Compañía de Minas Buenaventura

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode, and please note that this call is being recorded. I would now like to introduce you, your host for today's call, Mr. Rodrigo Echacopar, Investor Relations. Mr. Echacopar, you may begin.

Good morning and welcome, everyone. Presenting on the call today is Mr. Victor Govitz, CEO. Also present and available for your questions are Mr. Orlando Garcia, Vice President and CFO, Mr. Juan Carlos Ortiz, Vice President of Operations, Raul Benavides, Vice President of Business Development, Alejandro Hermosa, Vice President of Sustainability. In addition, joining us today is Mr. Roque Benavides, our chairman. Before we get started during today's call, we will make forward-looking statements that reflect the company's current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially to team risk and assertiveness. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on May 18, 2020. It is important to note that these statements include expectations and assumptions which will be shared related to the impact of the COVID-19 pandemic. As seen on slide two, our forward-looking statement also provides information on risk factors, including the effects related to COVID-19. that could affect our financial results. In particular, there is significant uncertainty about the duration and completed impact of the COVID pandemic. This means when Aventura's results could change at any time and the impact of COVID-19 on the company's results and outlook is a best estimate based on information available as of today's date. Please note, In the interest of safety, we are utilizing a more virtual approach in exercising social distancing while conducting this call. We would ask you to please bear that in mind in light of any potential technological difficulties which could occur. At this time, let me turn the call over to Victor. Victor, please go ahead.

Thank you, Rodrigo. Good morning to all, and thank you for attending this conference call. Before we start this presentation, we would like to wish you, your family and friends, health and well-being at this difficult time. We are pleased to present the results of the first quarter of 2020 from Compania de Minas, Buenaventura. We have prepared a PowerPoint presentation, which is available in our web page. Before we go further, please take a moment to review the cautionary statement shown on slide two. Please consider the new disclosure related to the COVID-19 pandemic. Moving on to slide three, highlights were as follows. In this third quarter of 2020, results were adversely impacted by the state of emergency and related mandated lockdown instituted by the Peruvian government in order to contain the spread of the coronavirus. Due to the outbreak of COVID-19 in Peru and related restrictions imposed, Conaventura lost 17% of its production for the first quarter of 2020. In this first quarter of 2020, EBITDA from direct operations was negative 6.8 billion dollars. And the adjusted dividend for the first quarter of this year, including associated companies, reached $30.6 million. In this third quarter, capital expenditures were $10 million, compared to the $8.5 million for the same period in 2019. In this third quarter, next loss was $75 million. compared with a net income of $27.3 million for the same period in 2019. The loss in the first quarter of this year, considered COVID-19-related provisions, of $9.7 million. The company's deep bottlenecking program continues, progressing during the first quarter of this year. In 2020, the program focused on the company's Tambomayo, Uchichagua, and El Brocán Mines. The companies have a strong cash position of $222 million as of March 2020, and a monthly fixed cost of care and maintenance approximately between $12 to $14 million. Also, we continue resetting our current topics, sustaining and growth, as well as a potential dividend payment to our shareholders in order to preserve liquidity. From April the 3rd, the company announced the successful refinancing of its $275 million syndicated loan facility. Maturity for the new loan facility has been set for a new five-year term loan with a 30-month grace period with $10,000 semiannual installments starting in October the 22nd. And Rentira has already presented the required documentation to restart operations of all its assets. We have already got all the permits to restart operations from the Ministry of Mines in all our mines An updated guidance will be reported once we achieve full capacity of operation in all our operations. The updated guidance is expected to be reported by the end of June. Moving on to slide four, the quarantine period in Peru was implemented starting March the 16th for an initial 15-day period, which was subsequently extended. As of today, The U.S. government mandated quarantine is expected to end on May 24th. During that quarantine period, production of direct operations has remained in care and maintenance. All mining activities were limited to those critical activities. We continue to process all on leach paths at Poimolache, La Sanja, and Llanacocha mines. On May 11th, the Peruvian government authorized mining operators to gradually restart key activities and resume operations. Moving on to slide five, as you can see in this slide, we have summarized Benaventura's current position after COVID-19 outbreak in the country. Benaventura currently maintains a strong cash position of $222 million as of March 2020, and approximately a monthly fixed cost of 10 million dollars between $12 to $14 million. As previously announced, in April 2020, Dona Ventura concluded that a rough announcing of its syndicated loan and maturity has been set for a new five-year term loan with a 30-month wage period. Dona Ventura will restart operations through a two-phase approach to prioritize close mines with the most significant production. In phase one, starting on May the 16th, in this phase, Tambomayo and Chuchapua del Brocal, which include Tajo Norte and Marcapunta, and Coimolache initiate operations. In phase two, starting on June the 16th, it leads to restart the operation in Huacopampa, Jultani, and La Santa. Buenaventura has already presented the required documentation for restarting operations in all of its assets and has obtained a permit from the Ministry of Mines to restart operations in all our mines. Moving on to slide six, the company has decided to report an updated guidance once all the operations achieve full capacity. However, the company continues to enhance its current mining plans in order to focus on high-grade areas while maintaining a focus on exploration and cost reduction efforts. Moving on to slides seven and eight. In these slides, we show the measures taken to transport our workforce safely, keeping the highest sanitary standards, and strict protocols to prevent the virus spread. Here you can find the measures taken inside our facility. A main one consists of organizing work cells based on tasks. A workforce cell will share common status and accommodation. Moving on to slide nine, we are showing our strategic map where we use, as usual, the capital B from the logo of Bonaventura as a visual index for the following slide. In the coming slides, we shall discuss the financial results of the company. Moving on to slide 10, for transparency matters, we have decided to record a massive detail of our production so you can appreciate in which way that COVID-19 has impacted our operating results. Moving on to slide 11, the decrease in this workforce You can see the decrease in revenues is partially explained by a decrease in volume sold, but in a greater magnitude to the current metal price. Moving on to slide 12, financial highlights. Total revenues during the first quarter were $114.5 million, which is 38% lower in comparison to the first quarter of 2019. This was primarily due to the decrease in volumes sold of gold and silver. EBITDA from our direct operations in the first quarter of 2020 was negative, $6.8 million, in comparison to $28.4 million in the first quarter of 2019. EBITDA including our affiliates in this first quarter was $30.6 million, which is 82% lower in comparison to the first quarter of 2019. And the net loss in this quarter was $75 million, compared to a net income of $27.3 million a year ago. This net loss considers a provision of $10.7 million related to COVID-19. CapEx has increased to $10 billion in the first quarter of 2020 compared to $8.5 billion in 2019. The free cash flow in this first quarter of 2020 was $22.3 billion, compared to a negative $38.2 million of free cash flow in the first quarter of 2019, a significant a remarkable number if we consider the current situation. Moving on to slide 13, here again we can see the capital V as a visual index for analyzing the results from our portfolio of operations. Moving on to slide 14 and 15, attributable production, please take into consideration that we suspended operations in the last 15 days of March This period represents 17% of the total effective days of blackwater. Total small attributable production in the third quarter of 2020 was 89,000 ounces, which is 21% lower than the field reported on the same quarter for the previous year. This increase was mainly explained by lower production in Tambo Mayo and Gena Koch. Silver attributable production for this quarter was 3.8 million ounces, which shows a decrease of 5% compared to a figure reported in the first quarter of 2019. This is mainly due to less production in Tambomai. In the first quarter of 2020, 12.9 thousand metric pounds of zinc were produced in nine year-old zinc production in the third quarter of 2019. In the case of lead, equity production was 7,000 metric tons in the third quarter of 2020, which is 15% lower in comparison to the third quarter of 2019. Finally, our upper attributable production for the first quarter of this year was 73.7 metric tons. These reductions may explain by a 22% decrease in production at Sarawak. Moving on to slide 16, the oil entertaining costs from our direct operations in the first quarter of the current year increased to 2,052 liter per ounce of coal, mainly due to lower gold ounce of salt in the period. It was caused by lower sales in Tambo Mario and Inventory. The costs applicable to sales in the first quarter of 2020 were as follows. For gold, 1,510 euro per ounce, which is 44% higher than a year ago. For silver, 10.56 euro per ounce, which is 38% higher than a year ago. For lead, 1,411 euro per metric ton, which is 6. percent greater than a year ago. For copper, $5,193 per metric ton, which is 12% lower in comparison to a year ago. Finally, in the cable sink, all supply to sales was $1,914 per metric ton, which is 10% lower than a year ago. Moving on to slide 17. The Vivo's own making program. As a result of the company's Vivo's own making program, we are gaining mining cost efficiency but partially offset lower migration outcome. As you can see, results for the third quarter were in line with budget, generating $7.4 million of additional EBITDA. This has included three gaps where you can see a downtrend in the operating expenses from 2020 to our software 2020 estimate considering no effects coming from COVID-19. Moving on to slide 18. Once again, you can see our capital B from our logo used for analyzing in more detail the updated information regarding our portfolio projects. Moving on to slide 19. Here we are presenting in one snapshot current development level for each one of our projects. Moving on to slide 20, San Gabriel project, the feasibility study and construction permit documentation by AUSENCO is in progress, and the prior consultation process might be affected by COVID-19 restrictions. Moving on to slide 21, the project We will continue this year with on-site column testing and power line right-of-path activities. Environmental impact assessments submission, social relations, and public assembly were delayed due to COVID-19 restrictions. Moving on to slide 22, the Rio Seco project. The piloting is postponed to 2020 due to COVID-19 restrictions. We expect to finish the accessibility study by the end of this year. Environmental impact assessment is expected to be approved in the first quarter of 2021. Just to record, through this project, we intend to unlock a significant value of Buenaventura's corporate portfolio. Moving on to slide 23, Santa Huatay's suicide project. We expect to reach the feasibility stage by 2021, preparing the environmental impact assessment process, initial documentation, and we are finishing and are tailing down the issue in January. Thank you for your attention, and we hand the call back to the operator to open the line for questions. Operator, please go ahead.