Will SCCO's net cash cost per pound of copper exceed $1.00/lb in any 2026 quarter?

Net cash cost was $0.58/lb in FY2025 with $1.59/lb by-product credits. Reaching $1.00/lb requires either: (1) by-product credits declining to ~$1.17/lb (a 26% drop from peak) while pre-by-product costs remain stable, or (2) pre-by-product costs rising to ~$2.59/lb while by-products hold. The by-product credit range was $1.16/lb (FY2023) to $1.59/lb (FY2025). A return to FY2023 by-product levels would push net cost to ~$1.01/lb. This requires molybdenum, silver, and zinc prices all reverting to 2023 levels simultaneously. Current commodity prices remain elevated, and the supply deficit in copper suggests the broader commodity complex may stay strong. A quarterly spike above $1.00 is more plausible than a full-year average above $1.00.

The question asks about 'any 2026 quarter' — a single-quarter spike is more achievable than a sustained trend. By-product prices are volatile on a quarterly basis. Molybdenum specifically has shown wide quarterly swings. Silver prices could decline if precious metals momentum reverses. Additionally, ore grade decline at Cuajone mechanically increases pre-by-product costs. If a single quarter sees below-average by-product production (mine sequencing, smelter maintenance) combined with above-average pre-by-product costs (lower ore grade, higher energy costs), net cost could spike above $1.00 temporarily. The 'any quarter' framing pushes probability higher than a full-year assessment.

The trajectory from $1.03 (FY2023) → $0.89 (FY2024) → $0.58 (FY2025) reflects rising by-product credits at peak commodity prices. If commodity prices merely normalize to mid-cycle (not crash), the committee estimated mid-cycle net cost at $0.75-0.85/lb — still below $1.00. Crossing $1.00 requires either (1) by-product prices falling to FY2023 levels, (2) a significant operational disruption reducing by-product output, or (3) pre-by-product cost inflation beyond what ore grade decline alone produces. Each scenario is possible in a single quarter but unlikely as a sustained outcome. The 'any quarter' framing makes this ~20%.

Current net cash cost at $0.58/lb requires a 72% increase to reach $1.00/lb. This is a large move. Even at mid-cycle by-product levels ($1.16-1.30/lb vs current $1.59/lb), net cost would be $0.87-1.01/lb — straddling the threshold. A single quarter with lower-than-normal by-product production could cross $1.00, but by-product pricing is relatively stable on a quarterly basis. Pre-by-product cost of $2.17/lb is rising but slowly (ore grade decline is gradual, not sudden). The strongest case for crossing $1.00 would be a simultaneous drop in molybdenum, silver, and zinc prices — which would likely only happen in a broad commodity downturn.

The committee established that by-product credits ranged from $1.16/lb (FY2023) to $1.59/lb (FY2025). At $1.16, net cost would be ~$1.01/lb — essentially at the threshold. By-product prices don't need to crash, just revert to 2023 levels. This is not extreme — it represents normalization from peak levels. Additionally, pre-by-product costs are $2.17/lb and rising from ore grade decline. If pre-by-product costs reach $2.25/lb (modest increase) and by-products revert to $1.25/lb (partial normalization), net cost would be exactly $1.00/lb. The 'any quarter' framing gives 4 chances. I assign 25% reflecting the cumulative probability of one quarter hitting the combination.

The gap from current ($0.58) to threshold ($1.00) is large, but the gap from mid-cycle ($0.75-0.85) to threshold ($1.00) is narrower. The question is whether we see a quarter where by-product production/pricing is below mid-cycle while pre-by-product costs are above trend. This requires specific conditions — mine sequencing producing lower by-product ore, smelter maintenance reducing by-product recovery, or a quarterly commodity price dip. Possible but not probable in any given quarter. Across 4 quarters, cumulative probability is meaningful. 18% captures this.

$0.58 to $1.00 is a big move. Requires by-product normalization from peak. At mid-cycle (~$0.80), still below threshold. Need below-mid-cycle by-products in a single quarter. Possible but unlikely. 20% for 'any quarter' framing.

By-product credits at FY2023 levels ($1.16/lb) would push net cost to ~$1.01. But FY2023 was a low point — current commodity environment suggests by-products stay above FY2023. Ore grade decline adds ~$0.05-0.10 to pre-by-product costs. Combined, a quarterly spike above $1.00 is possible but requires several factors aligning. 17%.

Committee estimated mid-cycle net cost at $0.75-0.85. Threshold is $1.00. Gap of $0.15-0.25 between mid-cycle and threshold. Quarterly volatility in by-product prices could bridge this gap in one quarter. 19% reflects low but non-trivial probability across 4 quarters.