BVN Compania De Minas Buenaventura SA

Mallay (100% owned by Buenaventura)

Mallay silver, lead and zinc production decreased in 4Q17 in order to accommodate production of Uchucchacua´s ore (higher value).

Silver production guidance for 2018 from Mallay´s mining operation is 0.4 million – 0.5 million ounces.

Julcani (100% owned by Buenaventura)

4Q17 silver production decreased 63% QoQ primarily due to a 61% QoQ decrease in ore treated and to lower ore grades (6% QoQ). 4Q17 Cost Applicable to Sales (CAS) of 30.25 US$/Oz was 142% higher than 12.50 US$/Oz in 4Q16, primarily explained by decrease in volume sold.

Julcani is currently in the process of strengthening its mining procedures in order to improve safety and increase profitability.  Moving forward, volume treated will be reduced and production will focus on areas with higher ore grades.

Silver production guidance for 2018 is 2.1 million – 2.4 million ounces.

La Zanja (53.06% owned by Buenaventura)

4Q17 gold production decreased by 6% quarter on quarter but was in line with the 2017 mine production plan. 4Q17 Cost Applicable to Sales (CAS) was 875 US$/Oz; a 19% increase compared to 736 US$/Oz in 4Q16, mainly due to an accounting reclassification of US$ 3.6M (Back Fill construction).

Gold production guidance for 2018 is 70k – 80k ounces.

Coimolache (40.10% owned by Buenaventura)

4Q17 gold production increased by 13% quarter on quarter, in line with what was announced at the beginning of the year. 4Q17 Cost Applicable to Sales (CAS) increased by 4%, compared to 534 US$/Oz in 4Q16, mainly due to a higher stripping ratio (0.419 in 4Q17 vs. 0.261 in 4Q16).

Gold production guidance for 2018 is 160k – 180k ounces.

El Brocal   (61.43% owned by Buenaventura)

4Q17 copper production decreased 13% compared to 4Q16, mainly due to lower ore grades (11% decrease QoQ). In 4Q17, zinc production decreased 46% compared to 4Q16, primarily due to a reduction in the amount of ore treated (24% decrease QoQ).

In 4Q17, zinc Cost Applicable to Sales (CAS) increased 11% quarter on quarter, mainly due to a decrease in zinc volume sold. Copper CAS in 4Q17 increased by 26% quarter on quarter due to an increase in meters drifted in order to prepare Marcapunta to mine 13K MTPD.

Zinc production guidance for 2018 is 43k – 50k MT, while copper production guidance for 2018 is 61k – 71k MT.

General and Administrative Expenses

4Q17 General and Administrative expenses were US$22.7 million; 4% lower than $23.6 million in 4Q16, primarily due to a reduction in the provision for allowance for doubtful accounts.

Exploration in Non-Operating Areas

4Q17 Exploration costs in Non-Operating Areas were US$6.0 million compared with US$11.8 million in 4Q16. During the period, Buenaventura focused its exploration efforts primarily on Yumpaq (US$2.7 million), the Marcapunta Norte (US$0.48 million), the Emperatriz area in La Zanja (US$0.28 million) and on the Luciana area in La Zanja (US$0.27 million).

 

Share in Associated Companies

During 4Q17, Buenaventura’s share in associated companies was US$4.3 million, compared to negative US$402.5 million reported in 4Q16, comprised of:

YANACOCHA

At Yanacocha (45.95% owned by Buenaventura), 4Q17 gold production was 134,291 ounces; 58,618 ounces of which were attributable to Buenaventura. This represents a 22% decrease as compared to the 171,675 ounces produced in 4Q16, of which 74,936 ounces are attributable to Buenaventura. For FY17, gold production was 534,692; an 18% decrease as compared to 654,933 ounces in FY16.

Gold production guidance at Yanacocha for 2018 is 470k – 545k ounces.

In 4Q17, Yanacocha reported a net loss of US$105.4 million, compared to a net loss of US$988.6 million reported in 4Q16.  Yanacocha’s 4Q16 net loss includes a US$889.4 million non-cash impairment; US$ 388.2 million of which is attributable to Buenaventura.

CAS in 4Q17 was US$ 797/oz; a 4% decrease as compared to the US$ 829/oz reported in 4Q16.

Capital expenditures at Yanacocha were US$ 19.3 million in 4Q17 and US$ 53.7 million in FY17.

Quecher Main

The Quecher Main project (oxide deposit) is currently in its Execution Stage. First production is expected in early 2019 with commercial production expected in the fourth quarter of 2019. The Quecher Main project extends the life of the Yanacocha operation until 2027, with average annual gold production of 200,000 ounces per year expected between 2020 and 2025. Cost applicable to sales (CAS) is expected to be between US$ 750 and US$ 850 per ounce and AISC between US$ 900 and US$ 1,000. CAPEX for the project is expected to be between US$ 250 and US$ 300 million (US$ 80 – US$ 90 million in 2018).

Yanacocha purchased the IFC´s five percent equity stake in Yanacocha

Yanacocha purchased the International Finance Corporation´s (IFC) five percent equity stake in Yanacocha for $48 million in December 2017. The purchase was made using Yanacocha’s existing cash balance. In 2018, Yanacocha agreed to make a capital reduction, Buenaventura´s stake in Yanacocha therefore increased to 45.95%, from 43.65%.

 

CERRO VERDE

At Cerro Verde (19.58% owned by Buenaventura), 4Q17 copper production was 116,351 MT, 22,782 MT of which is attributable to Buenaventura;  a 12% decrease compared to 132,814 in 4Q16 with 26,005 MT attributable to Buenaventura. FY17 copper production was 481,810 MT; a 4% decrease as compared to 502,495 MT in FY2016.

During 4Q17, Cerro Verde reported a net income of US$ 217.6 million compared to net income of US$ 114.9 million in 4Q16. This increase was primarily due to a US$ 150.0 increase in net sales, primarily related to an increase in average realized copper price to US$ 3.46 per pound in 4Q17, compared to US$ 2.72 in 4Q16.

During 4Q17, Cerro Verde´s concentrator plant averaged 374k metric tons of ore per day, the plant was originally designed for a plant capacity of 360k metric tons per day.

Capital expenditures at Cerro Verde were US$58.1 million in 4Q17 and US$152.8 million in FY17.

In June 2017, Cerro Verde extended the maturity of its Syndicated Loan until 2022, from 2019 under the prior agreement. In December 2017, Cerro Verde repaid US$ 220 million of this loan. The outstanding balance is therefore US$ 1.3 billion as of December 31, 2017.

Copper production guidance at Cerro Verde for 2018 is 460k MT – 500k MT.

COIMOLACHE (Tantahuatay operation)

At Coimolache (40.10% owned by Buenaventura), 4Q17 attributable contribution to net income was US$ 7.7 million, as compared to US$ 6.5 million in 4Q16.

In February 2018, Coimolache signed a contract with Cerro Corona (Gold Fields) to purchase oxide material. Based on this agreement, Coimolache will purchase 6.6 million metric tons of ore at US$ 5.5 per tonne over a three-year period.

De-bottlenecking program

 

As previously mentioned, the Company’s De-Bottlenecking Program will continue for the subsequent three years. During 2018 the program will focus on the following:

*At El Brocal this also considers the Esperanza Tunnel Connection and the 13K Copper Project

Projects description

Process Efficiency:

§	Dilution Control : Operating cost reduction through the treatment of higher-value ore; increased production also improves recovery rate .
§	Ventilation : system upgrade to increase productivity and improve exploration.
§	Hoist System : system upgrade to increase productivity.
§	Back-fill System : Reuse tailings to be mixed with cement to support and reinforce the mine. This also reduces costs incurred transporting the tailings to the tailings storage facility and increases the useful life of the storage facility.
§	Process Plant Fine Tuning : Equipment to be purchased to improve process efficiency.
§	Esperanza Tunnel Connection : Marcapunta Norte and Marcapunta Sur have been connected in order to improve operational productivity and reduce cost.

Management Efficiency:

	Differential Cut-off : use of a clearly delineated cut-off per area to increase profitability.

	Integrated Mining Contracts : Renegotiate contracts with contractors in order to better leverage synergies between Buenaventura’s operating units.

Other

 

§	Differential Cut-off : use of a clearly delineated cut-off per area to increase profitability.
§	Integrated Mining Contracts : Renegotiate contracts with contractors in order to better leverage synergies between Buenaventura’s operating units.

Buenaventura’s Board of Directors passed the following resolution at the Company’s February 27, 2018 Board meeting:

	Call for the Annual Shareholders Meeting to be held on March 27, 2018 with the following items proposed for approval:

a.	Approval of the Annual Report as of December 31, 2017.

b.	Approval of the Financial Statements as of December 31, 2017.

c.	Propose Ernst and Young (Paredes, Burga y Asociados) as External Auditors for fiscal year 2017.

d.	Declaration of a cash dividend of US$ 0.03 per share or ADS, payable on May 4, 2018.

 

 

 

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Company Description

Compañía de Minas Buenaventura S.A.A. is Peru’s largest, publicly traded, precious metals company and a major holder of mining rights in Peru. The Company is engaged in the mining, processing, development and exploration of gold and silver and other metals via wholly owned mines as well as through its participation in joint exploration projects.

 

Buenaventura currently operates several mines in Peru (Orcopampa*, Uchucchacua*, Mallay*, Julcani*, El Brocal, La Zanja and Coimolache and is developing the Tambomayo project.

The Company owns 45.95% of Minera Yanacocha S.R.L (a partnership with Newmont Mining Corporation), an important precious metal producer; 19.58% of Sociedad Minera Cerro Verde, an important Peruvian copper producer.

For a printed version of the Company’s 2016 Form 20-F, please contact the investor relations contacts on page 1 of this report, or download the PDF format file from the Company’s web site at www.buenaventura.com.

(*) Operations wholly owned by Buenaventura

**Tables to follow**

(*)Consolidates

(**) Equity Accounting

(***) As of 2018 the Equity Participation is 45.95%.

Note:

EBITDA (Buenaventura Direct Operations) consists of earnings before net interest, taxes, depreciation and amortization, share in associated companies, net, loss on currency exchange difference, other, net, provision for workers’ profit sharing and provision for long-term officers’ compensation.

EBITDA (including associated companies) consists of EBITDA (Buenaventura Direct Operations), plus (1) Buenaventura’s equity share of EBITDA (Yanacocha) (2) Buenaventura’s equity share of EBITDA (Cerro Verde), plus (3) Buenaventura’s equity share of EBITDA (Coimolache). All EBITDA mentioned were similarly calculated using financial information provided to Buenaventura by the associated companies.

Buenaventura presents EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) to provide further information with respect to its operating performance and the operating performance of its equity investees, the affiliates. EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) are not a measure of financial performance under IFRS, and may not be comparable to similarly titled measures of other companies. You should not consider EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) as alternatives to operating income or net income determined in accordance with IFRS, as an indicator of Buenaventura’s, affiliates operating performance, or as an alternative to cash flows from operating activities, determined in accordance with IFRS, as an indicator of cash flows or as a measure of liquidity.

 

 

 

APPENDIX 5: COST APPLICABLE TO SALES RECONCILIATION

Reconciliation of Costs Applicable to Sales and Cost Applicable to Sales per Unit Sold

 

Cost applicable to sales consists of cost of sales, excluding depreciation and amortization, plus selling expenses. Cost applicable to sales per unit sold for each mine consists of cost applicable to sales for a particular metal produced at a given mine divided by the volume of such metal produced at such mine in the specified period. We note that cost applicable to sales is not directly comparable to the cash operating cost figures disclosed in previously furnished earnings releases.

 

Cost applicable to sales and Cost applicable to sales per unit of mineral sold are not measures of financial performance under IFRS, and may not be comparable to similarly titled measures of other companies. We consider Cost applicable to sales and Cost applicable to sales per unit of mineral sold to be key measures in managing and evaluating our operating performance. These measures are widely reported in the precious metals industry as a benchmark for performance, but do not have standardized meanings. You should not consider Cost applicable to sales or Cost applicable to sales per unit of mineral sold as alternatives to cost of sales determined in accordance with IFRS, as indicators of our operating performance.  Cost applicable to sales and Cost applicable to sales per unit of mineral sold are calculated without adjusting for by-product revenue amounts.

 

The tables below set forth (i) a reconciliation of consolidated Cost of sales, excluding depreciation and amortization to consolidated Cost applicable to sales, (ii) reconciliations of the components of Cost applicable to sales (by mine and mineral) to the corresponding consolidated line items set forth on our consolidated statements of profit or loss for the three and nine months ended September 30, 2015 and 2016, and (iii) reconciliations of Cost of sales, excluding depreciation and amortization to Cost applicable to sales for each of our mining units.  The amounts set forth in Cost applicable to sales and Cost applicable to sales per unit sold for each mine and mineral indicated in the tables below can be reconciled to the amounts set forth on our consolidated statements of profit or loss for the three and nine months ended September 30, 2015 and 2016 by reference to the reconciliations of Cost of sales, excluding depreciation and amortization (by mine and mineral), Selling Expenses (by mine and metal) expenses and Exploration in units in operations (by mine and mineral) to consolidated Cost of sales, excluding depreciation and amortization, consolidated Selling Expenses and consolidated Exploration in units in operations expenses, respectively, set forth below.