Southern Copper Corp
NYSE:SCCO
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Southern Copper Corp
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Good morning, and welcome to Southern Copper Corporation's First Quarter 2023 Results Conference Call. With us this morning, we have Southern Copper Corporation's, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the first quarter 2023, as well as answer any questions that you may have.
The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements. Southern Copper Corporation 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.
Now I will pass the call on to Mr. Raul Jacob.
Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's First Quarter 2023 Results Conference Call. In today's call, we will begin with an update on our view of the copper market and then review Southern Copper's key results related to production, sales, operating cost, financial results, expansion projects and environmental, social and government. After this, we will open the session for questions. At today's conference, I'm joined by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board Member; as well as Mr. Leonardo Contreras, Board Member -- also a Board Members.
Let's focus now on the copper market. In the first quarter of this year, the London Metal Exchange copper price decreased by 11% from the average of $4.53 per pound that we had in the first quarter of 2022. The average price has been $4.05 this past quarter. The price reduction, which is slightly lower as we speak now, reflects concerns about a possible recession in the U.S. and Europe, and this has been partially offset by the good news on China's economy.
Our current copper prices are, as I say, at around $3.90 per pound. And we believe the prices are being affected by the following factors. One is the reduction in global inflation, which may slow down or even stop interest rates -- the interest rate hike cycle led by the Fed and the ECB. The bouncing back of the Chinese economy after its openness -- after the COVID -- strong COVID measures that they had, China's GDP has been growing at 4.5% and which is slightly higher than the expected 4% that was mentioned by the major companies that follow the Chinese economy.
We do have some uncertainty regarding future production growth in Chile and Peru. These 2 countries together represent about 40% of the global supply, and Chile recently reported a copper production decline in the fourth -- in the first quarter this year of about 4%. Considering how demand and supply are evolving, the most relevant market intelligence houses for the copper market are currently expecting a market imbalance or small deficit of about 100,000 tons for this year.
This assumes a growth in demand between 2% and 2.5%, and lower-than-expected supply growth estimated now between 1.5% and 2%. And this is basically due to the first quarter stoppages that we had in South America. Inventories are still very low at about 411,000 tons as of March 31. These are one of the lowest marks since 2001.
It is important to emphasize that copper plays a leading role in the global shift to clean energy, which correlates positively with our assertion that the underlying demand for copper will be strong in the long term. In this scenario, we believe the current cycle of low prices will be short-lived.
Now let's look at Southern Copper's production for the past quarter. Copper represented 77% of our sales in the first quarter of 2023. SCC's copper production registered an increase of 4% in the first quarter in quarter-on-quarter terms to stand at 223,272 tons.
Our quarterly results reflects a 16% increase in production in Peru, mainly from the Cuajone operation that grew 48.5%, and this was basically the result of much more mineral production in Cuajone. As you may recall, this operation had -- was affected by an illegal stoppage in the first and second quarters of 2022. So coming back to operation and operating at full capacity now, Cuajone have much more mineral production and better ore grades and recoveries. That certainly helped this quarter's production.
In the case of the Mexican operations, we had a drop in production of 2.4%, mainly coming from La Caridad, whose production decreased by 11% due to a temporary lower ore grade. For 2023, we expect to produce 940,000 tons of copper, an increase of 5% over the 2022 final trend. This growth will unfold as we have the Peruvian production at full speed, with -- coupled with new production in our Mexican operations through our Pilares and Buenavista Zinc concentrator project.
For molybdenum, it represented 11% of the company's sales value in the first quarter of this year and is currently our first by-product. Molybdenum prices averaged $32 per pound in the quarter compared to the $19 that they averaged in the first quarter of 2022. This represents an increase in price of 69%.
Molybdenum production decreased by 9% in the first quarter of this year, and this was mainly driven by a drop in production at the Toquepala mine due to lower ore grades. These results were partially offset by higher production at Cuajone, which increased its molybdenum production by 67%; and La Caridad, which increased its molybdenum production by 5%. These mines had a higher ore grade. In the case of Cuajone, obviously, more volume as well. And more -- better recoveries for Cuajone.
As you know, molybdenum is primarily used to produce special alloys for stainless steel that require significant levels of hardness and resistance to corrosion and heat. New uses for these metals are associated with lubricants, sulfur filtering of heavy oil and shale gas production. Silver represented 4% of our sales value in the first quarter of 2023, with an average price of $20.53 per ounce in the quarter. This reflected a decrease of 6% in silver price. Silver is currently our second by-product.
Mined silver production increased by 3% in the first quarter of this year, after production rose at Cuajone and Toquepala. This was partially offset by a decreased introduction of the Mexican operations. Refined silver production fell by 12% quarter-over-quarter mainly driven by a drop in production at our IMMSA refinery due to a temporary slowdown in purchases of third-party subs.
For zinc, it represented 3% of our sales value in the first quarter of 2023, with an average price of $1.42 per pound in the quarter. This represents a decrease with regard to the first quarter of 2022 figure. Zinc mined production increased by 2% quarter-on-quarter and totaled 15,075 tons. This was driven primarily by an increase in production at the Santa Barbara and San Martin mines. Refined zinc production increased by 11% in the first quarter of this year.
For 2023, we expect to produce 116,000 tons of zinc, which represents an increase of 94% over the 2022 production level. This growth will be driven by the production start-up of the Buenavista Zinc operation that should contribute this year with 52,000 tons of more zinc production, and by the recovery of the IMMSA mines production, where better ore grade areas has been identified. For next year and on, we expect to produce over 200,000 tons of zinc per year.
Financial results. For the first quarter of 2023, sales were $2.8 billion. This is $30 million higher than sales for the first quarter of 2022. Expansion was primarily fueled by an increase in the sales volume of copper that grew by 10%. Silver grew 15% and zinc 6%. This was partially offset by a decrease in the sales volume of molybdenum that decreased by 8% in sales. Metal prices fell for most of our products, with the exemption of molybdenum that increased, as I mentioned, by 69%.
Our total operating cost and expenses increased by $146 million or 11% when compared to the first quarter of 2022. Main cost increments has been in inventory consumption, repair materials, explosives, reagents, sales expenses, diesel and fuel, and operations contractors. These cost increases were partially compensated by exchange rate differences, purchased copper -- lower purchased copper and other factors.
When looking at our cost this past quarter, please keep in mind the following events. The Cuajone mine illegal stoppage affected our first quarter production and cost. The Russian invasion to Ukraine started in February of last year had an inflationary impact on cost that was mainly reflected after the first quarter of last year in the company's results.
The first quarter adjusted EBITDA was $1.568 billion, which represented a decrease of 7% with regard to the $1.678 billion registered in the first quarter of 2022. The adjusted EBITDA margin was 56% in the first quarter of this year versus 61% in the first quarter of 2022. Operating cash cost per pound of copper before byproduct credits was $2.09 per pound in the first quarter of this year. That is $0.051 higher then the value for the fourth quarter of 2022. This 2% increase in operating cash cost before credits is a result of higher cost per pound from production partially compensated by lower treatment and refining charges, lower administrative expenses and higher premiums on refined copper sales.
Regarding byproducts, we had a total credit of $631 million, or $1.33 per pound, in the first quarter of this year. These figures represent a 16.3% decrease when compared with the credit of $806 million or $1.59 per pound that we had in the fourth quarter of last year. Total credits have increased for zinc and silver and decreased for molybdenum significantly and for sulfuric acid.
Let me point out that we have an adjustment, a negative adjustment on open sales of molybdenum this past quarter of $265 million, and that was compared to a positive adjustment open sales at the closing of the fourth quarter of $141 million. So that is main event that obviously affected our byproduct revenues in this past quarter vis-a-vis the fourth quarter of last year.
Southern Copper operating cash cost, including the benefit of by-product credits, was $0.75 per pound in the first quarter of this year. These cash cost was $0.31 higher than the cash cost of $0.44 that we had in the fourth quarter of 2022. Of this increase, as I mentioned already, $0.05 came from higher cost per pound, mainly due to lower volume; and $0.26 came from lower byproduct credits resulting, as I mentioned, from lower prices of silver and zinc and the very significant open sales adjustment -- negative adjustment that we have on molybdenum sales in this first quarter.
Our net income in the first quarter of this year was $813 million, which represented a 4% increase when compared to $784 million registered in the first quarter of 2022. The net income margin in the first quarter of this year was 29% versus 28% in the first quarter of 2022. Cash flow from operating activities in the first quarter was $1.185 billion which represented an increase of 44% over the $821 million posted in the first quarter of 2022, and an increase of 10% over the $1.082 billion posted in the fourth quarter of last year.
For capital investments, our current capital investment program for this decade exceeds $15 billion and includes investment in Buenavista zinc, Pilares, El Pilar and El Arco projects in Mexico and in the Tia Maria, Los Chancas and Michiquillay projects in Peru. This capital forecast includes several infrastructure investments, including key investments to bolster the competitiveness of El Arco projects.
For the Mexican projects, let me start with the Buenavista zinc concentrator in Sonora. As I said, this is a project located in the Buenavista deposit. We're building a new concentrator for zinc, and we are expecting this production facility to produce -- or to add 100,000 tons of zinc and 20,000 tons of copper capacities per year. When operating, this facility will double the company's zinc production capacity and provide more than 2,000 operational jobs.
Currently, the capital budget for the project is $416 million, most of which has already been invested, and we are about to initiate operations this quarter, the second quarter. For Pilaris, also located in Sonora, this is a former or a brownfield mine that we acquired a few years back. It's located 6 kilometers away from La Caridad. And the project consists of an open-pit mine operation with annual production capacity of 35,000 tons of copper in concentrate.
The Pilares budget is $176 million, of which $114 million has been invested. The project is currently operating and delivering copper mineral oxides to the SX-EW facilities of La Caridad operation, and we expect to produce mineral for the Caridad concentrator at full capacity through the second quarter of this year.
El Pilar, also in Sonora, this is a copper greenfield project, which is strategically located 45 kilometers away from the Buenavista mine. We anticipate that El Pilar will operate as a conventional open pit mine with annual production capacity of 36,000 tons of copper cathodes. This operation will use highly cost-efficient and environmentally friendly SX-EW technology. The budget for El Pilar is $310 million.
The results from the experimental pads in the leaching process for El Pilar have confirmed adequate levels of copper recovery. Basic engineering study is finished, and the company continues to develop the project and engage in on-site environmental activities. The SX-EW plant detail engineering is being developed on an ongoing basis, and we expect production to begin in 2025 and mine life is estimated at 13 years.
For El Arco, located in the Baja California Peninsula, this is our class copper deposit located in the central part of the Baja California Peninsula. The project includes an open pit mine combining concentrator and SX-EW operations. Annual production is expected to total 190,000 tons of copper and 105,000 ounces of gold. As of March 31, the company has completed environmental baseline study for the mine and industrial facilities, and is reviewing basic engineering analysis to request environmental impact permits.
For the Peruvian projects, we have the Tia Maria project located in the Arequipa region in Peru. And this is a project that will use a state-of-the-art SX-EW technology, with the highest international environmental standards to produce 120,000 tons of refined copper cathodes per year. The estimated capital budget for the project is $1.4 billion.
In the case of Los Chancas, also in Peru, it's a project located in the Apurimac region in Peru. This greenfield project located, as I said, in Apurimac, it's a copper and molybdenum porphyry deposit. The Los Chancas project envisions an open-pit mine with a combined operation of concentrator and SX-EW processes to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The estimated capital investment is $2.6 billion, and the project is expected to begin operating in 2030.
As of March of this year, part of the project's land continue to be occupied by illegal miners, 70 of whom have regularly registered their stakes in the Integral Registers of Mining Formalization, or REINFO, as it is known in Spanish. The company has requested and the authority has ordered the exclusion of these 70 informal miners from the REINFO register, so that they are now all illegal miners. The company has also filed criminal complaints and other legal remedies to physically expel the illegal miners from the project.
Michiquillay project. In June of 2018, Southern Copper signed a contract for the acquisition of the Michiquillay project in Cajamarca in Peru. Michiquillay is a world-class mining project with inferred mineral resources of 2.3 billion tons, with an estimated copper grade of 0.43%. When developed, we expect Michiquillay to produce 225,000 tons of copper per year along with byproducts of molybdenum, gold and silver. It will have an initial mine life of more than 25 years and a competitive cash cost. We estimate that the investment of approximately $2.5 billion that will be required, and expect to initiate production by 2032.
In the fourth quarter of 2022, the company informed the Ministry of Energy and Mines that it has begun exploration activities and initiated an assessment of the existing mineral resource at depth. In 2023, in accordance with our social agreements with the Michiquillay and La Encanada communities, the company has hired unskilled labor and is paying for the use of surface land. We're supporting social programs in both communities as we roll out exploration activities.
Environmental, social and governance investment. SCC is committed to improving its ESG record by adopting best practices and informing the investment committee and other stakeholders about our progress in this manner. This year, Grupo Mexico will present edition #15 of the Sustainable Development Report, which contains disaggregated information from Southern Copper Corporation and reaffirms our commitment to transparency and ongoing improvement.
In 2022, we have placed particular importance on updating our strategy for climate change, which includes targets to reduce greenhouse gas emissions. This year's report also provides information on our program and objectives with regard to promoting diversity and inclusion, both inside the company and within the communities close to our operations.
Sustainable Development Committee. In 2022, Southern Copper Corporation set up a Sustainable Development Committee, which is presided by an independent director. This committee's main objective is to support SCC's Board of Directors in its in endeavors to supervise management of risks and opportunities in the environment -- in the ambits of environmental, safety and health, community development, human rights and corporate governance.
The committee meets every quarter and has assessed diverse aspects of the company's ESG trajectory, including adhesion to international agreements and management of water and mineral waste. The Sustainable Development Committee, in its third session, addressed climate change as well as diversity and inclusion and identify opportunities on the corporate governance front.
Third-party certification. In recognition of our commitment to implement best environmental, social and corporate governance practices, our Buenavista del Cobre mine, located in Mexico in Sonora, has obtained certification for 3 important ISO, International Organization for Standardization, standards: ISO 9001 for quality management; ISO 14001 for environmental management; and ISO 45001 for occupational safety and health management. These certificates are a further proof of our commitment to quality, the environment and the occupational safety and health of our employees.
Occupational safety and health. At Southern Copper Corporation, our employees' safety is our priority. Our unit in Ilo, located in the Moquegua region in Peru, has earned first place in the smelter and refinery category of the 26 National Competition for Mining Safety, organized by the Peruvian Institute of Mining Safety. This the distinction recognizes SCC's performance with regard to indicators of our employees, occupational safety and health, and is a reflection of our ongoing commitment to ensuring the sustainability of our operations.
Biodiversity. In March 2023, environmental management unit at Buenavista del Cobre obtained certification from the Wildlife Habitat Council in recognition for our contributions to efforts to prevent the extension of the Mexican gray wolf. Thanks to these actions, populations of these species, which was on the brink of extension in the wild, has multiplied in their natural habitat in Mexico. Going forward, we will continue to work side-by-side with society and authorities to serve the common good in the regions in which we operate.
Community development. At SCC, we continue to strengthen our community development model and currently operate 29 community centers that provide services to 350,000 people a year in Mexico and Peru. These efforts positively impact the quality of life of the residents in the committees where we work. Recently, we renovated 2 community centers called Casa Grande in Santa Barbara, Chihuahua and Charcas, in San Luis Potosi. These facilities will serve an additional 21,000 people.
Diversity and inclusion. At SCC, we're convinced that valuing diversity, preventing discrimination and promoting openness to different ways of thinking are fundamental in all efforts to develop inclusive workplace environments that promote the integral development of our employees and stakeholders. We are committed to driving the agenda for diversity and inclusion transversely throughout the company and in the communities around our operations. Our results in 2022 reflect the fruit of our efforts, with a 16% increase in the number of women employed by SCC.
Dividend announcement. Regarding dividends, as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans and other financial means at each Board meeting to determine the appropriate quarterly dividend. Accordingly, as announced to the market on April 20, the Board of Directors authorized a cash dividend of $1 per share of common stock payable on May 23 to shareholders of record at the close of business on May 9, 2023.
Ladies and gentlemen, with these comments, we would like to end up our presentation today. Thank you very much for joining us, and we would like now to open the phone for questions.
[Operator Instructions] Our first question comes from the line of Carlos De Alba with Morgan Stanley.
Raul, would you please comment on how you see costs trending in the coming quarters? Clearly, the industry is facing a lot of cost pressures, but Southern Copper has always been a low-cost producer. We've seen recent pressures, obviously, affecting the company, but any guidance would be very interesting to hear. And then my second question is regarding growth with specific wondering -- specifically wondering about Los Chancas. How quickly can you solve the situation there? We heard what you said that you got positive court rulings, but you how quickly can you restart exploration or the work that you were doing at Los Chancas if you had to stop them?
And combined with this, given the attractive profile of organic growth that you have, but with some of the challenging regarding the timing to execute on those, would the company consider M&A opportunities? You've heard, obviously, there is a couple of recent transactions where copper assets have been in focus. So I wonder to what extent the company will have appetite for a large -- relatively large, medium acquisition in copper, given that so far, you have focused -- the company has focused on smaller opportunities?
Okay. Thank you for your set of questions, Carlos. Okay. I'm going to touch base on each of them. If I skip one of your concerns, please let me know. Let me start by cost production. We already mentioned that we're expecting an increase in production of about 5% vis-a-vis next year for copper. And we are also expecting to have a much more production from -- for zinc this year, particularly, due to the beginning of the zinc concentrator at Buenavista. In the case of our cost we're expecting a better cash cost for the next quarters. And the reason for that is twofold.
I mentioned already that we had to include in our financials, a significant open sales reduction in molybdenum. It was $265 million that we have to charge or decrease our sales by that amount. That obviously explain why the company, vis-a-vis the market, has shown this quarter lower-than-expected results regarding particularly EBITDA and some other metrics.
So we're expecting not to have this type of adjustments in the second quarter. Where already current prices for molybdenum are at about $22 per pound, and we closed the past quarter at $24 per pound. So if there is an adjustment due to negative or to open sales of molybdenum, it will be relatively small than the one -- much more smaller than the one that we have acknowledged or registered in the first quarter. So that should improve our by-product revenues in the second quarter.
We're also seeing on the total cost of production, some trends that will reflect better cost. Particularly in energy, we're seeing much lower gas price than we had before. That is helping our energy cost of the Mexican operations. We're seeing some relatively lower fuel prices as well, and that will be much more noticeable in this second quarter. So for production, our expectation is to produce, for copper, 940,000 tons, for cost -- some cost reductions that should help to reduce our cash cost and some byproduct revenues, particularly in molybdenum this quarter, and also, through the year, in zinc. Because we will have 52,000 tons coming from the new zinc concentrator that we're about to initiate production in the Buenavista mine.
Considering the growth, in the case of Los Chancas, we believe that we're in a different environment vis-a-vis the government relation that the company has had. Currently, we're seeing a much stronger commitment from the Peruvian authorities regarding promoting private investments in Peru, which is a positive event for us. In the case of Los Chancas, in particular, we believe that through the year, we will be able to remove these illegal miners from the Chancas premises. And with that, we can come back to exploration efforts, and more important than that, the beginning of environmental impact assessment, which is after the feasibility study, the next step in our work for Los Chancas.
Finally, in M&A. Well, at this point, we have no -- we are not considering anything specific for M&A. However, it is in the -- the responsible thing to do in this case is to review any opportunities that may arise. And obviously, after a thoughtful review, advise our Board or recommend our Board some action in this matter. But for now, we're not considering anything specific.
Our next question, it comes from the line of Isabella Vasconcelos with Bradesco BBI.
Raul, I have a couple of questions. So the first one in terms of mining regulation and, particularly in Mexico, what are the kind of expected impacts on your operations deriving from the new mining law and whether it changes anything for El Arco and the development of El Arco. And my second question, specifically on the outlook for production for the coming years. We noticed that there was a slight delay on the start-up of Pilares, if I'm not mistaken. So if you could comment a little bit on the expected production outlook for the coming years for the key commodities. So those are my questions.
Thank you very much, Isabella. Okay. At this point, regarding the new mining law in Mexico, we don't see it as -- let me first mention that currently, the bill is not law. It has to pass a process in the Mexican Senate and the senate has to approve it. There are also -- the tax that was approved by the House of Representatives of Mexico, has not significant effect in our current business and our organic growth so far. Now once we have a definite law, we will review it carefully and see if there are any points where it may impact our operations or our growth for the long term.
And your second question is the outlook for production in the coming years. Already I mentioned, on copper, we're expecting to be at about 940,000 tons this year. For 2022 -- '24, we expect to produce 126,000 tons of copper that will come basically from much more production at the Peruvian operations, mainly for Toquepala, and the contribution at full capacity of Pilares and Buenavista zinc, the copper production of the Buenavista zinc concentrator. As you know, in this case, it is the same concentrator, but it does have some copper production.
In the case of zinc, let me go on -- excuse me, for copper, in 2025, we're expecting to produce 1,020,000 tons of copper; 2026, 1,100,000 tons; and for 2027, 1,071,000 tons. In the case of zinc, this year, we will be -- we're expecting to produce 116,000 tons of zinc. And after that, we will be over 205,000 tons for the next 4 years and on. It's the ore grade and the expected production of the new zinc concentrator will feed our ore production significantly for zinc in the next few years.
Our next question, it comes from the line of Hernán Kisluk with MetLife.
It's actually an extension of the question on costs made by Carlos before. So I understand that cost inflation has affected not only you guys but the industry as a whole. But at the end of the day, in mining, it's a game of who is at the lowest percentile of the cash cost curve. So I was wondering if during this period of cost turbulence for the industry as a whole, again, I'm wondering if your position in the cash flow curve has changed during this period.
To put it simply, Hernan, no, it hasn't changed. We're still -- we believe that we're still in the first quartile of cash cost. I haven't seen the latest, I mean, this quarter's information. I'm sure it is available. But so far at the end of 2022, we were certainly at a very competitive position. I mentioned already that we had some events that affected our cash cost in the first quarter, mainly the impact of this negative sales adjustment on molybdenum.
And for the next quarters, we should be lower than our $0.75 per pound that we marked in this past quarter due to more production coming from our operations and more credit vis-a-vis the same prices for all by-products, due to higher zinc production and lower open sales adjustment for molybdenum. That's our expectation. Obviously, we'll see what happens at the end of the day. What we're seeing in cost, generally speaking, it's a reduction in several cost that has affected our operations in Mexico and Peru. Let me put you a practical example of what I mean.
When the Russian invasion to Ukraine started, well, Russia has been, for many years, a significant ammonia producer, and ammonia is one of the key elements for open pit explosives. So we had a tenfold increase in the price of the ammonia, tenfold. And that has decreased significantly now that there are some other sources that has been developed for these key elements for open pit explosives, and some Russian production that has been passing through the different markets. So that is a practical example of what I mean, some costs -- some higher costs related to this tragic event has been coming back down. And the company is doing its part by working on producing more copper as well as some more of our byproducts.
Our next question, it comes from the line of John Tumazos with Very Independent Research.
The dividend of $1 was almost as large as net income. Should we infer from this that management expects net income to rebound to the $1.50, $2 a share range? Or are the big capital projects, 5 or more years out, not likely to need money next year or the year after? Or is the dividend a candidate to get adjusted because the payout is too large?
I -- well, it's up to the Board. The Board, as I mentioned, look at the cash position of the company, seeing the requirements of cash. For instance, in terms of debt payments, we have no payments up to 2025, where we will pay $500 million in debt. Last year, we had to pay $300 million. So we, at this point, have no significant debt payments. Prices were, well, better than what they are today. So for a forward looking on dividends, I would say that it will be a discussion at the Board level.
For now, the Board decided to pay a $1 dividend this past quarter -- or approved a $1 dividend that will be paid this quarter. But no, there are no -- one of the things that we stress is that our dividend policy is flexible depending on the conditions of the market, our cash flow generation and some -- and our growth plans. So this is something that we will review and the Board will make a decision in each Board meeting regarding this matter.
So there's no simple mechanical formula, like 50% or 70% of earnings or cash flow?
Yes, that's correct. There is no tie to any specific payout ratio or anything. Similarly, it depends on the way that the company sees the market, its commitments to capital as well as any duties that we have regarding debts or things like that. So there is no specific rule regarding dividends.
One thing that I'd like to stress is that even though we don't have any specific rule, we do have a very good track record of recognizing our shareholders through dividends. And depending on the company's possibilities, the company has always paid a dividend. In certain moments, it has been a relatively higher one, as you mentioned, John, regarding the relationship between net earnings and the dividend pay. But it is always an ongoing discussion. But one thing that I can tell is that we don't want to hold cash, and that is something that is important for -- I believe, for our shareholders.
Our next question, it comes from the line of Marcio Farid with Goldman Sachs.
A quick 2 follow-ups for me on my side, please.
So could you move a little bit closer to the microphone, we can't listen to you well.
Is it you better now?
Yes.
All right. Okay. Yes. So a couple of follow-ups for me. First of all, on the molybdenum prices. Just wondering if you have any outlook that you can provide to us, as in the market that we have a hard time trying to track. So just trying to understand how sustainable the current high prices are, what has been the main drivers and how to think about it going into the end of the year. Because it has obviously provided good cost support after byproducts for Southern Copper, right?
And secondly, specifically on Peru, it does feel like the worst of the social unrest has been left behind for now. So just trying to understand how you see the current operational environment in Peru, if there is anything that you would highlight going forward. And how confident you are that going to be seeing some sort of stability when it comes to mining production in Peru.
You're welcome, Marcio, and thank you very much for your questions. On the drivers for molybdenum prices, it's very hard to know what is going to happen. And let me explain you why. This is an extremely shallow market. Just to give you an idea, in copper on a yearly basis, there are about 25 million tons of copper, refined copper being produced and consumed. For molybdenum, it's less than 300,000. So it's a fraction, almost 10%, a little bit more than that, 15% in the volume of developed markets such as the copper one.
What has happened in the fourth quarter as low -- as much as we understand, and our commercial team has shared with us, is that given the uncertainties that we had in Chile and Peru, major molybdenum suppliers well as copper, some consumers decided to increase their inventories just to protect their pipelines of production in their own activity, these industrial consumers. And that somehow move up the price of molybdenum. Well, production in Peru has been much more stable through the quarter as well as some other higher operations in some other locations. So that has made the prices to adjust downward.
At this point, prices are at about $20 per pound for molybdenum, which is a good level for us. We won't regret receiving these prices for our production. It will be always better if they are higher, but that's where we are. And as long as it is stable, we will not have this bounce up and down in open sales that we have faced in both the fourth quarter and the first quarter of this year.
Regarding Peruvian social unrest, as you have mentioned, Marcio, it's left behind. The environment -- the current environment operation is absolutely normal. All the mines and different mining facilities in Peru are operating right now. There is no mining, say, operation being affected significantly by any kind of stoppages. And we believe that this is something that will certainly help to make more peaceful social environment through 2023. So I think that that's it.
And sir, I'm not showing any questions in the queue. You may proceed within final remarks.
Thank you, Carmen. Well, with this, we conclude our conference call for the first quarter of 2023. We certainly appreciate your participation and hope to have you back with us when we report the second quarter of 2023 results. Thank you very much, and have a very nice day today.
Thank you. And with that, we conclude today's conference call. Thank you for participating, and you may now disconnect.