Compañía de Minas Buenaventura S.A.A. Q2 2024 Earnings Call Transcript

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July 26, 2024

There are 6 speakers on the call.

Operator

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura Second Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen only mode. And please note that the call is being recorded. I would now like to introduce your host for today's call, Mr.

Operator

Sebastian Valencia, Investor Relations Analyst. Mr. Valencia, you may begin.

Speaker 1

Good morning, everyone, and thank you for joining us today to discuss our Q2 2020 4 results. Today, 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, Vice President of Geology and Explorations Mr.

Speaker 1

Roque Enavides, 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.

Speaker 1

While management believes that these assumptions, expectations and projections are reasonable in view of the current available information, we 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 per release issued in July 25, 2024. Let me now turn to Mr. Leandro Garcia.

Speaker 2

Thank you, Sebastian. Good morning to all and thank you for joining us today to discuss the quarterly results of the company. On Slide 2 is our cautionary statement, important information that I encourage you to read. Today, we will be discussing our performance for the Q2 of 2024, highlighting key achievements and strategies moving forward. After the presentation, we will be available for our Q and A session when our team will be happy to answer your questions.

Speaker 2

The next slide please. I would like to highlight a few key areas that contributed to our strong Q2 'twenty four results. Our EBITDA from direct operations for the 2nd quarter has increased $85,000,000 compared to the previous year, primarily driven by the great results coming from Yumpak and El Brocal, despite that El Brocal's processing plant was voluntarily suspended for 16 days as our response to a protest by nearby community, as announced on May 22, 2024. This is also reflected in a higher EBITDA margin of 39% compared to 13% from previous year. Our net income in the Q2 2024 reached $74,000,000 compared to last year's net loss of $5,000,000 Copper production decreased 22% year over year mainly due to the forecast volatility suspension previously mentioned.

Speaker 2

In the Q2 of 2024, silver production reached 4,000,000 ounces, a significant increase compared to the 1,700,000 ounces produced during the same period last year. Of this, a total of 29,000,000 ounces came from Uchucchacua and Yup. Oil production decreased 9% year over year, reaching 33.8 1,000 ounces since we are now mining lower grades at Orcopampa and Tambomayo mines. We are pleased to share that Cerro Verde announced a new dividend of $300,000,000 on July 24, of which $59 will be distributed to Werribel. For Noventura CapEx in the Q2 of this year totaled $84,000,000 which includes $70,000,000 allocated to the San Xavier project, primarily directed towards the completion of waste dumps and main substation platform.

Speaker 2

Our cash position reached 172,000,000 dollars with a total debt of $682,000,000 We continue deleveraging the company, reaching a net debt to EBITDA ratio of 1.4 times, lowest in years and within our targeted range. Moving on to our cost structure in the Slide 4. 2nd quarter all in sustaining costs have been reduced by 91% year over year. This reduction is primarily attributed to the increased silver contribution from Utuktacao and Yumpa as well as the decreased production at the Volcan. Moving on the cost applicable to sales strength.

Speaker 2

As you can see, copper cash has also increased mainly due to the broadcast voluntary suspension that was previously mentioned. Silver cast has decreased year over year, primarily driven by higher contribution of Uchucchacua and Yumpak's seasonal ounces. Gold cash has increased year over year, primarily driven by lower grades Alcambo mayo and Orcopampa. On the next slide, we will present the free cash flow generation. 2nd quarter 2024 cash position was in line with the Q1 of this year.

Speaker 2

The CapEx from San Gabriel and the dividends paid were offset by the cash generated by the operations and dividends received from Cerro Verde that were $29,000,000 in April. The EBITDA to free cash flow reconciliation is explained by the following breakdown of inflows and outflows. El Brocal and Yumpac have been the main contributors for the Q2 2024. As we have mentioned before, Buenaventura is going through a growth phase with an extensive CapEx related to San Gabriel. Additional dividends declared by Cerro Verde, $59,000,000 will be reported in the Q3 of 2024.

Speaker 2

Moving on to Slide 6, we have that in the next months, Buenaventura will be focusing most of its efforts in the San Gabriel project. On this slide, you can see the project's cumulative progress reaching a 57% overall progress by the Q2 of 2024, primarily driven by the completion of waste dumps and the main substation platform. The key milestone we are closely monitoring for the next quarter is the start of the high voltage power line construction and the start of the electrical and thermalization construction works. On the next slide, we are showing the processing plant progress that will operate at 3,000 tons per day. Currently, the foundations are at 80% progress.

Speaker 2

The SART and bolt mechanical works are at 60%, the primary crusher mechanical works are at 40%, and finally, the steel tanks mechanical works are at 30%. Moving on to Slide 8, we are showing the water dam foundation and filtering plant civil works. Finally, I would like to finish the presentation with a couple of closing remarks. 1st, in its 1st full quarter of operations, Uchucchacua and Yupac have made a remarkable impact delivering 2 900,000 ounces of silver. We are actively working at El Brocal to recover the production that is and stay aligned with our guidance, with a strong focus on reaching 11 tons per day by the end of this year.

Speaker 2

3rd, the San Gabriel project has achieved 57% overall progress, meeting our planned targets. We remain on track to reach our goal of producing our first gold bar by the second half of twenty twenty five. Cerro Verde continues to generate robust cash flow, leading to increased dividends. For fiscal year 2024, we estimate dividends of between $120,000,000 $150,000,000 attributable to our Natura's equity. In the Q2 2024, our leverage ratio stands at 1.4 times, reflecting our growing EBITDA and effective debt management strategy.

Speaker 2

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.

Operator

We will now begin the question and answer Our first question comes from Carlos De Alba with Morgan Stanley. Please go ahead.

Speaker 3

Yes. Thank you. Good morning, everyone. So I have a few questions. So on dividends in Cerro Verde, I want to see what you expect to receive in the Q4.

Speaker 3

There is already a dividend announced for August, But for the Q4 and what is the outlook given how relevant it is for the cash flow generation of the company? And then on San Gabriel, do you have any update on the CapEx figure? Until you are well into the project and we don't yet have a revised estimate for the CapEx. So I think we all would like to get some new information. And then finally, we saw a significant increase in the cost or some of your gold mines.

Speaker 3

You had some production issues, ore grades declining. So there are explanations in the release, but I would like to understand how do you see things going forward in the coming quarters?

Speaker 2

Okay, Alvaro. Thank you. Thank you for your questions. First, as you know, the potential from Cerro Verde will depends on the level of prices, the level of production, but we think there will not be any major change. So our expectations, as I told before, is still between $120,000,000 $150,000,000 for the 24 year and corresponding to this fiscal year.

Speaker 2

In terms of San Gabriel project, this semester we have expensed the entire semester $108,000,000 We expect to invest during 2024 a total of $280,000,000 and the investment in the 2025 will be around $200,000,000 I think maybe Renzo can go a little bit more further about the explanation, please, Renzo. [SPEAKER RODRIGO GUZMAN PERERA:] Yes.

Speaker 4

Hi. Yes, the total project costs will be updated into $650,000,000 This additional $180,000,000 is mainly based on escalating prices beyond our regional estimation, which was up 3% to 4% year over year. And we have been having changes in the project sequence and expediting cost to mitigate the 18 month delay that we had on 2021, 2022 to secure our 1st gold bar by the end of Q3 of 2025. So construction is professional work is going as expected, It's going to be seen in the picture, and we're dancing as planned. And the last big contractor is which is the electrical signal we will be starting next month.

Speaker 4

So now we have all the prices ready.

Speaker 3

So the $280,000,000 is the CapEx not for San Gabriel but overall in 2024?

Speaker 2

No. The $280,000,000 is for San Gabriel. Dollars dollars Yes. That's correct. All right.

Speaker 3

Thank you.

Speaker 2

Total project cost, yes. We will continue with our margin EBITDA of the project, 50%, and we expect to give more details in OpEx and the MPV, the new MPV in the Q3 of this year in the Q3 conference call. Regarding your third question about cost and grades, as you can see as you can read in our press release, ore grades in Orcopampa and Tambomayo are declining, and that is the main reason. Maybe Juan Carlos Ortiz can add some comments. [SPEAKER JOSE RAFAEL FERNANDEZ:] So we're having some trouble with my line.

Speaker 2

Please repeat the comment because I mean, this is a little bit of

Operator

And the next question comes from Cesar Perez Nova with BTG Pactual. Please go ahead.

Speaker 5

Yes. Good morning to everyone. I have three questions from my end, if I may. Could you please comment on how we should see Buenaventura's inflows and outflows of capital for this year? And the possible breakdown on what you expect to receive on the potential sale of Chaopiloma dos, the Yanacocha royalties, your dividends at Cerro Verde where FCX already made a $300,000,000 dividend announcement and your CapEx commitment budget for this year, if you could reiterate that, I would appreciate it.

Speaker 5

Then at El Brocal, how will costs evolve in the second half of the year, noting that they increased 14% in the second quarter and whether this copper ore that you have on inventory to support the plants resumption will have some impact or benefit once you hit a processing rate of 15,000 tons per day. And finally at Coimolache, I understand that Buenaventura received a construction permit to increase leach pad capacity. Could you please comment on next steps and when will the expansion be completed?

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Compañía de Minas Buenaventura S.A.A. Q2 2024
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