Buenaventura Mining Company Inc.

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura fourth 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. Sebastian Valencia, head of investor relations. Mr. Valencia, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our four-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 Maher, 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 current views and assumptions. While management believes that these assumptions, expectations, and projections are reasonable in view of the currently available information, we are cautioned not to place any 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 in February 20, 2025. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Sebastian. Good morning to all, and thank you for joining us today to discuss the quarterly results of the company. On slide two is our cautionary statement, important information that I encourage you to read. Today, we will be discussing our performance for the fourth quarter of 2024, highlighting key achievements and strategies moving forward. After the presentation, we will be available for Q&A session, where our team will be happy to answer your questions. Next slide, please. I would like to highlight a few key areas that contribute to our strong four-quarter 2024 results. Full year EBITDA 2024 – our EBITDA 2024 from direct operations excluding the sale of Chaupiloma's royalty company, reached $431 million, compared to $199 million reported in full year 2023, excluding the sale of contact. This performance is also reflected in a higher EBITDA margin of 37%, compared to the 24% in the previous year. Full year 2024 net income, including the August 2024 sale of Chapiloma Royalty Company, was $402.7 million, compared to $19.9 million in net income for the full year of 2023, including the sale of Contact. The year ended with a cash position of $478 million and a total debt of $627 million, resulting in a leverage ratio of 0.34 times. On February 4, 2025, Buenaventura issued senior unsecured notes for $650 million, maturing in 2032 with a 6.8 annual interest rate coupon. The proceeds will be used to refinance its award. 5.5% senior note due 2026 and for general corporate purposes. Simultaneously, Buenaventura completed a tender offer for the purchase of any and all of its bonds maturity in 2026, successfully repurchasing $401 million or 72.98% of the total outstanding bonds. On December 12, 2024, Buenaventura received 78.3 million in dividends related to its stake in Cerro Verde and received a total of 166.5 million in dividends for the full year 2024. The total CAPEX for the year 2024 amounted 378 million dollars with 291 million allocated to the San Gabriel project. In the full year 2024, silver production reached 15.5 million ounces, 69% higher compared to the 9.2 million ounces produced during the same period last year. Of this total, 10.5 million ounces came from Uchukchakwa and Yumpac Complex. Finally, Buenaventura's Board of Directors has proposed a dividend payment of U.S. 0.2922 per share. We have resumed dividend payments policy, reaffirming our commitment to delivering returns to our investors. Moving forward to our 2025 guidance. in the next slide. We anticipate a stable copper and silver production at both El Brocal and Uchuchagua Yumpa, maintaining consistent output level. Regarding gold production, our primary focus will be on the San Gabriel project, which is expected to become our main gold producing asset in the coming years, playing a key role in our long-term growth strategy. Moving on to our cost structure in slide five, the all-in sustaining cost for the fourth quarter of 2024 increased by 26% compared to the same period in the previous year. This rise is primarily driven by increased exploration activities aimed at supporting the company's long-term growth and resource development strategy. It is also important to highlight that the year-over-year decrease in all-in sustaining cost was primarily driven by lower commercial deductions and high by-product credits, mainly from Jumper. Moving on the cost-apricot-to-sales trend, as you can see, copper cash increased in the quarter, mainly due to lower by-product credit contributions at Del Brocal. Silver cost applicable to sales has increased year over year, but was consistent with the expectations for this quarter. Gold cost applicable to sales has increased year over year, primarily driven by lower grades at Tambomayo and Orcopa. On the next slide, we will present free cash flow generation. The four-quarter 2024 cash position increased during the quarter, driven mainly by the strong performance of El Brocal, Uchuchacua, and Yumpa, and dividends, of course, received from Cerro Verde. Despite the investment made in San Gabriel and the fact that we fully paid the outstanding debt at El Brocal, around 50 million dollars. In addition to these drivers, the EBITDA to free cash flow reconciliation reflects Buenaventura's growth pace, with significant capex investment related to San Gabriel and El Borcal's debt payment. Moving on to slide 7, this slide shows San Gabriel's cumulative progress. reaching 71 overall completion by fourth quarter 2024, primarily driven by finishing the engineering and procurement. The construction timeline remains on the schedule. We anticipate commencing the ramp-up phase in the third quarter of 2025, followed by the production of the first gold bar in the fourth quarter of 2025. However, this milestone remains subject to the timely approval of the necessary permits. On the next slide, we are showing the processing plant's progress that will operate at 3,000 tons per day. Currently, the primary crusher mechanical works are at 97 percent. The sag and bulge mechanical works are at 75 percent. the CIL tanks mechanical works are at 87%. Moving on to slide nine, we can see the progress of the main components of the plant. In slide number 10, we are showing the progress at the filter tailings plant at that currently is at 55%. As we move to the slide 11, I would like to highlight our progress with implementation of the UDF mining method, which aims to optimize ore recovery and reduce dilution. Our structure implementation program includes three key initiatives. First, engaging dedicated experts with over 15 years of experience in this mining method. Conducting a trial mine at Cambomayo to evaluate and refine its application, carrying out benchmarking visits to four mines in Nevada, USA to gather best practices and insights. This will ensure a successful and efficient integration of the UDF method. To conclude the presentation, I would like to share a few final thoughts. we have strengthened our balance sheet through successful bond issuance. This has improved our financial position, providing us with greater liquidity and flexibility to support future growth. Second, the year 2025 will be a significant transition for us, as the commencement and ramp-up of production at San Gabriel will mark an important milestone in our growth strategy and set the stage for long-term success. Third, we are seeing stable copper and silver production with consistent performance from our flagship assets, El Brocal, Uchukchakwa, and Yumpa. We are maintaining a steady output and operational stability. Finally, we are committed to returning value to our shareholders. We have resumed dividend payments by affirming our commitment to delivering returns and creating value for our investors. This reflects our dedication to sustainable growth and should hold it back. Thank you for your attention. I will hold the call 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. Our first question today is from Carlos de Alba with Morgan Stanley. Please go ahead.

Carlos de Alba Thank you. Good morning, everyone. So, I'm San Gabriel. and construction is 63% completed. Obviously you have four more quarters to go, but what are the key elements of the construction of the project that are still pending and what would be from your perspective, the most critical aspect of them or the top one, top two critical aspects of the construction that is pending. And then if you could remind us, as you obviously further move the project along and with the new realities of commodity prices and cost inflation. Can you remind us a little bit on the economics that you see for the project? What is the cost, the cash cost, and the also same cost that you expect for the project? Maybe just the profitability or IRR for the investment. How are you seeing that now? I have a couple of other questions.

Of course. Thank you, Carlos, for your questions, for both questions. Here with us is Renzo that can give you an update of the next milestones that we have in the project. Please, Renzo, go ahead. Yes, hi. Thanks for the question.

So as you mentioned, we have all the contractors on site running. Now it's about completing things. So we are starting with the first wind tag commissioning for the electric rooms in the crusher circuit. And next is going to be the commissioning, the C1 and C2 commissioning of the crusher area. And after that, the carbon leaching, the carbon leaching area. So that's kind of the three main goals for the next three months, something like that.

Thank you, Renzo. Any comments on the profitability?

Sure. Please, Carlos, let Juan Carlos Ortiz to give the... Sure.

Thank you, Leandro. Thank you, Carlos, for the question. Yes, the cost is going to be in the order of $1,400 per ounce of gold. That's going to be the cash cost for the project, and we expect to produce in a full year basis in the order of 120,000 ounces of gold per year. So, depending on the price, you can play with the scenarios of EBITDA that we can generate from San Gabriel.

Right. Yeah, fair enough. Thank you very much, Carlos. The other question I had is on dividends. So we saw the proposed dividends that we'll be discussing the next shareholders meeting. From management perspective, is this the only dividend payment that if approved will take place in 2024? And then perhaps only in 2025, once San Gabriel is starting to ramp up, potentially you have an increased dividend payment. Is that the way we should think about it?

Well, Carlos, you know our dividend policy is at least 20% of our net profit. We are in permanent evaluation of the possibility to give dividends. If there is any window in the following quarters to give an additional dividend, we will do it and evaluate it. Evaluate it and do it.

But haven't you been paying less than that, Leandro?

Excuse me?

I thought you had been paying less than the 20%.

Yeah. We, in the last three years, we have been paying $20 million. And the reason of this limited payment was because we were engaged in the construction of San Gabriel. We have some operational problems that we have resolved in the last three years. But now we are in a different position and we have to reward the passions of our investors.

Okay, so why didn't... So another way, you may pay more than $20 million in dividends in 2024, or that would only take place in 2025. That's basically what I'm asking.

In 2024, we pay $20 million, right?

Sorry, my mistake, 2025, sorry, or only 2026. So 2025, would you pay $20 million only and then in 2026, you will potentially pay a little bit more.

No, no, no. The management, the board is proposing these days to the annual general meeting is around 80 million. It's 20% of our net profit.

Okay, that's clear. Okay, excellent. And then last question is, how's the relationship going with Antofagasta? What do you think that you as a management team and Bonaventura as a company can level up this partnership or this investment that Antofagasta did a couple of years ago and the two board seats that they have? Can you maybe provide some examples of initiatives or things that you could do together, please.

Well, let me tell you that we as management team, we feel comfortable with the strategy we have proposed to the board. And Antofagasta, as part of the board, both of them are very supportive to the team strategy, and we are continuing with the same strategy that we proposed a couple of years ago, a year ago. So we continue with our plan, with our flagships, our effort to increase visibility of our company. No, we feel comfortable with them also, right? We feel them very supportive.

Great. Thank you very much, Leandro, Juan Carlos, and Renzo.

You're welcome, Carlos. Thank you.

The next question is from Cesar Perez Novoa with BTG Pactual. Please go ahead.

Yes. Good morning, gentlemen. Just continuing here on San Gabriel, I'm just going to piggyback on Carlos' discussion. My question specifically is if there is any risk related to completion of the asset. I know that you are well advanced and the assembly risk is minimal, but is there anything that investors should consider in relation to weather or perhaps rain as we go into the winter months? That would be my first question. And my second question relates to El Brocal. Your costs increased by around 36% year on year in the quarter. And as Leandro mentioned, this relates to lower byproduct contributions. So should we assume that cost for the copper circuit will remain at this level throughout 2025? That is circa around $6,800 per metric ton. At least that's what on the report. considering, of course, that your silver guidance for this unit is expected to fall in 2025, or is there anything that will reverse this? Thank you, Cesar.

Yeah, thank you, Cesar. For San Gabriel, Renzo can give you an idea. He's, of course, our vice president of project. He's in charge of San Gabriel, and also he's part of our management committee risk. So we continuously are evaluating the risk for all our operations and especially for San Gabriel. Please, Renzo, go ahead.

Yes. Thanks for the question. Yes. There's no risk about procurement because everything has been ordered already. The engineering is complete. In regards to rain, the rainy season in Peru is from December to March, with the highest rain on February. So we're about to finish the rain. Of course, there are some small delays due to the rain and the storm alarms, but nothing that we can recover in the following months. Commissioning and everything is going to be, this is on the south part of Peru, so it's very dry, so I don't foresee any problems with the with the weather, we passed the worst part already. Of course, the social issue is always pending. We're managing that so far. We haven't had a single stop date, so I don't foresee any bigger problems there. And at the end, the last one is the permits. So as soon as we finish construction, we are going to start working with the permits. And there's an authority committee the process that we need to go through as we are aiming at completing construction towards May, June. So we have some time to work with the authority to get the permit to operate. Thank you, Renzo.

And for the question related to Brocal, Juan Carlos here says that. Thank you, Cesar, for the question.

Yes. We expect to be in the range of $6,500 per ton of copper, the cost for El Brocal. We are getting stable at that range. And this is a combination of two things. We are lowering our unit cost in the mine by reducing the unit cost per ton, move from the mine and processing the processing plant. And at the same time, while getting closer to the average grade of copper of our reserve, we have been mining slightly over our average grade in the reserve. So getting closer and closer, kind of catching up with the average grade. So it's a balance between increasing the tonnage, reducing the cost, and reducing the grade, getting closer, the copper grade, getting closer to the average of our reserve to build an asset of more than 15 years' life of mines. So under all these combination of factors, we expect to have $6,500 per ton of copper, the average cost for a brocade.

All right. Thank you very much. And I'm sorry, Juan Carlos, just one more. At Coimolache, per the stated mine plan, gold production in 2025 is going to grow as you expand your leach pad. How much of this expansion will translate to cost? I believe that your average cost last year was around $1,600 per ounce. Is this going to move this year?

Yes. The cost is going to keep the same for the initial three quarters of the year up to August, September, in which we will get the permitting for discharging fresh ore into the leaching pads. So for this year, nine months, eight months, up to August, September, we will keep pretty much the same cost as we had in 2024. From the time we start placing fresh ore into the pad, August, September, November, December this year, the cost of the product cash cost will come down. So this is going to be an inflection point also for Quibolache. Once we get the permit, once we get the full production, our production cost, our cash cost will come down in the last quarter.

All right. Thank you very much, Juan Carlos, Renzo, and Leandro. Thank you very much.

Thank you, Cesar.

The next question is from Tanya Jakuskonek with Scotiabank. Please go ahead.

Great. Good morning. Thank you so much for taking my questions. Just wanted to come back on San Gabriel and thank you for the slides showing the progress. It's great to see. I can see everything pretty much on surface and that's great, but I wanted to move to the underground if I could and maybe someone can help me. Can I just get an update on where we are on the underground in terms of getting the stokes ready because the mill will be ready, but I need to understand where are the stokes in terms of preparation for ore to be delivered to surface. Most important, I would like to understand how your ground conditions are and the testing of these four mines in Nevada. Can you kind of give me what mines you benchmarked against and sort of the costing there? and maybe what you are experiencing here. I know you're doing a trial test at Tambo Mayo. Maybe you haven't done one yet at San Gabriel, but I'm just trying to understand how the underground is being positioned to be ready to deliver ore.

Thank you, Tanya. Thank you for your question. Please, Juan Carlos.

Sure. Well, regarding the progress on the other group mine, we are on track against our plans. We have two set of crews developing the mine with the local contractor, the mining contractor. So we are on track of what we plan to do. We already have right now like 20,000 tons of ore already in surface along with the development through the ore body. We are stockpiling that material in the surface right next to the processing plant. We expect to grow that stockpile up to almost 300,000 tons. by October, November this year. And of course, it will be plenty of oil and surface to catch up with the startup of the processing plant with the commissioning and the final operational settings of the processing plant. So we feel comfortable with the process of the underground mine. Along with that, we place an order with Epiroc to a complete fleet for our mine development and mining activities. That fleet is going to be delivered by Epiroc since July this year. June, July, and August, all the fleet will be delivered, our conventional equipment, as in fancy. So we don't expect any risk. We are training our people already, the new people that we are hiring around the San Gabriel footprint. So everything, all the plants are working together. Regarding the ground condition, we knew that it's going to be a poor ground, so it's something that we can control right now with shotcrete. There is no water on the ground, so it's a plus in the sense that we don't need to deal with that problem from the ground condition standpoint. Regarding the benchmark that we make, we are using all the parameters like this one mine, that belongs to I-80. It's Granite Creek. The other is Cortez Mine that is operated by Nevada Goldmine. But we are taking not the cost, but the production rates, like the KPI of how many tons you need to break with a jumbo, how many tons you need to haul with a loader, et cetera, et cetera, et cetera. And we use those KPI and translate that into our local matrix of operating costs. You have to take into consideration that an average operator in the state is in the range of hundred or $120,000 per year. In Peru, the same operator is a fraction of that. So we are taking that into consideration in order to make the local reconstruction of the operating goal for San Gabriel. So that's the reason we expect to be in the range of $140 to $160 per ton. whole units in the mine, the processing plant, and placing the tailings in the dry stacking system. I hope I answered your question, Natalia.

Yeah, the only thing I'm meaning, so you've got the programs, you're doing the shotcrete, you said you have no water, so that's good, right? You said no water? Yes, that's correct. Yeah, and you've got that $140 to $150 per tonne. What do you think, so, you know, in terms of, you know, the ore that you've extracted, that 20,000 tons, which I'd like to have the grade of what that stockpile is and what that 300,000 ton stockpile will also be. Is the grade exactly what you expected it versus the block models?

Well, we are pretty much in line. We are slightly above that, slightly above. We expect it to be running along blocks with 4 to 5 grams per ton. We are more on the over the 5 grams range of the material that we already have in surface for the 20,000 tons that we have in surface. For the whole year, we expect to place in surface 4.5 to almost 5 grams that the overall grade of the material that we're going to extract from the mine along this year.

And when you proposed your stokes, what sort of mining dilution is in your stoke models? Is it meeting what dilution you expected? I'm just looking at the little pages, the little photos of the underground. I don't even know if it's on Gabrielle.

Yes. At this moment, we are not having any dilution because we are opening the tunnel in what we call the first round. Once we have placed the backfill and we need to make the secondary breaks in which we will have waste on the left and the right side of the walls of the new tunnel in between these two backfill areas is where we start expecting to have some dilution. Dilution for those blocks is expected to be around 12%, but we need to monitor that because it's a consequence of several factors, like really lasting control, the quality of the filling. So probably we need to fine-tune that at the early stage of the mine. And probably after a few months, we will have a good assessment of is that more close to 10% or more close to 15%. Right now, our assessment is in the range of 12% dilution.

Okay. And can I ask also, just finishing off San Gabriel, you know, I saw in the reserves that you didn't report reserves for San Gabriel and you're under, you know, you're redoing your reserves. I was a bit confused about that because I would have assumed all of your reserves would have been reported under a specific standard. What was it about San Gabriel that didn't meet standard? And should I be concerned that these reserves are going to go down? I'm just trying to understand why did you have to redo the reserves only at that mine and nowhere else?

Yeah, remember that in, I think it was in the third quarter of 2024, we report an update on the operating costs of the mine. That was a material difference between the operating costs that we have in the feasibility study. So, based on that, we need to review the whole analysis in order to report kind of a fresh report for the 20F. So we are working on that. As you mentioned, we are taking into consideration the increased operating costs, the new block model we additionally filled in that we made up to October last year, and all the parameters of operational control, like dilution, as you mentioned, are being taken into consideration on a more detailed sequence. So, yes, we are working on that. We will report that on the 28th. We will see so far, because it's not finished yet, that probably we need to make an adjustment to reduce a little bit of the reserve that we report in the past. We report in order of 1.9 million ounces of gold as reserve, and probably we will report a little below that in this updated 20th report.

Okay. And when is the report coming out?

April 30, I think. April 30, yes.

Okay. Okay, well, thank you so much. I'm going to leave it to someone else to ask questions, but very helpful on understanding San Gabriel, and thank you for the photograph.

Thank you, Tanja.

Again, if you have a question, please press star, then 1. Please stand by as we poll for questions. Ladies and gentlemen, with that, we will be concluding today's audio question and answer session. I would like to turn the floor back over to Sebastian Valencia, Head of Investor Relations, for any webcast questions.

Thank you, operator. The first question comes from Enrique Verada of Morgan Stanley. Do you expect any dividends from Cerro Verde? Danny, Stanley.

Yes, well, Cerro Verde, as you know, has paid close to $170 million of dividends associated to the year 2024. For the year 2024, we don't expect more dividends. However, Cerro Verde in a full year is generating in excess of $2 billion. They have no debt. The capex that they spend every year is around $300 to $350 million. And working capital plus taxes is in the order of $700 million. With this, they are generating close to $1 billion of cash per year. Considering that they ended 2024 with close to $700 million, which is in excess of their minimum cash, we do expect at this level of prices of $9,000 per ton and dividends for 2025 in a similar amount than what we received in 2024.

The next question comes from Mora Villaneda of Compass Group. I was wondering if you can comment on your plans for Trapiche this year and the coming milestones for the project. Also, can you comment on the Algarrobo project you were granted by ProInversión?

For this question, maybe Renzo and Aldo can help us.

Sure. In Tlapiche, as you remember, we have an on-site column leaching plant. We are unloading the last set of column testing for variability. We have our QP team, all the QP team for the feasibility study visiting the site last month. And so that's one of the big milestones for this year to get up 60% advance in the final world class feasibility study. And we also in the permit section, we finish answering all the questions from the environmental impact assessment. And we're waiting for any second question, but if not, we're expecting to have that towards the end of the year. And finally, we keep working with the communities to secure the remaining 20% of the potential power line. That's going to be the plan for this year.

And regarding the Algarrobo project, this project will be executed to a transfer and option agreement between Buenaventura and Proinversión. It consists in three stages. The first stage consists of a period of three years to reach a social agreement with the community in Piura. Once this agreement is reached, it's going to start a period of five years to obtain permits and authorization. Of course, we have to execute a project of water supply that will cost $5 million approximately, then start a mineral exploration. and of course make a feasibility study. And then when Aventura will decide to exercise the option or not. The third stage will proceed consisting in the construction of a mining operation if we decide to exercise that option. And the capex will be between 400 and 800 million dollars.

At this time, there are no further questions. I would like to turn the call over to Operator.

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, Pedro. And before we conclude today's conference call, I would like to thank you for the time and effort you dedicated in joining us today. Your participation and input are greatly appreciated. Thank you very much, and have a wonderful day.

Ladies and gentlemen, that concludes Buena Ventura's fourth quarter 2024 earnings results conference call. We would like to thank you again for your participation. You may now disconnect.