Compañía de Minas Buenaventura

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura second 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 your host for today's call, Mr. Rodrigo Echecopar, Investor Relations. Mr. Echecopar, you may begin.

Thank you very much. Good morning, everyone, and thank you for joining us today to discuss our second quarter 2020 results. Today's discussion will be led by Mr. Victor Gorvitz, CEO. Also joining our call today and available for your questions are Mr. Leandro 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. Also will be present Mr. Roque Benavides, our Chairman. This conference will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual resource to differ materially from these statements. Any such statements should be considered in conjunction with questionary statements within our EARN release and risk factor discussions. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on July 30, 2020. In addition, it is important to note that these statements include expectations and assumptions which will be shared related to impact of COVID-19 pandemic. As seen on slide two, our forward-looking assessments also provides information on risk factors, including the facts related to COVID-19 that could affect our financial results. In particular, there is significant uncertainty about the duration and complemented impact of the COVID-19 pandemic. This means when an interim result could change at any time and the impact of COVID-19 on the company's business results and outlook is a best estimate based on the information available as of today. Please note that in the interest of safety, we are again utilizing a more virtual approach in exercising social distances while conducting this call this quarter. We would ask you to bear that in mind in light of any potential technological difficulties which could occur. At this time, let me now turn the call over to Victor Govitz. 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 second quarter of 2020 from Compañia de Mina Buenaventura. We have prepared a PowerPoint presentation, which is available in our webpage. Before we go further, please take a moment to review the cautionary statement shown on slide number two. Please consider the disclosure related to the COVID-19 pandemic. Moving on to slide three, Highlights were as follows. In the second quarter of this year, 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. As part of the Buenaventura two-phase plan on May the 15th Sabomayo, Uchachua, El Brocal, and Colmo Lache began the process to restart, to resume operations. The conference began on June the 15th, and at the date of this conference call, the company expects to reach full capacity of all operations by the end of August. In the second quarter, the EBITDA from direct operations was $26.5 million compared to $47.1 million reported a year ago. In this second quarter, the EBITDA from direct operations was, sorry, in June of this year, 2020, the EBITDA from direct operations was $33.3 million, an initial indication of post-state of emergency restriction recovery. even though at the end of June, we keep a high inventory level of final production at Tambo Mayo's mine in the order of $30 million. In this second quarter, adjusted dividend, including associated companies, reached $86.1 million, compared to $137.3 million in the second quarter of 2019. In this second quarter of 2020, capital were $11.6 million compared to $28.8 million for the same period in 2019. In this second quarter, net loss was $25.1 million compared to a net income of $9.7 million for the same period in 2019, $2.9 million of the above net loss was due to additional expenses related to the effects of COVID-19 on a consolidated basis. The company's de-bottlenecking program continued to progress during the second quarter of this year, but the risk reduced to 11. The program's 2020 focused on the companies Tambomayo, Uchuchagua, and El Brocán Mines, with worth to mention that fixed cost reduction in our production cost was a key component to tackle the period with only care and maintenance activities. Manaventura, in the second quarter, its cash position reached $196 million. Moving on to slide number four, we are showing our stability map where we use, as usual, capital B. from the logo of Bonaventura as a visual index for the following slides. In the coming slides, we shall discuss financial results of the company. Moving on to slide five and six. Here we can, for transparency matter, we have decided to report the monthly details of our production so you can appreciate in which way that COVID-19 has impacted our operating results. this opportunity, which has arranged the mine according to the phase in which we restarted operations. Moving on to slide seven, financial highlights. Total revenues during the second quarter were $97.8 million, which is 55% lower in comparison to the second quarter of 2019. This was primarily due to a decrease in volume sold of gold and silver. In the first half of the year, total revenues decreased 47% compared to the first half of 2019. Dividends from our direct operations in the second quarter of 2020 were $26.5 million in comparison to $47.1 million in the second quarter of 2019. Dividends from direct operations for the sixth month of 2020 decreased to $19.7 million in comparison to $74.8 million during the first six months of 2019. EBITDA, including our affiliates, in this second quarter was $86.1 million, which is 37% lower in comparison to the second quarter of 2019. EBITDA, including our affiliates, for the first half of the year was $116.7 million, compared to $304 for the same period in 2019. The net loss in this quarter was minus $25 million, compared to a net income of plus $9.7 million a year ago. For the first half of the year, the net loss was $100.1 million compared to a positive outcome of $37 million in 2019. The CAPEX has decreased to $11.4 million in the second quarter of 2020 compared to $27.8 million in 2019. In the first six months of the year, CAPEX totaled $21.5 million a 41% decrease in comparison to the first half of 2019. The free cash flow in the second quarter of 2020 was negative $24.2 billion compared to $34.10 million of free cash flow in the second quarter of 2019. For the first half of the year, the free cash flow was negative $1.9 million compared to negative $3.5 million in the first half of 2019. Moving on to slide eight, here again, we can see the capital V as a visual index for analyzing the results of our portfolio of operations. Moving on to slide nine and 10, we can see attributable production. Total gold attributable production in the second quarter of 2020 was 52,000 ounces, which is 46% lower than the figure reported on the home quarter of the previous year. In the first semester of 2020, total gold attributable production was 151,000 ounces, 34% lower than the same period in 2019. DCPs were mainly explained for lower production in Tambo Mayo and Yana Koch. Silver attributable production for this quarter was 3.8 million ounces, which shows a decrease of 5% compared to the same figure reported in the first quarter of 2019. In the first half of 2020, silver attributable production was 5.8 million ounces, 69% lower than the first semester of 2019. This is mainly due to less production in YouTube charcoal and tambourine. In the second quarter of 2020, 4,000 metric tons of zinc were produced, a 75% decrease compared to the second quarter of 2019. In the third semester of the year, zinc production decreased to 16.9 thousand metric tons. 42% lower than the same period in 2019. This is mainly due to the 72% decrease in production of zinc in our Utilchacoa mine. In the case of lead, equity production was 3.3 thousand metric tons in the second quarter of 2020, which is 75% lower in comparison to the second quarter of 2019. In the first half of 2020, lead production decreased to 10.3 thousand metric tons in comparison to 21.3 thousand metric tons in 2019. Finally, our copper attributable production for the second quarter of the year was 11.7 thousand metric tons. During the second half of 2020, copper attributable production was 41.4 thousand metric tons a 26% decrease compared to the same period of 2019. This reduction is mainly explained by a 24% decrease in production at zero-waste. Moving on to slide 11, the all-in sustaining costs for our diet operations in the first semester of the current year increased to US$1,815 ounce of gold, mainly due to lower gold ounces sold in the period. in the first semester of training were as follows. For gold, 1,125 USD per ounce, which is 14% higher than a year ago. For silver, 15.44 USD per ounce, which is 40% higher than a year ago. For red, 1,290 USD per metric ton, which is 8% higher than a year ago. greater than a year ago. And for copper, 5,252 US dollars per metric ton, which is 10% lower in comparison to a year ago. Finally, in the case of zinc, the cost applied to sales was 1,765 US dollars per metric ton, which is 20% lower than a year ago. Moving on to slide 12, we can analyze the DeWaterMaking program. As a result of the company's DeWaterMaking program, we are gaining mining cost efficiency that partially offset lower production outcome. You can see results for the second quarter were positive despite the current circumstances, generating $4.4 million of additional EBITDA. Additionally, the company continues to enhance current mining plan in order to focus on high-grade areas while maintaining a focus on exploration and cost reduction efforts. You can see more detail about the exploration program in the appendix of this presentation. Moving on to the slide 13, once again, you can see our capital D from our logo used for analyzing in more detail the updated information regarding our portfolio of projects. Moving on to slide 14, the pipeline of projects updated. Here we are presenting one snapshot of current development level for each one of our projects. Moving on to the slide 15, we can analyze briefly the San Gabriel project. The processing plan design is already finished. The feasibility study is currently at about 30% progress. The final layout is ready for the technical-communical report, which is under evaluation. Moving on to slide 16, Trapeze Project. We will continue this year with on-site column testing and power line write-off class activities. Also, the environmental impact assessment is expected to be approved by the end of 2021. Moving on to slide 17, the Rio Seco project, the chemical plant, to remove the arsenic content of copper concentrate. We have expected to finish the feasibility study by the end of the year. The environmental impact assessment is expected to be approved in the first quarter of 2021. And as you know, through this project, we expect to intend to unlock a significant value of our copper portfolio. Moving on to slide 18, the 10-tower-tied sulfide toric. We expect to reach the feasibility stage by 2021. We are preparing all the documentation regarding the environmental impact assessment, and also we are finishing the tailing dam basic engineering, which is a key component for this toric. With that, thank you for your attention. Call back to the operator to open the line for questions.