Compania de Minas Buenaventura SAA (BVN) 2015 Q2 法說會逐字稿

Good morning my name is Josh and I will be your conference operator today. At this time I would like to welcome everyone to the Buenaventura conference call. (Operator Instructions). Thank you. Thank you for your attention. I will now turn the call over to Raphael Gorge of i-advize Corporate Communications. Sir, please go ahead.

Thank you Josh, and good morning everyone. Welcome to Compania de Minas Buenaventura's second quarter 2015 earnings conference call on July 31, 2015. Today's call is for investors and analysts only, therefore questions from the media will not be taken. To begin from Lima, Peru are Mr. Roque Benavides, Chairman and Chief Executive Officer, Mr. Carlos Galvez, Chief Financial Officer, and members of the Company's management team. They will be discussing the second quarter 2015 results. If you did not receive a copy, please contact i-advize in New York at 212-406-3693.

Before we begin, I would like to remind you that any forward-looking statements made by Buenaventura's management are based on various conditions and may differ materially. These conditions are outlined in the Company's financial release in the disclaimer section. Please refer to that for guidance regarding this matter. And now it is my pleasure to turn the call over to Mr. Roque Benavides Chairman and Chief Executive Officer Buenaventura for his presentation. Mr. Benavides please go ahead.

Thank you Raphael, and welcome to this quarterly conference call of Compania de Minas Buenaventura. In the second quarter 2015 our EBITDA from direct operations was $32.9 million and our EBITDA including our associated companies was $90.7 million. Total attributable production including associates in the second quarter of 2015 was 186,000 gold ounces and 4.4 million ounces of silver.

At the Tambomayo project construction permits were granted in June 2015. Production should begin in the third quarter 2016 at 1,500 tons per day with production between 120,000 and 150,000 gold ounces and 2.5 million to 3 million ounces of silver. At the San Gabriel Chucapaca project, construction of the ramp started in June 2015. Environmental impact study assessment of the project construction is expected to be submitted in the third quarter 2015. During this quarter to second quarter 2015 at El Brocal, average plant capacity reached 14,000 tons per day level due to technical problems with the main mill's engine. Full production capacity level of 18,000 tons per day will be reached in the fourth quarter this year.

Cerro Verde's plant expansion to 360,000 tons per day is in-line with schedule and budget. 90% of the expansion has been completed. Completion of the plant is expected by late 2015and will become the largest concentration facility in the world. During the second quarter 2015 our net sales were $248.9 million. Our royalty income was $7.4 million dollars in this quarter.

For the six months of this year, net sales decreased 13% to $491.8 million. Royalties increased 7% to $16.5 million in this semester.

In terms of our production and operating costs in the second quarter 2015 Buenaventura's gold equity production from direct operations decreased 15%, from 107,807 ounces in the second quarter 2014 to 91,454 ounces in this quarter. Due to the declining production at the Breapampa mine. Gold production including associated companies was 185,705 ounces, 3% lower than we reported in the same period of 2014.

Silver equity production from direct operations decreased 7%, due mainly due to lower production at Uchucchacua mines due to a labor strike. Gold production at Orcopampa mine increased 2% in the second quarter 2015, and the cost applicable to save in this quarter decreased 8%, explained by lower diesel cost and the improvement in energy consumption.

Gold production guidance for 2015 continues to be between 190 and 205 thousand ounces of gold.

In terms of our silver production, silver production in the second quarter decreased 17% compared to second quarter of 2014, due to 29 days stoppage in May at the Uchucchacua mine, most applicable to sales in the second quarter decreased 1% compared to the second quarter 2014, mainly explained by a decrease in exploration expenses as a result of less diamond drilling. Revised silver production guidance for the whole year of 2015 is 14 million and 14.5 million ounces of silver.

In Mallay, our silver production guidance for this year is between 1.1 million and 1.25 million ounces of silver. In Julcani, our guidance for the full year 2015 is between 2.9 million and 3.1 million ounces of silver.

At La Zanja where we own 53% gold production in this quarter increased 2% compared to the second quarter 2014. The cost applicable to sales in the second quarter increased substantially due to higher oil haulage cost explained by a longer distance between Pampa Verde and the leaching pad. Gold production guidance for La Zanja is between 138,000 and 142,000 ounces of gold.

At Tantahuatay gold production in the second quarter decreased 9% compared to the figure in the second quarter of 2014. Costs applicable to sales in this quarter increased 4% due to higher blasting supplies, explained by an increase in the stripping ratio. Gold production guidance continues to be 138,000 to 142,000 gold ounces for the full year 2015.

At El Brocal in the second quarter, average plant capacity reached 14,000 tons per day. Copper production decreased 13% compared to second quarter 2014, and silver production increased 54% compared to a figure posted in the second quarter 2014. In the second quarter of this year, zinc cost applicable to sales was $1,659 per metric ton. Copper cost applicable to sales increased 19% compared to the second quarter 2014 due to higher commercial deductions, essentially arsenic. Zinc production guidance for 2015 is 60,000 to 70,000 metric tons, and copper production guidance for this year is 30,000 to 35,000 metric tons.

General and administrative expenses in this quarter were $18.5 million, 15% lower than the figure of the same quarter in 2014 due to lower labor expenses explained by an increase in workers profit sharing, a decrease in workers profit sharing. For the six months of this year, the expense was $40.3 million.

Exploration in non-operating areas during this quarter was $9.7 million compared to $14.8 million in the second quarter 2014. During the period, Buenaventura's main exploration efforts were focused on Tambomayo, La Zanja Underground, and for the six month period of 2015 the expense was $20.4 million compared with $25 million in the same period of 2014.

At Yanacocha during this quarter, gold production was 250,954 ounces of gold, 13% higher than the second quarter of 2014. For the six months period gold production was 464,000 ounces of gold, 17% higher than in the same period of 2014. Gold production guidance at Yanacocha continues to be between 880,000 and 940,000 ounces of gold.

In the second quarter of 2015 Yanacocha reported a net income of $18.2 dollars compared with a loss in the same period of last year.

CAS in the second quarter of 2015 was $648 per ounce, 36% lower than the reported in the same period in 2014. Capital expenditures were $18.2 million in this quarter and for the six months period $33.4 million. Yanacocha still has a strong pipeline of growth projects. Quecher Main -- prefeasibility, Chaquicocha Sulphides and Yanacocha Verde -- scoping and Maqui Maqui -- exploration.

At Cerro Verde during this quarter, copper production was 46,900 metric tons a 17% decrease compared to the same period in 2014. For the six months period, copper production was 95,543 metric tons. During 2015 in the second quarter 2015 Cerro Verde reported net loss of $900,000 dollars compared to $138 million in the second quarter 2014. This was mainly due to lower sales explained by the decline in copper price and for the six months period, the net income was $39.8 million. Capital expenditures at Cerro Verde, that is under expansion, were $467 million compared to $936 million in $936 million for the six months period of this year.

Cerro Verde's plant expansion continues in line on schedule, on budget, 90% has been completed, and as of June 30, total CapEx for the expansion project was $3.9 billion out of $4.6 billion budget. Completion of the plant is expected by late 2015 and will become the largest concentration plant in the world.

At Coimolache attributable contribution to the net income in the second quarter 2015 was $3.9 million for the six months period the contribution was $6 million compared to $10.9 million reported in the second quarter of 2014.

We have already mentioned the project development and exploration at Tambomayo and San Gabriel, and yesterday we had our board meeting, our quarterly board meeting, and we have accepted due to personal reasons and he prefers not to travel that much, have accepted the resignation of Tim Snider who has been a board member of ours for the last five years, and the nominating committee proposed and consequently the board of directors appointed Mr. John Marsden as a new member of the board of directors, effectively August 1, 2015.

Mr. Marsden is a mineral technology engineer from the Europe Royal School of Mines Imperial College of London. With 33 years of broad international experience managing major innovative copper, gold, silver, molybdenum & cobalt operations and projects in North and South America and Africa. Marsden has held various operations and technical management positions during 18 years with Freeport-McMoRan Copper & Gold., previously Phelps Dodge and nine years with Consolidated Gold Fields plc. We believe that Mr. Marsden will give us the independence and certainly the technology, the expertise that we need in our board of directors, and we are very pleased to welcome him. With this, we are open to any questions that you may have. Thank you.

(Operator Instructions). And we have our first question coming from Karel Luketic from Merrill Lynch.

Good morning Roque, good morning everyone. Thank you for questions. For my first question, some costs we saw quite a challenging performance on the overall costs of the first quarter, and it would be great if you could help us understand what were the key drivers for this cost increase and more importantly how recurrent in the coming quarters. That's my first question. My second question is going to Yanacocha. If you could also provide some guidance on what to expect in terms of volumes and costs for the second half of this year and if possible what should the trend be in 2016, and is it feasible to assume we will have a slightly cost and lower volumes versus this year? Those are my questions. Thank you.

I will start with the Yanacocha questions. We believe that Yanacocha will be in line with the guidance that has been given and should continue with the level of costs and level of production that we have already reported for this quarter. So we were expecting a good year for Yanacocha and believe that it has huge potential towards the future, as we have already mentioned. May I ask Carlos Galvez to answer the questions on the costs please.

When we talk about costs it is important to mention that it is true that the first half of the year and second quarter was impacted specifically by the stoppage that we had in Uchucchacua that you know that we had to continue pumping and consuming and paying, the payroll of the overhead and this part of the impact. On the other hand, we had worked on renegotiating with our suppliers new prices for not only the blasting material, not only the support material, but also the lead [ings] in the different operations which we believe shown and will impact in a better way the cost profile of the second half of the year.

Besides that, we have planned to catch up with our better expectations in [on top of] production during the second half by increasing some the grades and the recovery. And these will lead to dilute the cost. On the other hand, the profile that we should achieve in the Brocal's production will impact as well. On the one hand it is true we reported a profile on average of 14,000 tons per day [to put] in Brocal. In June we achieved 16,000 tons as an average, and we feel very confident that the second half of the year we will be much better to the point that we expect to obtain the average of the 18,000 tons per day of gold during the fourth quarter. There are several decisions that have been already made, and certain installations that will be fixed during the third quarter of this year. While I believe that those are the main issues that will impact in a positive way our costs.

Okay so just to make sure I understood Carlos, the specific disturbance you had in Uchucchacua along with [abo cabo] were the key drivers, and as those revert, costs should normalize in the second half. Is that correct?

This is correct. In addition to that, I didn't mention but it is important to inform that in June we received the permit to expand the volumes explored in Tantahuatay Coimolache and this is the reason that leads us to feel very confident regarding the final guidance of production in Coimolache. This [part of the five] that we produced normal volumes of gold due to this constraint.

I would like to add a few comments on the Uchucchacua stoppage which was generated from contractors. After the strike we analyzed four different scenarios to try to recover in what remains of the year the production that we lost during those 29 days. At the end we decided for the most conservative scenario which is as Carlos mentioned, increasing the through put as much as we can, increasing recovery and slightly increasing the grade, and that will recover for us close to 40% to 45% of the production lost during the 29 days of strike.

That is great. Thank you very much.

Thank you. Our next question comes from Carlos De Alba from Morgan Stanley.

Yes thank you very much gentlemen. The first question is Carlos, if you can quantify some of the benefit that you expect to see from these initiatives, and also if the guidance offer for Uchucchacua for an entire year, does that already include the increase in grade and recovery too that you expect to do during the second half? And then also if you could give us some details of what happened at El Brocal and what [yet again the proy exos] some technical issues that prevented it from reaching full capacity?

And then finally I read a couple of articles about some discussions around San Gabriel project. Apparently some people were trying to get more information. They were not completely happy. So I guess it's important for you that we all understand what is exactly going on, and if there is any possibility that the Company will face issues with the communities with that project. Thank you.

Yes Carlos. Regarding the costs, you know that in Uchucchacua specifically by increasing, by keeping the level of production by increasing some of the grade and improving the recovery, together the fact that we are [reusing] supplies costs plus increasing productivity, we expect to reduce these cash costs by about 15%. In spite of that, you have to add the effect of the devaluation of our currency that we impact to labor costs. I am not sure what the valuation will be of course this will add a positive impact. Regarding the [pouring] in El Brocal, we had some difficulties with crashing the equipment and the secondary crashing equipment, and I believe Roque can explain much better.

The technical problems that we are facing in Brocal are on the excessive wear on the liners in the secondary crusher. And that forced us to change the liners every other week, and that creates about a 30-hour shutdown every time we have to change the liners. So that has been one of the main problems there. The other problem we faced was with the washing drum. The washing drum now is the process of being changed. We have fabricated a new drum, and we're about to change that drum towards the middle of this month, and the last issue we have there is the scoop feeder that again wears very quickly, and forces us to do intensive maintenance on it. So we have these problems identified.

We are working on them. Probably the hardest problem to solve will be the crusher and then we are doing two options, one is of course continue to operate the way we are, and trying to optimize the liner wear, but the second option we're facing is that we've found standard crushers which is in the market and we're planning to, we're doing all the engineering to replace them for the secondary crusher.

We have already decided to incorporate the crusher. That will be in place and we expect to operate it in November. So this will completely turn around [the difficulty].

Let me go on San Gabriel. In San Gabriel we started to work on the ramp. To date we have 60.4 meters of ramp development, and just in July we advanced 52 meters. For August we have a plan of 75 meters, and our target is to have two blasts per day. In other words, we are on track on getting the experience and the speed in the development of the ramp. So that shouldn't be an issue. On the permitting side, we will complete the EIA study as Roque mentioned earlier by the end of this month, and so it should be ready for submittal. And we work this EIA alongside with the government.

Regarding the community, we have two workshops to inform them about the project and the EIA development with the communities last month. And yes we do face some problems with other communities from time to time, especially when we [never seek] land and that's a common occurrence in this part of the world, but nothing that will stop the project. We will continue the ramp as we planned. We are doing the feasibility study with AMEC, and we will plan to finish the feasibility study by the end of August, perhaps middle of September and then we will go into the next phase which will be engineering. The detail engineering, and we are also expanding the camp as we speak.

Thank you. Just a couple of more questions if I may. One has to do with the permit charge that appear in the quarter. Carlos if you can give us some details of what is behind this would be useful and also Roque if you could tell us why is it taking so long for Yanacocha to decide the next option to expand the life of mine and the operation. Why is it taking too long for them to make a decision?

We are certainly working on the different projects, and as I mentioned, there is a pipeline of projects that we believe are going to be feasible and we are working on the engineering of this project. It is, it takes time. I don't think it's taken that much time. Probably we should have started a week before, but anyway, now we are in line and we are working on this different project. In terms of being permanent, it .

It was informed us that we counted for [La sanaca] open [pick] considering that we are going to move to an underground area and while there is some difference in the assets and the present value on what we are going to obtain.

I would like to add to my colleague's comments on Yanacocha that one of the technical reasons why we were starting the ore as you know the Yanacocha transitions from [alcites] to sulfide. And the technical analysts now have to face a new technology, well different technology than the one that is being used in the [projects] basically floatation. But in addition to that there is arsenic with the cooper ore which brings additional complications to the quality of the concentrate. So basically those are the issues and we are analyzing in Yanacocha, but the potential is there.

Excellent. Thank you very much, Roque, Carlos and Igor.

Thank you. Our next question comes from John Bridges from JP Morgan.

Good morning everybody. Thanks for the report. Just wondered with the problems you've had in the quarter, have you changed the formal guidance for gold, silver, base metal productions for this year?

We are revising the guidance, but you know we are reducing the guidance of silver due to Uchucchacua by about 45 million ounces. The trade initially was 15 real ounces and now we are considering something maybe 14 to 14.5 real ounces. In terms of the gold production we haven't notified any. We are in line with what we consider, and this is why I mention the new [por median] in Coimolache. Because according the rate of production we had in the first half of the year, it was not going to be able to achieve the goal but with this commitment we are going to achieve that.

John, this is Igor here. in the case of Coimolache, we were able to get a permit that allows us to process up to 36,000 tons per day capacity, so this will allow us again to put more lower grade ore on the pad, because that was what [our tollins for] for production, and to this date we are still looking at the target which is 140,000 ounces per year. most at La Zanja and by the numbers I am looking at until the end of July it showed that both mines should be able to achieve the 140 mark.

I'm glad you mentioned that. I was going to go onto that. And Carlos was telling me before that you keep on finding more reserves at Coimolache. You know, what's the resource base there? What's the potential?

You know in the case of Tantahuatay you know that we have continued exploring and incorporating additional resources. Unfortunately I don't have the numbers of the potential over here, but you know that to the extent that we review our quarterly at (inaudible) of mine where they [band and bringing]. We feel very comfortable that the life of mining has been extended year after year. And the in the case of Coimolache we feel very good.

John, if I may mention a little bit of geology now. We are finding new ore in Orcopampa and so we were able to find a new structure at the 35 - 40 level and about a 1.7 meters taken close to 14 grams, and very good potential for development and the number of structure you see at the vein system. Again with the, but this other system has some copper in it, and so we were planning to contain that after we have all the processing facilities in Orcopampa to do so, so I think that Orcopampa is bringing good news in terms of finding more ore and addressing one of the issues that we had which was the reduction of reserves and resources. So I think Orcopampa is bringing more good news for us in terms of exploration.

Okay that's great. When will you be able to access that new structure?

I was reviewing the drawings this morning, and we should be, we have developed all the grid to infrastructure. So it's not just drilling to intercepts, but it's actual development. In the first structure we already developed 16 meters of the structure, and the potential to develop is about 700 meters, and the other system which is [de Lucia] system, the prospective ground is about 400 meters, and we have intercepted the same structure before and after the development in both directions, and it has as I said, 400 meters potential and we should be able to access this, I would say within two or three months if we wanted to put that in production right away. Although we have other phases in production. Right now, at this moment, we don't need the ore, but more important for us is to develop new resources. So that brings a lot of [comfort] work.

Okay so that might help you do a bit of catch up in Q4. And then Roque in your introductory remarks you mentioned the impact of arsenic. Could you just elaborate a little on that, and you know what the expectation is for those arsenic costs in the next few quarters?

Well the penalties that Brocal receives in selling it corporate concentrate, it's a high penalty, and that is what we referred to. We, as you know, we are working on a solution to arsenical coppers in the Rioseco plant we believe we have got a process which we are now testing as a continuous process, where it works as a batch process, and if that works it will be a turning point I would say for arsenical coppers worldwide, but typically for the arsenical copper that we have in Brocal in the short term and also in Yanacocha there is arsenical copper and in Tantahuatay there is arsenical copper. So we are working on that front, but in the time being we have to pay the penalties of these concentrates.

Our expectation is to be prepared to make a decision before the yearend to open this plant.

Yes.

Just to put more information on the table on this, the pilot plant is already operating. In other words, all the bench work has been completed, the pilot plant has been built, it's now in operation and the results of the pilot plant should be ready within a couple of months to make a decision, as Carlos says by yearend.

So that will be to go from a few kilograms per day to several tons a day?

Yes, it's about 1,000 kilograms per day pilot plant.

At present or what you're considering for next year?

No, no, at present. The pilot plant is processing at that rate. When we do the run. Yes.

And if you decide to go ahead, what would you, you would go to another scale?

We would go directly to an industrial type of scale given that the results are quite encouraging.

Wow. That's the holy grail. Well done, guys. Best of luck with that one.

Thank you. Our next question comes from Patrick Chidley from HSBC.

Hi gentlemen. Just a question on back to the previous discussion just on that processing of arsenic concentrates where you say your pilot plant runs at 1,000 kg a day. That's a thousand kilograms of concentrate in the front end, is it?

Yes.

Right.

We do runs with different conditions of course. We have to run and then stop the plant and then run again with different conditions. Changing the different conditions, but in a continuous [motor] as Roque had mentioned, right?

Okay and this is now a continuous test that you're doing, rather than a batch process, is that right?

That's right. Yes.

Okay. And so you, it sounds like you're feeling pretty confident, and if this is the case, then it is a bit of a worldwide breakthrough, isn't it?

Yes. I think it will transform many the economics of many mines if this is applicable. You see the testing has to end with the specific ore and what we have done is the testing with the Brocal ore. And some of the Yanacocha ores that the testing will have to be made for every specific mine if we go ahead with it, no?

Okay does it work equally well with El Brocal and the Yanacocha Verde ore?

Yes. Yes, yes. Both of them work very well and we feel we have a process.

Well great. That does sound very exciting. Just my other questions were just on the new discovery at Orcopampa then. You say the potential is 700 meters a strike. Is that correct?

Yes, this is on the 35-40 level, the structure. That's correct.

Okay so that's a long strike, you take 700 meters. How many holes have you got in it, then including crosscuts?

We are right now on the structure as I said. We got developed 16 meters. We were 1.7 meters width on average, and we have intercepted the drill holes are hidden behind. I think it's two or three interceptions ahead and singly behind. So I'm not exactly sure if it's two or three, but those are the ones that I reviewed this morning.

Okay thanks. And then last question on Uchucchacua. Are you now actually mining in the high grade areas on the other side where the high manganese was, or is that something to come in the future, and if so, when would you get into that stuff?

We have not modified significantly our mine plan for Uchucchacua as we had it from the beginning of the year. what we have done is we have adjusted the grade a little more towards the high end and in other words from close to 15 ounces of silver, but we will continue to mine the same, using the same plan. Now in the same plan we have phases with different grades, and so the blending of the grades is what we're trying to do, be more accurate so we can improve the grade going into the plant and so we can recover additional ounces in the process. So that's the basically what we are doing. We have some phases with higher grade than average, and then we're trying to mix and match and we use dilution as much as possible.

Right. I just recall that there was another area sort of on the other side of the district almost where you got much higher grade.

You are referring to [Umpeck]. That is very high manganese, but potentially what it shows us is that the district has a huge potential and with the Rioseco plant we have proved those resources invaluable. And that is very, very important. The thing is that the metallurgic process has added value to our resource that not having the Rioseco plant will have no commercial value. So we are really pleased that we did it, and that we have expanded the resource.

We will continue to develop [Upack] as we speak, we will continue to drive the ramp and do additional exploration there. That hasn't stopped, and as Roque mentioned, it's an extension. It's about five and a half kilometers from where we're currently operating in [Chequa], so that is in the same geological formation. The intermediate [Umasha] and the apres [Umasha], so it would be the same formation.

And just a question, when could you do you think you could be mining slopes in that high grade area in [Umpag]?

We haven't discussed that yet. I think right now we are focused on exploration more than anything else. In order to put that in exportation we would have to do a number of changes such as access roads, pumping, ventilation, et cetera. So it's still a little ways before we can commit to that for any specific time.

This is part of the long term mining plans and perhaps in four years' time we are going to look at it.

Okay got it. Thank you very much.

Thank you. Our next question comes from Alex Hacking from Citi.

Hi, yes, good morning gentlemen. Thank you for the call. I have two questions. The first question is can you help me understand a little bit better the calculation for [all] in sustaining costs. I can see that it was reported at $900 per ounce in the quarter, but gross margin was close to zero, and gold was almost $1,200 an ounce. So how do I sort of reconcile the difference between those numbers?

And then the second question is can you remind us on Cerro Verde what's going to happen to the cost structure post the expansion? Obviously the mine will be operating at a larger scale, but I think there's going to be some grade depreciation there. Once the bigger concentrate operates in. Thank you.

Okay regarding the concentration, always there is any cost. Where you have the numbers in our appendix, and I would prefer not to strain over the conference call, because it would be pretty boring. But we could have a separate conversation because we follow mainly the morals and the rules to calculating.

Cerro Verde, the project is on the schedule and to be able to start in as announced in the third quarter of this year. and I don't have the details of the cost, but the basic rule would be that all the fixed costs would be divided by the additional pounds that the plant will be operating, so we should see a reduction in the unit costs in general once it starts full operation. Now remember, keep in mind that Cerro Verde once it starts, it's not going to start, the ramp up period is going to take at least four or five months, so we should see the full operating facility next year. It's the ramp up period that takes that long.

Thank you.

Thank you. Our next question comes from Mr. [Vacion Cruz] from Capital Securities.

Good morning to all. My question is at (inaudible). We see (inaudible - technical difficulty).

Can you repeat that please? We didn't copy.

Yes. Which is your current [Fed] rate at Tantahuatay? (inaudible - technical difficulty).

We haven't copied correctly, but at Tantahuatay we are working there and we are very, we are essentially mining very carefully because it's very close to the [goche hita] town and essentially the use of explosives has to be very, very careful. So we are continuing mining there, and essentially we are focusing more on the lead, zinc, silver areas of the mine rather than the copper areas, but we are also producing some copper as well.

Yes maybe you referred to this in the earlier months of the year, we had some issues regarding the blasting in that particular area that Roque mentioned. Now we have reached an agreement with the communities where they will allow us to do the blasting there, of course a control blasting. We use timers and we do joint monitoring with the community, so now we are able to do the blasting in that particular area.

I was asking about the [old link or a type of market season and do you have the number or seem to remember of our own way]?

Ore grade.

Yes.

You are asking for the ore grade.

Yes.

Yes okay. The ore grade at, we may, I don't have it here. But we can pass it to you afterwards. Essentially it's in the range of 1 to 2 ounces of silver and close to 2% copper and close to one and a half percent lead if I am correct. But that's subject to reconfirm.

What is important to mention is that due to the agreement which we made with the committee in June we were obliged to put ores that were in a stockpile. And due to this, the recovery ratio was lower than what we expected, and we planned. But now that we are exploding and blasting from [Patanorte] we are going to put this metallurgy.

[What I want to know is there what are increasing of the grade and is affecting the options].

I am sorry, we are not copying you. Excuse me.

I want to know there is [I am quoting the non grade and (inaudible - technical difficulties) [the options].

What is affecting production?

[Is it going or the grade].

I will repeat myself I guess. Maybe I didn't copy your question right, but what has been affecting production are these installations in the plant that are not operating to what to our expectation. Also the secondary crusher, the washing drum and the scoop that I mentioned. We are redoing this mine plan for reviewing the mine plan as we do with all mines. We tried to pass it the best and most optimum grade through the plant, but that's what we're doing. I don't know if this answers your questions. If not, we'll send you detailed data via email.

Thanks for your answer.

Thank you. Our next question comes from [Ivan Weston] from Credit Suisse.

Hi thank you very much for the questions. The first one in on CapEx. I appreciate if you could comment what's your expected remaining CapEx for 2015 and also for 2016 and 2017. Additionally, how expect to fund? Is it reasonable to assume you are going to raise debt, and if that is the case, by when and what sort of amount? Thank you very much.

Yes well in terms of our CapEx we still consider our slightly less than [$70 million] and we mention for our [diet for sustaining CapEx] due to the fact that we will pay certain assets, so for Tambomayo that will be perhaps delivered in January or February. On the other hand, for next year that will be slightly higher due to the [$300 mill lower] as we mentioned due to this delay. So initially the 2015 CapEx was in the order of $300 million lower. It will be probably $217 and this will be moved to 2016. In the case of the 2017 CapEx, well, we have to review that. We don't have these numbers on top of my mind.

Okay thanks. And are you expecting to raise debt in the near future?

Yes we consider to raise some debt. Actually we are also in debt for the short term, taking the opportunity of the very cheap cost we obtain in the market and that we evaluated to the extent that we need to raise certain debt.

Okay and can you disclose what sort of amount you expect to raise and by the time frame and by year end this year?

Well the expectation is to raise some eventually before the year end. We have an opportunity to do so. But the instrument could be eventually as indicated long ore or eventually above if necessary. But this is something that hasn't been decided finally.

Okay very clear. Thank you very much.

You're welcome.

Thank you. Our next question comes from Tanya Jakusconek from Scotiabank.

Hi there. How are you.

Hi Tanya.

I'm sorry I was pushed off the call, so maybe you answered this and I don't know. It has to do with Tambomayo. I know that originally you had looked at a production profile of 110,000 to 120,000 ounces, and now I think you have been stating 120,000 to 150,000 ounces. Similar silver and similar costs and similar CapEx to build . what's changed the production profile? Is it since it's similar capital, similar infrastructure, is it grade and recovery? What has changed that?

It's tonnage. We were expecting initially 1,000 tons per day, and we are heading for fifteen hundred now. The thing is we organized or we planned on having everything ready, permitted to go to 3,000 with initial stage of 1,000 tons per day. Now we have decided to go for 1,500 and have a second stage that could take us to 3,000 tons per day. So it has been tonnage essentially that will permit us to produce more ounces.

I believe that you had a [somes take] and we have always mentioned the ore, the gold to be produced in the order of 120,000 ounces of gold in the order of 3 [mil] ounces of silver. What [you have mentioned] that the higher gold production was in San Gabriel. But we have always mentioned that the gold production in Tambomayo was going to be at the current level.

Just to add more information on the Tambomayo project, we started afterwards the actual movement of earth about three weeks ago, and we are also finishing up the concrete and the mechanical packages for bidding. So we are actually in construction mode in Tambomayo. So things are going as per the schedule.

Okay thank you.

(Operator Instructions). We now have a question from Jean-Pierre Fournier from AFP Integra.

Good morning everybody. Thank you for your report. I want to refer to production costs for silver related operation. I mean we know that if you go to (inaudible) [internet small appreciate net of prices] but when those mines are producing at almost core prices, there is some concern about among investors. So is it possible to prevent additional problems to reduce production costs? And if that's the case, what kind of measure can you take in the short term? Thank you.

May I ask Igor to help us with that answer. Essentially we are working on cost reductions, and obviously in these times which we call back to normal, we have to [tight] everything, and that's what we are working on.

Our strategy for costs is we have divided the strategy in the strategy for the operating areas, and they operation areas we are trying to analyze and increase productivity, we are negotiating all the major contracts to try to adjust the prices. At the end we are also renegotiating or trying to optimize all the supplies and services to the mines. We're working on all the extra time that we pay to the workforce and a whole array of reductions in administrative costs all the way from donations, trips, rentals, et cetera. And then also we are looking at the corporate level doing some additional cost reductions, but with participation of corporate personnel, and these are for example consolidating contracts and sustaining capital. Those are some of our existing operations that are near closure. [Definite] closure I should say, and review concessions for example. So we're focusing on a wide array of things to tackle a cost reduction and program for when [are in to that].

Okay thank you very much.

(Operator Instructions). At this time I show no further questions, and now would like to turn the call back over to Mr. Roque Benavides, Chairman and CEO for closing remarks.

Thank you for joining us in this conference call. We know that this is difficult times. This company, Compania de Minas Buenaventura, will continue its efforts on cost reduction and making our operations as profitable as possible with this current situation, and as I say back to normal, we have to continue working on efficiencies and making our operations as I say as efficient as possible. Thank you for attending and hope to see you soon.

Operator: Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.