares were in first quarter or in fourth quarter?

[Marlene de la Torre, executive]

In the first quarter. We are doing [indiscernible] -- November, December. You have that. The information is available in the Mexican Stock Exchange. As you know, we have to give that information as well.

[Alfonso Salazar, analyst]

Okay. I will check it out and follow up with you.

[Marlene de la Torre, executive]

I will -- we will send it to you towards [indiscernible].

[Operator]

And I'm not showing any further questions in the queue. I would like to turn the call back to Marlene Finny -- oh, we have a couple more questions, Marlene. Okay, we have Timna Tanners with Bank of America.

[Timna Tanners, analyst]

I wanted to probe a little bit more of this discussion of uses of cash and also the conglomerate discount I know you've talked about in the past. Buying back shares, is that something that you have a strategic reason for doing, if you could talk about that a little bit more? Now that you have lifted the Transporting Division, do you have any other measures that you're thinking about in order to call attention to the value of the subdivisions a little more clearly and extract greater value for the different components of your company?

[Marlene de la Torre, executive]

Sure, Timna. Thank you for your question. As you know, in the past, it is something that has been an important subject, the discounts of the [indiscernible] division of Grupo México versus the sum of its different subsidiaries. We have been trying to do a lot of different actions to decrease this discount. We -- one of -- we did the IPO, the Transportation Division, not only for that region but it was also for [indiscernible] for Grupo México, to give more clarity and to have a clear and clean structure of the company. So we have been working on that. Regarding the use of cash, as you can notice, we have increased our dividend. We are now paying one of the highest dividend yields in Mexico. And the buyback, at that point, the size of the share, we think, then, reflected the growth and the value of the company, so it makes sense in terms of return for our shareholders. We will continue to assess the market to see if there's another opportunity, and we'll continue to -- with this strategy. Our focus for now has been in the dividend side, which we have increased. But we will continue to overlook and to see in our toolbox all the different things we can do to decrease it. For now, in the short term, what we are doing is buyback, dividends and giving more clear and being trusted in the company.

[Timna Tanners, analyst]

Okay, that's helpful. My other question is just regarding, obviously, a very big issue that we keep hearing concern about is the risk over change in Mexican mining policy. I know you addressed that already, but is there something that you can point to that you think will help give clarity to the market or will help relax the market? Are we waiting for some information? Or is there some sort of proof that can come down in the next couple of months that we should watch for?

[Marlene de la Torre, executive]

We're certainly in contact with several offices from the government. This is something that doesn't -- it has not advanced since November, that is what's presented, so still we have to wait and see the details. But we do not expect any major change in anything in our company or a big impact. [indiscernible]

[Xavier García de Quevedo Topete, executive]

So anything that -- the first 5 months for the market that we are continuing our investment program, and we don't have any -- something to -- which has -- there have been a lot of [indiscernible] or not in the media for -- frankly, we don't see anything -- any new thing that could stop our investment [indiscernible].

[Operator]

Our next question comes from Gustavo Allevato with Banco Santander.

[Gustavo Allevato, analyst]

I have a follow-up question regarding the issue of terminal storage project. So I'd like to know if you guys have a secured long-term take-or-pay contract as our company in Mexico bills -- has for this kind of project? And when will this terminal start to generate EBITDA for the company?

[Xavier García de Quevedo Topete, executive]

We didn't quite [ read ] your question.

[Marlene de la Torre, executive]

We didn't get your question. Could you repeat it, please? It is regarding which contract?

[Gustavo Allevato, analyst]

Yes. It's regarding the few terminal projects that the company will build in Guadalajara. Does your company have take-or-pay contracts with any company to secure like an EBITDA generation constantly without stipulations or not?

[Octavio J. Esquinca, executive]

I think, if I understand correctly, the question is if there are long-term contracts and if we have any guidance for EBITDA, which I think were previously answered.

[Marlene de la Torre, executive]

We do have.

[Octavio J. Esquinca, executive]

We have a long-term contract secured for these 2 terminals. And in one second, we'll give you the EBITDA for [indiscernible] $10 million and $12 million per year.

[Operator]

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

[Marlene de la Torre, executive]

Thank you so much for joining our conference call today. We'll keep in touch in case you need anything else, and hope to see you next call. Thank you.

[Operator]

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