Compañía de Minas Buenaventura

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.

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.

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.