Compañía de Minas Buenaventura S.A.A. Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 13 speakers on the call.

Operator

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.

Operator

Mr. Salas, you may begin.

Speaker 1

Good morning, everyone, and thank you for joining us today to discuss our Q3 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.

Speaker 1

Juan Carlos Ortiz, Vice President of Operations Mr. Aldo Masa, Vice President of Business Development and Commercial Mr. Alejandro Hermoza, Vice President of Sustainability Mr. Renzo Maher, Vice President of Projects Mr. Juan Carlos Salazar, Geology and Exploration Manager Mr.

Speaker 1

Roque Enaes, Chairman and Mr. Raul Enaes, 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.

Speaker 1

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 30, 2023. Let me now turn the call to Mr. Landro Garcia.

Speaker 2

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 2 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 the next slide, our presentation will cover the 5 main topics shown here and will be followed by our Q and A session, where our team will be happy to answer your questions. Let's begin with some overview of the key highlights for the 1st 9 months of 2023.

Speaker 2

Our EBITDA from direct operations for the 1st 9 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 $300,000,000 obtained last year from the sale of our stake in Yanagocha. Our cash position remains strong in Q3 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 $49,000,000 strengthening our overall financial performance. It is important to note that Cerro Verde has a record in copper production during the Q3 of 430,000 tons per day, representing £255,000,000 of copper.

Speaker 2

After completing the processing plant operational readiness, we have successfully resumed operations at Uchucchacua on October 29 and also received approval from the for the Yumpak project's environmental impact assessment on September 7, enabling Buenaventura to perform metallurgical tests for up to 125,000 tons of ore from Junpak's pilot stope. We are determined with our commitment to sustainability and responsible mining practices while fostering production. Although operations at El Brocal, especially specifically the Coquihir Catacao Norte 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 2 years. Our consolidated production for copper, silver and gold across the last three quarters has had the following results. 44 1,000 tons of pine copper, thanks to the record production at El Brocal.

Speaker 2

We are on track to achieve the upper range of their guidance. 4,900,000 ounces of silver being El Brocal its main contributor during the 4th quarter 2023, Uchucchacua and Jumpa will contribute almost with 2,800,000 ounces to reach the full year guidance. 100 and 11,000 ounces of gold with a steady in production from Orkopampa. Moving on to our cost structure in Slide 5, you can see that our all in sustaining costs have increased by 34% compared to the 9 month period of last year. This is primarily explained by the gold production decrease at La Zanja, Tambomayo and Como Lache.

Speaker 2

However, it is important to mention that these figures does not include El Brocal and Cerro Verde with excellent cost performance during the Q3 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 grades at the Kulkarni and Tambomar Payo. However, we expect to reduce cost during the Q4 of 2023 with the contribution of Chacua and Tumpac Silver Alstops.

Speaker 2

Gold cost applicable to sales has remained relatively flat year over year despite the reserve depletion at La Zanja and lower production at Tambomayo. On the next slide, we are showing the free cash flow generation. During the Q3 of 2023, we have increased our cash position in $20,000,000 thanks to the excellent performance from El Brocal and the dividends received from Cerro Verde. The EBITDA to free cash flow reconciliation is explained by the following breakdown of the inflows and outflows. El Brocal, Tambomayo and Orcopampa have been the main contributors for the period of 9 months of 2023, while La Zanja, Culcania and Muchuchakwa had a negative EBITDA due to lower production for the first two assets, Keran and Keran maintenance and the injected Uchucchacua mine.

Speaker 2

However, we expect to have a positive EBITDA for the Q4, thanks to the resumption of Lutugchacua and the contribution of Yumpa. As we have mentioned before, Buenaventura is going through growth phase with a fixed CapEx related to Yumpac and San Gabriel. This has been partially offset by the income taxes and the dividends received from Cerro Verde. Moving on to Slide 7. We are focusing the pipeline on the projects that has more than 10 years of life of mine.

Speaker 2

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. The following slides, I would like to illustrate our main two projects, Yumpak and San Gabriel. We are relaunching a new Uchucchacua with the Yumpak mine, almost 6 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 application.

Speaker 2

However, in November, we are going to start processing ore from the Camila vein with a permit that allows 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.

Speaker 2

By the following quarter, we expect to start the field work with the underground contract. 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 mining and the grinding area to finally reach the carboning leach area. We expect to complete the 100 percent of this facility by the first half of year twenty twenty five. 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.

Speaker 2

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. Tangavel 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 twenty twenty five is maintained. Uchucarcoa was successfully restarted after 2 years of Kerra maintenance.

Speaker 2

Yumpac'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 suspension for the 9th month of 2023, El Brocal have reduced consistently corporate cash by 10%, confirming Buenaventura's effort to optimize cost. 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.

Operator

You may present your questions through the webcast by typing and hitting submit. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Carlos de Alba from Morgan Stanley. Please go ahead with your question.

Speaker 3

Yeah. Good morning, gentlemen. So first question is regarding Tambomayo. In the explanation of the production performance, it is noted that in order to reach the mines upper zone, you will require to do more rehabilitation and then you will be able to access this high grade ore. When would you be in a position to reach this high grade zone?

Speaker 3

And how much expenses or capitalized expenses will you have to incur in order to do so?

Speaker 2

Thank you, Carlos for your question. Actually, yes, that ore is in the upper part of the mine. But I will let Carlos Ortiz to give more explanation and the

Speaker 4

time line to reach that goal. Please, Juan Carlos. Surely, Andrew. Thank you, Carlo for the question. In the upper part of Cabo Mayo, we are already there.

Speaker 4

We are mining that area. We expect this year to mine at a certain pace. But due to the rock condition, the ground condition, we need to slow down the rate of extraction from that this area. We need to do more reworks on the ground support, do an auxiliary accesses toward the area in order to have more flexibility to mine the upper area of the mine. So we're already there.

Speaker 4

We don't need extra CapEx to add this area into production. We're already there. The only difference is the production rate is lower than we expected. So we are carrying on this production for 2,000 2023 into 2024. And the production in that area or the grade in that area is basically silver.

Speaker 4

It's around 5 to 7 ounces of silver, 2, 3 grams of gold. So it's a substantial production of silver coming from this area. And now we are offsetting this production with other areas of Tamo Mayo that are more on the gold value than the silver. That's the difference that you see in our guidance for the rest of the year of 20 23.

Speaker 3

All right. Thank you, Juan Carlos. I appreciate that. Another question is on Kulkarni. Clearly, the mine is losing money, cash attributable to sales of 26 in the Q3.

Speaker 3

But it is mentioned that there is a new zone of gold and copper that will begin production during the Q4. Would this I mean, can you talk a little bit more about this zone and what the implications would be for cost and production? Is this going to allow the mine to turn to the black and make money?

Speaker 2

Yes, of course, Carlos. Actually, the difference against our budgeted production is because the reconciliation of the grades the actual grade we could reach this quarter and during the 2023. However, we have we are working on this new area called Rosario and well, on Carlos will give you another a big picture of what is what are we finding there. Please, Juan Carlos?

Speaker 4

Sure, Pedro. Yes. In Julkari, we you see a footprint how it looks like. We have a core area at the center of the deposit where we have the main, let's say, geopharmaceutical point of view is the hotel area and it's surrounded by a ring where we have all the lead and silver mineralization. We are producing right now and historically we have been producing most of our recent silver production from the surrounding green, that's the Achilla mine.

Speaker 4

In that mine is where we are hitting now lower than expected grades in the stope that we have planned for 2023. Rosario area is at the center of the deposit. So it's not far, maybe 500, 400 meters from the existing stopes in the Achilla area. So we share a lot of infrastructure with Achilla. This area was originally mining many, many years ago in the upper levels and now we are accessing this area down below at the 6 ks level.

Speaker 4

And we hit the same vein that we have some evidence in surface where we have thicker thickness with a higher copper and gold grade than we had in the past in the upper area. So we have a long set of veins. Several of them are in the range of 5 grams of gold, 3%, 4% copper. So now it's something new for us regarding the historical position in the last 10 years, and we are developing this new area. We have by the developing of this area around a small campaign of 2,000 tons of coal that we are passing in the last quarter.

Speaker 4

In the last month of the year, maybe in December, we will process this after finishing all the pilot tests in the lab. We will do industrial test with this Matika Visa, if and all with a value in the order of $3.50 to $400 per ton for value. And we believe we're confident by the evidence that we're having so far in exploration and development that this area will become a significant player for Gulkari in the coming 2 years. We need to still to continue the exploration and develop this new area between 2024 2025 in order to have substantial production as a value from this area. So we have continuous operation from the silver areas, where we are trying to catch the high grade high silver grade areas and develop in parallel the area of Los Arjo.

Speaker 4

Altogether goes to the same cost basis. That's the reason the cost of Volcan is going a little bit higher because we are putting everything that we do as expense development in the Rosario area in the same basket as the Achille mine.

Speaker 5

Okay. So, Juan Carlos,

Speaker 3

so cost will increase, but ultimately this new area will make the mine profitable?

Speaker 4

Yes, that area. This year and the next year, we will invest in developing this area. We'll take like at least 12 18 months to develop and put this area into full production to be a substantial part, maybe 25% to 30% of the contribution in production in Guilquani will came from this area. Of course, we need to complete all the tests and be sure that everything goes fine in the material side, along with the resuming high grade for the Achilla mine, the historical mine. So it's for the next 12, 18 months, we will have a kind of higher than expected cost and then we'll deliver the additional production on Rosario mine.

Speaker 3

Okay. All right. Thank you. I'll get back to the queue for a couple of more questions. Thank you very much.

Speaker 2

You're welcome.

Operator

Our next question comes from Cesar Perez Novella from BTG Pactual. Please go ahead with your question.

Speaker 6

Yes. Thank you and good morning to all. I have two questions. The first would be on Yumpad. Buenaventura kept the 4th quarter 2023 target date for start up production unchanged.

Speaker 6

Is there a commercial volume that we should consider from this asset in the final quarter of the year? And if so, at what cost should we assume this for modeling? And my second question relates to the Marcapunta underground mine. You're increasing production from 10,000 tons per day this year to 12,000 tons per day over the next 2 years. Could you fine tune the date for this capacity increase and perhaps guide on the potential copper volume that we should anticipate from the asset in the future?

Speaker 6

Thank you.

Speaker 2

Thank you for your question. Please, Juan Carlos.

Speaker 4

Yes. On the first one on Jupak, we are starting a campaign of about 120,000 tons of ore. It's a part of is the final stage of exploration permit. We have license to process around 120,000 tons of ore into our Uchucchacua processing plant. So we will start right now, should we start just doing this test?

Speaker 4

It's a very high grade ore. It's over 20, 25 ounces of silver. So the idea is to produce, as we put in our guidance, in the order of almost 2,000,000 ounces of silver in the last quarter that we put in our guidance coming from this area. The gas for this production in Jupak is in the range of $11 $12 per ounce of silver. So this is regarding Junepec.

Speaker 4

And once we have the operational license, we will continue mining the same ore body from 2024 in advance at a rate of 1,000 tons per day with an average rate in the order of 20 ounces, 22 ounces of silver per ton. So it's a substantial asset for us. It's a very low cost for the combination of Yupaca and Uchucchacua mining. Regarding El Brocal mine, we are now at a production rate in the El Brocal mine in the area of 12 sorry, 10.5 almost close to 11,000 tons per day in some peaks. So in next year, in 2024, we will our target is to stabilize the production in the area of 11,000 tons per day, 2024 and keep developing the mine in order to increase the throughput in 2025 to around 12,000 tons per day.

Speaker 4

So, the target is to reach 12,000 tons per day by middle 2025. That's the target for the throughput point of view. Regarding copper production, because Anelro mine is a purely copper player, we will be our bottom part of course is going to be historical production in the rate of 50,000 tons of fine copper, but we are looking for opportunities to go over that, increasing not only the throughput, but also the recovery, all opportunities that we have basically on the cost side. As you see, we are reducing the cost, the producing cost from the Almirall mine and that's our main target. The main target is to monetize to increase production by to decrease the cash cost of the Amundro mine.

Speaker 2

If I may add, there is some need to any CapEx to the plant. We have plant capacity enough to treat the 12 1,000 tons per day. All the airports are in the mine site to extract the 12,000 tons per day from the mine.

Speaker 6

Okay. And just to be very clear, my connection is not very stable. But if I heard you correctly, you'll be hitting stable production of around throughput rates of 11,000 in 2024. In the middle of 2025, you'll be hitting 12,000 tons per day and your minimum copper production

Speaker 2

correct. Horace,

Speaker 6

yes. Okay. Thank you very much, gentlemen.

Operator

Our next question comes from Omar Avalaneta from Prima AFP. Please go ahead with your question.

Speaker 7

Hello. Thank you very much for the call. I have a couple of questions regarding Cerro Verde. Do you expect to receive dividends during this last quarter of the year? And do you have any information regarding the tax dispute between Freeport and the Peruvian government related to these OE and T?

Speaker 7

Thanks.

Speaker 2

Thank you, Umer, for your question. I will answer the first regarding the dividends. We know that and it's known by everybody that Cerro Verde has an excellent performance. There is some room for dividends, but the decision has not been taken until yet. So we expect, of course, some dividends, but there is the 100% of information.

Speaker 2

With respect of the trial in the CRE, We expect news for May next year, some confirmation or some communication from the CIE of the results of this trial.

Speaker 7

Okay. Thanks. And if I may, an additional question. Do you have any news regarding this consultative area process in Gunpek?

Speaker 2

Yes. Well, we are working very close with the Minister of Mines. But maybe here with us is Alejandro Moza that can give us more color to your for the answer?

Speaker 4

Yes. This process is currently under evaluation from the social office of the Ministry of Mines. They're evaluating all the processes that we have had in the past in that operation. And we should have some results from them or some instructions from them in the following weeks.

Speaker 7

Okay. Thank you very much.

Operator

Our next question comes from Jocelyn Jensen from BlueCur. Please go ahead with your question.

Speaker 8

Hello. Thank you very much for taking my questions. Do you hear me?

Speaker 2

Yes.

Speaker 8

Okay. I want to ask about CapEx. If you could provide us more color regarding the CapEx expected for 2024 for the growth projects and also for total and how much CapEx you expect for Farah Piche? And when do you expect to start building this project? And how do you expect to fund that CapEx?

Speaker 8

We have seen that in this quarter you have reduced leverage. But do you expect to take more debt on or and which are the available credit lines that you already have?

Speaker 2

Thank you. Thank you very much for your question. It's a relevant issue. Well, the CapEx for 2024 will be mainly all the Air Force will be for San Gabriel. For the sustaining CapEx, normally when Ventura has a budget of $80,000,000 RAPICI will be around 20 between 20 and 30, but maybe Daniel can help us with more exact figures that we are managing as today?

Speaker 5

Thank you, Leandro. Thanks for the question. For year 2024, we are expecting a total CapEx of around $300,000,000 From this, San Gabriel will require between $180,000,000 to $200,000,000 And for Yumpak, we will disburse around $25,000,000 For Trapiche, during 2024, we expect to disburse around $15,000,000 Going to the second part of your question, how are we going to fund these cash requirements, these short term cash requirements? We count with the cash that we are generating. It's around $200,000,000 of EBITDA.

Speaker 5

We also count with a cash position of also 200 $1,000,000 We count with the dividends from Cerro Verde. And if there is a gap that we estimate that it could be around $100,000,000 or $150,000,000 for a short period of time, We are very close to obtain committed revolving facilities with local banks in the order of $150,000,000 We already count with $50,000,000 for a committed line. So that will be the liquidity that we need for the funding of basically San Gabriel, Yulpac and our maintenance CapEx.

Speaker 8

Okay. Thank you very much. If I understand correctly, then you said that you already have $50,000,000 in committed credit lines and you expect to increase it up to $150,000,000

Speaker 5

Yes. That's correct.

Speaker 8

Okay. Thank you very much.

Operator

Our next question comes from Tanya Jafuszkanek from Scotiabank. Please go ahead with your question.

Speaker 9

Great. Good morning, everybody. Sorry, I fell off the line and had to dial back in. So I really apologize if you've already answered these questions. But I just wanted to know, on San Gabriel, where are we on the power line permit?

Speaker 9

I thought we were going to get it in Q4 of 2023. I just wonder where we are. Did we get it yet? Or are we expecting it?

Speaker 2

Thank you, Tania. Thank you, Tania, for your question. Renzo is with us. He can give you more detail of the process. Sure.

Speaker 2

We finished all the workshops with the communities and in November we should have the public assembly. So probably in December, we should have better news. Not better news, but news. Everything should work fine so far.

Speaker 9

Okay. And then maybe Daniel, again, I apologize if you talked about the Sierra Verde dividend. I think you had given guidance for about 100 $20,000,000 for this year and next. Is this something that we still should be thinking about? Or are we getting anything else from Cerro Verde this year?

Speaker 5

We are very optimistic of the cash generation of Cerro Verde. They are generating $2,000,000,000 of EBITDA. They have already distributed to Anantura $100,000,000 And of course, we expect an additional dividend if the results come in the Q4 as we expect.

Speaker 9

Okay. And then can I just ask one final question just on the Investor Day that you're hosting in New York on December 4? I'm just trying to understand because it's at the end of the year. And I'm just trying to understand at that Investor Day on December 4th, besides the updates on the assets like you're giving us and obviously the development pipeline. Will we be getting updated reserves and resources on December 4?

Speaker 2

Yes, Tanya. We will have news in that day. And one that is one of the reasons that we postponed the Buenaventura Day for the last month of this year. So we will have news for you.

Speaker 9

Okay. So we will have updated year end 2023 reserves and resources for the company?

Speaker 2

Yes, correct.

Speaker 9

Yes. Okay. And then one other thing, will you be providing us 2024 and longer term guidance as well at the Investor Day?

Speaker 2

Yes. Yes. We will be prepared for giving you those numbers.

Speaker 9

Okay. Is it just 2020 I'm just trying to understand, is it 2024 or is it more years than 2024?

Speaker 2

2024 and 2025.

Speaker 9

2025. Okay. And then yes. And then just I guess my final question for you is just any updates on just geopolitically what's happening in Peru for us that are far away and just read what's on CNN. So maybe we could have someone who actually lives in Peru give us an insight in what's happening.

Speaker 9

And again, there's protests that we keep reading about, etcetera. So maybe it would be really nice if someone can provide some insight into what's happening in Peru from a geopolitical standpoint for investment and also for anti mining and protests? Thank you.

Speaker 2

Yes, Tanya. Well, things are quite

Speaker 10

still

Speaker 2

the political situation is steady. The government, the current administration is trying to make all the efforts to invoke more investment, more private investment. President Borguarte is having some travel, some trips, while Efimania and this yesterday, the Congress authorized her to go to United States to conclude and to call for investment in Peru given the situation and given all the opportunities we have as a country. And there is an effort from the Minister of Economy to maintain and to pass this difficult economic situation because the lack of investment we have had in the last 2 or 3 years due to the political instability. But we are optimistic that the country is going in the right way.

Speaker 2

We think that Otar Olar, the Prime Minister, is trying to politically manage the situation, the all the different needs that the country has, but we are much we feel that we are much better than we were 1 year ago. So we are very optimistic. I don't know if here with us is, of course, our Chairman, Benavides. I don't know, Robert, if you want to add some ideas?

Speaker 10

Well, if I may say, the fact of having the Prime Minister, the Minister of Mines body language, if I may say, which gave a lot of support to the industry. I

Speaker 1

think there is a

Speaker 10

substitute to help in the industry to develop the projects. And then obviously the recession that we are leading through requires far more investment and mining is the main source if I may say.

Speaker 2

Thank you, Rocky.

Speaker 9

Okay. So Rocky, you think that then we are going to see a much more pro investment support for investment in Peru going forward because of the recession and things that the current administration is doing?

Speaker 10

There is no doubt about that. There is no doubt. I think the President traveling to Germany, traveling to the States in the next few days also shows the interest to attract more investment.

Speaker 9

Okay, great. Thank you so much and nice to hear from

Operator

Our next question is a follow-up from Carlos de Alba from Morgan Stanley. Please go ahead with your follow-up.

Speaker 3

Yes, great. Thanks. It's on Enbrelocal. Just apparently costs will be increasing in the 4th quarter as the company recognized the deferred shipping costs associated with the lead and zinc inventory. Can you provide a little bit more color on costs that were somewhat elevated in the 3rd quarter?

Speaker 3

So it will be very interesting to know what the implications would be for of this comment that may be personally.

Speaker 2

Carlos? Yes.

Speaker 4

We have a prestricting account, deferred presteping in our books that accounts for about $51,000,000,000 Because we finished the mining of the current phase of the open pit, we are speeding up the amortization of this amount of money into up to the end of this year. So, it's going to be accelerating amortization because the open pit signalized not only the mining, but also the processing of the ore that we broke up to September this year. So all the stockpiles are going to be processed up to December of late and thin. And based on that processing rate, we'll be doing the amortization of the $51,000,000 that we have in the deferred stripping account in El Brocal mine. This is pretty much what the main impact on cost because it's a substantial amount in the coming months.

Speaker 4

It started in the Q3 and it's going to follow the same rate of amortization in this Q4 of this year.

Speaker 10

All right.

Speaker 3

Okay. Thank you very much.

Operator

Our next question comes from Rodrigo Murrieta from AFP Integra. Please go ahead with your question.

Speaker 11

Hello. How are you? Thank you for taking the call. One question, what are the actions you're actually taking to start San Gabriel in the second half of twenty twenty five?

Speaker 2

Sorry, Rodrigo. I didn't hear your question as well as I want.

Speaker 4

Can you repeat it? Yes.

Speaker 2

Of course. So where can

Speaker 11

you explain more maybe on the actions you are taking to start production of San Gabriel in the second half of twenty twenty five? Because the construction percentage of the CapEx you're already being deploying is I think 14% and you changed your guidance. So maybe if you can develop more on where are the actions you are doing right now? And if you don't expect any issues with communities, for example, where the current actions with communities, so CapEx could be deployed efficiently or not?

Speaker 2

Okay. Thank you. Thank you for your question, Rodrigo. Renzo, maybe you can help us with your answers. Sure.

Speaker 2

Sure. Thanks for the question. So this year has been a year where we focus on all the pre construction services and so we can receive the main construction teams on-site. So by the end of this year, you should have the campsite being much terminated, the contractors on the field for the mine work for we are assigning the SMP contract and the concrete installation on November. So we're going to be focusing on full construction activities during the whole 2024.

Speaker 2

In parallel, we started our operation readiness group. So we're going to probably towards a year from now, we're going to have all the manuals and we're going to start training our people so we can initiate commissioning the Q1, Q2 of 2025. And in the social aspect, I think we're in good forms with the communities and no major problems in there. We keep working with them. We have like 30% of our people are from within the region.

Speaker 2

And so we have a good relationship, contract relationship, work relationship with the communities.

Speaker 11

Okay. Thank you. And one additional question. Do you have concerns about a new phenomenon for next year? Your communities have told you something?

Speaker 11

What are your current conversations about that topic?

Speaker 2

Thank you, Rodrigo. Yes, this is an an important issue that we have been discussing since April this year. We are working very closely to with our operations. We are defining all the critical aspects of the how the Nino effect can affect us. And we have a plan to alleviate all the damage that can be done by this phenomenon.

Speaker 2

We are working with our manager of safety and internally, we are coordinating with all the areas to be prepared for this plan.

Speaker 11

Okay. And as of now, do you have any estimation of how much would you spend to alleviate any circumstances due to this phenomenon? Or you're on or do you have any estimations nowadays?

Speaker 2

Well, we are looking yes, primarily, we are reviewing our capacity of to have to stop the inventories of our concentrates. We are viewing also we are reviewing the alternative routes that the ways that we have to access our mines. So we are focusing in 2 the 2 main issues, all the inflow of material we need and how we are going to get out with our concentrator. So we are planning which are the roads that we can use to establish how good and how prepared are alternative routes that growth that we have today and also the capacity of how much stop we will have in our for our concentrates and how stop we need increase, if any, of all our parts and equipment and the material we need to continue production.

Speaker 11

Okay. Thank you very much, Rehanu.

Operator

Our next question comes from Juan Cruz from Morgan Stanley. Please go ahead with your question.

Speaker 12

Good morning, everybody. Can you hear me okay?

Speaker 2

Yes.

Speaker 12

Excellent. In light of the CapEx and the projects that you have planned for the next few years, can you tell us what is the minimum cash level that you feel comfortable holding given where we are in the cycle? And also, how are you guys thinking about the bond maturity in 2026, understanding that there's still enough time to figure out a plan. But even where we are in the race environment, how much that costs you now and what would the potential refinancing costs could be? How are you thinking about that if you

Speaker 2

are? Thank you, Juan, for your question. Daniel can help us with the answer.

Speaker 5

Thanks for the question. For the minimum cash that we consider, we normally estimate 2 months of OpEx, which is around $50,000,000 So that would be our minimum cash. That's the first question. The second question is the second answer for your second question is, of course, we have a plan for the bond maturity, which is in 2026 in July. We are considering starting the renewal process at the beginning of year 2025.

Speaker 5

So we should count with our facility or our bond renewal plan executed by July 2025. We are evaluating the of course, the interest rates. As of now, they are in a very high level, but we expect that in year 2025 by mid year, they should have decreased substantially.

Speaker 12

Okay. Thank you. And just as a follow-up, given where your cash balance is, which is a healthy one right now at 220 something 1,000,000 at least as of September, should we expect that you come close to your minimum at any point or that's not in the cards?

Speaker 5

No. If we are going as we are getting close to our minimum, we will exercise our the liquidity that we have with the local banks.

Speaker 12

And those facilities are committed?

Speaker 5

We have one which is committed and the other ones we are looking for to be committed as well.

Speaker 12

Okay. So that's the ideally up to $150,000,000

Speaker 5

Exactly.

Speaker 12

Okay. Thank you.

Operator

And our next question comes from Jocelyn Jenson as a follow-up. Please go ahead with your question.

Speaker 8

Yes. Thank you. Just regarding production and strategy you have going forward. And your expectations for this year, Uchucchacua and Yumpa will produce around 2 point up to 2,800,000 tons just in the you're assuming that, that will be just in the 4th quarter?

Speaker 2

Thank you. Yes, limit 1,000,000 ounces.

Speaker 8

Yes, yes. Sorry, 1,000,000 ounces. Go ahead.

Speaker 4

Yes. Yes. This is our guidance. As I mentioned, Jupak is going to be processing the year around 100,000 tons, 90,000 to 100,000 tons of pork with a grade over 25 ounces of silver per ton this year. And Uchucchacua will be processing also around the same figure, around 90,000 to 100,000 tons of ore in the order of 10 ounces of silver per ton equivalent because it's a combination of basically polymericol with silver, lead and zinc.

Speaker 4

That equivalent grade of that material is in the order of 10 ounces of silver equivalent. So the combination of both that will be processed in campaigns, in batches, in the Yuchachua producing plant will bring us into the order of 2,500,000 to 2,800,000 ounces of silver by this last quarter of the year.

Speaker 8

And it will be correct like to multiply it for by 4 to get to that 20 24 number more or less or no?

Speaker 4

In the case of Uchucchacua, yes. In the case of Xupac, probably we're getting closer to the average grade of the deposit is more or lower in the range of 20 to 22 ounces is the average of Junpak mine instead of 25 ounces that we are putting ahead of time, speeding out production for 2023. So it will not be a little bit less production from Juniper next year.

Speaker 8

Okay. And going forward, I saw in your presentation from Q2 that you are expecting to reduce the operating unit. Could you give us more color about it? Which operating units are you thinking to close?

Speaker 2

This is in our presentation of the Q2? Yes. Well, we don't see any current operations to close. It is known by the market that we are struggling with reserves in Orcopampa and Tambomayo due to different reasons. But maybe is that the reference you have.

Speaker 2

But

Speaker 8

there is in the procedure is that you will have that you actually have 7 operations and then you will reduce to 5 operations in 2026 and to between 35 by 2,000 and 30?

Speaker 2

Well, we are concentrating in units that we can support at least we are concentrating with operations in mines that have more than 10 years of life of mine. All the efforts are to increase the loan of our mines and the strategy is to concentrate in those type of mines. So in the time, if any of the current mines doesn't have that characteristic, in that moment, we will decide to close, to sell, to not continue working in that mine. But our strategy is to focus on mines that have more than 10 years of life of mine. That is the message.

Speaker 8

Okay. And the revenue mix will still be fifty-fifty between base metals and precious metals?

Speaker 2

We foresee a little change. We were going to be more concentrated in sales coming from copper, it will be around 55%, 60% of our revenue coming from copper in the following years due to the increase in Brocal, well, the support of Cerro Verde and also the decreased production that we expect for Copan Panta Montalayo somehow offset, of course, by our new project of San Gabriel. In terms of precious metals that were supported by San Gabriel and Yumpac and Charpa.

Operator

And ladies and gentlemen, with that, we'll be concluding today's audio question and answer session. I'd like to turn the floor back over to management for any offline questions.

Speaker 1

Thank you, operator. The first question comes from Lenny Munoz from Forteo Capital. What is the level of engineering of San Gabriel? Detailed engineering at what percentage? And the CapEx for San Gabriel includes the working capital of the ramp up?

Speaker 2

Thank you, Lenny. Renzo can give us more color for that question. Sure. So we're currently at 90% completion of the engineering at this point. Indicates that we have enough engineering to place all the purchase orders and service orders and the remaining 10% is usually field engineering, so supportive of changes during the construction.

Speaker 2

And to the second question, yes, it does include the working capital. Everything it needs until we move to commercial construction.

Speaker 1

Thanks, Renzo. The second question comes from Tim Lambert from Lumi Sales. What is the timeline for the resumption of mining at Taho Norte?

Speaker 2

We are planning to receive operations

Speaker 4

in the open pit depending on the permits and the timeline for getting all the permits done. But our target is to be receiving the stripping by 2026 and production from the open pit in the Peruvian processing plant by the end of 2026, early 2027.

Speaker 1

Thanks, Juan Carlos. The third question comes from Javier de Romagna from Nicholas Partners. What guarantees the company have given against the credit lines?

Speaker 5

These credit lines are unsecured. We don't for see any guarantees related to these credit lines or any revolving facility that we can obtain for the following years.

Speaker 1

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

Operator

Thank you. At this time, we'll close today's question and answer session for both audio and offline questions. And I'd like to turn the floor back over to Mr. Garcia for any closing remarks.

Speaker 2

Thank you, operator. Before we finish today with our conference call, I would well I'd like to thank you all very much for making the time to visit with us. I would also like to remind everyone that we are organizing our Investor Day on December 4th in New York, and you are cordially invited. Thank you again. Thank you very much.

Operator

Ladies and gentlemen, that concludes Buenaventura's Q3 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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Earnings Conference Call
Compañía de Minas Buenaventura S.A.A. Q3 2023
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