BofA-Metals Mining - Latam A copper GEM：upgrading GMEX to Buy and Southern Copper to Neutral-20250727

Turning more constructive on SCCO and GMEX

We are double upgrading GMEX to a Buy from Underperform, with a PO of MEX152/shr(28% potential upside) from previous MEX90/shr. We also upgrade SCCO to Neutral fromUnderperform, with a PO of $108/shr (10% potential upside) from $72/shr. Over the pastfew years, we kept a cautious view on both SCCO and GMEX, due to a combination ofcapital allocation concerns, execution risk, regulatory uncertainty in Mexico, andpotential macroeconomic headwinds tied to tariffs. Fast forward to today and theseconcerns have largely faded. The likelihood of GMEX pursuing a Banamex acquisition hasmaterially declined, helping narrow its NAV discount from a recent peak of 56.4% to42.0%. Meanwhile, SCCO has secured all licenses and has begun constructing accessroads for Tia Maria – a project that has faced consistent delays and setbacks in pastyears. On the regulatory front, the 2023 mining reform in Mexico (although perceived tobe negative for miners) is being challenged in the courts and is likely to impact only newconcessions or those up for renewal (SCCO/GMEX insulated). Finally, despite initialconcerns surrounding Liberation Day tariffs, copper fundamentals have strengthened.