Copper costs turn negative for Southern, Vale as gold and silver byproducts soar

The byproduct windfall means producers get the full benefit of near record-high copper prices as the industry struggles to keep pace with growing demand. Photo by Graham Hughes/Bloomberg

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For copper miners Southern Copper Corp. and Vale SA, surging prices of byproducts like gold and silver are creating an unusual situation: The cost of producing the red metal has turned negative.

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Southern Copper reported a cash cost, net of revenue earned by selling byproducts, of minus 11 cents USD a pound in the January-to-March period, versus 77 cents USD a year earlier. That means the company is making money just by extracting copper ore from mines, even before accounting for the selling price of the metal.

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Vale’s cost of producing copper also turned negative on an all-in basis. Other major producers continued to report positive costs.

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The rare result reflects a surge in prices for metals such as gold, silver, molybdenum and zinc that are found alongside copper in large ore deposits. Silver has more than doubled over the past year, while gold is up roughly 40 per cent. Southern Copper and Vale benefit more than most peers because their deposits tend to be comprised of many different metals, generating significant byproduct revenue.

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The byproduct windfall means producers get the full benefit of near record-high copper prices as the industry struggles to keep pace with growing demand from global electrification, including the rapid development of data centres and artificial intelligence.

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“A negative cash cost means that our byproduct revenues of US$1.2 billion more than cover our production cost for copper,” Southern chief financial officer Raul Jacob told analysts Thursday.

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Beyond byproducts, Southern’s underlying costs are also structurally low due to large-scale, integrated operations. Though the Iran war has disrupted supplies of sulphuric acid — used to separate metals from ore — Southern and Vale are net sellers of the leaching agent, helping to shield their base-metals units from inflation.

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