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spk02: Good day, ladies and gentlemen, and welcome to the Campaña de Minas Buenaventura first quarter 2023 earnings results conference call. At this time, all participants are in a listen-only mode, and please note that this event 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 first quarter 2023 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, Vice President of Projects, Mr. Juan Carlos Salazar, Geology and Explorations Manager, Mr. Roque Benavides, Chairman, and Mr. Raul Benavides, Director. Before I hand out 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 close. 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, you are cautioned not to place a new 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 April 27, 2023. Let me now turn the call to Mr. Leandro Garcia.
spk03: Thank you, Gabriel. Good morning to all, and thank you for attending this conference call. We are pleased to present the results for the first quarter 2023 from Compania de Minas, Buenaventura. We have prepared a PowerPoint presentation, which is available on our web page. Before we go further, please take a moment to review the cautionary statement shown on slide number two. Moving on to slide three, highlights were as follows. First quarter, 23 EBITDA from direct operations was $51.6 million compared to the $86.9 million reported in the first quarter of 2022. EBITDA results do not include $300 million from the sale of Buenaventura Steak in Llanacocha. First quarter 2023 EBITDA, including Ashes' company, reached $181.9 million compared to the $233.7 million in the first quarter of 2022. Again, EBITDA results do not include the $300 million from the sale of Buenaventura Steak in Llanacocha. First quarter 23 net income from continuing operations reached $72.2 million compared to U.S. dollar $134.7 million net income from continuing operations for the same period in 2022. El Brocal or mine from its open pit was stockpiled during the first quarter of 2023 and was not treated during the quarter. Underground mine production increased to 9,350 tons per day during the first quarter of 2023 compared to the 7,100 tons per day in the first quarter of 2022. as part of the ramp up to reach 10,000 tons per day during 2023. This stockpiled lead and zinc ore will be treated at Borcal's processing plant in the second quarter of 2023. Buenaventura's cash position reached $173.1 million as of March 31, 2023. Net debt increased to $556.8 million with an average maturity of 3.1 years. First quarter 2023 capital expenditures were $36.2 million compared to $19.9 million for the SAME PERIOD IN 2022. FIRST QUARTER 2023 CAPEX INCLUDES 9.7 RELATED TO THE SAN GABRIEL PROJECT AND 8.8 MILLION DOLLARS RELATED TO YUNPAC PROJECT. ON MARCH 24, 2023 SERRO VERDE ANNOUNCED A TOTAL DIVIDEND DISTRIBUTION OF 250 MILLION DOLLARS. BUENA AVENTURA WILL RECEIVE 49 million relative to its stake in Cerro Verde on April 28, 2023. During the first quarter of this year, operations at Julcani were suspended for 10 days in February 2023 related to anti-government protests which adversely impacted production and mine development. Operations were fully reestablished on February 16, 2023. The company plans to recover this production in subsequent quarters and expects to meet 2023 production guidance. Moving on to slide four, our financial highlights. Total revenues during the first quarter were $186 million, which is 20% lower in comparison to the first quarter of 2022. As we mentioned before, our EBITDA from direct operations for first quarter 2023 was $52 million in comparison to $87 million during the first quarter of 2022. Again, these figures exclude the Anacocha transaction effect. Also, our net income from continuing operations for the first quarter of 2022 was $73 million in comparison to a net income from a continuing operations of $135 million during the same period in 2022. The CAPEX increased to $36 million in the first quarter of 2023 compared to the $20 million in the first quarter of 2022. Moving on to slide five, attributable production. Total gold attributable production in the first quarter of 2023 was 39,000 ounces, 21% lower than the figure reported in the same quarter of the previous year. This decrease is mainly explained by La Zanja mining operations suspension since the fourth quarter of 22 and lower production of Coimbatore as mining and ore stockpiling were temporarily suspended in the fourth quarter 2022. Silver attributable production for this quarter was 1.1 million ounces, which shows a decrease of 38% compared to the figure reported on the first quarter of 2022. This decrease in production was primarily due to the Brocal underground mine being the sole producing mine during the first quarter of 2023. as with the adverse impact of the 10-day suspension of activities at Julcani due to protests as described. Finally, our copper attributable production for the first quarter of the year was close to 29,000 metric tons, a 7% increase compared to the same period in 2022. Moving on to slide six, all-in sustaining cost and cost applicable to sales. The all-in sustaining costs from our direct operations in the first quarter of 2023 increased by 44% to US$1,924 per ounce of gold. The costs applicable to sales for the first quarter of 2023 were as follows. For gold, US$1,124 per ounce, which is almost equal to a year ago. For silver, 21.5 US dollars per ounce, which is 41% higher than a year ago. For lead, 1394 US dollars per metric ton, which is 1% higher than a year ago. For copper, 6738 US dollars per metric ton, which is 2% higher in comparison to a year ago. Finally, In the case of zinc, the cost applicable to sales was $1,966 per metric ton, which is 31% lower than a year ago. Moving on to slide seven, our pipeline of projects update. Here we are presenting in one snapshot the current development level for each of our projects. Moving on to slide eight, our projects. In the case of UMPAC, our Bramford project, we are focused on development of main ramps and exploration tunnels. Updated geological model suggests the opportunity to increase mineable grade with less mining development. Environmental permit for underground exploration granted in February 2023. Environmental permit for mining expected on May 2023. In the case of San Gabriel, our Greenfield project, we have finished the Arani campsite. The Petar is to start in May and definite campsite is to start in July. Authority admitted the power line environmental impact assessment currently programming the third workshop by the third quarter of 2023. Working with the regional government on road maintenance and right of way. We have reached an agreement with community on oil transport fees. Thank you for your attention, and I will hand the call back to the operator to open the line for the questions. Operator, please go ahead.
spk02: Ladies and gentlemen, at this time, we'll begin the question and answer session. To join the question queue, you may press star and then 1 using a touch-tone telephone. To withdraw your question, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then 1 to join the question queue. Our first question today comes from Carlos de Alba from Morgan Stanley. Please go ahead with your question.
spk09: Thank you. Good morning, everyone. First question is, at El Brocal, the stockpiles that you accumulated in Q1, how much are you processing this quarter? Can you offer some color as to how much volumes of lead and zinc will be sold? during the second quarter from these stockpiles, or would you really expect to see the volume really coming only in the third quarter, given that the processing will take place during the second quarter? And my second question has to do with the balance sheet and the free cash flows. The free cash flow in the last several quarters has been, for the most part, negative, and your debt has increased, net debt has increased, and the maturity is only 3.1 years. And so how are you going to address this situation? We're getting more and more questions from investors that are concerned about the balance sheet. And Cerro Verde is paying dividends, but probably not as much as we would have thought. So, yeah, just any comments, maybe, Daniel, on how you're going to address this situation? What are the plans that the company has in order to improve the balance sheet? That would be great.
spk03: Thank you, Carlo, for your questions. First, in terms of Brocal, maybe Juan Carlos will give more color to the answer. But the thing is, the ore that we have stockpiled there, we have a plan to pass through the plant during the year. In terms of the free cash flow, we have some strategies of how to pass this negative quarter in terms of free cash flow. However, this third quarter has been characterized because of the using of working capital. We have used more working capital. We have not treated the ore, for example, in Brocal. Daniel will give you for sure more information about which are our strategies for this coming year and all the projects we have in the row. And finally, the dividend of Cerro Verde. We we already have received the first part of the dividend. We expect for sure during the year, normally Freeport declare dividends one in March and the second as an advance in October. So we should expect an additional dividend during the year. Please Juan Carlos, if you can give more color to Carlos.
spk07: Sure. We end up the first quarter of 2023 in Bocal with an average of 200,000 tons of ore in a stockpile. The focus was on stripping the upper areas of this phase that we are mining in the open pit. In the coming quarters, we will increase that volume of the stockpile. up to around 1 million tons in the third quarter, and then coming down by the end of the year to finalize this year with around 400,000 tons of ore in the stockpile. By the first quarter of 2024, we will complete the processing of this material. The material is mainly polymetallic with some areas that contain copper because here we're getting closer and closer to the underground mine that is mainly copper. This is pretty much the same transition that we see in the open pit. The volumes of zinc and lead that we are going to be producing are in line with our guidance for the year, so it's only the sequence of mining up to September and the sequence of processing all the way down to the last quarter of the year and first quarter of 2024. So, at the first quarter of 2024, we will finalize the processing of the outstanding stockpiles of oil from the open pit in Brocal.
spk04: In our next question. Sorry, the second part of the answer of the question from Carlos. Thank you, Carlos, for your question. Yes, temporarily we are having a deterioration of our leverage ratio. It's over three times right now, but we believe this will be reducing in the following quarters when we have a better EBITDA. During last year, the second EBITDA of 2022, which is counted within the period of this ratio, we had a very low EBITDA. And we believe in the second quarter and the third quarter with Brocal improving operation after treating the stockpiles that Juan Carlos mentioned, we are going to recover the EBITDA. Meanwhile, to be able to fund UNPAC and San Gabriel, we are going to use our own cash, but also we are going to raise a temporary facility that we have already committed with local banks. This could be up to between 50 and 100 million dollars. This will permit us to fund temporarily our obligations in Yumpac and San Gabriel, and we will see if we need to extend the maturity of this loan. However, we believe that with the dividends from Cerro Verde that we will received we will receive it at the end of the year after starting uh in the third and fourth quarter we will be able to um finish the year with a leverage ratio of below 3.5 times for next year uh after when having to check on you but working full capacity and a better and having a better evidence we think that the leverage ratio could go down to levels of three times.
spk09: Thank you, Daniel. Just one question on the working capital in the quarter. Leandro alluded to that, but actually the biggest negative impact that we can see is not on inventories. It is on trade and other accounts payables, almost $80 million negative impact. Any particular... a reason why such a big delta in that line? Yes, Carlos.
spk04: As you remember, last year we experienced the same situation. In December, we registered a big amount of bills from contractors, basically at El Barocal and Tambo Mayo. These were registered at the end of the year and were paid during the first quarter of the year. So this is a temporary effect as well. Thank you.
spk02: And our next question comes from Tanya Jokusconic from Scotiabank. Please go ahead with your question.
spk01: Good morning, everyone. Thank you so much for taking my question. I actually have three. Just for Daniel, Daniel, I know at your investor day and in your materials, you gave guidance for Sierra Verde dividend to be about $120 million per annum for you for the next sort of three years. Is that still a good number for us to use?
spk04: Yes, Tanya. We think that with the levels of the copper price right now, Cerro Verde is generating a very important cash flow. We believe that the amount of dividends should be between 100 and $120 million per year.
spk01: Okay. And then Daniel, there's been no change to your capital cost guidance that you provided earlier this year?
spk04: Not at this point in time. We are still evaluating any effect at San Gabriel, but at this point in time, we maintain the same level of coverage for this year.
spk01: Okay. So can I just come back to San Gabriel, and then my final question is actually back to El Brocal, but just on San Gabriel, you mentioned that we have, so you've done the camps, you're doing the power line, power line EIA, and then we have the Third workshop. I thought we were totally permitted on this project. Can you remind me what this third workshop is? And am I getting a permit with this third workshop? I'm just very confused.
spk03: Thank you, Tanya, for your question. The permit we mentioned last year was the construction permit. But well, here with us is Renzo Maher,
spk08: our vice president of projects so he can explain in detail the the following the following part yes hi and so as landry is saying we do have the construction permits and environmental permits for for the mine what we're talking here is about the the permit for the power line we do have the process of this is first we get all the land we already have all that We have the design ready, done, and now it's about the environmental impact assessment of the line, which is different than the environmental impact assessment for a mine. So it's a different regulation. So it's two different permits.
spk01: Okay. Sorry, I misunderstood. I had assumed we had all of the permits to go. So this is just a power line permit and that you're doing the consultation with the communities is how I'm understanding it. and that's gonna be happening in Q3 23. When are you expecting the power permit then?
spk08: Oh, right after then. That's a different regulation, yes. Towards the end of the year, we're gonna have the construction permit for the power line.
spk01: Okay, all right. Is that the last permit I need? Because you have the construction, you have the environmental, this power permit, is that pretty much it in terms of the big permit?
spk08: Yes. There's a lot of operational permits, small permits, yes. But the biggest ones, yes.
spk01: Now I understand the permits here and there, but the bigger ones. Okay. And is the power line permit critical on the timeline to get into production by mid-2025? No, it is not.
spk08: No? No. No, we do have like a six-month lead in there, free time.
spk01: Okay, so you could start up with generators is sort of what I understand?
spk08: Yes. Okay. It is always optimal to do it with a power line, but yes.
spk01: Yeah, okay. No, for sure, for sure. Okay, thank you for answering that. And then maybe for Daniel again, sorry, Daniel, just my understanding on El Brocal and how we should model it in our model. so I get the right cash flow coming out of this asset for you. Should I just be thinking this year, like until Q3, we are mining the copper from the underground, and then the lead and zinc stockpile, which you're increasing the stockpile from 200,000 tons to a million. Should I be thinking that that then starts to, majority of it come off in Q4, so that gets processed and revenue comes in Q4 and Q1 of next year, is that the majority of the revenue coming out from that stockpile and the copper just comes and goes through this year? So two things, copper revenue coming through the entire year where the lead and the zinc is coming in Q3, Q4 and Q1 of next year. Is that how I should think about it?
spk03: Maybe Juan Carlos can explain the process of how we are going to work with Brocal. Please, Juan Carlos.
spk01: Just so I understand how the revenue is coming and the cash flow is coming through quarterly.
spk07: Yeah. Yeah. I can explain that, Tania. The processing of the polybutylene core is starting now in April. The speed at which we are mining is higher than the processing rate. That's the reason that we are building up some additional stockpiles. But at the same time, we are processing the ore. In that situation, we will reach a peak of about 1 million tons of the stockpile by the third quarter. Then we stop the mining of the open pit, and we start processing the outstanding stockpiles. And as I mentioned, that the stockpile will be completed, processed by the first quarter of 2024. But we are starting now in April. We start the processing of the polymetallic ore. So the revenue coming from the zinc and lead concentrates is starting now in April. And it will continue up to the first quarter of next year.
spk01: Okay. Okay. And that's... The lead and zinc is already in your 2023 guidance you gave us in your pre-release. So I should think about that lead and zinc, whatever the guidance is, to be now sold from Q2 to year end.
spk07: That's correct. That's correct.
spk01: Okay. That makes sense to me. Thank you so much. I really appreciate you taking my questions. Thank you.
spk02: Thank you, Sandra. Once again, if you would like to ask a question, please press star and one. To withdraw your questions, you may press star and two. Our next question is a follow-up from Carlos De Alba from Morgan Stanley. Please go ahead with your question.
spk09: Yeah, thank you. Just to jump back, if I may ask, where do you guys stand in terms of the permits and what is sort of the deadline that you internally have to receive these permits and still be able to ramp up the operations in the fourth quarter or start ramping up the operations in the fourth quarter or later this year?
spk03: Carlos, let me ask you, which permit is your permit? Yumpac, Chacua? Yeah, Chacua, really, Chacua. Okay, okay. Well, maybe... Alejandro, we are in line what we have explained to the market. We are in line with our times. However, Alejandro can give you the detail of which will be the time frame in order to restart Chacua and begin Yumpa. Please go ahead, Alejandro. Yes, thank you, Carlos.
spk06: Okay, we have two different situations. Chacua has no major issues in terms of permits. We just have to, on due time, do the procedures to restart the operation. So that's not a major issue. On the Yumpa side, What we have, we're on the final stage of getting the approval for the environment assessment study that the main environmental permit that we have. And we should be able to get that approval. We should have gotten already, but we should get it by May. Within May, we should get that approval. After that, we need to go into the Minister of Mines to get the construction permit and it should take us a few months more. It's just an issue of bringing all the files together and we should have a permit for the first phase of the project that would be by the on time as it was scheduled.
spk09: Okay, and so when would you expect to get the construction permit for Yom-Pak?
spk07: Juan Carlos? Yes, we expect to have the – we already are developing the mine, Carlos. We are running the ramps, running the accesses. With the license that we expect to have in May, four or six weeks down the road, we will start to develop the ore bodies. In May, we will start heating the ore bodies and start making galleries through the ore bodies in very high-grade areas, about 20 to 25 ounces of silver. So we'll start developing that. In order to transport the ore from the Yumpac area, first kilometers to the processing plant of Chacua, we'll need an additional permit, and we expect to have it by the end of this year. 2023 of the first quarter of 2024. Of course, we are doing our best to try to speed it up and try to get the permit by the last quarter of the year, 2020. So to put these 23, 25 ounces of silver into our balance sheet by the end of the year. That's June back. And in parallel, we are doing some developments, new developments underground in Uchukchakwa mine, to access new areas that we have discovered in the last 12 months, 18 months. And there are a different blend of silver, lead, and zinc. More now into the probably zinc, lead, than silver. So it's more polymetallic ore, good value, and probably we will start We are doing now the developing of these stocks. We are producing some small stockpiles of ore so far, and we expect to start the production of the processing plant in Chukchakwa by October. So pretty much the two operations, Yumpan and Chakwa, by the end of this year, we will start turning into production.
spk09: And just to clarify, the construction permit in Yumpac that you still need is really just for the transportation of the ore to the Uchichagua plant?
spk07: Yeah. It's a permit actually because we have all the permits for the mine development, for the camps, for the power line, for the access road. It's ongoing. It's mostly done. But for the transportation between the Yumpac a site to the processing plant of 12 kilometers along the highway we need to get an additional permit and also for processing um commercialization of the concentrate that we will produce so that's the final permit that we will require to put them officially into production okay thank you carlos let me uh add that we are somehow more positive with the
spk03: government attitude for the permitting. We think they have identified that the bureaucracy and the difficulties the mining industry is facing these days and they are somehow involved and very worried and they're trying to do their best to accelerate all the permitting. So we are very optimistic that we are going to be granted all the permitting we need to continue the operations and restart operations and start the Jhumpa.
spk09: Okay? Thank you.
spk02: And ladies and gentlemen, that will conclude today's question and answer session. I'd now like to turn the floor back over to Mr. Garcia for closing remarks.
spk03: Thank you. Thank you for attending this conference call. I have to mention that yesterday we have our seventh anniversary as Compania de Minas Buenaventura, and we are very proud to be part of this family and And we have to go further with our efforts to get in all our projects and all our work for our company, for our collaborators, for our country. Thank you very much and have a good day.
spk02: Ladies and gentlemen, that will conclude Plano Ventura's first quarter 2023 earnings results conference call. We would like to thank you again for your participation. You may now disconnect your lines.
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