Compañía de Minas Buenaventura

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

Good morning, everyone, and thank you for joining us today to discuss our third quarter 2020 results. Today's discussion will be led by Leandro Garcia, CEO. Also joining our call today and available for your questions are Daniel Dominguez, CFO, Mr. Juan Carlos Ortiz, Vice President of Operations, Raul Benavides, Vice President of Business Development, Alejandro Hermosa, Vice President of Sustainability, and also available for your questions will be Roque Benavides, our chairman. This conference will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statement should be considered in conjunction with cautionary statements within our earnings release and risk factor discussions. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on October 29, 2020. In addition, it is important to note that these statements include expectations and assumptions, which we will share related to the impact of the COVID-19 pandemic. As seen on slide two, our forward-looking statements also provides information on risk factors, including defects 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 Aventura's results 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's date. Please note that in the interest of safety, we are again utilizing a more visual approach in exercising social distances while conducting this call this quarter. 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 now turn the call over to Leandro Garcia. Leandro, 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 third quarter of 2020 from Compañía Minas Buenaventura. We have prepared a PowerPoint presentation that is available in our webpage. Before we go further, please take a moment to review the cautionary statement shown on slide two. Please consider the disclosure related to the COVID-19 pandemic. Moving on to slide three, highlights were as follows. Third quarter 2020 EBITDA from direct operations reflected a positive trend on both a sequential year-on-year basis, despite the effects of COVID-19 on Buenaventura's operation during the quarter. EBITDA from direct operations reached 68.5 million for the third quarter 20 compared to 26.5 million dollars in two quarter 20 and 58.4 million reported in three quarter 19. The third quarter adjusted EBITDA including associated companies reached 183.9 million compared to 168.2 million in third quarter 19. Third quarter 20 capital expenditures were 12.6 million compared to 28 million for the same period in 2019. Third quarter 20 net income was 24.4 million compared to $4.5 million for the same period in 2019. The company's deep bottlenecking program continued to progress at a reduced level during the third quarter of 2020. The program's 2020 focus is on Buenaventura's Tambo Mayo, Uchuk Chacua, and El Rocal Miles. Buenaventura's cash position reached $265 million for the third quarter of 2020. the company has released its update guidance for the full year 2020. In line with the company's ongoing focus on cash preservation, on October 29, 2020, yesterday, Buenaventura successfully recognized the final $113 million leasing payment for its Huanza hydroelectric power plant, effective November 2, 2020. This extends the maturity by 18 months bullet at rate of LIBOR 30 days plus 2.10%. Moving on to slide four and five, nine month, 20 monthly production and 20, 20 guidance. For transparency matters, we have decided to report the monthly detail of our production so you can appreciate in which way the COVID-19 has impacted our operating results. You can see a positive trend in terms of production in most of our operations. Additionally, we have included our 2020 operating guidance for your reference. In the case of Tambomayo, the guidance for gold production is between 70,000 and 74,000 ounces. In the case of Corcopampa, the guidance for gold production is between 40,000 and 42,000 ounces, showing the positive exploration results obtained during the year. In the case of Coimbatore, the guidance for gold production is between 100,000 and 106,000 ounces. In the case of La Sanja, the guidance for gold production is between 13,000 and 16,000 ounces. In the case of Llanacocha, the estimate gold production is 335,000 ounces, as announced by Neymar. In the case of Vulcani, the guidance for silver production is between 1.4 and 1.6 million ounces, showing a recovery in the last quarter. In the case of Uchuchagua, This mine did not achieve full capacity during the third quarter 2020, mainly due to a reduced workforce and shortage of workers required to successfully operate at full capacity. 2020 operating guidance for silver is between 4.4 and 5 million ounces. In the case of brocal, the guidance for copper production is between 33 and 36 thousand metric tons. For zinc, the guidance is in the range of 48 and 51,000 metric tons. This shows that in the last quarter, we will be changing the mix of production, focusing more on copper than zinc. Moving on to slide six, financial highlights. Total revenues during the third quarter were $228.2 million, which is 1% lower in comparison to the third quarter of 2019. This was primarily due to a decrease in volume sold of gold and silver. EBITDA from our direct operations in the third quarter of 2020 was $68.5 million in comparison to $58.4 million in the third quarter of 2019. EBITDA, including our affiliates in this quarter, was $183.8 million, which is 9% higher in comparison to the third quarter of 2019. And the net income in this quarter was $24.4 million compared to a net income of $4.5 million a year ago. The capex has decreased to $12.6 million in the third quarter of 2020 compared to $28 million in 2019. The free cash flow in the third quarter of 2020 was $76.6 million compared to $10.8 million of free cash flow in the third quarter of 2019. Moving on to slide seven and eight, attributable production. The gold attributable production in the third quarter of 2020 was 81.6 thousand ounces, which is 33% lower than the figure reported on the same quarter of the previous year. This decrease was mainly explained by lower production in Tambo Mayo and Llanacocha. Silver attributable production for this quarter was 3 million ounces. which shows a decrease of 40% compared to the figure reported on the third quarter of 2019. This is mainly due to less production in our Uchubchagua mine. In the third quarter of 2020, 15.9 thousand metric tons of zinc were produced, a 22% increase compared to the third quarter in 2019. This is mainly due to a 72% decrease in production of zinc at our Uchukchakwa mine. In the case of lead, equity production was 7.3 thousand metric tons in the third quarter of 2020, which is 20% lower in comparison to the third quarter of 2019. Finally, our copper attributable production for lead. third quarter of the year was 25,000 metric tons. This reduction is mainly explained by a 32% decrease in production at Brocal and 18% decrease in production in Cerro Verde. Moving on to slide 9, all-in sustaining costs and costs applicable to sales. The all-in sustaining costs from our direct operations in the first nine months of the current year increased to US$1,286 per ounce for gold, mainly due to lower gold ounces sold in the period. The costs applicable to sales for the nine-month period of 2020 were as follows. For gold, US$1,035 per ounce, which is 3% higher than a year ago. For silver, US$16.96 per ounce, which is 50% higher than than a year ago. For lead, US$1,181 per metric ton, which is 4% lower than a year ago. For copper, US$5,019 per metric ton, which is 7% lower in comparison to a year ago. Finally, in the case of zinc, the cost applied to sales was US$1,181 $789 per metric ton, which is 11% lower than a year ago. Moving on to slide 10, the debottlenecking program for the third quarter 2020. As a result of the company's debottlenecking program, we are gaining mining cost efficiency that particularly upset lower production output. As you can see, results for the third quarter were positive. generating $7.1 million of additional EBITDA. Additionally, 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. You can see more details about the exploration program with the appendix of this presentation. Moving on to slide 11, pipeline of projects update. Here, we are presenting in one snapshot the current development level for each one of our projects. Moving on to slide 12, San Gabriel. The feasibility study is at 76% progress and is expected to be completed by the end of the year. The construction permit is already submitted for approval and we aim to start construction by the second quarter of 2021. Moving on to slide 13, Trapiche, the pre-feasibility study with M3 is at 86% progress and is expected to be completed by the end of the year. On-site column testing activities are delayed until the first quarter 21 due to COVID restrictions. The feasibility study will begin after test completion. Moving on to slide 14, Rio Seco. The feasibility study is expected to be concluded in the first quarter of 21. The AEA will be filed by the end of 2020. This project will unlock value for our copper portfolio. Moving on to slide 15, Tantahuatay's sulfide project. This is a standalone business case. We expect to reach pre-feasibility stage by 2021. We are currently preparing the AER process initial documentation. We have already finished tailing down basic engineering. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.