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spk05: Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode, and please note that today's call is being recorded. At this time, I'd like to introduce your host for today's call, Mr. Gabriel Salas, Investor Relations. Mr. Salas, you may begin.
spk11: Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 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, Mr. Renzo Maher, Projects Manager, Mr. Juan Carlos Salazar, Geology and Explorations Manager, Mr. Roque Benahides, our Chairman, and Mr. Raul Benahides, Director. 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 discussions. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on February 25, 2022. 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 statement also provides information on risk factors, including defects related to COVID-19 that could affect our financial results. In particular, there is continued uncertainty about the duration and contemplated impact of COVID-19 pandemic. This means when our interest results could change at any time and impact of COVID-19 on the company's business results, and outlook is the best estimate based on the information available 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.
spk03: Thank you, Gabriel. And 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 time. We are pleased to present the results of fourth quarter and full year 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. Four quarter 21 EBITDA from direct operations reached 62.8 million U.S. dollars compared to 59.1 million dollars reported in four quarter 2020. Full year 21 EBITDA from direct operations reached 204.4 million dollars, a 39% increase of as compared to compare it to 147.4 million for the full year 2020. Four quarter 21 EBITDA including associate companies reached 210.2 million compared to 171.7 million in four quarter 2020. Full year 21 EBITDA including associates reached $719 million, a significant increase as compared to $403 million for the full year 2020. Aligned with the company's strategy to focus primarily on exploration, four-quarter 21 exploration operating units increased to $15.5 million compared to $12 million in four-quarter 2020. Full year 21, exploration and operating units increased to 56.4 million compared to 28 million in last year. Four quarter 2021 capital expenditures were 32.2 million compared to 38 million for the same period in 2020. Full year 2021 capital expenditures reached $90.7 million compared to $73.2 million in full year 2020. The full year 2021 capital expenditure mainly driven by growth cap at San Gabriel, $13.9 million. Sustaining cap of UMPAC, $10.2 million. And Ebrocal, $19.5 million. Post applicable to sales for the full year 2021, reflect a 67.7 million impact due to COVID-19 related expenses compared to the $30.5 million reported in 2020. Buenaventura plans to significantly reduce these expenses by updating its COVID-19 protocols aligned with the increase of vaccinated workforce. Buenaventura's cash position reached $377 million as of December 31, 2021, reflecting $137 million in dividends received from Cerro Verde in the year 2021. Moving on to slide four. Aligned with Buenaventura's commitment with its shareholders, the board has proposed a dividend payment of US $0.073 per share. The company expects a total capex between $190 and $210 million during 2022. The sustaining capex will reach between $90 and $100 million, and the growth capex mainly driven by San Gabriel will be around $100 and $110 million. The company's portfolio of greenfield project continue progressing well during the work. San Gabriel project concluded the prior consultation processes in both direct and influence communities, Corire and Oyoio. Construction permits expected by second quarter of 22, followed by the full funding decision. Yumpa project, which will add close to 30 million ounces of silver to Chagua Life of Mine keeps progressing according to the plan with the EIA Environmental Impact Assessment and Detailed Engineering of Construction Perm. Exploration of Tomasa vein continues with positive results, which will contribute another 30 million ounces of silver to the reserves. This will allow the company to increase silver production beginning 2024 on top of Chagua once the latter resumes operations. Buenaventura sold its total stake in Yanacocha for $300 million and continued payments of up to $100 million tied to future increases in metal prices. Additionally, Newmont transferred its ownership interest in the La Sanja joint venture to Buenaventura in exchange for royalties on any future production and also contributed to with $45 million to cover future closure costs. The net proceeds of the Guanacocha sale in a combination with the deviance received from Cerro Delve during the fourth quarter of 2021 will allow Buenaventura to fully repay the $275 million of the syndicate loan and partially fund the San Gabriel project. This decision is aligned with Buenaventura's commitment to deliver the company an improved balance. Buenaventura finished the ESG materiality assessment as a roadmap to its sustainability strategy. During 2022, Buenaventura will focus in measuring KPI, such as carbon emissions, water footprint, human rights, among others. Moving on to slide five, ESG corporate strategy. During 2021, with the help of our stakeholders, we completed the materiality matrix shown in this presentation. This enables Buenaventura to focus on those items which are identified as highly material. The results and action plan is shown in the next slide. Moving on to slide six, here you can find some key indicators regarding our ESG strategy. For example, on the environmental pilot, Buenaventura is committed to a responsible water management, achieving a 98% of freight circulation at our open-peat operations and 83% at underground operations. Also, in 2021, we have used 74% percent of renewable energy, primarily from our hydroelectric plant. And this year, we will focus on measuring our carbon footprint. Regarding the social pilot, as we have always mentioned, taking care of our workers' health is our top priority, and we will continue working on this. We have achieved a 92 percent fulfillment of social commitment. Also, we have leveraged over $10 million on infrastructure projects that directly benefit the communities developed. Finally, regarding the governance pilot, we will focus on optimizing EBITDA and the construction of our San Gabriel and Jumper projects, which are key value generators. Moving on to slide seven, financial highlights. Total revenues during the fourth quarter were $203. which is 7% higher in comparison to the fourth quarter of 2020. In 2021, total revenues increased to $901 million compared to 2020 where total revenues were $677 million. As we mentioned before, our EBITDA from direct operations for 2021 increased to $204 million in comparison to $147 million during 2020. Also, our EBITDA, including associated companies for 2021, reached $719 million in comparison to $403 million during 2020. The CAPEX decreased to $32 million in the fourth quarter of 2021, compared to $38 million in 2020. In 2021, CAPEX reached $91 million, a 24 increase in comparison to 2020. As you can appreciate on the graph shown in this slide, we are returning to pre-pandemic levels and even achieving greater results than 2019. Moving on to slide eight and nine, attributable production. Total goal, attributable production in the fourth quarter of 2021 was 59,000 ounces, which is 15% higher than the figure reported on the same quarter of the previous year. In 2021, total gold attributable production was 198,000 ounces higher than the same period of 2020. Further attributable production for this quarter was 2.5 million ounces, which shows a decrease of 27% compared to the figure reported on the fourth quarter of 2020. This is a direct result of the suspension of operations at chart. However, during 2021, silver attributable production was 13 million ounces, 13% higher than production in 2020, mainly driven by higher silver production at El Brocado. In the fourth quarter of 2021, 9,000 metric tons of steam were produced significant decrease compared to the fourth quarter in 2020. In 2021, zinc production decreased to 41,000 metric tons, 6% lower than the same period in 2020. In the case of lead, equity production was 5,000 metric tons in the fourth quarter of 2021, which is 32% lower in comparison to the fourth quarter of 2020. In 2021, lead production increased to approximately 21,000 metric tons in comparison to the 24,000 metric tons in 2020. Finally, our copper attributable production for the fourth quarter of the year was 28,000 metric tons. During 2021, copper attributable production was 102,000 metric tons, an 11% increase compared to the same period of 2020. Moving on to slide 10, all-in sustaining costs are cost applicable to sales. The all-in sustaining costs from our direct operations in 2020 increased by 8% to $1,406 per ounce of gold. The costs applicable to sales for 2021 were as follows. For gold, $1,206 per ounce. which is 10% higher than a year ago. For silver, $18.81 per ounce, which is 3% higher than a year ago. For lead, $1,483 per metric ton, which is 26% higher than a year ago. For copper, $6,584 per metric ton, which is 28% higher in comparison to a year ago. Finally, In the case of zinc, the cost applicable to sales was $2,274 U.S. dollars per metric ton, which is 18% higher than a year ago. As we mentioned before, cost applicable to sales has been impacted by approximately $67.7 million of expenses related to COVID-19. Moving on to slide 11, pipeline technology. 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 are glad to announce that we finished the prior consultation in both communities and expect construction permits by the end of two quarters of 2022, followed by the full funding decisions. We are working with AUSENCO to finish the construction management agreement by the end of first quarter 2020. Moving on to slide 13, Trapiche, we have completed one of two environmental impact assessment workshops in the field, and we are missing one to be held by the end of the first quarter of 2020. The cooperation agreements with four out of five communities are on its final stages. We finished update report on power line land access with power results. Moving on to slide 14, Tantawatai's salt project. Hormone Access Board approved viability stage. Finished in 2021 in-field drilling program confirming high-grade salt. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
spk05: Ladies and gentlemen, at this time, we will begin today's 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 1 to ask a question. We'll pause momentarily to assemble the roster. And our first question today comes from Carlos Alba from Morgan Stanley. Please go ahead with your question.
spk06: Good morning, everyone. Thank you very much. So, a few questions, if I may. First is, could you comment on the budget for exploration on both operating and non-operating units for 2022? Clearly, we saw a step up in those in the last quarter, for sure. So, I wonder if you can comment for the outlook, the guidance for 2022. And also, given the comment that you made on COVID-19 related expenses that increased significantly last year versus 2020, how much do you think you can reduce those in 2022? And then, if I may, just on the dividend from Cerro Verde, obviously a very nice payment for you guys and for all shareholders. What do you see going forward? I mean, is this current level of dividend from Cerro Verde something that we can finally see on a recurring basis? And my last question, and sorry to load you up with all of them, is can you confirm if the syndicated loan has already been paid? Just want to make sure that we model that properly. And if not, when do you expect that will be paid? Thank you.
spk03: Thank you, Carlos, for your question. I will answer you the last two questions, and then I'm going to pass the microphone to Daniela and Juan Carlos Salazar. In the case of Cerro Garde DBS, there are not a final figure that we are going to receive this year, but the company, Freeport, has all the the desire and expect to give more dividends this year in the way that and align also with the cash that they are generating every month. As soon as we know, we should inform to the market. The last question about the syndicate, The syndicate is not canceled up to date. We are expecting to be canceled in March, the first days of March. That's our quick view of that. I let Juan Carlos Salazar to talk about the budget of exploration for 2022. Please, Juan Carlos, go ahead.
spk10: Thank you, Leandro. Yes, our budget has increased, especially for this new project we are now drilling, especially the Tomaso project. We are increasing our drilling in that area. Also, we increased our drilling in El Brocal, especially in the open pit. We have new areas, the Tatiana sector, and also we have to – additional some drilling in the south part of the open pit. And so we increase our budget in that regard.
spk04: Once again, if you... Sorry, Lalo. To give some figures, explorations for operating areas would be in the order of $50 to $60 million. And for explorations in non-operating sites, Greenfield, we are talking about between $10 and $15 million. All of these are going to our OPEX and is within the EBITDA that we announce normally. And another additional piece of information, Carlos, is that with this payment of the syndicate loan in March, we will be reducing our leverage ratio, and we estimate a leverage ratio by the end of the year of around 2.5 times, without considering any effect of Cerro Verde's dividends.
spk05: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. And our next question comes from Bastien Mer from Lorraine Vale. Please go ahead with your question.
spk09: Hi, guys. Thanks for the call. Two follow-up questions. First, as you said, probably you will pay the bank syndicate on the first day of March. Have you already received the payment from the sale of Genacocha Steak? And the second one, if you can please repeat the amount that you are expecting to divest on drilling on brownfield projects, because I didn't get it right. Thanks.
spk03: Thank you for your question. Yes, the first answer for your first question, if Minera Yanacocha already paid, we have already received all the payment the same day that we have the final signature. And in the brownfield, Daniel,
spk04: The explorations for within our mining sites are in the order of 50 to 60 million dollars. And for the greenfield exploration projects, we are expecting between 10 and 15 million dollars.
spk09: Okay, perfect. And if I may, one last question. More in the in viewing the market, how do you see prices for this year? What are your expectations, especially for zinc and for the precious metals, right? Which is your base case scenario and what do you expect if you expect to these prices remain at healthy levels? If you can give me more color about that, that would be great.
spk03: Difficult question. However, we can comment about the prices that we have used for our budget. Maybe Daniel can give us some color of the prices, and then maybe Aldo can comment about what our thinking of prices are for the following years. Please, Daniel.
spk04: Yes, Leandro. For our budget, we have been very conservative and considered $22.5 for silver, $1,700 for gold, and $9,400 per ton for copper. For zinc, also $3,200 per ton. Thank you, Leandro. Aldo Massa is here.
spk07: And comment on prices for the future, for this year. I really think in precious metal, really depend on the geolitical situation, what is going to happen with the world that is already taking place. If it's continue or escalate, probably the gold and the silver is going to be higher. Talking about copper, right now it's almost $10,000 per metric ton. It's a very good price. All the analysts are thinking that maybe in the next three years, the copper price will be a little bit lower because there will be more production. There will be some that is coming ahead. And maybe there will be a little surplus in the market. But in 2024, 2025, probably will be a huge deficit in the market and the copper price is going to be up again. Talking about zinc, the zinc is very high right now. It's $3,650 per metric ton. Most of the analysts and traders are thinking that maybe the zinc is going to be up and probably reach $4,000 per metric ton because of the higher energy prices in Europe. But this will not be maintained in the future. Probably it's going to reach $4,000, but the next year will be between $3,000 and $3,500. Dalet will usually follow the thing. Right now it's also in a very good price. It's $2,400 right now. And this is our idea for prices. As Daniel mentioned, we're very conservative with the prices. But we really hope that the prices will maintain at those levels for the future. Thanks.
spk03: Thank you, Waldo.
spk05: Once again, if you would like to ask a question, please press star and then 1. We do ask that you please limit yourselves to a single question. Please note that if you do have a follow-up, you can rejoin the question queue. Once again, that is star and then 1 to ask a question. Our next question comes from Tanya Jokiconic from Scotiabank. Please go ahead with your question.
spk01: yes good morning so i um my questions i have to do with your develop i'm sorry the um uchachakwa mine um i just wanted to get an understanding of what's happening at uchachakwa um in terms of you know your focus is drilling and trying to you know to identify you know stopes and other for 2022 but kind of wanted to understand sort of your planning on this asset and when we can bring it up. And also, I wanted to get an update on San Gabriel, what's happening there, and if you are seeing CapEx increases because of inflationary pressures. Thank you.
spk03: Hi, Tanya. Thank you for your question. The first part, I will give the microphone to Juan Carlos Ortiz, and then Renzo should answer the question. question about regarding San Gabriel. Thank you, Tanja, again.
spk02: Thank you, Leandro. Thank you, Tanja, for the question about the Chukchakwa. Just to make a follow-up to the last time we had this conference call, we started demobilization of the contractors in the Chukchakwa mine. We finished that demobilization by November. And in December, we resumed development And these developments are for drilling stations, to reach drilling stations underground. And this drifting is being done with Buena Ventura resources, equipment and personnel. We only have contractors for drilling, for diamond drilling. The rate of development that we have right now with our own resources is about 300 meters per month. We are ramping up, bringing more equipment and training our own people from other areas to go underground. We expect to reach about 600 meters per month in April to May. At this stage, we expect to complete a drilling program of about 80 kilometers in the year and about 7,000 meters of development in the underground mine. We are now taking into consideration in this figure the rehabilitation of old mining tunnels in which we go back for drilling again to get a drilling station ready for exploration program. What we plan to do first is to, we have a new interpretation of the geology of Chacua based on some characteristics of certain horizons of the limestone that in the past give access or give a lot of old bodies with high grade and large bodies. So the main focus of exploration and the developments to do this exploration is to chase those old bodies in the, it's an anti-clino that we have in the eastern side of the mine. So basically we are doing that. At the same time, of course, we are reviewing all the information that we have, the historical information of the mine, and try to put the new bodies together to see what are the best opportunities and synergies that we can build up with the old stoves that have mining infrastructure and the newer bodies that are pretty much in the range of 300 to 500 meters from our existing underground mining facilities. So pretty much the idea is that along year 2022, we get all this information together, we update our mine sequence plan, and probably come out with a plan to resume operations along the second half of 2023 or early 2024 with a more competitive and stable production unit.
spk01: So am I understanding that this mine could come up into production in the second half of 2023, or is it more 2024? I just had a bit of static on the phone.
spk02: Yes, it's in that range. It's in that range. We expect to resume as soon as possible. That will be the second half of 2023. But it's depending on the information that we gather with exploration.
spk01: Okay. Thank you for that. And just on San Gabriel, if I can just get an update. I did read in the release that you have done your public hearings with the communities and that you know, we could start construction as soon as we, you know, if we get permission to do so, and maybe just talk about the timeline and any capital inflation you're seeing.
spk03: Sure, Sanja. Spencer will give you more color on San Gabriel.
spk12: Sure. Thanks for the question. We keep advancing the conversation with the community and the authorities. We We're still aiming at sustaining our projection that we will start construction after the rainy season that is in the first part of the second quarter. And in regards to your question about increasing GAPEX, the number that is in our 400, 370 to 430 already includes some escalation costs because of last year. So, we're confirming that range.
spk01: And what escalation cost did you include in that number?
spk12: Oh, because the number we present the last year was a number from 2019, and we are confirming it to 2020 since we moved it. We didn't start construction as expected in 2019. One, I'm sorry, we're moving into 2022, so there's some escalation on the cost of equipment and the such.
spk01: Okay. I'll come back with more. Thank you.
spk05: And our next question comes from Mauricio Fernandini from Credit Corp Capital. Please go ahead with your question.
spk08: Thank you. Good morning, everyone, and thanks for the presentation. I would like to know more about the shift to copper at El Brocal, and I don't know if you could elaborate more on that one. Basically, it caught my attention that there was a significant fall in our treaty at Tajo Norte, copper and silver zone. Now, I wanted to know why this happened and how should we respect our treaty and production at Tajo Norte, both copper and silver, and to move on the following quarters.
spk03: Thank you, Mauricio. Juan Carlos Ortiz will give you the correct answer for your question.
spk02: Thank you, Mauricio, for the question. As we come with the market, the Tajo Norte is progressing to the south, and by doing so, we are moving away from the polymetallic ore into the copper ore. That's the same ore body that we are mining underground, so we are getting closer to the underground mine. That's the reason in year 2021 we have lower zinc and lead production compared to the previous year, 2020, and an increase in the copper production. So, it's getting more copper from the open pit and gradually less zinc and lead. The silver comes along with this transition area. It's a very high rate spots that we have. some high-grade silver nuggets that we have in this transition period. We take advantage of that in our model, in our geological model. We're kind of conservative because that's the way to do the model. That's the reason we could get the guidance on silver production. And probably this year, we will continue mining the same area, so we have some opportunities to over- do our serial production as well. And it's always, we publish our conservative figures, and quarter by quarter, we will see what's the positive or not for reconciliation that we have from our . So, it's part of the life of mine that we have . There is no big surprise. There is no problems from the production . Thank you very much.
spk05: And our next question is a follow-up from Carlos Alba from Morgan Stanley. Please go ahead with your follow-up. And Mr. Alba, is it possible your phone is on mute?
spk06: Yep. Sorry. Sorry about that. Yes. So thank you. Several points, additional points, if I may. On the San Gabriel, just to confirm, so when do you expect construction may start, and then when do you expect production or first metal to be produced if everything goes well? And the other questions I have is you can comment on COVID-19 expenses in 2022, if there is a range of a number that you can provide. And then finally, what would be the strategy in Trapiche? You're still looking at probably doing a joint venture there. And at what stage or at what point do you think that would be more optimal for you to to actively try to find a partner, and what would be the areas that Trapiche could start in your view if everything goes according to plan?
spk03: Thank you, Carlos, for your question. Yes, sorry for the COVID-19 information for 2022. The budget for this year is between $14 million and $15 million. That is the budget we are expecting for COVID-19 expenses. In terms of San Gabriel, construction we expect to begin as Renzo told us before, in the second quarter of this year, as soon as possible. And commercial production is around 2025. There are three years of construction. That is the commercial production, yeah. In the case of Capiche, we have not made a decision already, but of course there is the sentiment in the group of management to look for a joint venture, or someone who can collaborate with us in the developing of Trapeze. In terms of dates, maybe Renzo can give us the current dates that we are managing. Please, Renzo.
spk12: Yes. For Trapeze, we are in our last year of feasibility. So, if everything goes as planned, we should start the construction phase on the year 2024, second part of 2024, and it will last three years.
spk06: Thank you very much.
spk05: And our next question is also a follow-up from Tanya Jakosconic from Scotiabank. Please go ahead with your follow-up.
spk01: Great, thank you. So I did want to come back to San Gabriel and just wanted to understand You provide us production and the capital and EBITDA numbers, but just wanted to know if you have, what do you think operating costs are going to be at that asset? Given inflationary pressures, just wondering what you are projecting for operating costs for San Gabriel and also operating costs for 2022 for the overall company.
spk03: Thank you, Tanya. We can begin with San Gabriel, please, Renzo.
spk12: Yes. In operating costs for San Gabriel, I think our holding sustaining cost is around $1,400 per ounce. And that's kind of what we are projecting. And we have been, I think I didn't get your question correctly the first time. We have been working over the whole 2021 quoting the equipment and quoting the main services that we're going to be hiring. And we have some savings in there that cover for the CAPEX increases due to inflation and escalation costs. So that's why we're maintaining the same range of CAPEX.
spk01: Yeah, I just was wondering what you're seeing in terms of inflationary pressures. Is it like 10 percent? Is it five? Like, what are you seeing in costs and capital?
spk12: Yes, I think we are in the, inflation was 20% in the cost of equipment. That's what we have been seeing during this quoting process.
spk01: Okay. And then maybe Daniel can give us an update on just overall, what should we be thinking about costs for 2022? in your portfolio of assets.
spk04: Yes, Tania. Thanks for your question. If we talk about gold, we can say that Urcopampa will be producing at a cost applicable to sales of between $1,100 and $1,200 per ounce. In the case of Tambomayo, it would be close to $1,000 per ounce. And in the case of La Zanja, close to $1,400. Chubchaco, of course, will not be producing. Hulcany will be producing at a cost applicable to sales of around $12 to $13 per ounce. And El Brocal for copper will be producing at between $6,000 and $600 and $500. Okay, so $6,000 to $6,500 at El Brocal Yes, for copper.
spk01: Okay. No, that's very helpful. Thank you so much for that, and have a great day, everyone.
spk03: Thank you, Tanya. Thank you, Tanya.
spk05: And, ladies and gentlemen, that will conclude today's question and answer portion of today's conference call. I would like to turn it back over to Mr. Garcia for any closing remarks.
spk03: Thank you, and thank you for attending this conference. Before we finish today, thank you another time for making the time to be with us, and have a wonderful day for you and your family. Thank you.
spk05: Ladies and gentlemen, that concludes Buena Ventura's fourth quarter and four-year 2021 results conference call. We would like to thank you again for your participation. You may now disconnect your lines.
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