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spk02: Good day, ladies and gentlemen, and welcome to the Compania de Mina Bueno Ventura second quarter 2022 earnings conference call. At this time, all participants will be 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. Gabriel Salas, Investor Relations. Mr. Salas, you may begin.
spk03: Good morning, everyone, and thank you for joining us today to discuss our second quarter 2022 results. Today's discussion will be led by Mr. Leandro Garcia, Chief Executive Officer. Also joining our call today and available to your question are Mr. Daniel Dominguez, Chief Financial Officer, Mr. Juan Carlos Ortiz, Vice President of Operations, Mr. Renzo Mager, Projects Manager, Mr. Juan Carlos Salazar, Geology and Explorations Manager, Mr. Roque Benavides, Chairman, and Mr. Raul Benavides, Director. Before I hand our call over, let me first touch on a few items. On Buena Ventura's website, you will find our press release that was posted yesterday after market closed. Please note that today's remarks include forward-looking statements that are based on management's current views and assumptions, while management believes that its assumptions, expectations, and predictions are reasonable in the view of the currently available information. We are cautioned not to place and view reliance on these forward-looking statements. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on July 26, 2022. Let me now turn the call to Mr. Leandro Garcia.
spk08: 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 of the second quarter 2022 from Compania de Minas, Guadalajara. 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. Moving on to slide three, the highlights were as follows. Second quarter 22 EBITDA from direct operations was negative 19.1 million compared to 68.5 million reported in the second quarter of 2021. Second quarter 22 operating cash flow reached 72.7 million compared to 101.7 million in second quarter the last year. Second quarter 22 net loss was 39.9 million compared to a 37.5 million net income for the same period in 2021. The second quarter 22 exploration at operating units increased to 18.9 compared to 14.5 million in the second quarter 2021. This increase is part of the company's revised strategy to increase its focus on exploration in order to extend life of mine. Second quarter 22 capital expenditures were $30.5 million compared to $21.4 million for the same period in 2021. Second quarter CAPEX includes $11 million related to the San Gabriel project and $60.3 million related to the Yumbot project. The company continues strategy of progressively reducing fixed costs at the Uchukchagua mine to improve the cost structure efficiency when the operation restarts. COVID-related expenses were reduced from $19.1 million in the second quarter of 2021 to $1.9 million reported in the second quarter of 2020. Buenaventura's cash position reached $326.3 million as of June 30, 2022. Net debt was reduced to $416.4 million with an average maturity of 3.8%. versus 2.2 years of last quarter of 2021. On the second quarter of 2021, sorry. On April 29, this year, Cerro Verde paid a total dividend of $150 million, when Aventura of that received $29.4 million relative to its stake in Cerro Verde. Once a score in debt amounts to $90 million with a coupon rate of 5.05% per annum, payable until 2027. Moving on to slide four, our ESG corporate strategy. Here you can find some key indicators regarding our ESG strategy. During the second quarter of 2022, we start our carbon footprint measurement, and we conducted our human rights due diligence. In line with our ESG strategy, during the second quarter, we will apply to the Dow Jones Sustainability Index. Moving on to slide five, financial highlights. Total revenues during the second quarter were $150 million, which is 38 percent lower in comparison to the second quarter of 2021. The first half of the year, total revenues decreased to $383 million compared to the first half of 2021. As we mentioned before, our EBITDA from direct operations for second quarter of 2022 was negative $19 million in comparison to $69 million during the second quarter of 2021. EBITDA from our direct operations for the six months of 2022 increased to $413 million, in comparison to $108 million during the first six months of 2021. The increase is mainly due to the Janacocha transaction. Also, our EBITDA, including associated companies for the second quarter of 2022, which are $52 million in comparison to $181 million during the same period in 2021. The figure including our affiliates for the first half of the year was $630 million compared to $344 million for the same period in 2021. The capex increased to $31 million in the second quarter of this year compared to $21 million in the second quarter of 2021. In the first six months of the year, APEX totaled $49 million, a 43% increase in comparison to the first half of 2021. Moving on to slide six and seven, our attributable production. Total gold attributable production in the second quarter of 2022 was 48,000 ounces, which is 3% higher than the year reported on the same quarter of the previous year. This increase is mainly explained by the 81% year-over-year higher volume or treated at all copampas. It was partially upset by the 18% decrease in the convalescent gold grade and the 30% decrease in ore stockpile on the leach bacteria. In the first semester of 2022, total gold attributable production was 97,000 ounces, 15% higher than the same period in 2021. Silver attributable production for this quarter was 1.6 million ounces, which shows a decrease of 51% compared to the figure reported on the second quarter of 2021. During the first half of 2022, silver attributable production was 3.4 million ounces, 48% lower than the first semester of 2021. This decrease was mainly explained primarily due to the suspension of Utujaqua's operation, as was previously announced, and a change of the mine plan sequence at El Broca. In the second quarter of 2022, metric tons of zinc were produced, a decrease compared to the second quarter in 2021. In the first semester of the year, zinc production reached 15,000 metric tons, 28% lower than the same period in 2021. In the case of lead, equity production was 4,000 metric tons in the second quarter of 2022, which is 41% lower in comparison to the second quarter of 2020. The first half of 2022 lead production was approximately 8,000 metric tons in comparison to 11,000 metric tons in 2021. Finally, our copper attributable production for the second quarter over the year was 28,000 metric tons. During the first half of 2022, copper attributable production was 55,000 metric tons and 13% increase compared to the same period of 2021. Moving on to slide eight, all-in sustaining cost and cost applicable to sales, cash. The all-in sustaining cost from our direct operations of the first semester of 2022 decreased by 6% to 1,450 U.S. dollars per ounce of gold. The costs applicable to sales for the first semester of 2022 were as follows. For gold, $1,128 per ounce, which is 11% lower than a year ago. For silver, $17.65 per ounce, which is 10% lower than a year ago. For lead, $1,341 per metric ton, which is 2% higher than a year ago. Of copper, $6,885 per metric ton, which is 16% higher in comparison to a year ago. Finally, in the case of zinc, the cost applied to sale was $3,167 per metric ton, which is 51% higher than a year ago. Moving on to slide nine, pipeline of projects. Here we are presenting one snapshot, the current development level for each one of our projects. Moving on to slide 10, San Gabriel. The construction is delayed due to social matters that are being addressed. We are expecting to resume activities on the following weeks. The engineering and the procurement work packages are underway. Engineering at 40% completion, procurement at 61% completion. Power line boot dealing starts when 93% of the power line lands are secured. We are left in 3.5 kilometers to go. Moving on to slide 11, Trapiche. We are finishing first on-site metallurgical column testing after 200 days of primary leaching. Column comparison and flow rate control help confirm design recovery. We have completed all chloride leaching tests in Lima. Final report in process. We have successfully completed completed the mission IPIA workshop. We have signed cooperation agreements with two out of five communities, remaining one is still in process. We have started power line land agreements with three communities. Access road land agreements to be resumed after cooperation agreements are finalized. Moving on to slide 12. So far, Coimbatore's board approved the development of a 20K pre-feasibility study. The drilling plan to increase resource certainty and Takamachi's land acquisition are in progress. That's all. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
spk02: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Jen Spies with Morgan Stanley. Please go ahead.
spk05: Yes. Thank you for taking my call. My first question is on On the cast that you reported, the zinc cast was $4,100 per ton, which is above the current spot price. And the copper cast was, I think, $7.2, which is close to the current spot price. Just wanted to know what the strategy there is going forward if you're considering, I don't know, stopping operations or what is going on with the costs that you're currently experiencing. Thank you.
spk08: Thank you, James, for your question. This second quarter for Brocal after the landslide that we have in the last days of March have making more complex our operation. However, we have a plan, and in more detail, Juan Carlos can answer your question. Please, Juan Carlos.
spk06: Thank you, Leandro, and thank you, James, for the question. Regarding zinc in Brocal, during this quarter, after the landslide that we had in the open pit where we produced the polymetallic ore, we have to supply the processing plant with the stockpiles, the low-grade stockpiles that we have from previous years. That's the reason we feed low-grade into the processing plant, or that low-grade also has some lower than previously obtained metallurgical recoveries, and that's the reason we have this increased cost for the seam production. We'll continue with this, feeding this material into the processing plant along this quarter as the rehabilitation works in the open pit progress. And by the last quarter of this year, we will reach the production in normal terms from the open pit. In the case of copper, we have two components working together, impacted us during this quarter. Number one was inflation. mainly diesel contractors, we need to renegotiate the cost of the services from the contractors that operate in the underground mine where we feed all the copper to the processing plant. And the second impact that we have is that we are ramping up the production in the underground mine. So we're investing more meters of development underground. We are now almost at stable production of 8,000 tons per day from previously 7,500 tons per day. Now we are at 8,000 tons per day and we expect to be close to 8,500 tons per day by the end of the year. So now in this second quarter we invest more meters in development and more in infrastructure in order to allow the ramp up of production from copper costs in the second quarter.
spk05: Okay. So 800,000 tons per day versus how much did you say? And when was that lower comparison? Last year or last quarter?
spk06: At the beginning of the year, at the beginning of the year, we were around 7,500 tons per day. Now we are 8,000. We expect to be 8,500 tons per day by the end of this year. Okay, perfect.
spk05: And if I may make a follow-up question, just any caller on Cerro Verde, the results were not very good as well. Were they also impacted by provisional pricing? And along those lines, just to confirm, the provisional pricing impact for you, was it around $30 million? Is that correct?
spk04: Sorry. James, hi. This is Daniel Dominguez. The impact for Buena Aventura in the quarter was $40 million.
spk05: $40 million, okay.
spk04: Yes. And by the way, in the reconciliation, there is a $30 million that is adding up to the loss, the $50 million loss. That should be $40 million. We will correct as soon as we finish this call. Okay, perfect.
spk05: And on Cerro Verde, any color there on what's going on? Are they also experiencing higher costs, or is it mainly provisional price?
spk04: They are experiencing higher costs. due to inflation, basically. This should be in the order of 5% to 8%. However, we feel very confident that they will continue distributing dividends. We were not expecting higher dividends for this second quarter. They were approved only $30 million, but for the second half of the year, we do expect higher dividends that should add up for the entire year to at least $100 million to $120 million. Sorry, Leandro.
spk08: No, if I may add, also the embedded derivative for the corporate price in the provisional invoices affected the sales and revenues also, right? Okay. Perfect.
spk02: Great. Thank you so much.
spk08: Thank you, Jim.
spk02: Again, if you have a question, please press star, then one. Our next question will come from Tanya Jakukonek with Scotiabank. Please go ahead.
spk00: Great. Good morning, everyone. Can you hear me? Hello?
spk08: Yes. Yes, Tanya, yes.
spk00: Good. Good morning. I'm just going to ask some very quick questions for modeling. Just wanted to come back to three for modeling, please. On royalty income, you had none this quarter. Is this something that we should think about, that you're not going to get anything going forward? Or what happened with the royalty income?
spk08: Hi, Tanya. The royalty income comes from the income we used to receive from... through our company. And we should continue receiving this revenue in a lower rate from last year because we have reduced our participation. Okay. All the arrangements with Newmont, we split Chopiloma.
spk00: Okay, no worries. I understand that one. Okay, and then... If I may... Okay, go ahead.
spk04: Yes, Tanya, sorry. As you can see in the current line of royalties, we have zero. Yes. We have reclassified this on the other lines. We continue expecting for the entire year around $8 to $10 million. But we are reclassifying this in others.
spk00: Okay. Got it. Thank you. And then, Daniel, can I also ask two other modeling questions? One has to do with CAPEX. It looks like you've done $50 million for six months, and previous guidance had been $190 to $210 million. overall, and then you have the separate within their development capital of 100 to 110. Can you give us an idea if that 190 to 210 is still valid? Because you've got a lot to spend then in the second half.
spk04: We expect to disburse this year for San Gabriel due to the delays around between 100 and 105 dollars. Lower?
spk00: Okay, so 100 to 100. Is that for all CapEx or is that just San Gabriel?
spk04: This is just for San Gabriel. And for our sustaining CapEx, including UMPAC, we expect the $90 million that you mentioned.
spk00: So $190 in total. Like if you were to put all the CapEx together, you still expect the $190 million, including the development CapEx? Yes. Okay. Thank you for that. And just, Daniel, lastly on the modeling question before my last two questions on the assets, just the revenue, when I looked at the revenue line and I looked at your volumes and your sales, sorry, your sales and your realized pricing, it still was much lower than I had expected. So I'm just trying to understand how going forward can we, you know, do, you know, I thought with the provisional pricing, I would have captured all of that, but it was much lower again. So I'm just wondering if there's any clarity from you guys on that, why it was so much lower.
spk04: The embedded derivative or the provisional pricing had an impact of $40 million in the quarter. The price we closed when we sold this concentrate was in the order of $5,200. And the provisional price, sorry, $9,200. And the default curve at the end of the quarter was around 82. So there's a big gap there. We expect these to revert in the following quarter.
spk00: So should I be thinking that 52 million is coming back in the next two quarters?
spk08: Oh, it depends on the spot price, not the QP that we will have, the final QP that we will have in the work. in our sales. Right.
spk00: Okay. All right. Thank you. I'll make a stab at that. Maybe just on San Gabriel, can I just get an update on what are these social issues that have come about and what are they and why do you think they will be resolved quickly in the next few weeks and then where is the project, you know, where are we on some of the other items? I know you mentioned the procurement and and the power line, but we've got some other critical paths to get through this year and next. So maybe just an update for me on that.
spk08: Sure, Tanjan. Thank you for your question. Allow us to clarify the situation of San Gabriel. Here we are with Renzo Mager, our manager. project manager, and he will give you more color of the current situation in Zangabia. Please, Renzo, go ahead. Yes. Hi, Tani.
spk07: So I guess the first thing to comment is that we are not blocked. What we have had is two events. The first one happened in mid-June. Both of them last less than six hours, and it was communities or people from outside our direct area of influence requiring to be considered as part of the area of influence. One of the highlights to mention is that our relationship with our two communities that are part of the actual area of influence are still intact, and we keep working with them to develop the projects. What we are doing is we're working with authorities to open this discussion with each one of these communities in a separate table. Meanwhile, we're keeping our field operations at a minimum. That's our decision until we find the... So we don't exacerbate this initial problem. You can actually go to the project today. It's not blocked. We don't foresee a major impact at this point. Since we are at the beginning of the project, most of the activities are still engineering and procurement. Those activities have not stopped at all. And kind of the main construction will start in the second part of next year. So what we are seeing today is minor delays on pre-construction activities only.
spk00: And on the pre-construction activities, anything critical to get to that second part of next year construction?
spk07: Nothing that we cannot accommodate because the campsite, for example, is currently being built at the factory. The first modules of the temporary camp are still under construction on the factories, maybe some delays on when to place them on site, but nothing that cannot be accommodated at this point.
spk00: Okay, so you're just thinking that the camp is just the critical path to get that in place so that you can start construction in the second half of next year.
spk07: Yes, actually preparing the footing for that camp to be placed on top of. Again, we have one year to kind of mix and match things and try to minimize the impact.
spk00: Okay. So it's just two events from other communities. So your two communities that you are area of influence are fine. Other people outside of these communities want something from you and that's what caused the social issues. Is that correct understanding? Okay.
spk07: That's correct. That's correct. And it's not blocked. I guess the main point is it is not blocked. You can actually walk to the project. It has been like two visits.
spk00: Okay. All right. No, thank you for that. And then just on, can I ask on Uchachakwa? I read that you've been doing your underground development and you're increasing your development rate and you want to do a startup of this, restart the mine in Q4 of 2023. Can you just remind me from now until Q4 of 2023, what needs to be done at Ucha Chacua to bring the mine back up?
spk08: Sure, Tanja. Remember that we are focusing on Chacua and Yumpan as a whole, that the specific works that we are doing on Chacua are preparing the mine, gathering all the areas that we are going to stop here. Juan Carlos can give you more detail of that.
spk06: Thank you, Leandro, and thank you, Tanya, for the question. Yes, we have been processing as planned along these initial two quarters of 2022 for exploration, and most of the tunneling has been done to prepare new areas for exploration as was the original strategy. Now we reach the level of 700 meters per month that the developing capacity that we already have in place, 100% done with Buenaventura resources. We only have contractor for diamond drilling now. And with this 700 meters per month capacity, now in August and September, we will start to split part of that volume of meters into exploration and gradually increase the percentage of those 700 meters into mine development and mine preparation. That, particularly in two new areas that we have confirmed to exploration along the last six months, Nora Geraldine is one of them. We will prepare that area. The focus of the development will be in that area and also We have access to some areas in the Carmen mine, part of our reserve. We are doing the confirmation drilling there. We are doing rehabilitation works on the railroad and the accesses, ventilation, all the facilities that we need to require for future mining. And that's basically the agenda for incoming quarters. It's developing Noda Geraldine as a new area for mining next year, the rehabilitation in the current mine, and a cost reduction that we have been mentioning before. We are reducing our size of the operation in Chacoa. At the same time, the same team, the same management team, is taking care of the development of the Jumbac project. Remember, the Jumbac project is only three kilometers straight line from Chacua to the Jumbac. So the same team will take care of these two mines, two operations, and both together will fit into the Chacua processing plant in the last quarter of next year. So we are doing all of our effort now to try to speed it up, to try to a little bit advance that delivery time ahead of the fourth quarter of next year as much as we can into the third quarter of next year. So it's the main agenda that we have working at the same time with these two operations, Uchukchakwa, rehabilitation, and Noda Geraldine as a new area, and JunePAC, mine development, and all infrastructure for mining, like ventilation, pumping, offices, camps, shops, warehouses, etc., that also will be delivered by the second quarter in June, the second quarter of next year.
spk00: And will you, with all of this development that you're doing, and it looks like you're going to be developing in ore in some spots, will you have a big stockpile ahead of the processing facility when you're ready to go in Q4? of next year?
spk06: Yes, that's the plan. The plan is to, right now, this year, 2022, most of the development will be in waste, developing in the ramps and the accesses. Next year, by March, according to the plan, we will start developing in ore, in March. So between March and September next year, gradually more developing will be done along the bays of the ore bodies.
spk00: So do you have a targeted stockpile size that you will have ready to feed the mill when you are ready?
spk06: Well, we believe to have between 10 days, 12 days will be enough. So that's part of the tradeoff that we're making to speed up the resume operation of the processing plant. We will have like 90 days of the stockpile. Once we have 10, 15 days on a sustained basis, probably will be the right time to turn on the processing plant again.
spk00: So ultimately, so I understand correctly, you will have 90-day stockpile, 90 days to start the melt.
spk06: No, no. No, the idea will be to be with 15 days, 10 to 15 days of stockpile and surface right next to the processing plant.
spk02: Yeah.
spk06: So if we reach that level on a sustainable, again, with a sustainable level of production from the underground mines, probably that is going to be the time for resuming the operation of processing plants. Right now, we're conservative with that for the last quarter of next year, but probably we'll reach that level somewhere in the third quarter next year.
spk00: Okay, perfect. Thank you. I will stop asking questions and leave it to somebody else. But thank you so much for the insights.
spk07: Thank you, Tanya. This is Renzo. I just want to add that it's not only in regards to San Gabriel, that the communities of Puyo, Oyo, and Coriti, our relationship is not only intact, they are very proactive and they send letters to the ministry stating the support for the project.
spk00: Yeah, it just appears that it's just outsiders that just want something, a piece of something from you and your communities within your space of influence of where you're going to be operating are in support. So it's just a matter of how do you deal with them and you said you have the authorities in place helping you and And then obviously, hopefully some resolution will be quickly with them. Yeah. Thank you.
spk07: Thank you.
spk02: Again, if you have a question, please press star, then one. This concludes our question and answer session of today's conference call. I would now like to turn the conference back over to Mr. Leandro Garcia for any closing remarks. Please go ahead, sir.
spk08: Thank you, sir. Before we finish today, this conference call, we want to thank you very much for making the time to join with us and share all our information. Thank you and have a wonderful day.
spk02: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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