Hello, everyone, and thank you for holding. Welcome to Grupo México's Third Quarter Earnings Conference Call. With us today are all of Grupo México's top executives who will discuss the financial performance of the company during the third quarter 2026 results, giving you a summary of the latest news and addressing any questions you may have at the end of the call. Before we begin, I would like to remind you that information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to place undue reliance on these forward-looking statements.
Grupo México undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. All results are expressed in full U.S. GAAP. The presentation may be followed through our webcast, but if you wish to ask a question during the Q&A session, you will need to do so via phone call by pressing star one one. A copy of the slides that the company will be reviewing today is available on the website at grupomexico.com. At this time, I would like to remind everyone that your lines must be in listen-only mode until the Q&A session.
Now, we will begin with Marlene Finny. Please proceed.
Thank you so much, Carmen. Good morning, everyone, and thank you for joining us today for Grupo México's third quarter earnings conference call. Sitting with me today are the top executives from our three divisions. During our call, we will be following, as Carmen mentioned before, a presentation that can be downloaded from our website or followed by accessing the webcast. Today's detailed program can be found on slide number three. I will start with Grupo México's ESG highlights, followed by the quarter scorecard and financial highlights. Then, Mr. Leonardo Contreras will provide detailed information regarding our mining division's main highlights, project updates, and comments on the industry's economic environment. He will then be followed by Mr. Fernando López Guerra, who will go through the financial results and the events of our transportation division.
Lastly, Mr. Francisco Zinser will comment on the infrastructure division's relevant events and numbers. As usual, at the end, the line will be open for questions and answers. Now let us go through our main ESG highlights on slide number five. Firstly, four of our operations in Sonora received the CAMIMEX Silver Helmet Award for outstanding safety performance and accident prevention, making this the first time that four operations from the state have been recognized in the same edition, reflecting our commitment to the workers' safety. Then, in Michiquillay, Peru, the participative environmental committee completed its third environmental performance verification of 2026. This committee, which includes community leaders and public and private sector representatives, plays an active role in environmental monitoring, reinforcing transparency and improving effective management of environmental and community affairs.
Additionally, our construction company was selected from more than 50 companies in six countries to receive the FICCI Corporate Social Responsibility Award, recognizing its commitment to community wellbeing and responsible operations. Lastly, during this quarter, Dr. Vagón, the health train, provided free medical services to more than 17,000 people across communities in five Mexican states, continuing to bring essential healthcare and medical support to remote communities. Now I will continue on slide number six with our scorecard, and I want to note that we reached record financials this quarter.
Starting with our accumulated revenue for the first nine months of the year that totaled $17.6 billion, representing an increase of more than 25% when compared to the first nine months of 2025. Our EBITDA totaled $10.6 billion, showing an increase of close to 50% when compared to the same period of last year. Our copper production reached roughly 776,000 tons for the first nine months of the year. This is a slight decrease when compared to 2025. This is very important. Our net cash cost totaled $0.38 per pound, an improvement of almost 60% when compared to the first nine months of 2025.
Lastly, our board approved a stock dividend equivalent to one common share for every 194 common shares outstanding. This distribution, which follows the share repurchase program executed during the quarter, represents an estimated $0.0126 per share and an annualized dividend yield of 2.1%. This reflects the company's forward-looking approach in an environment with market volatility and rising interest rates, where we are looking to remain flexible. Turning to slide number seven, Grupo México continued to have a solid balance sheet, with $15.6 billion generated during the first nine months of the year. As you might already know, our debt is mainly denominated in U.S. dollars, and this represents 80% of our total debt, while the rest is in Mexican pesos. 89% of our debt is at a fixed rate.
On this slide, you can also see the dividend paid in 2024, along with the corresponding payout ratios and the implied dividend yield. For this quarter, the dividend is calculated based on the closing share price of the declaration date. Moving to slide number eight, we continue to have a comfortable debt maturity profile with no payments of over $1 billion until 2027. Our cash position stood at $13.8 billion at the end of the first nine months of 2026. That's all for me now.
Now I will let Leonardo Contreras comment on our mining division's performance.
Thank you, Marlene. Good morning, everyone, and thank you again for joining us today. I will start today with a brief remark on the current copper market on slide 10. The LME copper price increased 44% from an average of $4.34 in the third quarter of 2025 to $6.41 during this quarter. In the Comex market, we saw a 34% increase with an average of $6.48 per pound during the third quarter. Now, based on current supply and demand dynamics, we think there will be probably a slight copper market surplus for 2026, as supply growth is expected to modestly outpace demand growth from key markets such as decarbonization technologies, artificial intelligence, and electric vehicles. Copper inventory worldwide stood at 1,105,000 tons as of October 9. We estimate that this inventory level can currently cover around 14 days of global demand.
Now let's continue with the mining division's financial highlights on slide 11. This quarter, we showed exceptional financial results that represent a record for the mining division. During the first nine months of this year, sales stood at $14.4 billion, almost a 40% increase versus 2025, driven by higher sales volumes of zinc paired with stronger copper, molybdenum, zinc, and silver prices, which increased roughly 31%, 35%, 26%, and 108% respectively. Our EBITDA totaled just more than $9 billion, a 60% improvement compared to the first nine months of 2025 with a 63.5% margin. Our copper production reached close to 776,000 tons, a slight decrease of 2.8% when compared to the first nine months of 2025, mainly due to lower ore grades as we budgeted for 2026 within our Peruvian operations. This was partially offset by higher production at our mining units in Mexico.
Our net cash cost for the first nine months of this year settled at $0.38 per pound, a significant 58.8% improvement compared to the same period of 2025, reflecting a 55% reduction ensuring a very competitive level. Now let's move on to CapEx. We invested $1.4 billion during the first nine months of the year. I would like to continue talking about projects under progress in slides 12 and 13. Starting with slide 12, Tía María continues to make steady progress, reaching nearly 50% of overall completion. As of September 30, we have committed $1.1 billion, of which $884 million has already been invested. Key milestones as of September 30 include the completion of major earthworks, continued progress on the project's power infrastructure, and the advancement of construction activities across processing and operational facilities. Key equipment orders also continue to advance.
Also, the project has generated more than 6,800 jobs, of which 1,200 are local positions and remain on track to begin operations within the first half of 2028. Now let's move on to Los Chancas, in which we continue implementing social and environmental programs in our local communities while advancing efforts to secure the project's area and address illegal mining activities. As we move to Michiquillay, we continue advancing on key technical studies and project planning activities. During the quarter, the mineral resource report was completed, while development and infrastructure studies continued to move forward. Lastly, we are forward on sharing our potential expansion of Cuajone. We are currently evaluating an expansion of the concentrator's milling capacity from 90,000 to 120,000 tons per day to maintain or potentially increase production.
The expansion would support an increase of roughly 55,000 tons of copper and 1,400 tons of molybdenum per year, translating into a 33% increase in milling capacity. In addition, we are evaluating the feasibility of a potentially larger expansion to 150,000 tons per day. Now, moving into Mexico, we are glad to share that El Pilar has obtained all required environmental permits, and early site preparation activities began during the quarter. Development activities continued to move forward across key infrastructure areas, including power facilities and the 60 MW plant, keeping the project on track for construction to begin in 2027 and production to come online by 2029.
If we turn to slide 15, you will see a timeline of our main projects. Please, if you have any follow-up questions, we will be happy to address them during the Q&A session. Now I will let Fernando comment on our transportation division.
Thank you, Leo, and good morning, everyone. Thanks again for joining us. Continuing with the transportation division results on slide 17, I am going to go through our financial highlights for the first nine months of the year. Our sales reached $2.8 billion, a solid 14% increase compared to the first nine months of 2025. Our EBITDA for the first nine months of 2026 totaled just shy of $1.2 billion. This is 9.3% higher than 2025, where the EBITDA margin stood at 41.1%. Both in revenue and in EBITDA, this is a record for our division. As of our net income, it totaled $332 million during the first nine months. It is 11% lower than the same period of 2025. Transported volumes grew 5.4%, both in net ton kilometers and in carloads, reflecting a solid accrued growth in the division.
Continuing with the main variations of our revenue on slide 18. As a reminder, these variations are considering results in Mexican pesos. I will start with the segment that delivered the strongest revenue growth through the quarter, which is Intermodal, leading the segment with a 16% increase driven by growth in domestic traffic in both U.S. and Mexico, as well as our cross-border operations. In Metals, we had a solid 14% increase supported by a recovery in Mexico's scrap and steel slab market. Lastly, in Minerals, the segment grew by 13%, reflecting strong volume growth driven by longer iron ore hauls. In the mid-growth range, the cement segment delivered a 9% growth in revenue, driven primarily by stronger demand in central and southeastern regions of Mexico.
Energy segment grew 7%, supported by higher LPG, coal, and asphalt trade volumes, partially offset by winter refined products volumes resulting from higher oil prices in Mexico. Also, we saw a 4% growth in Industrial segments due to the growth in paper imports, partially offset by a contraction in the new railcar market and beer consumption in the U.S. On the other hand, we saw revenue decline in some segments. Chemical and Ag segment declined by 3%. The Chemical segment was impacted mainly due to a quality issue affecting fertilizer imports and sulfuric acid shipments. This is paired with weather related to the disruptions at the Topolobampo port. The Agricultural segment was impacted by lower volumes driven by higher soybean imports to ports and the shift of border imported to locally sourced corn, resulting in a shorter haul.
Lastly, the Auto segment showed a 5% decrease due to scheduled maintenance shutdowns and shift reductions at some of the OEMs. Now let's take a look at our operating metrics shown on slide 19. During the third quarter, average train speed remained stable, while dwell time increased 8% as a result of car velocity decline 2%. However, as you can see, there was a 3% improvement in average train length, reaching close to 1.9 km, as well as 3% increase in gross tons per train, a 1% increase in crew starts during the quarter. To conclude, both train length and tonnage increased, and in some cases, in order to achieve these improvements, we must extend the railcar dwell times at the most critical terminals until we target train length and tonnage is obtained.
Moving on slide 20, you can see our CapEx guidance for 2027. The board approved an investment budget of $619 million for maintenance, special projects, and the acquisition of locomotives. This allows GMXT to continue growing and improving through sustained investments. Around 62% of our annual CapEx will be invested in rail infrastructure, equipment, bridges, and locomotive, and some machinery. 12% of the annual CapEx will be for yards and terminals, focusing on siding enlargement and yard reconfigurations. 7% of the budget is planned for special projects focusing on key infrastructure such as the bypasses and our safety program throughout some cities.
Lastly, roughly 19% is planned for the acquisition of locomotives. This is the main reason our CapEx is higher for the next year, as it goes in hand with our volume growth guidance that we show on the next slide. On slide 21, you'll find our 2027 outlook that implies 5%-8% volume growth, along 8%-10% revenue growth, along with a CapEx program that I just mentioned. We believe this volume increase will be led by Intermodal and Agricultural segments. With this, I conclude the general overview of the Transportation division.
I will now let Francisco Zinser comment on the Infra division.
Thank you very much, Fernando, and good morning, everyone. I will start by going through the financial highlights of the Infrastructure division shown on slide number 23, which are a milestone for us and mark an important growth pathway for the coming years. Our sales for the first nine months of the year stood at $618 million, an increase of 24.6% when compared to the first nine months of 2025. This is mainly due to the integration of Saavi Energía, the reactivation of all our oil rigs, and higher revenues from the real estate leases. Our EBITDA totaled $309 million, a 30.5% increase for the first nine months of the year with a 50% margin, mainly driven by higher contributions from the energy, oil rigs, and real estate businesses, and slightly offset by lower results in our construction and engineering business and the effect of the toll roads sale.
Lastly, net income totaled $371 million, an increase of over 371% when compared to the same period of 2025, as a result of the sale of 81.1% of our stakes in the Salamanca-León Highway . Now, I would like to go through some of our most relevant events shown on slides number 24 and 25. During the third quarter, the Energy division delivered strong growth, with revenues reaching $375 million, and EBITDA totaling $206.9 million, representing year-over-year increases of 60.4% and 69.1% respectively. This performance was driven by the consolidation of Saavi beginning on September 8 of this year, marking a major milestone in the expansion of Grupo México's energy platform. With a 70% controlling stake, Grupo México now leads one of Mexico's largest private power generation platforms, significantly expanding the scale and strategic relevance of the Energy division within the infrastructure portfolio.
Turning to Perforadora México, the company reported revenues of $55.4 million and EBITDA of $14.7 million in the third quarter, representing year-over-year increases of 3.8% and 114.8% respectively. The strong EBITDA recovery reflects the return to operations of the Zacatecas and Chihuahua platforms in early July, followed by Campeche in late August and Tabasco in early September. With all the oil rig fleet now fully operational, the business is entering a new phase of improved asset utilization and earnings recovery following the operational disruptions we've had over the past few months. Going into slide number 25. During the third quarter, the Real Estate division continued to deliver solid results, with revenues reaching $81.1 million and EBITDA totaling $50.1 million, year-over-year growth of 14.7% and 10.4% respectively.
Performance was driven by higher rental income, favorable foreign exchange rates, and a strong occupancy of almost 94%, reinforcing the platform's ability to generate resilient growth and recurring cash flow. The company continues to actively evaluate growth and investment opportunities to further expand its presence in the real estate sector. Lastly, since the beginning of the year, Grupo México Infraestructura has consolidated Grupo Proyecta, adding the fourth stage of Lomas de Angelópolis in Puebla and further extending and strengthening its development pipeline within the real estate portfolio. While most projects are still in the early stages of development and therefore contribute only marginally to current results, they represent an important source of future growth, with contributions expected to increase as projects move through the commercialization and continue to mature.
Finally, moving into slide number 26, you can see a map of our newly integrated Energy division assets, which include a diversified portfolio of combined cycle power plants, wind, solar, mobile natural gas facilities located across Mexico and the U.S. I am very proud to know that we are now the largest privately owned power generation company in the country and have very interesting project pilot in the pipeline, sorry, in the coming years. With this, I conclude our review of the main highlights of the Infrastructure division.
Now, I will let Marlene give her closing remarks. Thank you.
Thank you so much, Francisco, Leonardo, and Zinser. Thank you, everybody. Also, you can find a summary of our financial highlights on slide number 28. With that, we will open the line for Q&A.
Thank you so much. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. We ask that you please project your voice clearly and ask your question slowly, one at a time. One moment for our first question. A reminder, to ask a question, press star one one to get in the queue. Our first question comes from the line of Regina Carrillo with GBM. Please proceed.
Hi, good morning, and congratulations on the outstanding results. I have one question for Marlene, one for Fernando, and one for Francisco, if that's okay. Marlene, what was the main rationale for choosing a stock dividend rather than a cash dividend? Should we see this as a one-off or a trend that should be used again as investment cycle accelerates? Fernando, can you give us a general update on the Belgrano Cargas in Argentina? Are you still participating in that? If so, what are the progress there? Finally, Francisco, congratulations on the Saavi consolidation. Beyond the initial consolidation, what will be the key sources of growth for Saavi and what level of annual sales and EBITDA can we expect from this going forward? Thank you.
Thank you so much, Regina. Thank you for your questions. I will answer your first question, and then I will let Fernando and Francisco answer the other ones. I was hoping to address this, and give everyone a little bit more color on the matter regarding the dividend. As you may know, this is a board decision, and there is a rationale behind the stock dividend decision driven by several factors. I would say that maybe the first one would be the flexibility, to have flexibility in all the goals that we are looking in our three divisions to continue to grow organically and inorganically. This is a result, as you know, of the share buyback program we currently have in place, which we are giving the stock support among volatile environment.
This is also the result of the feedback we have been hearing from the market at a time we think it makes sense. Another point was considering that we are looking at a major maturity next year from GMFB. Depending on the rate and how we see everything, we wanted to have that flexibility as well to see if we should refinance or do anything else. I think the most important thing to have in mind here is we are looking to grow within our three business lines, and we are evaluating opportunities that we can ensure sustained growth and value creation. Again, with our three business lines, with our infrastructure, transportation, and mining. The idea was to remain flexible for the coming opportunities and internal cash needs or external cash needs.
You want an answer from-- Marlene, are you done?
I was just going to mention that we will continue to monitor to see what is happening and how the thing is evolving and the projects we are analyzing to see if this is one-off or this will continue to be the case. As of now, this is all we can share. Sorry, Fernando.
That's okay. About Belgrano and Argentina, as you, we've been public about it, that we were interested in putting a lot of teams and time into the project. However, at the end, how the bidding process came out, it is an open access model. It is the same as Europe operates under that. But for that model, you have one operator for the track, several operators on top, and we do not get to build synergies or economies of scale. So basically, none of them make money or break even. Governments need to step in and subsidize, and we are not keen on that model. As you remember, Mexico followed the U.S. and the North American model, and we did not reinvent the wheel. We were just focusing on economies of scale.
In railroads, we need to build density, longer train. That way we can lower the cost and then lower our rates. If not, we cannot compete versus over the road. So for that decision that we are stepping away of this bidding process, and that's basically it.
Finally, this is Francisco. Thank you very much, Regina, for the congratulations and the question. We are expecting next year, which we will be fully consolidating for the whole year, the Saavi platform that we're exiting at it. We are expecting sales of roughly $1.9 billion for 2027, and an EBITDA of roughly $640 million for next year as well.
Thank you all for your answers.
Thank you. One moment for our next question. It comes from Pedro Mello with Citi. Please proceed.
Hi, can you hear me?
We can hear you now. Thank you, Pedro.
Yeah. Sorry. It's Gabriel Barra here. I have two questions for our end here. The first one, just following up the last question about the capital structure in deep and cetera. We have seen these two recent news that GMXT is not going to continue with the potential investments in Argentina, and we had some news about the discussion about Rumo in Brazil. When we take a look on the capital structure of the company, we see a company with a really comfortable leverage situation, net cash. We understand the structure is that you want to have more potential investments in the future. My question is, how do you see the leverage level for this moment? It's a net cash, or we should see a potential small leverage here.
How should we model this leverage going forward, given that we do not have any clear target given all this recent news on those investments that I mentioned. The second one about the investment in Brazil. You have touched base on Argentina and the potential investment, but I want to hear about Rumo and about the news that you have seen here in Brazil on this transaction. Not only in terms of Rumo, but how do you see Brazil in terms of a potential target for investment in infrastructure or even any other logistic business here in the region? How do you see the region going forward at this moment? Those are the two questions that I have. Thank you.
Yes. Thank you for your question. On the leverage side, we are still evaluating our options, and as Marlene was mentioning, we want to maintain ourselves flexible. As you know, there are very few opportunities that come out there, and the fact that we have a solid balance allows us to step in. That is the way we have done it in the past. We are evaluating our options. What Rumo, I think we are not here to comment on that as of right now. Sorry.
Regarding the capital structure and the cash we are generating. As Fernando mentioned right now, and I mentioned earlier, we want to remain flexible, even though as of now we are welcoming Argentina. We do still have a lot of organic, and we are analyzing organic growth projects, so we want to remain flexible.
Okay. Thank you. Cheers.
Thank you. One moment for our next question that comes from Alejandro Demichelis with Jefferies. Please proceed.
Yeah. Good morning. Thanks very much for taking my question. Actually, two questions, if I may. The first one is regarding [audio distortion] [Asarco]. Maybe, Leonardo, you could comment on how you see the Asarco project. Will you finally be thinking about that? Then the second question, maybe for Marlene. Marlene, you have mentioned that you're looking at organic and also inorganic opportunities. Just to clarify, those inorganic opportunities, could those be within your existing verticals? Would you look to do something outside of your existing perimeter?
All right. Thank you, Alejandro. Let me answer the first one first. In terms of Asarco, we continue with our path forward for the Ray expansion. We're just waiting on some feasibility studies, and hopefully we can have more clarity by the first quarter of next year. Silver Bell as well, it continues with feasibility studies, and we will have more clarity as well in the upcoming quarters. As per the smelter and the refinery in Hayden, we're increasingly optimistic to restart Hayden at 1.4 million tons copper of concentrates at San Antonio. We believe that this would bring critical mineral copper processing capacity back to the U.S., and this will account almost for 350,000 metric tons of copper contained. If this goes into our refinery, then we might as well think of 500,000 metric tons of copper as well. We're optimistic.
I don't know, Marlene, if you would like to answer the other question.
Sure. Thank you. I want to be very clear. I think we are looking at organic growth, and we have a very strong pipeline in all of our three divisions, and inorganic opportunities that we are analyzing. Nothing to mention right now, but we're analyzing in our three divisions. That means infrastructure, transportation, and mining, not anything else.
That's very clear. Thank you. A bit of a follow-up to Leonardo. Leonardo, could you please update us on what is the CapEx required for all of those projects in Asarco?
Yes, Alejandro. We're talking about to use between $4 billion and $6 billion now, considering the three core products that we just mentioned. Again, we're finalizing and having more detailed engineering for each of them.
Fantastic. Thank you very much.
Thank you. One moment for our next question, please. It comes from Alfonso Salazar with Scotiabank. Please proceed.
Thank you. I have two questions. The first Marlene , sorry to insist on this one, but regarding the cash dividend and the optimization of balance sheet. There is a trade-off. We understand that you want to have flexibility for growth. There is a lot in the pipeline, very attractive projects, no question. At the same time, you have a very high level of cash and you have access to debt whenever necessary. So, it's good that you will see it reasonably, even if interest rates are increasing, to increase return on equity. Just wondering if you can share how Grupo México sees this balance between this trade-off between optimization of balance sheet and flexibility. That's the first question.
The second is regarding Asarco and the expansion of Ray. I remember this is a point that it was postponed, and many years ago, you talk about this. It didn't happen. I remember that back then, one of the problems that you were facing was hardness of rock. The rock hardness was very high, and that was one of the problems. So how you plan to solve that for that? Are you going to implement a pre-crusher? Or if you can give us some details on the Ray expansion.
Thank you, Alfonso, for your questions. Obviously, we take into consideration everything when we are analyzing on the board, actually, is analyzing the decision to pay the dividend or how much as a dividend. This time, this board meeting, we were very focused on all the growth that we want to do to continue to create value. We think that the value we can create with new growth coming into the company, it has a better return for everybody. We do take into consideration to optimize the capital structure of the company, but in this case, and in this quarter, we focused on growth and flexibility at one time.
Answering your second question, Alfonso, all the analysis that we have done, the life of mine and so on, I do think that the expansion justifies. Yes, we have seen some hardness, but it is all taken into account into this expansion. We do not see any problems with that going forward.
Thank you. As a reminder, if you do have a question, simply press star one one to get in the queue. One moment for our next question. It comes from Henrique Braga with Morgan Stanley. Please proceed.
Well, team, thanks for taking my question. I just have a few across the divisions. If we can start on the transportation. Can you clarify on the guidance for 2027 if the revenue is in U.S. dollars or in Mexican pesos, and if the volume is in net ton per kilometer?
Yes. Our guidance is in U.S. dollars. As you just seen, all the group are reporting U.S. dollars, so you should always look out in that end. Volume growth, it is not ton kilometers and car loads. What appears here is car loads.
Great. Thank you. If I can ask about Asarco. Could you disclose what was the cash cost before and after by-product during the third quarter 2026, and what is the outlook for the fourth quarter? And maybe if you have a view on 2027, that will be helpful.
Yes, Henrique. The cash cost for third quarter 2026 was, before by-products, was $3.78, and after by-products, $3.60. Basically, where we lagged was on the pounds produced. I do think that the cost control has been pretty well managed, even with the fuel increases. I would expect that if we have a better production within the fourth quarter, we should be lower in our cash costs. For 2027, yes, we would definitely envision a big reduction on the cash costs again, from the production side of things. The only variable that we do not control such as fuel. Those variables are the only ones that could impact going forward, but we should be able to manage with producing more.
Okay. That is helpful. How much more are we thinking in 2027?
We should be between 4,000-7,000 of the metric tons copper year-over-year.
Thanks. If I may, sorry if I am extending a little bit here, but I just want to clarify something in the energy division, the agreement with Saavi, the integrated company. During the third quarter 2026, did the reported results, you consolidated everything, but was it pro rata for just the days after the due announcement, or were those results for the entire quarter?
Yeah. Thank you for the question. No, we consolidated only from September 8th to September 30th, so that is 22 days of power generation. In the financial results, that is what we consolidated. Obviously, the whole balance sheet is consolidated, but in terms of power production and in terms of the financial income statement, 22 days.
Okay. Can you give us a little bit more color on how the new company looks like? I was thinking in terms of if you could clarify a little bit, how much was the energy production in third quarter 2026, and how much do you expect for the upcoming quarters? Maybe if you could give us a little bit more color on how those new assets that Saavi is bringing to the operations, how are they operating? So their capacity utilization, and what are the margins of that business? Also, if you could give us a ballpark number of what their net income margin, because that would be relevant for the minorities that were one of the most
Yeah. Sure. With the consolidated platform, so that means our three previously existing assets, our combined cycle power plant and two wind farms, and the 10 assets that Saavi has, which are seven combined cycle power plants, one solar asset, and they also have three mobile gas turbines that are currently contracted with xAI in the U.S. Roughly, we will be generating 2 GWh per month. That will give you 24 GW per year of power generation, which is a significant increase of what we were having previously. The assets that Saavi have are operating at very similar levels than the ones we have. We are talking about 97%, 96% utilization factor across basically all of their different assets.
As you know, they are located in places in Mexico where there is a lot of current demand, and roughly three-quarters of the Saavi pre the merge, the combined cycle that we have. Regarding how we are expecting next year sales, EBITDA, as you probably know, in this business, gas prices, which again, is the most important cost for the combined cycle power plants and the mobile gas turbines, they are passed through. We are expecting $1.9 billion, as I said before, in sales, but this is mostly more a reflection of how the gas curves are looking forward for next year. In the same proportion, that is how the costs are affected, because again, it is a pass-through.
The relevant measure, it is obviously the spark spread, which affects directly your EBITDA, and that is the one we are expecting at $640 million for next year, which accounts Saavi's existing assets and Grupo México's existing assets as well. This is the result of the combined platform moving forward.
Very clear. Thank you.
Sure.
Thank you. Our next question comes from the line of John Charles Tumazos with John Tumazos Very Independent Research. Please proceed.
Thank you. Could you explain a little bit more the new reserves, that updated reserve report for Michiquillay, if I am pronouncing it correctly. Was the prior tons in grade what the government calculated when the project was auctioned five or more years ago? Was the updated calculation of Southern Copper exactly the same? Are there any more details?
Yes, John. I will look into your question, probably send you a note after the meeting. What we have seen is that the potential of Michiquillay is greater than what we initially expected. Going back to your point of when we acquired it, yes, we are seeing more resources, but let me share with you a note, with the specifics.
The tons are more, and the grades are about the same. Is that a fair summary?
I would probably hint to you that the grades are a little bit higher and the tons are higher as well.
That will be it. [Non-English content].
No, thank you.
One moment for our next question, please. It comes from Emerson Vieira with Goldman Sachs. Please proceed.
Hello, good morning. Thanks for the opportunity. I have two questions. First one, just confirming my understanding in terms of when you expect the company to release the final feasibility study for [UN] project, and which products are most beneficial? That is the first question.
Yes. Thank you for the question. I think let me put them in order. I do think that it's the Ray expansion. I think that the next quarter, we should have a much clearer path. As well with the smelter and the refinery. Silver Bell, it would probably be during the ongoing year next year.
All right. Thank you. On the expansion of the refinery as well, what conditions must a company see in order to move along with the project? Of course, we have all the current situation in the U.S. But is that a necessary condition to move ahead, or I don't know, you guys are thinking about other levers to potentially bring the project to an economically viable situation and then move ahead. Just to understand, it depends on, I don't know, a political decision or the project is by itself viable.
I think that it's in our hands to make the project very viable. That being said, we're in active conversations and engaging with the U.S. government as well.
Okay. Thank you. Just a final one, please, on capital allocation, very clear that the company wants to have flexibility to spend money in growth avenues. Given that the company decided to not go ahead with the Argentinian mining process and the potential acquisition of Rumo also hasn't gone through, what type of capital giving pipeline, what is the kind of in the pipeline, I would say, the company is looking at in terms of, I don't know, geography or maybe factors. Is too focused on core business or maybe you could, I don't know, start looking at other segments as well. Thank you.
Sure. Thank you. We are looking at different options, both organic growth in mining. As you know, we already discussed earlier today the project that we are developing and everything that we have in our pipeline. We discussed Saavi, and such as Saavi, we are looking into further growth in energy, real estate, and transportation division. We are looking through other alternative growth possibilities. We are analyzing different growth paths in our divisions, in our businesses. In the geographies that we already have operations, in Mexico, Peru, we've had exploration in other countries such as in the mining division in Argentina and Chile.
We are looking mainly in the U.S., in the countries that we already have operations and we know how to operate in the jurisdictions that we like and know how to feel comfortable.
Okay. Thank you.
Thank you. This will conclude our Q&A session. I will turn it back to Marlene Finny for final comments.
Thank you so much. Thank you for all your questions. Thank you to Grupo México for being here and keep in touch with us if you have any questions afterwards. We are always open and hope to see you next quarter. Bye.
Thank you so much for