El Arco Project PFS: $475M NPV, 12.1% IRR
Southern Copper Corporation's El Arco Project in Mexico has a Pre-Feasibility Study (PFS) outlining an after-tax NPV of $475M and an after-tax IRR of 12.1%. The proposed mine plan runs 35 years.
Southern Copper Corporation's El Arco Project has reported Pre-Feasibility Study (PFS) results for the copper project in Mexico. The study headlines an after-tax net present value of $475M at a 10% discount rate. It reflects Southern Copper Corporation's (SCCO) latest disclosed economics for the asset.
Economics. The after-tax NPV is $475M using a 10% discount rate. After-tax IRR is 12.1%. The study models a payback period of 6.5 years. Economics are based on Copper $3.30/lb; Gold $1,600/oz; Silver $20.70/oz; Molybdenum $9.00/lb.
Production and mine plan. The project envisions an open-pit operation. Life of mine is 35 years. Metallurgical recovery averages 86%.
Resources and ownership. The company holds a 100% interest in the project. Royalties and streams: Only royalties payable to the Mexican Government..
These figures are extracted from Southern Copper Corporation's technical disclosures and reflect the most recent PFS on file. Compare this project against other developers and producers in our project economics database, and always verify the numbers against the original technical report before making any investment decision.
Reserves & Resources
| Category | Tonnage | Grade | Contained |
|---|---|---|---|
| Indicated - Mill | 826.62 Mt | 0.41% Cu, 0.008% Mo, 0.12 g/t Au, 1.6 g/t Ag | 7,544.91 Mlb Cu, 146.48 Mlb Mo, 3.226 Moz Au, 41.88 Moz Ag |
| Indicated - Leach | 51.32 Mt | 0.30% Cu | 335.25 Mlb Cu |
| Indicated - Total | 877.95 Mt | 0.41% Cu | 7,880.16 Mlb Cu, 146.48 Mlb Mo, 3.23 Moz Au, 41.88 Moz Ag |
| Inferred - Mill | 2,344.89 Mt | 0.37% Cu, 0.006% Mo, 0.11 g/t Au, 1.5 g/t Ag | 19,352.33 Mlb Cu, 298.15 Mlb Mo, 8.05 Moz Au, 110.89 Moz Ag |
| Inferred - Leach | 63.78 Mt | 0.25% Cu | 350.94 Mlb Cu |
| Inferred - Total | 2,408.66 Mt | 0.37% Cu | 19,703.27 Mlb Cu, 298.15 Mlb Mo, 8.05 Moz Au, 110.89 Moz Ag |
Our Analysis
- IRR after-tax
- 12.1%
higher than 8% of 26 projects we track
- NPV after-tax
- $475M
higher than 35% of 31 projects we track
- Payback
- 6.5yrs
slower than 92% of 26 projects we track
- Mine life
- 35yrs
- Discount rate
- 10%
- Study price assumption
- Copper $3.30/lb; Gold $1,600/oz; Silver $20.70/oz; Molybdenum $9.00/lb
- Spot copper today
- $6.52/lb
The viability question is settled by the math. A 12.1% after-tax IRR, ranking in the bottom quartile of the 26 copper projects we track, does not clear the roughly 15% hurdle developers need to secure project finance. The 6.5-year payback, longer than 92% of tracked peers, reinforces the problem: capital is committed for a long time before it returns, and the return on that wait is thin. This is a PFS, so the estimate carries a plus or minus 25% band, but the gap between this IRR and the financing threshold is too wide to be closed by estimation error alone. The project is unlikely to be built on its current economics.
What could change the outcome? The study assumes copper at $3.30/lb, while the current live spot is $6.52/lb. That gap is the single most important variable in the model. If the study's price deck is conservative, the realized IRR could be materially higher than stated, and the project becomes financeable. But relying on spot prices to rescue a PFS is a bet on market persistence, not a project attribute. The alternative levers are a lower capex figure, which the PFS band does not permit us to quantify, or a partner willing to carry development risk. Given the company is a US$145.05B diversified large-cap with 12 tracked projects, it can choose where to deploy capital, and this one does not currently justify priority.
The NPV of $475M sits well below the company's market cap, which cuts two ways. It could mean the market has not credited the asset's value, or more plausibly, that the market sees a project whose returns do not justify the financing and execution risk. The 35-year mine life in Mexico is a positive jurisdictional anchor, but longevity does not fix a weak rate of return. The deciding question is whether copper prices stay near current levels through a construction decision; if they do, this project works, if they revert toward the study's assumption, it does not.
Our take, benchmarked against the project economics in the Mining Stocks database. Figures are estimates drawn from company technical reports — not investment advice; always verify against the source filing.