Compañía de Minas Buenaventura

Good day, ladies and gentlemen, and welcome to the Compania de Minas Buenaventura third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode, and please note that this 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.

Good morning, everyone, and thank you for joining us today to discuss our third 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 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 the 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 view of the currently available information, you are cautioned 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 October 30th, 2023. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Gabriel, and good morning to all, and thank you for joining us for today to discuss the quarterly results of the company. On slide two is our cautionary statement, important information that I encourage you to read. We assume that you have already read the results reported yesterday. Moving on to the next slide, our presentation will cover the five main topics shown here, and we will be followed by our Q&A session, where our team will be happy to answer your questions. Let's begin with some overview of the key highlights for the first nine months of 2023. Our EBITDA from direct operations for the first nine months of 2023 has witnessed a 27% increase as compared to the same period of the previous year. It is worth mentioning that the figures do not include the $300 million obtained last year from the sale of our stake in Yanagotchi. Our cash position remains strong in third quarter 2023. due to a strong performance at El Brocal. We are pleased to share that our dividends received from Cerro Verde during the quarter have contributed to $49 million, strengthening our overall financial performance. It is important to note that Cerro Verde has a record in copper production during the third quarter 23 of 430,000 tons per day representing 255 million pounds of copper. After completing the processing plant operational readiness, we have successfully resumed operations at Uchukchakwa on October the 29th, and also received approval for the UNPAC project's environmental impact assessment on September the 7th, enabling Buenaventura to perform metallurgical tests for up to 125,000 tons of ore from Yunpac's pilot stove. We are determined with our commitment to sustainability and responsible mining practices while fostering production. Although operations at El Brocal, specifically the Colquihil-Catajonorte mine, have temporarily been suspended until the approval of the environmental impact assessment, we are able to continue focusing on increasing the underground production to 12,000 tons per day as planned for the following two years. Our consolidated production for copper, silver, and gold across the last three quarters has had the following results. 44,000 tons of fine copper thanks to the record production at El Brocal. We are on track to achieve the upper range of their guidance. 4.9 million ounces of silver, being El Brocal its main contributor. During the fourth quarter 2023, Uchukchakwa and Yumpac will continue almost with 2.8 million ounces to reach the full year guidance. 111,000 ounces of gold with the steady production from Corcovam. Moving on to our cost structure in slide five, you can see that our all-in sustaining costs have increased by 34% compared to the nine-month period of last year. This is primarily explained by the gold production decrease at La Sanja, Tambomayo, and Comolache. However, it is important to mention that these figures does not include El Brocal and Cerro Verde with excellent cost performance during the third quarter of 2023. Moving on the costs applicable to sales trend, as you can see, the prioritization of copper ore at El Brocal with better operating margins is translating into a 10% cost reduction in the last quarter. Silver cost applicable to sales has increased 29% year-over-year, primarily driven by lower head rates of the Julcani and Tambomayo. However, we expect to reduce costs during the fourth quarter of 2023 with the contribution of Chacua and Yumpac silver houses. Gold cost applicable to sales has remained relatively flat year-over-year, despite the reserve depletion at La Zanja and lower production at Tambo Maya. On the next slide, we are showing the free cash flow generation. During the third quarter of 2023, we have increased our cash position in $20 million, thanks to the excellent performance from El Vocal and the dividends received from Cerro Verde. Free cash flow reconciliation is explained by the following breakdown of the inflows and upflows. El Brocal, Tambomayo, and Orcopampa have been the main contributors for the period of nine months of 2023, while La Zanja, Hulcania, and Uchukchacua had a negative EBITDA due to lower production for the first two assets, Kerala and Kerala Mantenis, and the indigested Uchukchacua mines. However, we expect to have a positive EBITDA for the fourth quarter. Thank you. Thanks to the resumption of Lucho Chacua and the contribution of YUMPA. As we have mentioned before, Buenaventura is going through a growth phase with an extensive capex related to YUMPA and San Gabriel. This has been partially offset by the income taxes and the dividends received from Cerro Val. Moving on to slide 7, we are focusing the pipeline on the projects that have more than 10 years of life of mine. Also, we have a diversified portfolio of projects in each stage of the viability cycle, enabling Buenaventura to continuously deliver new projects in the following years. In the following slides, I would like to illustrate our main two projects. Yumpac and San Gabriel. We are relaunching a new Utuk Chakwa with the Yumpac mine, almost six kilometers away from the current mine. This recent restart will extend the life of mine by around 15 years. Yumpac have successfully obtained its environmental permit and have submitted the financial authorization for the deposit of provision. However, in November, we are going to start processing ore from the Camila Bank with a permit that allowed us to treat up to 125,000 tons of ore from the pilot scope. Moving on to slide 10. In the next years, Buenaventura will be focusing most of its efforts in the San Gabriel project because it will be a relevant contributor to the company's value. It will add more than 14 years of life of mine to the company. In this slide, you can see the progress of the project quarter by quarter. By the following quarter, we expect to start the field work with the underground contractor. On the next slide, we are showing the air movement activities for the processing plant facility. On slide 11, you can see the layout of the future plant of the San Gabriel project. with its crushing equipment on the left of the picture going through the miling and the grinding area to finally reach the carboning leach area. We expect to complete 100% of this facility by the first half of year 2025. On the next slide, we show a couple of pictures of other components of the project that are processing and planned. such as the mine, pond, and water treatment plant on the top left. Also, the San Gabriel definite campsite and the waste dump facility. On the bottom of the slide is the underground mine portal with its ventilation system. Finally, I would like to finish the presentation with a couple of closing remarks. San Gabriel construction will progress faster as the main contractors are already on the project. Total capex for the project remains unchanged and the start of commercial production for the second half of 2025 is maintained. Uchukchakwa was successfully restarted after two years of care and maintenance. UNPAC's environmental permit was approved. and production will start in November. El Brocal have a record production of copper this year. Despite the open pit temporary suspension for the 9th month of 2023, El Brocal have reduced consistently copper cash by 10%, confirming Buenaventura's effort to optimize costs. Thank you for your attention. I will handle the call back to the operator to open for the line for questions. Operator, please go ahead.