Southern Copper (NYSE: SCCO) expects its copper production to exceed one million tonnes by 2029, driven by the advancement of its flagship Tia Maria project, which is approaching the halfway point of construction. The forecast underscores the company's confidence in a tightening global copper market, even as it grapples with weaker output from its Peruvian operations.

The company raised its 2026 production guidance to 917,000 tonnes, approximately 1% above its original target. Output is projected to remain broadly stable in 2027 before rising to roughly 970,000 tonnes in 2028 as Tia Maria ramps up. By 2029, annual production is anticipated to reach 1.06 million tonnes. Management also predicted a slight global copper deficit this year, noting that exchange inventories currently cover only about 15 days of worldwide demand. Copper is widely used in power networks, construction, industrial equipment and transportation, making supply additions from large mines closely watched by manufacturers and infrastructure-linked buyers.

"For 2028 and on, we expect Tia Maria to fill in and increase our production level to about 970,000 tonnes," said Raul Jacob, vice-president of finance, treasurer and chief financial officer, during the company's second-quarter earnings call. "And in 2029 our copper production should be over 1 million tonnes."

Tia Maria is central to Southern Copper's long-term growth strategy. The company has committed $1.1 billion to the project, invested $693 million to date, and recently issued $1.25 billion in 10-year senior unsecured notes to finance its completion.

Record quarterly results

Southern Copper reported second-quarter sales of $4.3 billion, along with record adjusted EBITDA of $2.86 billion and record net income of $1.67 billion. Operating cash flow reached $3.68 billion in the first six months of the year, while capital expenditure totalled $865 million over the same period.

Management attributed the strong quarterly performance to higher metal prices, which more than offset a 12% production decline in Peru caused by lower ore grades and recoveries at the Toquepala and Cuajone mines. Increased output from the company's Mexican operations partially mitigated the shortfall.

Tia Maria progress and project economics

Despite execution risks associated with Tia Maria and other development projects in Peru, Jacob said the company does not anticipate construction delays. He confirmed that the project's water licence has been renewed and that equipment procurement, including desalination infrastructure, remains on schedule. Material currently in process is also expected to boost copper sales during the second half of the year.

Southern Copper estimated Tia Maria's cash cost at $1.16 per lb., noting that the operation will not benefit from by-product credits. The company also approved a quarterly cash dividend of $1.10 per share and a stock dividend of 0.012 shares, representing an estimated total distribution of $3.23 per share.

Ongoing challenges

Difficulties persist at Southern Copper's Los Chancas project, where illegal mining activity has slowed development. Uncertainty also remains regarding Peru's mining policy under the country's incoming administration. Jacob said management will await the new government's formal proposals before commenting on potential changes to the country's mining canon, the fiscal mechanism through which mining-related revenues are distributed to regional and local governments. Proposed restrictions on new open-pit mines in Mexico are not expected to affect Southern Copper, as its existing concessions remain valid, he added.

With Tia Maria nearing the halfway mark of construction and financing now secured, Southern Copper is positioning the project as the cornerstone of its next growth phase. If the mine enters production on schedule, it would lift company-wide output at a time when management expects global copper supplies to remain tight.