Buenaventura Mining Company Inc.

Q4 2022 Earnings Conference Call

3/1/2023

spk01: Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura fourth quarter and full year 2022 earnings results conference call. At this time, all participants are in a listen-only mode. Please note this call is being recorded. At this time, I'd like to introduce your host for today's call, Mr. Gabriel Salas. You may begin.
spk02: Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2022 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 Mager, Vice President of Projects, Mr. Juan Carlos Salazar, Geology and Explorations Manager, Mr. Roque Benadiez, Chairman, and Mr. Raul Benadiez, Director. Before I hand our call over, let me first touch on a few items. On Buenaventura'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 projections are reasonable in the view of the currently available information. Your caution not to place undue reliance on these forward-looking statements. I encourage you to read the full disclosure concerning forward-looking statements within the earnings results press release issued on February 28, 2023. Let me now turn the call to Mr. Leandro Garcia.
spk05: Thank you, Gabriel, and good morning to all, and thank you for your attending to this conference call. We are pleased to present the results for four quarter and full year 2022 from Compania de Minas Buenaventura. 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 number two. Moving on to slide three, the highlights were as follows. Fourth quarter 2022 EBITDA from direct operations was $66.9 million compared with the U.S. $59.7 million reported in four quarter 21. Full year EBITDA from direct operations reached $473.1 million, a significant increase as compared to $204.4 million for the full year 2021, and includes $300 million resulting from the sale of Buenaventura State in Yanacoche. Four-quarter 22 net income reached $68.7 million compared to a $222.3 million net loss for the same period in 2021. The four-quarter 21 result includes a net loss of $301 million from discontinued operations, mainly due to the reclassification of Buenaventura's interest in Yanacocha. Full year 22, net income was U.S. dollars $602.9 million compared to a $262.8 million net loss for the full year 2021. Four-quarter 2022 exploration and operation units increased to $27.2 million compared to $15.5 million in four-quarter 2021. This increase was aligned with the company's revised strategy to increase its focus on exploration in order to extend the life of mine of our old units. Full year 2022 exploration at operating units increased to $80.8 million from $56.4 million in full year 2021. Buenaventura's cash position reached $253.9 million as of December 31st, 2020. Net debt decreased to $484.6 million with an average maturity of 3.4 years. All quarter, 22 capital expenditures were $58.8 million compared to the $32.1 million for the same period in 2021. Full year 2022 capital expenditures reached $152 million compared to $90.3 million in last year. Full year 2022 CAPEX includes $34.7 million related to the San Gabriel project and $30.4 million related to the June project. On December 20, 2022 Cerro Verde paid a total dividend of $250 million. Buenaventura received $49.8 million relative to its stake in Cerro Verde. The total dividend received by Buenaventura in full year 2022 was $79.1 million. Mining operations at La Zanja were halted in October 2022 when phase four mining was completed. However, Bleaching will continue to the extent that it remains profitable while Buenaventura continues exploration related to the underground copper-gold sulfide project. Buenaventura's board of directors has proposed a dividend payment in the amount of US$0.073 per share , aligned with the company's commitment to shareholder value. Moving on to slide four. social, environmental, and political challenges. Today, Buenaventura's on-site operations have been operating normally, while off-site logistics have encountered some delays. Despite the social issues, there has been no damage to Buenaventura's property or assets, and all other Buenaventura mining assets are operating under normal conditions. Moving on to slide five, financial highlights, Total revenues during the fourth quarter were $246 million, which is 3% lower in comparison to the fourth quarter of 2021. The full year 2022, total revenues decreased to $825 million compared to $901 million during the full year 2021. As we mentioned before, Our EBITDA from direct operations for fourth quarter 2022 was $77 million in comparison to $60 million during the fourth quarter of 2021. EBITDA from direct operations for the full year 2022 decreased to $173 million in comparison to $204 million during the full year of 2021. These figures exclude the Yanacocha transaction Also, our net income for the fourth quarter of 2022 was $69 million in comparison to a net loss of $22 million during the same period in 2021. Net income for the full year of 2022 reached $603 million compared to a $263 million net loss for the full year 2021. The capex increased to $59 million in the fourth quarter of 2022 compared to the $32 million in the fourth quarter of 2021. In the full year 2022, capex total $152 million, a 68% increase in comparison to the full year of 2021. Moving on to slide six and seven, attributable production. The gold at the root of production in the fourth quarter of 2022 was 53,000 ounces, which is 10% lower than the figure reported on the same quarter in the previous year. This decrease is mainly explained by lower production at Tambomayo, in line with the planned mining sequence of low and lower grade. The full year of 2022 Total gold attributable production was 206,000 ounces, 4% higher than the same period in 2021. Silver attributable production for this quarter was 1.7 million ounces, which shows a decrease of 25% compared to the figure reported on the fourth quarter of 2021. During the full year of 2022, Silver attributable production was 6.8 million ounces, 43% lower than the full year of 2021. This decrease was mainly explained primarily due to the suspension of Uchuchacua's operation, as was previously announced, and a change of the mine plan sequence at El Broca. In the fourth quarter of 2022, 5,000 metric tons of zinc were produced, a 45% decreased compared to the fourth quarter in 2021. The full year, 2022, zinc production reached 28,000 metric tons, 33% lower than the same period in 2021. In the case of lead, equity production was around 3,000 metric tons in the fourth quarter of 2022, which is 30% lower in comparison to the fourth quarter of 2021. The full year of 2022, lead production was approximately 15,000 metric tons in comparison to the 21,000 metric tons in 2021. Finally, our copper attributable production for the fourth quarter of the year was close to 31,000 metric tons during the full year 2022. Copper attributable production was 116,000 metric tons, a 13% increase compared to the same period of 2021. Moving on to slide eight, all-in sustaining cost and cost applicable to sales. The all-in sustaining cost from our direct operations in the full year 2022 increased by 2% to US$1,564 an ounce of gold. The cost applicable to sale for the full year 2022 were as follows. For gold, $1,153 per ounce, which is 4% lower than a year ago. For silver, $19.60 per ounce, which is 4% higher than a year ago. For lead, $1,329 per metric tonne. which is 10% lower than a year ago, for copper, $6,613 per metric ton aligned with the full-year 2021 fee. Finally, in the case of zinc, the cost applied to sales was $2,812 per metric ton, which is 24% higher than a year ago. Moving on to slide 9, pipeline of project update. Here we are presenting in one snapshot the current development level for each one of our projects. Moving on to slide 10, sorry, San Gabriel. Engineering and procurement work offsite activities progress as planned by a significant 64% and 83% respectively. relative to a total target set for the project completion. These thereby reduce overall project uncertainty, and potentially enable the recovery of a portion of time lost related to this project relative to its targeted completion. Tyne Ausenko's EPCM contract and awarded power line boot contract. Moving on to slide 11, Trapiche started the second set of on-site column metallurgical testing and ROM metallurgical leaching test, environmental impact assessment and social engagement fieldwork progressing as planned. Thank you for your attention. I will hand the call back to the operator to open the line for your questions. Operator, please go ahead.
spk01: 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 your handset prior to pressing the numbers to ensure the best sound quality. Once again, in order to ask a question, please press star and one. We'll pause momentarily to assemble the roster. And our first question today comes from Carlos De Alba from Morgan's Family. Please go ahead with your question.
spk00: Carlos De Alba Good morning, everyone. Thank you for the presentation. My question, Leandro, is maybe on CapEx, right? The guidance of 350 to 370 came above market expectations. So if you could allude or explain a little bit what drove this, I think it's also a little bit higher than what the company had mentioned before. It was planning on spending in 2023. So if you can provide maybe a little bit of color as to what is driving that increase or apparent increase. And also, what are the expectations in terms of breaching the gap between your fairly reduced cash flow operations, at least as of lately, and these CAPEXs? I don't know if you can comment, maybe Cerro Verde dividends is what is going to bridge that gap, or if you will have to issue debt, or maybe are you planning on selling some assets. If you can maybe address this question on free cash flow, that would be interesting to understand what the company is planning. And then we noticed, obviously, the increase in exploration spending. Can you talk about what the budget is for the two lines that flow into your income statement, the exploration in operating units and the exploration in non-operating areas for 2023? Thank you.
spk05: Thank you, Carlos. The increased cap for the following year mainly is explained because of the the topics we have in San Gabriel and we have to continue doing the work in 2023. For the difference of the cash and the topics we are going to need in 2023, we do have a plan. We expect also the dividends of Cerro Verde and maybe some financing is needed. for this year to cover the increased CAPEX. Maybe Daniel and Juan Carlos can give you more color of those questions.
spk03: Thank you, Leandro. Thank you, Carlos, for your question. As Leandro mentioned, this increase in the guidance for the CAPEX of 2023 is due to to the carry forward that we have from the delays at San Gabriel in 2022. The figure we expect for this year, 2023, is around $350 to $360 million. The breakdown of this is at San Gabriel we will need around $190 million for developing YUMPAG close to $50 million. And at El Brocal, the tailing dam management, to be able to expand the plant capacity and the capacity of the tailing dam, we will devote around $50 million there. In terms of the exploration budget, for 2023, we are expecting between $80 and $90 million. The distribution of this are... close to $50 million in exploration for our operations, and $30 to $35 million to our greenfield projects. Going back to how we are going to fund these CAPEX requirements for this year, we have $250 million in cash that we are going to use. We expect, as Leandro mentioned, dividends from Cerro Verde. They could be in the order of $100 million, $120 million. And of course, when we need the cash, we could be raising something close to $50 million or $100 million. As we have already mentioned, we have between $50 and $100 million already committed with local banks.
spk00: Thanks for those details, Daniel. So you don't think that a company will have to sell assets?
spk03: Not at this point in time, Carlos. That's clear.
spk01: And once again, if you would like to ask a question, please press star and then one on a touchtone telephone. To withdraw your questions, you may press star and two. Again, that is star and then one to ask a question. And at this time, we have a follow-up question from Carlos De Alba from Morgan Stanley. Please go ahead with your follow-up.
spk00: Yeah, thank you. Thank you, guys. Coming back to La Sanja, Leandro, what is the level? So you mentioned that the leasing will continue as long as it is profitable to do so. What is that level in terms of gold prices? And for how long, how much more material do you think you can potentially extract there?
spk05: Thank you, Carlos. The planned output this year is 5,000 ounces this 2023. We will continue leaching La Sanja during all the time we are converting this unit and developing the copper-gold sulfide project. Juan Carlos, I don't know if you want to comment something about La Sanja additionally?
spk04: Yes, sure, Leandro. Currently, we have a very conservative budget of about 5,000 ounces of gold to be extracted from the existing leaching pad in 2023. We expect to be above that figure, but it's a very conservative initial figure because it's something that you learn in the process how much you can get out. In parallel, we are working on a project to do some geophysics on the pad to know what are the kind of dry areas where the solution is not running through that could be potentially wet with additional drilling in order to pump with low pressure the CNI solution in order to extract gold from the dry areas that were not completely leached because of the way the pad is being built. There is some local experience doing that with success. So it's a kind of innovative process that we will build on this year in order to extend profitable or economic leaching of the path for, we don't know how much, but probably one or two more years to go.
spk00: Thank you, Juan Carlos. And so the cost attributable to sales at La Zanja is around, or was in the fourth quarter at least, $1,649, which was better than the full year of $1,820. Around those levels is the break-even potentially, and below that, would you stop leaching, or would you just carry on and extract all the material for the next one to three years that you mentioned?
spk04: Yeah, well, there's a good question because the cost actually records all the expenses that we make in the La Sanja unit. It includes also part of the exploration, part of the... Progressive closure that we do in some other areas that we are not going to be mining in the future. Some studies that we do regarding the sulfide projects. So we have a separate kind of split cost accounting for what is related to the extraction of gold from the path. In addition to what we do for exploring and developing the copper gold sulfide projects that we have in the same footprint. So kind of it mixed together right now, but in our accounting, we will follow what is profitable from the leaching operation itself, regardless of what additional costs we need to do to develop the copper sulfide project in La Sanja.
spk00: Okay. All right.
spk04: Thank you.
spk01: Once again, if you would like to ask a question, please press star and one. To withdraw yourself from the question queue, you may press star and two. Again, that is star and then one to join the question queue. And ladies and gentlemen, at this time, in showing no further questions, this will conclude today's question and answer portion. I'd like to turn the floor back over to Mr. Garcia for closing remarks.
spk05: Thank you. Well, before we finish today, I would like to thank you for your time to join us and have a wonderful day. Thank you very much again.
spk01: Ladies and gentlemen, that concludes Buena Ventura's fourth quarter and full year 2022 earnings results conference call. We would like to thank you again for your participation. You may now disconnect your lines.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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