Buenaventura Mining Company Inc.

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura Third Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode, and 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 Officer. Mr. Salas, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our third quarter 2024 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 Majer, Vice President of Projects. Mr. Juan Carlos Salazar, Vice President of Geology and Explorations. 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, we 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 October 30th, 2024. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Gabriel. Good morning to all, and thank you for joining us today to discuss the quarterly results of Compañía de Minas-Buenaventura. is our cautionary statement, important information that I encourage you to read. Today, we will be discussing our performance for the third quarter of 2024, highlighting key achievements and strategies moving forward. After the presentation, we will be available for our question and answer session, where our team will be happy to answer your questions. The next slide, please. This slide, I would like to highlight a few key areas that contributed to our strong third quarter 2024 results. Our EBITDA from direct operations for the third quarter has increased to $132 million compared to the previous year, primarily driven by strong results from Jumpac and El Brocal. This performance is also reflected in a higher EBITDA margin of 40%. compared to 25 percent in the previous year. Third quarter 2024, net income, including the sale of Chaupiloma Yoroi Healthy Company, reached $237 million, compared to 28 million net loss for the same period in 2023. Copper production decreased 9 percent year over year. In third quarter 2023, copper production at El Brocal had increased due to higher estimated copper content mine from the open pit transitional ore. In the third quarter of 2024, silver production reached 4.4 million ounces, a significant increase compared to the 1.9 million ounces produced during the same period last year. Of this total, 3.2 million ounces came from Uchukchakwa and Yuma. Oil production increased 7% year over year, mainly explaining to you to increase output at Hurtani and La Santa. We are pleased to share that Buenaventura completed the sale of its Chaupiloma Royalty Company to Franco Nevada for 210 million dollars during third quarter 2024. Buenaventura's capex is in third quarter 2024, totaled $98 million, which includes $77 million allocated to the San Gabriel project, primarily allocated to the Mines Water Dump and to power line construction. Buenaventura's credit rating was upgraded by Moody's to B1 with a positive outlook. Moody's cited Buenaventura's operational improvements driven by increased production from its Brokal, Yumpak, and Uchukchagua mines, as well as efficiency in cost reduction, cash flow generation, and conservative liquidity management as key factors. Our cash position reached $458 million, with a total debt of $675 million. We continue the leveraging the company reaching a net debt EBITDA ratio of 0.5 times, lowest in years and within our targeted range. Moving on to our cost structure in slide four, the third quarter 2024 all-in sustaining costs have been reduced by 69% year over year. This reduction is primarily attributed to the increased silver contribution from Uchukchakwa and Yuma. Moving on, the cost applicable to sales trend. As you can see, copper cash decreased in the quarter mainly due to an increase in volume process during the quarter, resulting from a stockpile ore process. The cash is in line with the third quarter 2023 figure. Silver cash has decreased year over year, primarily driven by the higher contribution of silver ounces from Uchukchagua and Yumpa. However, it has increased quarter over quarter due to higher exploration expenses and increased costs at Uchukchagua and Yumpa related to ground support works. Gold cash has increased year over year, primarily driven by lower rates at Tambomayo and Orcopapa. On the next slide, we will present our free cash flow generation. The third quarter 2024 cash position increased during the quarter, driven mainly by the strong performance of El Brocal, Uchuchaco, and Yumpac, the sale of Chaupiloma for 220, and dividends received from Cerro Verde. In addition to these drivers, the bid to the free cash flow reconciliation reflects Buenaventura's current growth phase, with significant capex investment related to San Gabriel. Moving on to the slide six, this slide shows the San Gabriel project's cumulative progress, reaching 65% overall completion by the third quarter of 2024, primarily driven by the advancement in the water dam and the power line construction. A key milestone we are closely monitoring for the next quarter is the completion of the pipeline works. Out of the 650 million total CAPEX, we have already executed 350 and committed close to 230, allowing us to reach the project completion at any cost and any cost increase. 100% of the structural steel is now on site. A major contract for plant and infrastructure has been awarded. On the next slide, we are showing the processing plant's progress that will operate at 3,000 tons per day. Currently, the sack and balls mechanical works are at 60%. The primary crusher mechanical works are at 90%. And finally, the shield tanks mechanical works are at 65%. Moving on to slide eight, we present the progress at various facilities essential for the underground mine development, including the north ramp portal, fine installations, and the short-grid plant. Moving on to slide nine, we are showing the progress at various infrastructure of the project. Or you can say the filter daily plan, the water dam, the power line, and the campsite 100% completed. Finally, to our closing remarks, I would like to finish with a presentation with these comments. First, Uchukchakwa exceeded expectations, reaching an average throughput of 1,500 tons per day earlier than expected. while UNPAC maintained a steady production of 1,000 tons per day, delivering 3.2 million ounces of silver in the third quarter. Second, at Del Brocal, we successfully processed 100% of the stockpiled ore, enabling us to meet our production target for the first nine months of 2024. The underground mine reached a record average throughput of approximately 12,000 tons per day during the quarter. Third, the San Gabriel project achieved a 65% overall progress meeting our planned targets. Buenaventura continues the risk in the project by completing engineering and procurement. And lastly, I am pleased to report a record low leverage ratio of 0.5 times for the quarter, driven by a strong EBITDA growth the sale of non-core assets, and effective debt management. Thank you for your attention, and I will hand the call back to the operator to open the line for questions. Operator, please go ahead.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Cesar Perez-Novoa from BTG-Patchewel. Please go ahead.

Cesar Perez- Thank you. Good morning, everyone. Congratulations for your third quarter. Really outstanding results and a lot of progress. If I may, I have three questions. The first one relates to El Brocal. I believe the company is on track to achieve average mining rates of around 11,000 metric tons in 2024. However, during the third quarter, copper production fell around 10%, even though your average rates for the quarter stood at 12,000 metric tons per day. Can you please comment on why the volume fell and when will El Brocal reach the targeted rate of 12,500 per day, if I recall correctly? My second question relates to San Gabriel. Leandro mentioned completion is already at 68%. Could you please comment on project economics now that you have a fully revised CAPEX? And in addition, any new update on Trapiche would be also greatly appreciated. And finally, if I may again, if you could indicate where your sources of inflows and outflows of cash will be in the next year, including your dividends from Cerro Leroy. I asked a lot of questions, but thank you very much for taking them.

Thank you, Cesar, of course. Regarding Brocal, we already reached the objective to treat 12,000 tons per day. This objective was planned to be reached on December this year, but we reached it before. Maybe Juan Carlos Ortiz can give more explanation to the production of copper, please.

Juan Carlos Ortiz- Thank you, Leandro, and thank you, Cesar, for the question. Yes, we reached 12,000 tons per day average rate production in the mine. We are planning to keep ramping up this rate up to 12.5 thousand tons per day, probably by the first or second quarter of 2025. So we're on track to reach full capacity of the global mine as we plan it. The difference in between third quarter 2023 and third quarter 2024 in copper production, that 10% lower production compared between quarters, is because in the last year we have production, an exceptional production of new shipping oil from the open pit. We have like 12,000 tons straight from the open pit, crush it, and sell it directly to the market with an average of 20% copper. So you have over 1.4,000 tons of fine coppers as a spot sale on third quarter 2023. That's the main difference between the third quarter 2023, when we have this spot production, and third quarter 2024, where 100% of the copper production came from the underground mine. That's the main difference of copper production between coppers.

And continue with the second question. You were asking about the economics of San Gabriel. San Gabriel, we are planning to have an EBITDA around $100 million per year. Our cash costs should be around $1,300, and we are sustaining capex yearly between $5 and $7 million. And more importantly, the production will be around 130,000 ounces per year. And in terms of inflow and cash flow, Daniel, please, can you give more color to the question?

Yes, of course. Thank you, Cesar, for your question. For 2025, we expect to start the year with a cash position of around $370 million. And considering the prices for gold of $2,100, for silver $27, and for copper $9,000 per ton, we estimate an EBITDA for the following year of around $350 to $380 million. In addition to this, we expect to receive $150 million of dividends from Cerro Verde, This is regarding the inflows. And regarding the outflows, we expect to spend at San Gabriel close to $240 to $250 million. plus our sustaining capex, which is in the order of $100 million to $120 million. And finally, we are going to pay the taxes for the Chao Pri Loma sale, which we received $210 million this year, but we are going to pay the corporate tax of 29.5%, which is $45 million, and will be paid in the first quarter of next year.

All right, very good. Thank you very much for the detailed explanation. Thank you all.

No, Cesar, I left for the end your question about Trapiche. Any news about Trapiche? We continue with the feasibility study. And Renzo, please, if you can give more information to Cesar.

Sure. Exactly, we're in the middle of the disability study, and we are starting to receive the best results from our second set of column testing on site, confirming the business case. We keep working to consolidate the right of pass for the power line. We're probably 60% advanced in that one. And in the environmental impact assessment process, we finished the public assemblies. Those are great news. We're in the process of solving the authority question, so hopefully within the next six months, we should have an environmental impact assessment approved.

Okay, very clear. Thank you very much.

The next question is from Carlos de Alba with Morgan Stanley. Please go ahead. Carlos, your line is open on our end. Perhaps you have it muted on yours.

Yep, thanks. Good morning. Sorry about that. So I have several questions. The first one is on San Gabriel, just continuing the discussion there. Any expectations, any guidance on how do you see the mine ramping up to full normalized production run rate of 130,000 ounces per year? It seems that the first ore is in the second quarter of next year. So how do you see the ramp up?

Thank you, Carlos. Well, Renzo, Juan Carlos, please.

So the startup plan, we're expecting to reach 65% of our production capacity by the third quarter of of 2025 with commissioning activities on the mill and crusher starting in the first quarter next year. And then we're going to start the ramp-up process up to 3,000. I don't know if Juan Carlos, you can comment on that part.

Sure. We have right now the contractor running the tunnels on the ground. We have two crews, two fleets working for the north and the south ramps at the same pace. We are reaching an average development rate of about 500 to 600 meters per month. We are getting into the ore body right now. So we're scheduled to have access to the pilot test, the initial pilot test by December this year in order to start training more people on the mining method that we're using in San Gabriel and continue with this training along the first half of 2025. We have been reaching, we're close to the decision to purchase all the mining equipment. That's for the mining operation. We have good delivery times, so we'll be able to rent the equipment and new equipment according to the plan that we have for ramping up the whole production. So we are well in track for the mine development side, along, as Renzo mentioned, with the construction and commissioning of the processing plant.

Thank you. Just to clarify, the 65% of capacity by the third quarter of 2025, is that throughput or is this your final production?

No, no, no. That's 65%, which equals 2,000 tons per day. That's when the project will end. with a constant production of 2,000 tons per day for three weeks without major stops and with a commercial product at the end. That's kind of it. That's kind of it. When we finish the project and we start operations. That's it. Right. Got it.

Okay. Then the next question is on Cerro Verde. Any expectations for dividends in the fourth quarter?

Well, you may see the financials, and there is some cash that we expect to maybe, we will discuss it in the next board meeting.

How much will it be, your expectations?

We expect an additional... $50 or $60 million for us, for Buenaventura.

$50 to $60 million for Buenaventura in the fourth quarter, potentially. Potentially, exactly. All right, great. And then on a couple of operations, what can we expect on Coimbatore profitability in the coming quarters, given that despite the good prices, it is struggling in the third quarter?

Well, the current situation, we are expecting a permit. Yes. We are expecting a permit for continue our operations. Once we have the permit, the production will come as we were used to, around 70,000 ounces per year. We expect to put more mineral, more ore in the leach path that has been constructed, and we are expecting that permit. We will begin production in the third quarter of, between the third quarter and the fourth quarter in the next year. Maybe more detail, Juan Carlos can give it.

Thank you, Leandro. Yes, the rail profitability, we are, for this quarter and maybe the incoming quarters, close to a breaking situation in Colmo Lache. We are extracting gold from the inventories that we hold on the path. As Leandro was mentioning, we already have the environmental license to do the expansion of the paths. We hold the land. We are currently fighting for the construction permit. So we have to have the construction permit ready by the end of the year, early 2025. And there are some other details of the permits, but on that sequence of ideas, we will have the chance to start putting fresh ore on top of the path by the third quarter of 2025. So the idea is that we hold the situation kind of close to break-even, cash break-even, until we reach the permit for construction, permit for placing fresh ore on top of the path, by the third quarter of 2025, and at that time, we will resume profitability as we had in the past.

But so basically, if you're going to resume leaking in the third quarter, probably you only see production until the fourth quarter of 2025 or first quarter of 2026? Yeah, when we're ramping up.

Yes, it will be ramping up. As you know, you start placing the ore, and you have a leaching period, total leaching period of a total of 60 days. So usually you need to start waiting, but third quarter of next year will be a pivotal moment for homologating back into profitability because there will be some gold ounces coming from the path, the existing inventory that we have, and we are taking it out right now. plus the addition of fresh oil in the third quarter. So, it will be a combination of both of them. So, probably, the fresh oil will add a lot of fuel for the profitability of Colmellacci by the third quarter.

All right, excellent. And then lastly, sorry for all these questions, but just to get them out of the way, on Kulkani, what is the rationale to sustain, to keep this operation in Buenaventura's portfolio? given the elevated cost?

Yeah, well, we are trying to make more efficient hulkani. We have to make some, to take some decisions there. But we are moving from the, to the copper and gold areas that give us more production of gold in order to be more efficient with that mine. uh as i told you carlos we are evaluating the situation and the continuity of that mind in our portfolio okay thank you very much everyone good quarter thank you thank you again if you have a question please press star then one the next question

is from Tanya Jakuskanek with Scotiabank. Please go ahead.

Great. Good morning or good afternoon, everybody. Thank you so much for taking my question. Sorry, I just got on a bit late. It was another call ahead of you. Just wanted to come back to San Gabriel. Can I just ask, I think I heard an EBITDA of $110 million. Was that a San Gabriel EBITDA?

Yes, between 9 million and 110. Yes. 90 million between 90 and 110. Yes.

Okay. And sorry, what gold price was that based on? $2,000. Okay. All right. Thank you so much for that. Can I just ask, I heard you mention the total cash cost went to $1,300. Yes. And I think originally the feasibility study or your plan was $800. So that's like a 60% increase. Can someone explain to me what has happened to these total cash costs? It's not just inflation. Is something changed in the mine plan?

Yes, yes. The mining method has been changed. Juan Carlos, I don't know if you can give more information to Tanya?

Yes, sure, Leandro. Well, if we split the operation of San Gabriel into the mine, the processing plant, and the overhead expenses, pretty much the processing plant and the overhead pretty much are aligned with the feasibility studies operating costs. The main difference is on the underground mine. Right now that we get our hands on the mine, as I mentioned before, we are running tunnels and assessing the quality of the rock and what is the safe way to proceed to mine the deposit. The quality of the rock is very poor. We require a lot of reinforcement, and we need to change the volume of oil that will be extracted with underhand mining methods compared to the original study. So it's a combination of more expensive tunnels to be driven in this pool quality rock, more expensive openings to be made due to the quality of the rock, and a larger percentage of ore extracted by the underhand mining method instead of the overhand. So the underhand is more expensive. We're required to use more cemented backfill with 7% cement. So the combination of all these factors is the one that makes the significant change on the operating cost of San Gabriel.

So can I ask what is the operating cost per ton of this operation? If you take the mining plus the milling plus the GNA processing, so what would it be? Is it like $200 a ton? I don't know anymore, $250?

In the initial years, it would be in the order of $150 per ton, and then gradually, When we start doing less of the expensive openings, the first cut that we need to make for the underhat, we will start coming down to $140, $135 per ton. That's a combination of processing, overhead, and the underground mine.

Okay. And that's U.S. dollars?

U.S.

dollars. Yeah. Okay. And can I ask, you know, like when did you understand that the mining costs had to change? Was this a recent thing that you, once you started to put the decline in and you started to see the rock conditions or when did you kind of note that you had to change?

Yeah, I have been recently once we started driving the tunnels along the body in the last two quarters. We started in May with a contractor driving tunnels in the body. So we have the chance to reassess the quality of the rock. We redo all the geomechanics, the selection of the mining method, and then we need to re-run the mining planning or the mine plan. There was an opportunity. We reduced a lot of tunneling in the new design, almost $100 million of less expenses on tunneling to be made in the new arrangement. That is offset by the larger expenses on cemented backfill. So it was in the last five months to six months that we have more thorough access to the onboarding or assessment, not by drill holes, but with openings, galleries, in which we know better the quality of the rock. And we are on that conservative side of the equation. So, we are now putting more shock rate and reinforcement. And probably during the operation, we will test if that is necessarily a sign of opportunities that we foresee right now to reduce expenses and do something more efficient in the coming months.

Mm-hmm. And just on the sustaining capital, which you mentioned would be $5 to $7 million, most of the companies that we follow with underground mines and that sort of range would have like maybe $200 an ounce of sustaining capital, which brings it to $25 million a year. Can you explain to me why your sustaining capital is so low?

Well, our official sustained capital is just to keep all the assets in good shape, keep maintaining all the equipment that we have. So we have experience in Tambomayu, Okopampa, Sanor, mature operations. We know pretty much what we need. so everything that we need for the construction and the spare parts um any auxiliary service is being taken down or taking considered in inside the cabinets so that's the reason that in the coming years after completion of the project we only expect to be in the range of less than 10 million dollars sustaining capex as uh we see for maintenance of all the facilities it's a very compact footprint And it's a brand new operation. So we expect to be at that range based on our experience and the dynamics of the project itself.

Okay. Maybe if I can leave San Gabriel and go to just talking about just your costs as you go into 2025. Can someone just share with me as you think about your budgeting of your costs, what sort of labor inflation are you forecasting or overall inflation for 2025 estimates over 24?

During the COVID time, there was an increase in the labor cost due to the cost of inflation. The inflation rate We reach around 9%, but the last year we expect to have, this year we expect to have 2.4, 2.5% of inflation. So in that range should be the increase in labor costs. We normally are at those levels with inflation, no?

And what about other items within your cost structure? So when I think about your 2025 costs, should I just think that they're only 2.5% higher than 2024, or are there other things within your cost structure that will move those costs more than 2.5%? From in our regions?

60% of our cost comes from the contractors and the manpower, right? So it's a big component of our operations. We remember we are trying to replace the contractor in the most important mines. We are trying to replace the contractors with our own people and our own equipment. So we should expect in the long run, not necessarily in 2025, but it's a strategy that we are beginning this 2025 year. So we expect to reduce the cost of tunneling or all the labors we need in our mines. we shouldn't expect any important increase in our cost.

Okay. And of the 60% of your cost, which is labor, what percentage of that is just contractors? Is it half? Third?

Yeah. It certainly can be half, right? Danielle, I don't know if...

If I can give you a little bit more detail of this, Tanya, the labor is between 16% and 20% of our total costs. Total contractors are 56%. From this 56%, 25% is labor from contractors. So the 16% plus labor. The 14% are labor. This will be affected by the 2% to 4% inflation that Leandro mentioned.

So 16% is your own people, and then 14, 1, 4 is contractors.

Correct.

So 16 plus 14 gets me to 30%. 30% is labor. That will be affected.

Okay.

Yeah. Okay. Perfect. Thank you so much. And then Daniel, while I have you on, I saw, obviously you've got your Seattle there. They dividend, um, which you got about, uh, I think was it 60 million. And then we got, um, the 210 million from the sale of the royalties of Franco. So now you have more cash than debt on your balance sheet. Can you just review with me your capital allocation? for that additional cash? Obviously, you've got 280 million or whatever the number was to pay for San Gabriel still, right? We have to finish San Gabriel, but maybe your capital allocation on all this cash on the balance sheet.

At this point in time, we will use all the proceeds from the shareholder's dividend and and the asset sale to fund San Gabriel. Remember that we have $200 million in Revolve facilities, RCS, that we have in use. So those facilities will remain ungrown because we count with this process. So at this point in time, the funds will be devoted to fund San Gabriel.

Okay. And we just continue to pay the dividend as per formula. So cash goes to fund the San Gabriel. And is there any money going to Trapiche that I should know about the feasibility study? How much is this costing?

We are spending at Trapiche around $20 million per year until we reach the pre-feasibility study. So that is the average. And regarding the dividends, we continue paying dividends as every year. Next year, we should evaluate what would be the amount of dividend paid considering the good performance of the company this year.

Okay. So if I understand all of the cash and the dividend go to San Gabriel and then your debt outstanding will just be paid over time with your cash flow? Would that be a safe assumption?

Exactly. We will pay $50 million of El Grokal loan. We're doing this this quarter, so maybe you will see at the end of the year $50 million less in cash.

Okay. Okay, got it. Thank you so much, and Look forward to hopefully seeing San Gabriel when it's up and running. Thank you.

Ladies and gentlemen, that concludes the question and answer session of today's conference call. I would like to turn it back over to management for closing remarks.

Thank you, Brenda. Before we finish today's conference call, we are excited to announce that when Aventura, San Juan, and Vestal Lake This event is an excellent opportunity for us to connect with you. This Buenaventura Day will be held December 10th in New York. There we will share our latest updates and discuss our strategic vision and key projects for the coming year. We hope you all join to gain deeper insight toward Aventura's growth plan and operational progress. Please save the date and keep an eye for more details coming soon. We look forward to see you in New York, and again, thank you very much, and have a wonderful day. Thank you.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.