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spk00: Good morning, ladies and gentlemen. Welcome to the Compania de Minas Bonaventura third quarter 2021 earnings conference call. At this time, all participants will be 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. Gabriel Salas, Investor Relations. Mr. Salas, you may begin.
spk05: Good morning, everyone, and thank you for joining us today to discuss our third quarter 2021 results. Today's discussion will be led by Mr. Leandro Garcia, Chief Executive Officer. Also joining our call today and available for your questions are Mr. Daniel Dominguez, Chief Financial Officer, Mr. Juan Carlos Ortiz, Vice President of Operations, Mr. Aldo Massa, Vice President of Business Development and Commercial, Mr. Alejandro Hermosa, Vice President of Sustainability, and Mr. Roque Benadiez, our Chairman. This conference call 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 statements should be considered in conjunction with cautionary statements within our earnings release and risk factor discussion. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on October 28, 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 provide information on risk factors including the effects related to COVID-19 that could affect our financial results. In particular, there is continued uncertainty about the duration and contemplated impact of the COVID-19 pandemic. This means Buena Ventura's results could change at any time and the impact of COVID-19 on the company's business results and outlook is best estimated based on the information available as of today's date. At this time, let me now turn the call over to Mr. Leandro Garcia, Chief Executive Officer. Leandro, please go ahead.
spk02: Thank you, Gabriel. 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 from the third quarter of 2021 from . 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 two. Please consider the disclosure related to the COVID-19 pandemic. Moving on to slide three, highlights were as follows. Third quarter, 21 EBITDA from direct operations reached $39.5 million, compared to 68.5 million reported in the third quarter of 2020. Nine months, the first nine months, 21 EBITDA from direct operations reached US dollars under $41.6 million. an increase as compared at $88.1 million from the ninth month of 2020. Third quarter adjusted EBITDA, including associate companies, reached $183.7 million compared to $183.9 million in third quarter of 2020. Nine months 2021 adjusted EBITDA, including assets, reached $593.3 million, a significant increase as compared to U.S. dollars, $298.5 million for the first nine months of 2020. Third quarter net loss reached $91.9 million compared to $14.9 million net income for the same period in 2020. The first nine months of 2021 net loss was $39.3 million compared to $68.9 million net loss in nine months of 2020. It is important to note that the net loss for the third quarter of 2021 and the nine months was impacted by 66.4 million Yanacocha impairments corresponding to Vivian's equity ownership position in disaster. Aligned with the company's strategy to focus primarily on explorations, The third quarter 21 exploration and operating units increased in $17.1 million compared to $7.6 million in third quarter of 2020. The first nine months 2021 exploration and operating units increased to $40.9 million compared to $16.1 million in the first nine months of 2020. The third quarter 2021 capital expenditures were $24 million compared to $12.9 million for the same period in 2020. Nine months 2021 capital expenditures reached $58.5 million compared to $35.2 million in the first nine months of 2020. Cost applicable to sales, cash, for the first nine months of 2021 reflects a $43.8 million impact due to COVID-19 related expenses. Buenaventura's cash position reached $287.9 million as of September 30, 2021. Mining and ore processing activities were suspended at the Uchukchagua mine In line with Buenaventura's strategy to reduce costs and become cash-neutral while enabling the company to focus on underground exploration and optimize the current reserve exploitation sequence with a gradual operations restart. Moving on to slide four, ESG corporate strategy. Our company has always been committed to help local communities and to have responsible practices with the environment. We have measured some indicators, as you can see on this slide. For example, we achieved a 94% water recirculation in our open-pit operations and 88% at our underground operations. We have done a special effort to improve our ESG reporting practices following international standards like the World Gold Council, AET, Dow Jones Sustainability Index, and the United Nations Global Moving on to slide five, continuing with ESG corporate strategy. For several months, we have been working with our stakeholders, local communities, investors, directors, workers, et cetera, in order to start implementing a better ESG reporting system. And after all the effort, we have been able to build a matrix that we are presenting on this slide. Here you can see the most important subjects which are located at the right part of the matrix and belong to the high material area. In this area we have determined that the health and safety, the responsible use of water, and the value generation for stakeholders are the three most important topics to work on and therefore to include in our report. Moving on to slide six, financial highlights. Total revenues during the third quarter were $220.4 million, which is 3% lower in comparison to the third quarter of 2020. In the first nine months of the year, total revenues increased to $647 million compared to the nine-month period of 2020, where total revenues were $440.5 million. EBITDA from our direct operations in the third quarter of 2021 was $40 million in comparison to $69 million in the third quarter of 2020. EBITDA from direct operations for the nine months of 2021 increased to $142 million in comparison to $88 million during the first nine months of 2020. EBITDA, including our affiliates in this quarter, was $184 million, which is in line to the EBITDA generated in the third quarter of 2020. EBITDA, including our affiliates for the first nine months of the year, was $593 million, compared to $299 million for the same period in 2020. The capex increased to $24 million in the third quarter of 2021, compared to $13 million in 2020. In the first nine months of the year, capex totaled $59 million, a 66% increase in comparison to the first nine months of 2020. As you can appreciate on the graph shown in this slide, we are returning to three pandemic levels and even achieving greater results than the first nine months of 2019. Moving on to slide seven, Uchukchakwa's status. The COVID-19 pandemic adversely impacted mine preparation and exploration at Uchukchakwa. As a consequence, we are working with narrower ore veins and lower silvers. The suspension enables us to achieve the most significant cash preservation while de-risking future negative free cash flow generation through the following. Workforce optimization in order to reduce fixed costs from $2 to $5 million per year. Decrease COVID-19 related expenses from 12 to 15 months in 2022. re-evaluation of existing contracts to renegotiate, reconcile, and streamline the company's contractor base from $7 million to $9 million per year. This strategy will be implemented during the period 2021-2023, with a gradual and efficient restart of operations once related objectives have been achieved. prioritizing exploration over ore extraction to increase reserves in the long term. Importantly, these suspensions will not affect the progress related our high-grade dune pack project expected to begin production in early 2024. Moving on to slide eight and nine, attributable production. Total gold attributable production in the third quarter of 2021 was 80,000 ounces, which is 2% lower than the fuel reported on the same quarter of the previous year. In the first nine months of 2021, total gold attributable production was 217,000 ounces. 7% lower than the same period in 2020. This decrease was mainly explained by lower production in Yanacoche. Silver attributable production for this quarter was 3.6 million ounces, which shows an increase of 20% compared to the figure reported on the third quarter of 2020. During the first nine months of 2021, silver attributable production was 11 million ounces, 20% higher than the first nine months of 2020. In the third quarter of 2021, 11,000 metric tons of zinc were produced, a significant decrease compared to the third quarter in 2020. In the first nine months of the year, zinc production decreased to 32,000 metric 2% lower than the same period in 2020. In the case of lead, equity production was 6,000 metric tons in the third quarter of 2021, which is 23% lower in comparison to the third quarter of 2020. In the first nine months of 2021, lead production increased to approximately 16,000 metric tons in comparison to 18,000 metric tons in 2020. Finally, our copper attributable production for the third quarter of the year was 26,000 metric tons. During the first nine months of 2021, copper attributable production was 75,000 metric tons, a 12% increase compared to the same period 2020. Moving on to slide 10, all-in sustaining costs and costs applicable to sales. The only sustaining cost from our direct operations in the first nine months of 2021 increased by 60% to US$1,488 per month. The costs applicable to sales for the first nine months of 2021 were as follows. For gold, US$1,224 per month, which is 80% higher than a year ago. For silver, 19.54 US dollars per ounce, which is 15% higher than a year ago. For lead, 1,453 US dollars per metric ton, which is 30% higher than a year ago. For copper, $6,295 per metric ton, which is 25% higher in comparison to a year ago. Finally, in the case of zinc, the cost applicable to sales was $2,127 per metric ton, which is 19% higher than a year ago. As we mentioned before, cost applicable to sales has been impacted by approximately $44 million of expenses related to COVID-19. Moving on to slide 11, pipeline of projects and updates. Here we are presenting in one snapshot the current development level for each one of our projects. Moving on to slide 12, San Gabriel. We finished geometallurgy testing and confirmed study goal recovery with 85.33%. The EIA's validity extension will be achieved by starting water dump preliminary works next year. We reached an agreement with Corire community to finalize Consulta Prevost. The Hoyo community is still in process. Early construction works are expected to start after both communities ratify agreements with the Minister of Energy and Mines. Moving on to slide 13, Trapiche, we started on-site metallurgical column testing, and we finished Chloride leaching trade-off study, devaluation on primary ore is the next step. We agreed with SENACE to hold the second EIA workshop by late November, followed by EIA submission early 2022. The project access road agreement draft was released to Antabamba and Moyoco communities for approval. Moving on to slide 14, tantawatai sulfites. Formalaceous board approved viability stage as informed in the previous conference call. The infill drilling started at least currently at 24% of advance. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
spk00: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys to ensure the best sound quality. Once again, that is star and then one to ask a question. we will pause momentarily to assemble the roster. Once again, if you would like to ask a question, please press star and then one. And our first question today comes from Tonya Jackus Connick from Scotiabank. Please go ahead with your question.
spk06: Great. Good morning and happy Friday, everyone. Thank you for taking my questions. I have two that I'd like to ask on two different assets. Can I start on Uchichagua? I just want to try and understand, as you go through this whole evaluation on this asset, Is it fair to assume that this asset will be down from the rest of 2021 and all through 2022?
spk02: Thank you for your question. Well, as you know, we have been struggling with, we have a lot of problems to talk the last four conference calls, we have been doing our best efforts to not to stop production, but finally we have decided this hold of our output and our production in order to make more efficient the mind to go further with all the work we have for geology explorations and the mine preparation. Actually, we will expect to have this mine stopped by at least one year. We will be evaluating this resume of operations during 2022, but any additional comment may be Juan Carlos can give us some more color about this.
spk04: Thank you, Tania, for your question. Yes, we will plan to continue with exploration work underground, developing of tunneling and diamond drilling along 2022. And based on those results, we will review our decision on where to restart the operation in 2023. If we don't have the conditions at that time and we would prefer to continue with exploration, we'll probably extend that strategy along 2023. Okay.
spk06: And given you stopped the mine, should I be thinking that this care and maintenance now is going to have a cost for us to have? And if so, what is the cost of care and maintenance, you know, either per quarter or per year? whatever is easier for you?
spk04: It's a combination of two things. One is going to be, obviously, the care maintenance per se. It's about fixed costs in the area of $1.5 million per month, payroll plus all the ancillary services, pumping, water treatment. And on top of that, we will have mine maintenance, tunneling for exploration to get new access to different areas for diamond drilling. And that amount is still under review with our people. We are working on our annual budget along November.
spk06: Okay. So I guess you will give us some sort of guidance next year, but at least one and a half per month of holding costs as long as this is down. Okay. And just on the... You mentioned narrower veins that you're seeing and you're putting the effort in to do this exploration. As you go into narrower veins, usually you have to change your mining method because you're going to have to be more selective mining, which is more expensive. So I'm just wondering how, you know, you mentioned that you don't really see much impact to your reserves and resources with this being down. But just because the veins are narrower, I'm trying to understand how it could not have an impact.
spk04: Yes. The thing is that right now we don't have isolated veins. Usually they came like in a package, several veins altogether. We need to fill all the gaps in between in order to have an idea of how many veins do we really have all together closer to each other and optimize the design of the mining facilities to mine that area. Right now, we're mining certain veins, and sometimes we duplicate the infrastructure like an additional ramp or an additional ventilation infrastructure for a vein that is only 90, 80 meters deep. to the north or to the south. So we need to have time to explore the other veins, get all the information together in addition to the existing veins that we already reported in our reserve. And once we have all that information, we locate the ramps and all the infrastructure to serve more tonnage than we are doing right now. That's the reason we need time for exploration to include all those veins that we have now as a potential source or potential resources in order to have an optimized design. That's the reason we need some time for continued exploration near the existing reserve blocks. In doing so, we expect to dilute the infrastructure costs and get back into production with pretty much the same operating costs or improved operating costs from the underground mine.
spk06: Okay. From what I'm hearing, It appears to me, and maybe I'm wrong, that maybe you haven't done enough detailed tighter space drilling to really understand. And maybe someone can tell me what your drill spacing has been on your mine planning, but it appears if you're not able to connect all of these veins together, you kind of have to do more tighter space drilling. Is that a correct assumption?
spk04: Well, no. In the blocks that we already have reserved, In some areas, of course, we need to go from maybe 22 meters, I think it was, to 15 meters spacing. According to the new guidelines and updated statistics, we need probably to make shorter distance drill holes for part of an existing reserve. So that would be part of the migration to the SK 1300 standard. But what I mentioned was structures or veins that are parallel to the existing ones, 20 meters, 60 meters, 80 meters to the north or to the south of the existing ones. So we will add those potential resources now into our mining plan. That's what the strategy we will focus on in the current reserve class. In addition to that, of course, explore potential areas where in the past we had ore bodies with a larger thickness and a higher grade. So we identified, based on the model that we are understanding better in JUNPAC, we're bringing that experience from exploration into Chukchakwa mine, and we identified several targets, pretty much in the anti-clinal of Chukchakwa. So it will be a two-set strategy, looking for more structures, more veins near our existing reserve, plus opening new areas of exploration near the mine, 600 meters, 500 meters from the existing facilities, in that anticlinal sector with particular horizons in limestone that pretty much follow the same model in which we're very successful right now exploring Jumbak. So we're bringing that control, that lithological control, into Chukchapua in the anticlinal sectors to look for our bodies, high-grade veins that we had in the past. We already had in the past. So we're connecting the dots in that area. kind of near mine areas somewhere.
spk06: Okay, so as I understand it, there's some tighter space drilling to be done within your reserve blocks, plus step out to, you know, try and target some of these veins close by to bring them in. Definitely, yeah. And then my last question, if I can, just on San Gabriel, you mentioned the validity of of the EIA extension to be achieved. So are you saying that you're going to be getting this EIA by putting in this water dam next year, or what is it that you still need to do to just get this EIA approved?
spk02: Thank you, Tanja. With us also is Renzo Mager, our project manager, and he will explain a little bit more about our process in San Gabriel. Please, Renzo. Sure, thank you.
spk03: Well, the EAA is already approved, but these instruments have a shelf life of five years. So because of the COVID, we haven't been able to start construction, and it is getting to the end of that shelf life. So in order to extend that shelf life, we need to start something. And we have all the working permits to start a water dam. So if we start the early process of the water dam, we're going to be initiating the execution. And therefore, the environmental impact assessment shelf life is going to continue. That's the strategy.
spk06: Okay. And then when you've done this, you know, water dam, like what else, you know, and you're doing consultation with the communities, I see, you know, to finalize. you know, that process. Once we've done that, are you then ready to make a decision for construction?
spk03: The construction permit has already been submitted a year and something ago, and There's no more technical questions about it. We're ready to start. The only thing that is missing is to finish this consulta previa with the community that has been impacted by the COVID activities. So we have had some advances in the last quarter, one of those being that we have been able to have public assemblies with the community. That was one of the main obstacles to reach agreements with them. Second, the community directors have been finally assigned. They have all the paperwork ready to make decisions. That's another big step. And third, the government have been helping us sending the right letters to the community. However, they have changed. So the new officers in the ministry are new, and we are working with them to kind of know each other again. So we are still expecting to start construction, full construction, by the end of the rainy season, that is March 2022. That's our best. We're holding with that in mind.
spk06: Okay, great. Thank you so much for the clarity.
spk00: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. Once again, that is star and then one to join the question queue. Our next question comes from Jens Spies from Morgan Stanley. Please go ahead with your question.
spk01: Hello, and thank you for taking the questions. I just want to ask, how much do you expect to get from dividends from Cerro Verde next year? And also for us to model this year, going in further years. What payout ratio are you expecting Terraria to have in the upcoming years? And if I can do a follow-up question, I just wanted to ask if you have any sense of how much the government might increase the mining taxes, because obviously they haven't given any details about the specific rate, but I was just wondering if you have got any sense of that. Thank you.
spk02: Hi, James, and thank you for your question. In response to the first question about these several relativities, um you have seen the the results of this last third quarter of cerro verde and the operation is going very well and of course um we will expect an additional dividend for this last part of the year. We have not spoken with Freeport, but I'm sure that all the shareholders will expect an additional dividend before the end of 2021. The payout rate, we have to talk with them. I think the future years of Cerro Verde, we do not have any investment, big investment planned for the following years. So the capex is limited for the following years also. It's around, imagine around $300, $400 million, but all the cash with these prices that generates Cerro Verde, of course, will finish some part of the . And regarding your second question about tax, we We are not sure how will be the final number of increasing the tax for mining. We have received some message from the minister public declarations that will increase for the higher profit margins for the companies that earn profit in the higher level of the profit margins for companies that are located there. However, he has been very clear telling the the press and in all the declarations, that he will be vigilant and he will preserve the competitiveness of the mining industry. That is the message that we have received from them. So we expect some additional tax or royalties, additional increase, but in the higher level of profit margins. So we will see it in the following weeks, how is the final number. Okay.
spk01: Thank you, Landon.
spk00: And ladies and gentlemen, at this time, we would like to conclude today's conference call, and I would like to turn the floor back over to Mr. Garcia for any closing remarks.
spk02: Well, thank you for attending this conference call, and have a great day and be safe. Thank you very much.
spk00: Ladies and gentlemen, that does conclude today's conference. We do thank you for attending. You may now disconnect your lines.
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