BVN Compania De Minas Buenaventura SA

 

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

Coimolache (40.10% owned by Buenaventura)

3Q18 gold production at Coimolache increased by 25% as compared to the same period last year, in line with the mine production plan. 3Q18 Cost Applicable to Sales (CAS) increased by 22%, compared to 485 US$/Oz in 3Q17, due to a higher stripping ratio: 0.79 in 3Q18 vs. 0.28 in 2Q17, and a 92% QoQ increase in hauling expenses, mainly due to the purchase of ore from Goldfields.

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

Uchucchacua   (100% owned by Buenaventura)

3Q18 silver production at Uchucchacua decreased primarily due to a 20% QoQ reduction in ore grades. 3Q18 Cost Applicable to Sales (CAS) of 9.91 US$/Oz was 10% lower than 11.00 US$/Oz in 3Q17, primarily due to increased by-product contribution (lead and zinc) and a 51% QoQ reduction in exploration expenses.

Silver production guidance for 2018 is 15.0 million – 17.0 million ounces.

Mallay (100% owned by Buenaventura)

 

Mallay silver, lead and zinc production decreased in 3Q18, in-line with guidance released at the beginning of 2018. 3Q18 Cost Applicable to Sales (CAS) of 13.10 US$/Oz was 7% higher than 12.29 US$/Oz in 3Q17, primarily due to a decrease in volume sold.

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

Julcani (100% owned by Buenaventura)

3Q18 silver production increased 8% QoQ primarily due to a 37% QoQ increase in ore grades despite a 22% QoQ decrease in ore treated. 3Q18 Cost Applicable to Sales (CAS) of 14.63 US$/Oz was 5% lower than 15.39 US$/Oz in 3Q17 despite a lower volume sold primarily due to the Company’s success in centralizing the operation.

Silver production guidance for 2018 is 2.3 million – 2.5 million ounces.

El Brocal   (61.43% owned by Buenaventura)

3Q18 copper production increased 8% compared to 3Q17, mainly due to a 35% QoQ increase in the amount of ore treated. Zinc production in 3Q18 decreased 16% compared to 3Q17, mainly due to a lower ore grade (a 16% decrease QoQ).

In 3Q18, zinc Cost Applicable to Sales (CAS) decreased by 55% compared to 1,789 US$/MT, primarily explained by a decrease in commercial deductions. Copper CAS in 3Q18 increased by 10%, compared to 5,201 US$/MT in 3Q17, mainly due to an increase in exploration expenses.

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

At El Brocal, the Company benefited from its Business Interruption Insurance related to problems detected with the 20x30 mill in May 2017. During 3Q18, the Company received US$ 10 million from a possible total claim of US$ 55 million.

 

 

General and Administrative Expenses

 

3Q18 General and Administrative expenses were US$ 15.9 million; a 21% decrease as compared to the US$ 20.2 million in 3Q17.

Exploration in Non-Operating Areas

 

3Q18 Exploration costs in Non-Operating Areas were US$ 9.8 million compared with US$ 4.4 million in 3Q17. During the period, Buenaventura primarily focused its exploration efforts on the Yumpaq area (US$ 4.30 million), Marcapunta Norte (US$ 2.66 million) and Emperatriz (US$ 1.12 million).

Share in Associated Companies

During 3Q18, Buenaventura’s share in associated companies was US$ 22.2 million, compared to negative US$ 32.9 million reported in 3Q17, comprised of:

YANACOCHA

At Yanacocha, which is 43.65% owned by Buenaventura, 3Q18 gold production was 153,523 ounces; 67,013 ounces of which were attributable to Buenaventura. This represents an 8% decrease as compared to the 141,923 ounces produced in 3Q17; 61,949 ounces of which were attributable to Buenaventura. For 9M18, gold production was 373,099; 162,858 ounces of which were attributable to Buenaventura, a 7% decrease as compared to 400,401 ounces in 9M17; 174,775 ounces of which were attributable to Buenaventura.

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

In 3Q18, Yanacocha reported a net loss of US$ 1.9 million, compared to a net loss of US$ 18.3 million reported in 3Q17.

CAS in 3Q18 was US$ 756/oz; a 31% decrease as compared to the US$ 1,098/oz reported in 3Q17 mainly due to more volume sold (increase of 13% QoQ), lower stripping ratio (0.99 in 3Q18 vs. 2.69 in 3Q17) and improved metallurgical results from “transitional ore”.

Capital expenditures at Yanacocha were US$ 40.48 million in 3Q18.

The Quecher Main project, an oxide deposit, is currently in its Execution Phase. 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), 3Q18 copper production was 124,902 MT; 24,456 MT of which is attributable to Buenaventura, in-line with the figure reported in 3Q17 of 128,644 MT; 25,189 MT of which was attributable to Buenaventura. 9M18 copper production was 353,865 MT; 69,287 MT of which was attributable to Buenaventura. In-line with 365,459 MT reported in 9M17; 71,557 MT of which was attributable to Buenaventura.  

During 3Q18, Cerro Verde reported net income of US$ 93.6 million compared to net loss of US$ 155.8 million in 3Q17. This increase was primarily due to the pre-tax charges of US$ 376.6 million recorded in 3Q17 due to of the Royalty Dispute. Additionally, the increased income reflects a US$ 69 million one-time charge associated with the negotiation of new 3-year labor agreement.

Capital expenditures at Cerro Verde were US$ 63.97 million in 3Q18.

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

COIMOLACHE (Tantahuatay operation)

At Coimolache (40.10% owned by Buenaventura), 3Q18 attributable contribution to net income was US$ 4.7 million, as compared to US$ 5.6 million in 3Q17.

 

De-Bottlenecking Program – 3Q18 Update

Buenaventura’s De-Bottlenecking Program continues to make progress with significant positive results.

 

 

 

 

 

 

Variations in EBITDA and CAPEX

 

The Company’s budgeted EBITDA has been impacted by lower metals prices and lower production coming from Orcopampa, El Brocal and Uchuchacua.

 

In order to maximize the Company’s Cash Flow generation, the full year estimated CAPEX has been reduced from US$ 130 – 170 million to US$ 80 – 120 million.

 

Other

During the October 25, 2018 Board Meeting of Directors the following resolution was passed:

                                                                                                                                                           

Declaration of a cash dividend in the amount of US$ 0.06 per share or ADS. The record date is November 16, 2018 to be paid to shareholders on November 30, 2018.

 

***

 

 

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.