BVN Compania De Minas Buenaventura SA

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Buenaventura Announces Second Quarter

and Six Month 2018 Results

Lima, Peru, July 25, 2018 – Compañia de Minas Buenaventura S.A.A. (“Buenaventura” or “the Company”) (NYSE: BVN; Lima Stock Exchange: BUE.LM), Peru’s largest publicly-traded precious metals mining company, today announced results for the second quarter (2Q18) and six-month (6M18) period ended June 30, 2018. All figures have been prepared in accordance with IFRS (International Financial Reporting Standards) on a non-GAAP basis and are stated in U.S. dollars (US$).

Second Quarter 2018 Highlights:

·	2Q18 EBITDA from direct operations was US$ 88.4 million; a 58% increase compared to US$ 56.0 million reported in 2Q17. 2Q18 Adjusted EBITDA (including associated companies) reached US$ 191.1 million; a 73% increase compared to US$ 110.2 million in 2Q17.

·	2Q18 Net Income was US$ 41.3 million, compared to a negative US$ 6.2 for the same period in 2017.

·	Buenaventura´s Net debt to EBITDA ratio was reduced to 0.8x.

·	The Company’s de-bottlenecking program is in progress, with results that will be reflected at the Tambomayo and El Brocal operations during the 2H18 (Please see page 8 for more details).

·	At Cerro Verde, a dividend of US$ 200 million (US$ 39 million attributable to Buenaventura) was paid on April 24, 2018.

·	At Yanacocha, Sumitomo Corporation purchased a five percent stake of the company in exchange for a payment of approximately US$48 million. Buenaventura´s stake in Yanacocha therefore reverted to 43.65%.

 

 

 

Operating Revenues

2Q18 net sales were US$ 317.8 million; a 26% increase compared to US$ 252.1 million reported in 2Q17. This result was primarily due to an increase in volumes sold of silver (32% increase QoQ), lead (13% increase QoQ) and zinc (20% increase QoQ) as well as to higher prices of lead (7% increase QoQ), zinc (14% increase QoQ) and copper (22% increase QoQ).

Royalty income increased 2%; from US$ 4.6 million in 2Q17 to US$ 4.7 million in 2Q18 due to a 2% increase in revenues at Yanacocha.

 

(1)	Buenaventura’s Direct Operations i ncludes 100% of Buenaventura’s operating units, 100% of La Zanja and 100% of El Brocal .

(2)	The realized price considers the adjustments of quotational periods.

(3)	Considers 100% of Buenaventura’s operating units, 100% of La Zanja, 100% of El Brocal, 40.095% of Coimolache and 43.65% of Yanacocha.

Production and Operating Costs

 

In 2Q18, Buenaventura’s equity gold production was 78,858 ounces; in line with the production reported in 2Q17 of 79,330 ounces. Zinc equity production increased by 23% compared to 2Q17 primarily due to a 64% increase in production at the Uchucchacua mine. Copper equity production increased by 8% compared to 2Q17, mainly due to an 8% increase in production at the El Brocal mine.

Buenaventura´s 6M18 equity gold production increased 17% compared to 6M17, mainly due to the contribution of Tambomayo operating at full capacity since the beginning of the year. Equity silver production increased by 9% as compared to 6M17, primarily due to an increase in production at Tambomayo. Buenaventura´s equity zinc production increased 19% in the 6M18 period compared to 6M17, primarily due to a 95% increase in production at Uchucchacua.

 

(1)	Buenaventura’s Direct Operations i ncludes 100% of Buenaventura’s operating units, 53.06% of La Zanja and 61.43% of El Brocal .

(2)	Based on 100% of Buenaventura´s operating units, 53.06% of La Zanja, 61.43% of el Brocal, 40.095% of Coimolache and 43.65% of Yanacocha.

(3)	Based on 100% of Buenaventura’s operating units, 100% of La Zanja and 100% of El Brocal .

Tambomayo   (100% owned by Buenaventura)

 

2Q18 year on year gold production at Tambomayo increased due to the fact that during 2Q17 the plant was still in the ramp-up phase. Cost Applicable to Sales (CAS) in 2Q18 decreased 24%, to 547 US$/Oz, compared to 723 US$/Oz in 2Q17.

Gold production guidance for 2018 is 110k – 130k ounces and silver production guidance is 3.0M – 3.5M ounces.

Orcopampa   (100% owned by Buenaventura)

 

The decreased in 2Q18 gold production at Orcopampa was primarily due to a 20% QoQ decrease in ore grades. Cost Applicable to Sales (CAS) increased 20% in 2Q18, to 910 US$/Oz, compared to 760 US$/Oz in 2Q17, primarily explained by a decrease in volume sold.

As previously mentioned in our most recent Operating Report released on July 12, 2018, Buenaventura’s management made the decision to temporarily reduce its annual production guidance for Orcopampa in order to centralize the underground operation. Management plans to prioritize Buenaventura’s De-bottlenecking Program over ore mineral extraction.

Gold production guidance for 2018 is 120k – 140k ounces.

Uchucchacua   (100% owned by Buenaventura)

 

2Q18 Silver production at Uchucchacua decreased primarily due to a 10% QoQ reduction in ore grades. 2Q18 Cost Applicable to Sales (CAS) of 10.03 US$/Oz was 5% lower than 10.59 US$/Oz in 2Q17, primarily due to increased by-product contribution (lead and zinc) and a 19% QoQ reduction in exploration expenses.

 

Silver production guidance for 2018 is 17.2 million – 18.6 million ounces.

Mallay (100% owned by Buenaventura)

 

Mallay silver, lead and zinc production decreased in 2Q18, in-line with guidance released at the beginning of 2018. 2Q18 Cost Applicable to Sales (CAS) of 12.46 US$/Oz was 11% lower than 13.95 US$/Oz in 2Q17, primarily explained by a 91% QoQ decrease in exploration expenses.

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

Julcani (100% owned by Buenaventura)

 

2Q18 silver production decreased 4% QoQ primarily due to a 30% QoQ decrease in ore treated despite a 35% QoQ increase in ore grades. 2Q18 Cost Applicable to Sales (CAS) of 15.26 US$/Oz was 8% lower than 16.65 US$/Oz in 2Q17 despite a 34% QoQ increase in exploration expenses, primarily due to the centralization of the mine.

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

La Zanja (53.06% owned by Buenaventura)

 

 

Gold production in 2Q18 decreased by 49% year on year, in line with the guidance released at the beginning of 2018. 2Q18 Cost Applicable to Sales (CAS) was 941 US$/Oz; a 17% increase compared to 802 US$/Oz in 2Q17, mainly due to a 44% QoQ decrease in volume sold.

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

Coimolache (40.10% owned by Buenaventura)

 

2Q18 gold production increased by 25% quarter on quarter, in line with the mine production plan. 2Q18 Cost Applicable to Sales (CAS) increased by 19%, compared to 513 US$/Oz in 2Q17, mainly due to a higher stripping ratio, 0.67 in 2Q18 vs. 0.18 in 2Q17, and a 14% QoQ increase in hauling expenses.

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

El Brocal   (61.43% owned by Buenaventura)

 

2Q18 copper production increased 8% compared to 2Q17, mainly due to a 35% QoQ increase in the amount of ore treated. Zinc production in 2Q18 was in line with that of 2Q17.

In 2Q18, zinc Cost Applicable to Sales (CAS) decreased by 11% compared to 1,838 US$/MT, primarily explained by a decrease in commercial deductions. Copper CAS in 2Q18 increased by 12%, compared to 4,861 US$/MT in 2Q17, mainly due to an increase in exploration expenses: 4,184 DDH meters in 2Q18 vs. 0 in 2Q17.

As discussed within the Company’s most recent Operating Report, the production mix has been modified within El Brocal´s 2018 mining plan. More production will be derived from the polymetallic open mine. The plan is to smoothly and efficiently transition the underground operation from 8k TPD to 13k TPD. El Brocal´s 2018 annual EBITDA budget will not be effected.

Zinc production guidance for 2018 is 45k – 55k MT, while copper production guidance for 2018 is 45k – 55k MT.

General and Administrative Expenses

2Q18 General and Administrative expenses were US$20.7 million; a 6% increase as compared to the US$ 19.6 million in 2Q17.

 

Exploration in Non-Operating Areas

2Q18 Exploration costs in Non-Operating Areas were US$8.3 million compared with US$5.5 million in 2Q17. During the period, Buenaventura primarily focused its exploration efforts on the Yumpaq area (US$3.22 million), Marcapunta Norte (US$1.49 million) and Emperatiz (US$0.87 million).

Share in Associated Companies

During 2Q18, Buenaventura’s share in associated companies was US$34.2 million, compared to negative US$3.1 million reported in 2Q17, comprised of:

YANACOCHA

At Yanacocha, which is 43.65% owned by Buenaventura, 2Q18 gold production was 115,342 ounces; 50,347 ounces of which were attributable to Buenaventura. This represents a 5% decrease as compared to the 120,856 ounces produced in 2Q17; 52,754 ounces of which were attributable to Buenaventura. For 6M18, gold production was 219,575; 95,844 ounces of which were attributable to Buenaventura, a 15% decrease as compared to 258,477 ounces in 6M17; 112,825 ounces of which were attributable to Buenaventura.

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

In 2Q18, Yanacocha reported a net loss of US$12.1 million, compared to a net loss of US$62.2 million reported in 2Q17.

CAS in 2Q18 was US$833/oz; a 26% decrease as compared to the US$1,129/oz reported in 2Q17 mainly due to improvements to the gold mill.

Capital expenditures at Yanacocha were US$26.1 million in 2Q18.

The Quecher Main project, an 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. Total CAPEX for the project is expected to be between US$250 and US$300 million; US$80 – US$90 million of which will be deployed in 2018.

CERRO VERDE

At Cerro Verde (19.58% owned by Buenaventura), 2Q18 copper production was 118,458 MT; 23,194 MT of which is attributable to Buenaventura, in-line with the figure reported in 2Q17 of 118,071 MT; 23,118 MT of which was attributable to Buenaventura. 6M18 copper production was 228,964 MT; 44,831 MT of which was attributable to Buenaventura. This represents a 3% decrease as compared to 236,815 MT reported in 6M17; 46,368 MT of which was attributable to Buenaventura.  

During 2Q18, Cerro Verde reported net income of US$188.9 million compared to net income of US$104.1 million in 2Q17. This increase was primarily due to a 33% increase in net sales of US$203.2 million, primarily related to an increase in the average realized copper price (US$3.10 per pound in 2Q18 compared to US$2.62 per pound in 2Q17) and higher sales volume (118k MT of copper in the 2Q18 compared with 111k MT in the 2Q17).

Capital expenditures at Cerro Verde were US$79.0 million in 2Q18.

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

COIMOLACHE (Tantahuatay operation)

At Coimolache (40.10% owned by Buenaventura), 2Q18 attributable contribution to net income was US$1.8 million, as compared to US$3.7 million in 2Q17.

 

De-bottlenecking program – 2Q18 Update

Buenaventura’s De-bottlenecking Program continues to make progress. Results of additional EBITDA generated will be reflected at the Tambomayo and El Brocal operations during the 2H18.

 

 

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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 43.65% 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 2017 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

Note on Forward-Looking Statements This press release may contain forward-looking information (as defined in the U.S. Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including those concerning the Company’s, Yanacocha’s and Cerro Verde’s costs and expenses, results of exploration, the continued improving efficiency of operations, prevailing market prices of gold, silver, copper and other metals mined, the success of joint ventures, estimates of future explorations, development and production, subsidiaries’ plans for capital expenditures, estimates of reserves and Peruvian political, economic, social and legal developments. These forward-looking statements reflect the Company’s view with respect to the Company’s, Yanacocha’s and Cerro Verde’s future financial performance. Actual results could differ materially from those projected in the forward-looking statements as a result of a variety of factors discussed elsewhere in this Press Release.

 

**Tables to follow**

 (*)Consolidated

(**) Equity Accounting

 

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 4: 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.