Southern Copper weighs $680M Cuajone mine expansion

Southern Copper (NYSE: SCCO) is assessing a $680 million expansion for its Cuajone mine in southern Peru. The aim is to tackle declining ore grades and enhance efficiency in response to the copper industry's need for new supply. The proposed expansion would boost milling capacity by 33%, increasing daily output from 90,000 to 120,000 tonnes.

This would result in an average annual production of 55,000 tonnes of copper and 1,400 tonnes of molybdenum. However, Southern Copper is also contemplating a potential increase to 150,000 tonnes per day.

Anglo American CEO Duncan Wanblad highlighted the supply scarcity during a recent mining conference, attributing it to limited resources, lengthy permitting processes, and rising development costs. Recent analyst reports have pointed out the discrepancy between potential mine expansions and the actual production companies aim to deliver.

BloombergNEF estimates the industry requires $332 billion in new mine investment to prevent a supply shortage expected from 2028 onwards. The shortage is projected to expand to 3 million tonnes (8% of consumption) by 2035, and 20 million tonnes (44%) by 2050.

Geopolitical disruptions and increasing electricity demand, particularly driven by artificial intelligence, are further straining global metals supplies. Wood Mackenzie's report on Thursday emphasized the pressure these factors put on copper, especially as mining investments struggle to keep up with demand.

Despite outlining preliminary production targets, Southern Copper has not yet given a final investment decision or set a timeline for the expansion. The company's Peruvian copper production declined 2.9% in the first nine months of 2026 to 693,602 tonnes, mainly due to lower ore grades at its Peruvian mines. However, the Cuajone mine, which produced nearly 163,000 tonnes of fine copper in 2025, remains central to Southern Copper's Peruvian business.