Q4 2023 Southern Copper Corp Earnings Call
Participants
Raul Jacob Ruisanchez; VP of Finance, Treasurer & CFO; Southern Copper Corporation
Alfonso Salazar; Director of Metals and Mining & Analyst; Scotiabank Global Banking and Markets, Research Division
Gabriel Mosquera Simoes; Analyst; Goldman Sachs Group, Inc., Research Division
John Charles Tumazos; President and CEO; John Tumazos Very Independent Research, LLC
Sofía Martin
Timna Beth Tanners; MD of Equity Research; Wolfe Research, LLC
Presentation
Operator
Good day, and welcome to Southern Copper Corporation's Fourth Quarter and Year 2023 Results Conference Call. With us today, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the past quarter and year 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 to Mr. Raul Jacob.
Raul Jacob Ruisanchez
Thank you very much, Carmen. Good morning, everyone, and welcome to Southern Copper's Fourth Quarter of 2023 and full year 2023 Results Conference Call. At today's conference, I'm joined by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board member as well as Leonardo Contreras who is also a board member. 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 ESG. After this, we will open the session for questions.
Before we get into the details of this past quarter, I'd like to make some comments regarding the company results in 2023. Even though 2023 was a challenging year of Southern Copper, we believe the company achieved good results. 2023 net sales were $9,896 million. This is $152 million or 1.5% lower than 2022 net sales. This result was driven by higher sales volumes for copper of 2.2% and molybdenum of 2.3%, better prices for molybdenum by 28% and silver. This situation was partially offset by a decrease in metal prices for copper and zinc and by a reduction in the sales volume of silver and zinc.
Net sales in 2023 were negatively impacted by a year accounting adjustment of $406 million for lower metal prices on sales. In addition to this, we estimate that 2023 sales were affected by a larger copper anode inventory in process at year-end. If we exclude these two effects, the sales for 2023 would have been 3% higher than the 2022 mark. The 2023 copper production increased 1.8% year-on-year to 911,000 tonnes of copper.
The yearly result was mainly attributable to higher production at our Peruvian operations a result that was partially offset by a reduction in production of our Mexican operations, which was mainly fueled by a drop in mineral processing and recovery at the Buenavista mine. In the second half of last year, we experienced a reduction of fresh water at our Buenavista operation, which was generated by the fact that we lacked the permit we expect to receive for building a pipeline of approximately 20 kilometers to transport water from the wells to the operations and nearby townsites. For 2024, the company has decided to transport the water through other means to secure the supplies required to ensure that Buenavista can operate at full capacity for copper production and the ramp-up of new zinc concentrator operations.
For our byproducts, molybdenum production totaled 26,836 tons in 2023, which was 2.3% higher than the figure of 2022. This increase was due to higher production at 3 of our 4 mines, the exception was Toquepala. Mine zinc production rose 9.2% year-on-year due to higher production at the Charcas and Santa Barbara man. Mined silver production was less than 1% in 2023, primarily driven by lower production at the Buenavista mine. This decrease was partially offset by higher production at our Peruvian operations.
In 2023, the operating cash cost per pound of copper, including by-product revenue credits was $1.03, a $0.25 increase in cash cost reported versus $0.78 per pound in 2022 was mainly attributable to $0.17 per pound increase in the production cost and $0.08 in by-product revenue credits.
At this point, we believe we are seeing the end of the inflation-related cost. Our cash cost before by-product trade credits evolved from $2.09 per pound in the first quarter of 2023 to $2.23 per pound in the fourth quarter. It is important to note that levels were pretty stable through the second half of last year.
For 2024, we expect our cash cost before by-product credits to be $2.20 per pound. We expect zinc and silver to contribute positivity to growth in 2024 on the back of an uptick in volumes. For zinc, we expect a growing introduction of 80%, 80%. For silver, 13%. Nonetheless, we also expect molybdenum prices to remain at the level that they are now, which is about $19 per pound. In this scenario, all in company cash cost credit for 2024 will total $1.03 per count. Therefore, our cash cost after by-product credits is estimated at $1.17 per pound for this year 2024. This increase in value was driven primarily by a 13% reduction in by-product sales.
Adjusted EBITDA in 2023 was $5,029 million. This is 6% lower or $320 million below the figure of 2022. The drop in adjusted EBITDA year-on-year was primarily attributable to a reduction in sales equivalent to $152 million, a $113 million nonrecurring variance in other income due to 2022 insurance and tax refunds and a $54 million uptick in operating costs. The adjusted EBITDA margin in 2023 was 50.8% versus 53.2% in 2022.
For net income, last year, we had $2,425 million, that's 8% lower than the mark for 2022. The net income margin was 24.5% last year versus 26.3% in 2022.
Now let us focus on the copper market. The London Metal Exchange copper price increased 2.2% from an average of $3.63 per pound in the fourth quarter of 2022, up to $3.71 per pound in the fourth quarter of 2023. At the beginning of last quarter, we were expecting a market surplus for this year. However, after a significant reduction in copper production was announced by some producers, market expectations for surplus ceased and were replaced by concerns about potential deficits due to the extremely low available inventory. Even though there are significant uncertainties this year for the world economy, such as the slow recovery of China, a recession in Europe and a soft landing or minor recession in the U.S., we believe copper prices should have good support through 2024.
Now let's look at Southern Copper's production for the past quarter. For copper, it represented 77.8% of our sales in the fourth quarter of last year. Copper production registered a decrease of 3% in the fourth quarter in a quarter-on-quarter terms to stand at 234,089 tonnes. Our quarterly results reflect a 9.6% decrease in production in Mexico, driven by our Buenavista mine, which was partially offset by higher production at La Caridad mine due to better ore grades. Production at our Peruvian operations increased 6.6% in a quarter-on-quarter terms, which was mainly due to higher production at our Toquepala operations. Compared to the third quarter of last year, copper production increased 3.5%, which was mainly attributable to higher production at the Cuajone, Toquepala and Caridad mine.
For this year, we expect to produce 936,000 tonnes of copper, an increase of 3% over the 2023 production. Last year, we drove our Pilares project to full capacity and initiated a ramp-up at the Buenavista zinc concentrator. For 2024, we expect these 2 projects to contribute with 44,000 tonnes of copper to our production.
Molybdenum represented 10% of the company's sales value in the fourth quarter of 2023 and is currently our best seller. Molybdenum prices averaged $18.41 per pound in the quarter compared to $21.17 in the fourth quarter of 2022. This represents a decrease of 13%. Molybdenum production increased 6.6% in the fourth quarter compared to the same quarter of 2022. This was mainly driven by an increase in production at Toquepala and Caridad mine due to higher ore grades in both operations. These results were partially offset by lower production at the Cuajone and Buenavista mine. Molybdenum production increased 2.3% year-on-year in 2023 after production grew at La Caridad, Cuajone and Buenavista. This was partially offset by lower production at Toquepala. For this year 2024, we expect to produce 25,500 tonnes of molybdenum.
For silver, it represented 4.3% of our sales value in the fourth quarter of 2023, with an average price of $23.25 per ounce in the quarter, which reflected an increase of 9%. Silver is currently our second by-product. Mined silver production decreased 3.2% in the fourth quarter versus the same mark of 2022 after production reduced Buenavista and -- after production reduced in Buenavista and Cuajone. This was partially offset by higher production at the Toquepala, Caridad and in IMMSA operations. Refined production fell by 40% quarter-on-quarter, which was mainly driven by a drop in all of our refineries. And this, I'd like to comment that we're expecting -- we're having a different -- a change in commercial conditions and that has somehow altered the purchases of material for silver production at the refineries in Mexico.
In 2024, we expect to produce 20.7 million ounces of silver, an increase of 13% compared to 2023. Zinc represented 3.3% of our sales value in the fourth quarter of 2023. Zinc prices averaged $1.14 per pound in the quarter. This is a 17% decrease regarding the fourth quarter of 2022 figure. Zinc mined production increased 11% quarter-on-quarter and totaled 16,930 tonnes. This was driven primarily by an increase in production at the Santa Barbara and Charcas mine. Refined zinc production increased by 1% in the fourth quarter.
In 2023, we produced 65,509 tonnes of zinc, an increase of 9.2% compared to 2022. This was mainly driven by an uptick in production at the Santa Barbara and Charcas operations. This was partially offset by a decreased production at the San Martin mine. Refined zinc production increased by 1% in 2023 compared to 2022.
For this year, we expected to produce 113,800 tonnes of zinc, which represents an increase of 80% over our 2023 production level. This growth will be driven by the start-up of the Buenavista zinc concentrator that will contribute with 54,400 tonnes of zinc. For the year 2025 and on, we expect to produce over 170,000 tonnes per year of zinc.
Financial results. For the fourth quarter of 2023 sales were $2.3 billion which is $525 million lower than sales for the fourth quarter or 19% -- or a 19% reduction. Even though copper prices were 2% higher than in the fourth quarter of 2022, sales of this metal decreased almost 10%. Net sales in the past quarter were negatively impacted by a quarterly adjustment -- accounting assessment of $62.3 million for copper sales, and this was basically for lower metal prices and sales.
In addition to this, at the end of the past quarter we have a larger copper anode inventory in process and that also affected copper. Regarding our byproducts, despite a 6% increase in the volume of molybdenum sold, growth of our main byproduct decreased 54% due to lower prices and an important accounting adjustment of $106.2 million of molybdenum sales. Zinc sales decreased 18% due to lower prices and volumes. For silver, sales fell 10% due to lower volume, which was partially offset by better price. So the fourth quarter of last year, sales reduction was mainly affected by an increase in copper inventory and adjustments on sales of copper and molybdenum for $168.4 million.
Operating cost. Our total operating costs and expenses decreased by $23.5 million or 2% when compared to the fourth quarter of 2022. The main cost reduction has been in inventory consumption, capitalized leachable material, workers participation and tenders. These cost reductions were partially offset by higher contractor costs, labor, exchange rate variances, raw materials, water, fuel and other costs.
The fourth quarter of 2023 adjusted EBITDA was $1,055 million, which came 35.3% under the $1,631 million registered in the fourth quarter of 2022. The adjusted EBITDA margin for the fourth quarter was 46% versus 58% in the fourth quarter 2022. Cash flows. Southern Copper operating cash cost, including the benefit of byproduct sales was $1.25 per pound in the fourth quarter of 2023. This cash cost was $0.27 higher than the cash cost of $0.98 in the third quarter of this year -- of this past year.
Operating cash cost per ton of copper before by-product credit was $2.23 per pound in the fourth quarter of 2023. That is $0.01 lower than the value for the third quarter. This 1% decrease in operating cash cost is a result of lower cost per pound from production and lower administrative expenses were partially offset by lower premiums on cathode sales and higher treatment and refining charges on concentrate pay.
Regarding by-products, we recorded a $0.28 reduction in credits. This fourth quarter production in 2023 had -- we had a credit of -- for the fourth quarter of last year, we had a credit of $491 million or $0.984 per pound. These figures represent a 22% decrease when compared to a credit of $604 million or $1.26 per pound in the third quarter of last year. Total credits increased 16% but decreased for molybdenum 33% and sulfuric acid to 11%.
Net income in the fourth quarter was $445 million, which represented a 51% decrease versus the fourth quarter of 2022 figures. The net income margin in the fourth quarter of 2023 was 19% versus 32% in the fourth quarter of 2023. Net income was affected by lower sales as explained earlier and by year-end non-recurrent adjustments in nonoperating costs as well as tax.
Cash from operations. Cash flow from operating activities in 2023 was $3,572 million, which represented an increase of 27% over the $2,802 million posted in 2022. This result was mainly driven by a reduction in working capital.
For capital investments, our current capital investment program for this decade exceeds $15 billion and it currently includes investments in the Buenavista zinc and Pilares project in Mexico and in the Tia Maria, Los Chancas and Michiquillay projects in Peru. In 2023, we spent $1 billion on capital investments, which reflected a 6% increase year-on-year and represented 41% of net income in 2023.
Since there is a description of our main capital project in Southern Copper's press release, I'm going to focus on updating new development for each. For the Buenavista zinc concentrator in Sonora, the capital budget for the project is $439 million, most of which has already been invested. We have initiated the commissioning process and progress is 99%. Ramping up of the plant began in the first quarter of this year, this quarter after technical adjustments to the concentrator. We expect to produce 54,500 tonnes of zinc and 11,900 tonnes of copper in 2024 and an average of 90,200 tonnes of zinc and 20,700 tonnes of copper per year in the next 5 years.
For the Pilares project in Sonora, Mexico, the budget for this project is $176 million, of which $145 million has been invested. Pilares is currently operating at full capacity and delivering copper ore to La Caridad operation. Since Pilares is fully integrated into our operations, this will be the last time we are reporting on it as a project. In other words, Pilares graduated from the project stage and is now part of the La Caridad operations.
For the Peruvian project, in the case of the Tia Maria project in Arequipa, we reiterate our view that the initiation of construction activities at Tia Maria will generate significant economic opportunities for Islay province and the Arequipa region. Given the current Peruvian economic situation, it is crucial to move ahead on projects that will stimulate a sustainable growth cycle. We expect to begin the construction phase of the project in the near future. We will make it a priority to hire local labor to fill the 9,000 jobs that we expect to generate during Tia Maria's construction. Additionally, from day one of our operations, we will generate significant contribution to revenues in the Arequipa region by paying royalties and later on income tax.
The Los Chancas project in Apurimac it's a greenfield project in which we are in a coordinated effort with the Peruvian authorities of the company, making significant progress in eradicating the illegal mining activities at our concession. Once this process is complete, we will restart environmental impact assessment, conduct a diamond drilling campaign for 40,000 meters and initiate hydrogeological and geotechnical studies to gather additional information on the characteristics of the Los Chancas deposit.
The Michiquillay project in Cajamarca as of December 31 of last year, we have drilled 63,000 meters from a total program of 110,000 meters and obtained 20,137 core samples for chemical analysis. Geological modeling, cross section interpretation and drilling logging are currency underway. For 2024, the company expects to complete the diamond drilling product, geological modeling and resource evaluation. We will also begin hydrogeological and geotechnical studies and assess results of metallurgical testing at the deposit. The company continues working with the Michiquillay and La Encañada communities following the guidelines of the social agreements signed with them.
For environmental, social and corporate governance, or ESG practices, major improvement -- we have a major improvement in water recovery that we want to report on.
Over the last 4 years, we have improved the use of water at our operations going from 0.64 cubic meters, less than 1 cubic meter, 0.64 of water to a milled ton of mineral in 2020 to 0.53 cubic meters in 2023. This represents an increase in efficiency of 17%. Improvement has primarily been driven by the company's initiatives to recover water from our Quebrada Honda tailings dam in Peru and by an uptick in the water volume recovered at the Buenavista del Cobre mine in Mexico.
We continue to make progress in our sustainability ratings. S&P Global results in its Corporate Sustainability Assessment or CSA, indicate that Southern Copper Corporation has achieved a place among the top 10 performers in the mining sector with a rating that exceed the industry average by 100%. These results reflect our ongoing commitment to improving our sustainability practices and maintaining the company's inclusion in the Dow Jones Sustainability Index for the Latin American region. This year marked our fifth consecutive year in the Dow Jones Sustainability Index. In 2023, SCC achieved some of the highest scores in the sector for key CSA indicators, including transparency and disclosure, occupational safety and health, operations closure and human capital development.
We obtained a score of 90 out of 100 on CSA's climate governance index. This attests to the progress the company has made in this area. Additionally, we achieved a score of 100 in the Task Force on Climate-Related Disclosures which focus on management and disclosure of financial risks and opportunities related to climate change. Additionally, investor-led Climate Action 100 plus initiative recognized our efforts to develop an emissions reduction roadmap and awarded us a full compliance rating in the TCFD category. Furthermore, the rating agency Sustainalytics reduced the company's risk by two levels between 2020 and 2023.
In 2023, we registered a 97% increase in year-to-date -- year-to-year investment in social infrastructure. In Mexico, $35.9 million was allocated to these efforts. A project that was particularly noteworthy this year focused on improving water infrastructure for the communities of Cananea and Nacozari. In Peru, $45.7 million was invested in social infrastructure, including the progress in building the wastewater treatment plant or PTAR in Ilo.
The company also prioritized educational infrastructure development in Peru and will build upon successful previous initiatives in Moquegua and Tacna. Continuing our commitment, the company is actively expanding educational infrastructure to benefit the community under the Works for Taxes modality. This effort includes setting up 5 high-performance schools of COAR that is the acronym in Spanish for 1,500 students to strengthen the capacities of outstanding students in the state educational circuit. Two schools are currently under construction in Moquegua and Tacna. These investments have made Southern Copper the primary private investor in Peru's national educational infrastructure.
Regarding dividends, as you know, it is the company's policy to review our cash position, expected cash flow generation from operations, capital investment plans and other financial needs at each Board meeting to determine the appropriate quarterly dividend. Accordingly, as announced to the market on January 25, the Board of Directors authorized a cash dividend of $0.80 per share of common stock payable on February 29 to shareholders of record at the close of business on February 13, 2024.
Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us, and we would like to now open up the call for questions.
Question and Answer Session
Operator
(Operator Instructions) It comes from the line of Timna Tanners with Wolfe Research.
Timna Beth Tanners
Good day and happy Friday. Can you hear me okay?
Raul Jacob Ruisanchez
Yes.
Timna Beth Tanners
I had a bunch of questions. First off, I wanted to hear about how you are guiding to lower costs? And just if you could provide some more color on how the costs come down, just given broader inflation that we've been seeing prevalent in the last couple of years?
Raul Jacob Ruisanchez
Okay. Basically, what we're seeing is that after enough uptick in prices, saying after the Russian invasion to Ukraine, we saw a combination of the impact that it has on energy and some key materials for us, such as ammonia that is used as a material for explosive production as well as steel, for instance, and obviously oil. And we had some cost push. Well, we react to that. We are signing -- changing the mix of explosives, changing -- making more research to improve our cost on steel as well as looking into some other ways to save energy, both at power and at fuel. And that somehow has helped us and made us stabilize our cash cost before credits at about $2.23, $2.24 last year, and we have the expectation of decreasing it a little bit more through 2024.
Timna Beth Tanners
Okay. That's helpful. Regarding Tia Maria, you sounded more constructive in the release this time and in the remarks. And I'm just wondering if it's actually time to put it in our estimates coming forward. And if so, if you could elaborate on timing. Also, that $1.4 billion amount in light of all the cost inflation around miners globally. Can you just remind us if that's an updated number and what that entails?
Raul Jacob Ruisanchez
Sure. Regarding the CapEx, we already have spent a little bit north of $350 million on equipment that is stored with the proper care nearby the Tia Maria deposit. And we are more positive for sure on Tia Maria and we are moving forward with some actions that -- and we will report on progress as we get better news on it. But yes, we are much more positive regarding the project. But we will like to give good news when we have something relevant to report.
Operator
It comes from the line of Gabriel Simoes with Goldman Sachs.
Gabriel Mosquera Simoes
So the first one if you could provide some more details on the gap that we observed in production versus copper sales in this quarter. So you mentioned this is due to the anode inventory...
Raul Jacob Ruisanchez
I can't copy you Gabriel, I can't copy you at all, could you get closer to...
Gabriel Mosquera Simoes
Is it better?
Raul Jacob Ruisanchez
Yes, much better now.
Gabriel Mosquera Simoes
Sorry, sorry. I'm sorry about that. So the first question is about the gap that we observed this quarter in production versus sales for copper. So you mentioned that this is due to the anode inventory situation, but any additional detail that you could provide us on the market here would be interesting. And in addition, would you expect this gap to be reversed in the coming quarters, so that the excess inventory that you accumulated due to the higher production that will be interesting to know as well.
And my second question is regarding the comment that you guys made on the Buenavista water situation. So I just wanted to have some more color on how this is going. And if it has already impacted some of your costs in some way, it should affect your cost in a meaningful way in the short term? And if there is a longer-term solution for this already underway? Or could it structurally increase the cost of the mine in the future? If this is a relevant metaphor for the costs?
Raul Jacob Ruisanchez
Okay. Thank you very much for your questions, Gabriel. Okay. Well, we have an inventory built up at the -- related to Minera Mexico refinery. At the end of the past quarter, we had about 7,800 tonnes of copper in process that should be sold I believe this quarter in the first quarter of this year. So this is not like -- it's more like one thing. Obviously, inventories have not -- are bearing all the time. But in this case, we had some repairs that were scheduled for the end of the year that generated this uptick in inventories in process.
Regarding the Buenavista water situation, well, we have -- as I mentioned, we -- the company has taken action on solving this program for this year. We're basically moving water using water tankers, trucks. And obviously, it has an impact in cost. We'll see that -- it's about $29 million that we're expecting. And in terms of production, it created a problem in production at Buenavista. If you look at the metrics that we're reporting for Buenavista, we're mentioning that there was a reduction in mineral process as well as recovery.
That's directly related to the lack of orders. So that's why the company has made us -- evaluated different ways to solve this. And we finally took a decision and are implementing it since this month -- I'm sorry, since January.
Operator
Our next question comes from Alfonso Salazar with Scotiabank.
Alfonso Salazar
I have three questions. The first one is regarding the water concessions. And I want to understand how this water from Cananea relates with a new law in Mexico that requires a mining concession for use of water, specifically for mining activities. So I just want to understand if there is a link between these two things. If I'm not mistaken, I remember correctly back in November 2022, there was a misunderstanding between the government and the company because of some concessions -- water concessions granted to the company at Buenavista, which I think the company clarified that there were no such concessions granted.
And the second question was regarding El Arco. I didn't see the details in the press release about this project. I just want to understand why is that? And the third question that I have is regarding the blended grade that we should expect at La Caridad and basically because it's going to be using Pilares as a satellite mine, so I would imagine that we should increase the La Caridad mine as more production comes from Pilares. So I just want to understand what to expect in terms of the blended grade there. And these are the three questions that I have.
Raul Jacob Ruisanchez
Thank you very much, Alfonso, good hearing from you. Okay. In the water concessions, well, basically, we do have the concession for the wells. What we don't have, it's the final permit to build a pipeline. So that is something that we expect to have when we finish working on the construction for the wells, but we haven't received it yet. So this is what has created this. This plus some lower rain than expected this year -- this past year, I should say. That is basically what we have in the wells will solve the problem in terms of water availability, no matter how the weather affects rains in the area.
Now in the case of El Arco, we haven't made any reference to the project because we have not much progress to report. We will do that when we have something relevant to share with the financial community. At this point, we're advancing the project, but there is nothing relevant to report. And then on the blended rate expected for La Caridad, let me explain what's happening in -- when we initiated the production of mineral at La Caridad -- the Pilares project, we found that there was an oxide layer that had to be removed before getting into full force, which are the feed for the concentrator. So the first month, this was at the end of 2022 and the first quarter of 2023.
We basically removed these oxides from the Pilares deposits and send it to our SX-EW leaching areas. That material is being processed. So we will expect to have some more refined SX-EW copper coming from Pilares in the near future. And then we look at the prices -- relative prices of molybdenum vis-a-vis copper. This was by mid-2023, molybdenum had very good prices and copper not as good as we had say in the year before. And after making some numbers, some financial reviews, we conclude that it was interesting to increase the molybdenum production of La Caridad, which is from our 4 open pit mines, the ones that have the best ore grade for molybdenum.
So the company favored the production of molybdenum at La Caridad and that was sold taking the opportunity of much higher prices for molybdenum. That has passed the last quarter, we had a price that was reported lower than what we had before. And consequently, we're coming back to sending ore from Pilares to La Caridad. Our expectation is that we should be producing about 35,000 tons of copper from Pilares in the mix at the Caridad concentrator with Caridad material.
Alfonso Salazar
Okay. And if I understand, in case moly prices soar again, you may reduce the input from Pilares to produce more molybdenum, right?
Raul Jacob Ruisanchez
If prices make -- if the prices make sense to do that, we'll consider it.
Alfonso Salazar
And just to confirm, the problem with water that you have at Buenavista does not relate with the changes to the mining law and the water concessions?
Raul Jacob Ruisanchez
I don't think so. I think that this is a different matter. It's just a pipeline permit that is taking longer than what we belief when we initiated this -- the work in these two wells.
Operator
Comes from the line of John Tumazos with John Tumazos Very Independent Research.
John Charles Tumazos
Thank you very much. I apologize if I have any construction noise in the background. Southern Copper had 24,500 tonnes less output from purchased ores in 2023 and $113.5 million less other income. Could you describe whether the purchased ores were in Sonora or Southern copper? And if it's a regular sustainable or sort of an episodic thing and what had been the other income, which declined?
Raul Jacob Ruisanchez
Okay. Let me address the last question. Other income was the expected one in 2023, other income/spend was the proper one, the usual trend of the company in 2023. The anomaly was in 2022. And it was a positive thing for the company. We had some insurance refunds as well as tax refund that we had in 2022. So more than having lower other income in 2023, we had an exceptional, very good 2022 in that regard.
Getting into the ore purchases, basically, we have to purchase an unusual amount of copper concentrate in 2022 to fill up our smelter in Peru due to the Cuajone mine stoppage of 54 days. We had a committee that blockaded the water supply for Cuajone for, as I say, 54 days that was in 2022. So in 2023, Cuajone operated at full capacity, which is excellent for us.
And that's why we reduced significantly our purchases of third-party's material. Generally speaking, we are buying third-party's copper for technical reasons because as you know, John, we are low in copper concentrates, so we keep using just our own material, fill up our smelters and refineries. But sometimes, we want to acquire third-party material that has technical characteristics that improve our process, and that's why we are buying some of that as our report shows.
Operator
Our next question comes from Sofia Martin with GBM.
Sofía Martin
I was just wondering if you could share your production guidance going forward for the next couple of years?
Raul Jacob Ruisanchez
Certainly, Sofia. Okay. I already mentioned that for 2024, it's 935,000 -- 936,000. For 2025, 956,000; 2026, 985,000; 2027, 1,001,000; 2028, 1,018,000. I also mentioned that from this year, we're increasing our zinc production from 65,500 last year, up to 118,000 this year, and then over 170,000 for the next foreseeable future.
Operator
It's a follow-up from Timna Tanners with Wolfe Research.
Timna Beth Tanners
I just had two more questions. One was related to the reported interest of Grupo management...
Raul Jacob Ruisanchez
We cannot -- we don't hear -- we couldn't hear you at the beginning.
Timna Beth Tanners
Sorry. So just two quick questions. One is related to the reported interest in Las Cruces from Grupo Mexico. Is that anything you can comment on? And the second one, just is there anything that you can provide in terms of color on the Board's decision to cut the dividend?
Raul Jacob Ruisanchez
The first one, I couldn't get your question. I am so sorry.
Timna Beth Tanners
Sorry about that. My connection might be kind of rough. So it's been reported that Grupo Mexico is looking at Las Cruces, the Spanish mine owned by First Quantum. So I was just wondering if you have any comment on that or if it's relevant for Southern Copper?
Raul Jacob Ruisanchez
It's a relevant question for Grupo Mexico actually. But just what we do, if there is a good opportunity to generate value for our shareholders through an acquisition, we dive into these alternatives. In this case, the company is not directly involved. It's through AMC that the Las Cruces evaluation is being done.
In the case of the dividend, well, it's -- as we explained, in each board meeting, the company, the Board looks at how the market is, what are the next payments that the company has to do, what are the investment requirements? And in this case, if you see our cash generation from operations was somehow lower. So the Board decided to cut a little bit the copper -- I'm sorry, the dividend in order to maintain a solid cash position for the company.
Operator
And sir, I'm not showing any further questions in the queue.
Raul Jacob Ruisanchez
Okay. Thank you very much, Carmen. Well, with this, we conclude our conference call for Southern Copper's fourth quarter and full year results for 2023. We certainly appreciate your participation and hope to have you back with us when we report the first quarter of 2024 results. Thank you very much for being with us, and have a very nice day.
Operator
And thank you all for joining our call today, and you may now disconnect.
