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spk04: Welcome to the Compania de Minas Buenaventura Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in 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.
spk00: Thank you. Good morning. Good morning, everyone, and thank you for joining us today to discuss our four-quarter 2020 results. Today's discussion will be led by Mr. 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, Mr. Aldo Maza, our new Vice President of Business Development and Commercial, Alejandro Hermosa, Vice President of Sustainability, and Renzo Maher, the Corporate Project Manager. Also available for your questions will be Roque Benavides, our chairman. This conference call will include forward-looking statements, which are subject to various risks and uncertainties. That would cause our actual results to differ materially from these statements. Any such statements 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 February 25th, 2021. In addition, it is important to note that these statements include expectations and assumptions which will be shared related to the impact of 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 completed impact of the COVID-19 pandemic. When our results would change at any time and the impact of COVID-19 on the company's business results, an outlook is a best estimate based on the information available as of today's date. Please note that in the interest of safety, we're utilizing a more virtual 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 moment, let me now turn the call over to Leandro Garcia. Leandro, please go ahead.
spk06: 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 these difficult times. We are pleased to present the results of the fourth 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 disclosure related to the COVID-19 pandemic. Moving on to slide three, highlights were as follows. EBITDA from direct operations reached 59.1 million in fourth quarter 20, compared to 73.9 million US dollars reported in fourth quarter 19. Fourth quarter 20 adjusted EBITDA, including associated companies, 192.4 million dollars compared to 183.7 million dollars in fall quarter 19. Capital expenditures in fall quarter 2020 were 38 million dollars compared to 39.6 million for the same period in 2019. Fall quarter 20 net loss was 60 million compared to a net loss of $53.7 million for the same period in 2019. The company's Devo-Dolmaking program continued to progress at a reduced level during the fourth quarter of 2020. The program focused primarily on Buenaventuras, Tambomayo, Uchuchagua, and El Boca Mines during 2020. Buenaventuras' cash position reached $235 million for the fourth quarter 2020. The company had no mine-related fatalities during the full year 2020. Moving on to slide four, financial highlights. Total revenues during the fourth quarter were $236.1 million, which is in line with the fourth quarter of 2019. Increased commodity prices, excluding debt, support the fourth quarter 2020 net sales previous despite reduced volume sold due to the adverse effects of COVID-19. Evidence from our direct operations in fourth quarter of 2020 was $59.1 million in comparison to $33.9 million in the fourth quarter of 2019. This was mainly due to the lower production coming from Uchuchagua, as we have not achieved full capacity during the quarter as previously announced. Also, lower production from Tambomayo negatively affected the EBITDA. The EBITDA including our affiliates in this quarter was $192.4 million, which is 5% higher in comparison to the fourth quarter of 2019. This increase mainly comes from better results from Cerro Valdez. The net loss in this quarter was $60 million compared to a net loss of $53.7 million a year ago. This result considered a deferred stripping cost of $11.6 million from El Brocal, originated by a variation in the technical and economic parameters of the research. Additionally, it considered a cost of $110 million. $24.8 million from Yanacocha related to an update in the mine closure plan. The capex has decreased to $38 million in the fourth quarter of 2020 compared to $39.6 million in 2019. The free cash flow in the fourth quarter of 2020 was negative $14 million compared to negative $65.9 million of free cash flow in the fourth quarter of 2018. Moving on to slide five and six, attributable production. Total gold attributable production in the fourth quarter of 2020 was 79.5 thousand ounces, which is 31% lower than the figure reported on the same quarter of the previous year. This decrease was mainly explained by lower production in Tambo Mayo Silver attributable production for this quarter was 3.7 million ounces, which shows a decrease of 35% compared to the figure reported on the fourth quarter of 2018. This is mainly due to less production in our Chukchakwa mine. In the fourth quarter of 2020, 11.5 thousand metric tons of zinc were produced. a 16 percent decrease compared of the fourth quarter in 2019. This is mainly due to a 64 decrease in production of zinc at our Ocho Chaco line. In the case of lead, equity production was 6.8 thousand metric tons in the fourth quarter of 2020, which is 34 percent lower in comparison to the fourth quarter of 2019. Our copper attributable production for the fourth quarter of the year was 25.4 metric tons. This reduction is mainly explained by a 24% decrease in production at El Brocal and 18% decrease of production in Cerro Verde. Moving on to slide seven, oil and sustaining costs and costs applicable to SAIT. The oil and sustaining costs from our direct operations in 2020 increased to $1,374 per ounce of gold, mainly due to lower gold ounces sold in the period. The cost applicable to sales for 2020 were as follows. For gold, $1,097 per ounce, which is 10% higher than a year ago. For silver, $18.29 per ounce, which is 52% higher than a year ago. For lead, $1,174 per metric ton, which is 5% lower than a year ago. For copper, $5,133 per metric ton, which is 4% lower in comparison to a year ago. Finally, in the case of zinc, the cost applied to say was $1,935 US dollars per metric ton, which is 5% lower than a year ago. Moving on to slide eight, debacle-making program for quarter 2020. As a result of the company's debacle-making program, we are gaining mining cost efficiency that's partially offset by lower production output. As you can see, results for the fourth quarter were positive, generating $8.1 million of additional EBITDA. Moving on to slide 9, pipeline of projects update, here we present in one snapshot the current development level for each one of our projects. On slide 10, San Gabriel, we completed feasibility study by AUSENCO. We completed geological confirmation drills with no major impact on tonnage or grade. The construction permit is delayed until the second half of 2021 due to the Ministry of Mining and Energy difficulties in re-initiating the consulta previa or prior consultation process due to COVID second wave and current political situation. Moving on to slide 11, Trapiche, previous Ability Study has been updated with a new component arrangement by M3. We are currently working with the community to start column test activities by April 2021. Additionally, we are performing chloride leaching tests with excellent results and evaluating its inclusion in the AEA study. environmental assessment. Moving on to slide 12, Rio Seco, we complete the feasibility study by summer. The area public assembly was successfully executed, and we are waiting for authorities' revision and comments. Moving on to slide 13, Santa Huatay sulfites, we have updated and confirmed scoping study by entry for a 6,000 tons per day copper concentrate plant. We are starting the five-year viability phase. In this moment, we would like to share our guidelines, our main financial guidelines for 2021. In terms of sales, we will be in the range of 800 $850 million to $950 million. These sales assumes metal prices of gold of $1,800, silver $23 per ounce, lead $1,850 per ton, copper $7,250 per ton, and zinc $2,300. We are expecting to have EBITDA from our direct operations in the range of $160 million to $180 million, and including our affiliates will be $560 million to $600 million. In terms of CAPEX, our sustaining CAPEX will be between $50 million to $60 million, and our projects, including part of San Gabriel but not the construction, will be between $30 and $35 million. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
spk04: Thank you very much. We will now begin the question and answer session. To ask a question, please press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And the first question today comes from Carlos de Alba with Morgan Stanley. Please go ahead.
spk03: So the first question is just on the CAPEX, Leandro, that you just mentioned, how much of the 30 to 35 is San Gabriel? And yeah, just to know how much you guys are spending on that one. The second question is regarding the ongoing dispute with the SONAT. Can you give us an update, please? What are the latest? I understand that based on the latest releases on that matter, that the company may have to start paying some of this money, and how is the company planning on addressing, yeah, or funding or financing the payments for the SUNAD, and any updates on the legal front or the judicial appeal that you are moving forward in order to try and avoid to, to make these payments or avoid these payments. Thank you very much.
spk06: Thank you, Carlos. For your first question, the capex considered for San Gabriel in the figure I just gave you is $19 million. And in terms for the question related to SUNAT, There is no news in the legal side, in the legal edge of this controversy. We continue to dispute in the judicial area our rights. In terms of pay, we are finishing the strategy to prepay this SUNAT payment directly to SUNAT We are, as you imagine, we are constructing this strategy using the maybe we should sell some known core assets and also we should look for a financial facility in terms of bonds or any other We should be done, all these strategies will be done at most in June of this year. When we get some advance, we will inform you which are the steps we are taking.
spk04: Thank you.
spk06: Maybe Daniel can give you some color in this matter, Carlos.
spk01: Thank you, Leandro. Just I wanted to give a little bit more detail of the CAPEX for year 2021. As Leandro mentioned, we are planning to execute $90 million. From this, San Gabriel represents $20 million, our direct operations, 55 million, and the remaining 15 will go to other projects like Trapiche and Rio Seco. Thank you.
spk03: Thank you very much.
spk04: And once again, if you'd like to ask a question, please press star and 1. And our next question will come from Tanya. Jakus Gunek with Scotiabank. Please go ahead.
spk07: Great. Good morning, everybody, and I hope everyone is well. Thank you for taking my question. I just wanted to circle back just one more for guidance, if I can. Is there any more EBITDA improvement you're expecting from the de-bottlenecking program in 2021, or have you completed that program?
spk06: Thank you, Tanya. Thank you. And thank you for your question. The devotal making program has a duration of three years, and it has end on December 2020. Now we are working on a new program that is based also in continuous improvement, but now we are focused on recover the full capacity of all our plants and our mines, and to also increase our exploration program. For that, we need to gather all our workforce to have a better performance in our units.
spk07: Okay, so given that the focus on expiration, would you be able to give us the guidance for your expiration spend, both, you know, direct and through your affiliates for 2021?
spk06: Yes, we can make public our guidance for explorations investment for this year, considering the The green thing and the brown thing is very just inciting in our own minds. We will publish in our website. Perfect. Thank you very much.
spk07: Okay. And just two other questions if I could. I just wanted to get, you know, to circle back on just on the assets. Can I just get an explanation on what is exactly happening at two of your mines, Tambo Mayo We seem to have quite a drop in both your gold and zinc recoveries. I'm just trying to understand what's happening at Tambomayo and then also what's happening at Uchachapua on the silver side where the recoveries were weak there also.
spk06: Yes, Tanya. It will be a pleasure. With us, here we have Juan Carlos Ortiz and can give you his explanation in the Hello, everybody.
spk05: Thank you, Tanya, for your question. Regarding Tambomayo, we have problems in the last quarter with one section of the mine, the level 44, that we will build that all into the processing plant, and it has a different behavior from the We tried to deal with that because we were doing long-haul drilling, so much of the production was already on the processing plant. We expect that probably from the gold side, so we need to change most of the process from That was really the problem that we have along with some bad loss of maintenance activities that were not properly attended during the previous quarantine due to the pandemic. We have the two fronts at the same time, the difficult ore getting into the processing plant and the delay in the maintenance of the processing plant to try to have some flexibility to deal with that ore. We are working on that. We will start working on that later last year. We are still working with that in this quarter. It's a checker form. We put the grade of silver. That came from areas that have a lot of manganese. So we need to make a trade-off for cleaning the oil that we produce. So we need to sacrifice a little bit of the recovery of the sugar in order to get commercial-grade concentrates for Ochoa Chacra. That's basically the reason we're going to do a little drop in the recovery of Ochoa Chacra in the last quarter.
spk07: OK. So just going forward, are these recoveries that we are expecting from these two mines what we saw in Q4?
spk05: For the 2021, we have a rate that is equal to the ratio for the budget. So it's not part of our budget.
spk07: OK. And then my final question, I just wanted to come back on just the funding your options for funding your tax bill. I think we mentioned non-core asset sales. I just wanted to try and review whether a non-core asset would be your power plant and if you would consider equity issuance as one of your options.
spk06: Thank you, Tanja. We will not consider equity in our options. we will consider a program of bond issues and the sale of some of our assets. One that can be the asset you mentioned, WANSA, also can be CONTACTO or a group of them. In that range, and those are the assets that will be divested.
spk07: Okay, great, thank you so much and good luck.
spk06: Thank you, Tanya. Thank you.
spk04: And the next question will come from Leopoldo Silva with Lara and Vial. Please go ahead.
spk02: Hi, guys, do you hear me?
spk06: Yes, Leopoldo.
spk02: Okay, thanks. Well, I guess my question is regarding reserves. I see that your Orcopampa and Tambomayo gold reserves are lower than those at the beginning of 2020. So now that we have higher gold prices and that you along the year have said that you were happy with what the preliminary results that you were getting with exploration in these mines, shouldn't we have expected higher gold reserves and what happens in these two mines? If that or maybe with, I don't know, 1600 for gold as an average, not all the gold that you could mine at these prices,
spk06: First of all, you have to keep in mind that last year we were also affected in an area of explorations for COVID. So we fell behind in our programs or going with the people to make all the drillings and all the work we did. involved and related to explorations. However, as you say, we are very optimistic, but we didn't have the time to convert that potential in reserves or in third reserves. During this year, we will have, I think, an important increase in our targets and in our results. Maybe also Juan Carlos can give you more color in this research matter.
spk05: Thank you, Leandro. Yes, Leopoldo, in the case of Orcopanta, we have some discolories. As Leandro mentioned, it was late in 2020, so they're still at the inferred potential level. we have not enough time to move all these new discoveries into the measured and indicated categories to become reserves. We've come to the conclusion alone that we have good results in the exploration of Tokopampa, particularly in an area near our operations called Ikara, Ramal 4, Ramal Platter. There are some good results. Only along the way, we will keep updated about the progress of this exploration. In the case of Tandemayu, It's a very high-grade vein, a set of veins, so there is not much ore between $1,300 per ounce and $1,600 per ounce. Everything is very, very high-grade, so there is not much low-grade alteration or low-grade hollows around the vein. The impact of increasing the price necessarily brings new reserves or additional reserves We are working on exploration. We have several machines working on the site right now, probably expecting new results in the next month. But still, it's a little bit delayed, the exploration in Tambo Bayou.
spk02: Okay, and do you believe that 2022 and the years forward you could lift the production of these mines? Or would you expect rather to maintain what you have in guidance for 2021?
spk05: In the case of Orcopampa, we expect to keep running at around the guidance level. That is about 40,000 to 45,000 ounces of coal a year. In the case of Sandomayo, probably a little bit less than the guidance of this year, maybe around 70,000, a little bit below 70,000 ounces. But still, if you'd like to work on it personally, that would be something additional. But it's a little bit too early to say what the levels for the next year.
spk02: OK, all right. Thanks very much.
spk04: And once again, if you would like to ask a question, please press star then 1. And again, pressing star then one will allow you to ask a question. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the call back to management for any closing remarks.
spk06: Thank you, sir. Before we finish today's conference call, I want to thank you again for making the time to join us today and have this wonderful day. Be safe and see you soon. Thank you.
spk04: And thank you, sir. Ladies and gentlemen, that concludes Buenaventura's fourth quarter 2020 conference call. You may disconnect your lines. Thank you.
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