Compania de Minas Buenaventura SAA (BVN) 2017 Q4 法說會逐字稿

Greetings, and welcome to the Buenaventura Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Barbara Cano of Inspire Group. Thank you. You may begin.

Thanks, Melissa. Good morning, and welcome, everyone. Presenting on the call today is Mr. Victor Gobitz, Chief Executive Officer. Also present and available for your questions are Mr. Leandro Garcia, Vice President and Chief Financial Officer; Mr. Gonzalo Eyzaguirre, Chief Operating Officer; and Raúl Benavides, VP of Business Development.

If you've not yet received a copy of the earnings press release, please visit www.buenaventura.com, where our webcast presentation is also available to accompany today's discussion. Should you need any assistance, please contact Inspire Group in New York at 646-452-2334.

Before we begin, I'd like to remind you that this call will include certain forward-looking statements. These statements relate to expectations, beliefs, projections, trends and other matters that are not historical facts and are therefore subject to risks and uncertainties that might affect future events or results.

Descriptions of these risks are set forth in the company's regulatory filings. Statements made on this conference call should be considered together with these cautionary statements and other information contained within the company's earnings release dated February 27, 2018, as well as the information contained within the company's most recent periodic reports filed with the BDL.

With that, I'll now turn the call over to Mr. Victor Gobitz, Chief Executive Officer. Mr. Gobitz, please go ahead.

Thank you, Barbara. Good morning to all, and thank you for attending this conference call. We are pleased to present our Fourth Quarter and Full Year 2017 Results of Compañía de Minas Buenaventura. We have prepared a short PowerPoint presentation, which is available in our web page.

First of all, I would like to welcome Leandro Garcia to his new position as Chief Financial Officer. We are glad to have Leandro join in Buenaventura's management team.

Before we go further, please take a moment to review the cautionary statement shown here on Slide #2. Moving on to Slide 3. Highlights were as follows. In this Q4, EBITDA from our direct operation was USD 116.6 million, which is an increase of 44% compared to the same period a year ago. In 2017, net income was $60.8 million compared to negative $323.5 million a year ago. The net-debt-to-EBITDA ratio was reduced to 1.4x. The company de-bottlenecking program is in progress, with results expected to be gradually reflected from 2018 to 2020.

Yanacocha purchased the International Finance Corporation's 5% equity stake in Yanacocha for $48 million in December 2017. In 2018, Yanacocha agreed to make a capital reduction. Therefore, Buenaventura's stake in Yanacocha increased from 43.65% to 45.95%.

In June 2017, Cerro Verde extended the maturity of its syndicated loan until year 2022 and in December 2017, prepaid $220 million. Therefore, the outstanding balance is $1.3 [billion] as of December 31, 2017. In line with Buenaventura's dividend policy, a dividend payment of $0.03 per share will be declared.

Moving on to Slide 4. Financial highlights. Total revenues in 2017 were $1.2 billion, which is 19% higher in comparison to a year ago. EBITDA from our direct operation was $372 million, which is 11% higher in comparison to last year. EBITDA, including our affiliates, was $714 million, which is 11% higher in comparison to last year. And the net income in 2017 was $61 million compared to negative $323.5 million a year ago. As you well know, in 2016, net income included an impairment of $388.2 million coming from Yanacocha.

Moving on to Slide 5. We are showing our strategic map where you can see our portfolio of operations and projects. The capital B from the logo of Buenaventura, as usual, we're using it as a visual index for the following slides. Here, we would like to point out in the right part of the slide that the ratio of net debt-to-EBITDA has been reduced to 1.4x.

Moving on to Slide 6. Attributable production. Total gold equity production in 2017 was 631,000 ounces, which was in line in comparison to a year ago. However, in terms of our direct operations, we produced 398,000 ounces, which was 17% higher in comparison to a year ago, mainly explained by a new production coming from Tambomayo.

Silver equity production for 2017 was 26.4 million ounces, which was 7% higher in comparison to a year ago based on the better results coming from Uchucchacua and El Brocal. Copper equity production was 122,000 metric tons, 4% lower in comparison to a year ago.

Finally, in 2017, more than 65,000 metric tons of zinc were produced, 6% higher in comparison to a year ago. This increase was mainly due to Uchucchacua higher production.

Moving on to Slide 7. As you can see that consolidated volumes sold from our direct operations significantly increased in the case of gold, explained by the volume sold coming from Tambomayo. And in the case of silver, it is explained by the volumes sold coming from Tambomayo and also by higher silver grade coming from El Brocal.

Moving on to Slide 8. The all-in sustaining cost from our direct operations in 2017 was USD 856 per ounce of gold, 22% higher in comparison to a year ago. The cost applicable to sales in the full year was as follows: for gold, USD 759 per ounce, which is 9% higher than a year ago; for silver, USD 11.28 per ounce, which is 1% lower than a year ago; for zinc, USD 0.97 per pound, which is 16% higher than a year ago; in the case of copper, the cash cost was USD 1.51 per pound, which is 16% higher in comparison to a year ago.

Moving on to Slide 9 and 10. You can see the volume of gold sold and the cost applicable to sales for each one of our gold assets. At Orcopampa, cost applicable to sales was $743 per ounce, an increase of 5% in comparison with 2016. As part of the de-bottlenecking program, our alternative ventilation plan for Orcopampa was defined, and full implementation is expected in 2018.

Tambomayo begun commercial production in August 2017, and in 2018, it will be Tambomayo's first full year operating at total capacity, and production will be between 110,000 to 130,000 ounces of gold.

Moving on to Slide 11. You can see the volume of silver as well as the cost applicable to sales for each one of our assets that are a part of our portfolio.

Moving on to Slide 12. You can see the volume of copper and zinc sold as well as the cost applicable to sales for each of the assets part of our portfolio.

Moving on to Slide 13. The de-bottlenecking program, which we are implementing in our biggest underground mines, is in progress, and results are expected to be seen gradually during the following 3 years. According to our economic analysis, we intend to generate total EBITDA of $120 million to $150 million between 2018 to 2020. And this program will require a total CapEx of $35 million to $45 million throughout the same period of time. The de-bottlenecking program is meant to improve efficiency, reduce cost and also increase our capabilities for more aggressive mine development and exploration programs in order to generate more visibility for our ore reserves; in other words, increase our life of mine. We reckon that an extended life of mine means better mining plans, a more steady and predictable level of production, resulting in an increased market value for our underground mines.

Moving on to Slide 14. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.

(Operator Instructions) Our first question comes from the line of John Bridges with JPMorgan.

The numbers are looking much nicer. The guidance for next year is looking good, very encouraging. Well done. I was just wondering if there's any clarity on cash flows and dividends coming out of Cerro Verde this year, just as a first question.

Thank you, John, as well, thank you for your questions. Yes, we expect to discuss this particular case of the dividend of Cerro Verde in the coming AGM, the Annual General Meeting, that will be held on March 23. But clearly, Cerro Verde in terms of production and in terms of financial figures, it has a very robust numbers.

Exactly. And the terming out of the debt means that more cash is available for dividends, is that correct?

I would say that the cash position of the company is robust. But to discuss about dividends, we prefer to state that at the end of the AGM.

Okay. Tajo Norte, the reserves have jumped up a lot there. Does that make any -- mean any changes in the production plans there. And do you have a plan for 2018 as to how many tons are going to be copper-focused and how many are going to be zinc-focused, so we could manage our model there?

Yes, Tajo Norte is one of assets that is part of El Brocal. As you know, El Brocal, we have the open pit Capra Norte and the underground mine, Marcapunta. The mix in terms of production will be answered by Gonzalo Eyzaguirre, our Vice President of Operations. Gonzalo?

John, yes, what we are planning to do is to increase the copper production in 2018. Right now, we are producing around 8,000 tonnes a day. And in 2018 the idea is to increased the production to 10,000 tonnes a day in Q2, in the second quarter, and then increase the production to 13,000 tonnes a day in Q3. And that means that the production from Tajo Norte will decrease.

Yes. Let me add some information, John, that the case is that the commercial terms for the copper concentrate of Marcapunta have been increased, improved a lot. So it makes sense it's more profitable to increase our copper production in the case of El Brocal.

That's right. The margin of copper is better than the zinc, so the idea this year is to produce more of the material that creates more value.

Yes, sir, and it's interesting you say that because your copper production was down a bit this quarter. Was that due to a buildup of inventories? Or was there something else going on?

It's because we were investing and developing the mine. We have to do some work improving galleries, ramps, et cetera, to be prepared for the 13K production. So -- and for that reason, we mined part of the area in our underground mine that has a lower grade. But the idea, as I told you before, is to starting this second quarter of 2018, the production will increase to 10,000 tonnes a day. The equipment is ready now, it's under commissioning, the tertiary crusher, the mobile crusher, the filter, the new filter. All the equipment is ready. So for sure, in Q2, we're going to start producing 10K.

And the total throughput at El Brocal when you've made these expansions, how much of this is taking from the total and how much of it is expanding the total throughput?

We will swap the production from copper -- from zinc to copper. The total production for 2018 will be around 18,000 tonnes a day.

This is our base case in terms of processing capacity.

Our next question comes from the line of Botir Sharipov from HSBC.

I've got couple on Yanacocha and also on your de-bottlenecking program. On Yanacocha, first question is, you guys bought -- Yanacocha bought the 5% stake of IFC, increasing your share in Yanacocha. It would be interested to know how this process went about? What's the rationale? Is that something that you see at the same Quecher main and maybe long-term future that prompted you guys to make that deal? And also on Yanacocha, the company reported net loss, yet the cash costs were pretty good, relatively speaking. I just wanted to maybe see if you could reconcile if there were any maybe items below the operating lines for Yanacocha like taxes or something else that sort of led to a net-net loss versus a positive EBITDA and a relatively decent cash cost? So those are the questions on Yanacocha. And as far as the EBITDA savings, the $120 million to $150 million EBITDA, is that incremental EBITDA that you're looking to generate from the bottlenecking program over the next 2 years? Did I understand this correctly?

Yes Botir, thank you for your questions. You have 3 different questions. The first one is related to the rationale behind this increase in our share participation in Yanacocha. First of all, I have to say that we have a very confident view of the long-term plan for Yanacocha. And trying to explain with more detail that concept here is Raul Benavides, he will explain to you the Quecher Main project and the sulfide project, the exploration program in the underground part of Yanacocha. Please.

Well, the Yanacocha has some projects in hand. One is to control cost and to reduce fixed costs in order to [allocate] this new level of production. We are also working on optimizing the closure cost so that it is reduced. And as a way to bridge in order to get into the sulfides, there is development of Quecher Main that needs 3 things for a couple of years before getting into full production. But that will take us to the point where we can start production of the sulfides. We are very optimistic about the sulfides. There has been very good intersects in Chaquicocha that will increase the amount of oxides, high-grade oxides underground that can be processed in the gold mill. And also there's an opportunity in the gold mill to generate some more ounces and better recoveries by adding some gravity and flotation cells. So in other words, we're very confident that the Yanacocha future will come in a good way, but we're in the transition in order to see these developments. And Newmont says that the sulfides are in Stage 2 of their project methodology.

Thank you, Raúl. Your second question was related to the financial figures in Yanacocha. Leandro Garcia, our CFO, will answer it.

The explanation of this negative in Yanacocha is a charge of $109 million in the last quarter due to an environmental liability update.

Okay, that explains it.

Yes. And your last question, Botir, was related to the de-bottlenecking program and the effect in the EBITDA. Here, Gonzalo, who is in charge of this program, will explain in more details.

Yes. The number that we see there is the total of 3 years from 2018, '19 and 2020. We expect to have an additional increase, nominal increase from $120 million to $150 million. And for 2018, we expect that the increase of the EBITDA will be around $15 million to $25 million. And what we've already done in the debottlenecking project is the Esperanza tunnel, which is located in Marcapunta, El Brocal is ready. We're going to have a decrease in holding distance that will give us a lower cost. As I mentioned before, the main components of the 30K project in El Brocal is -- those components are in commissioning right now. The production, we expect the production will increase to 10,000 tonnes a day in the second quarter. Also, we have divided the integrated mining contracts projects in 3 phases. The Phase 1 of those contracts will be ready in Q2, in the second quarter. We expect a decrease in our cost, mining cost in our North area for that quarter. And then we have 2 other phases. Phase 2 will be ready in Q3 and the third phase in Q4. So by the end of the year, we will complete this integrated mining contracts project.

(Operator Instructions) Our next question comes from the line of Thiago Ojea with Citi.

I just want to clarify on 2 topics that were mentioned. First, on the debottlenecking project. You mentioned a target of $120 million to $150 million EBITDA until 2020. But for 2018, would it be only $15 million to $25 million, is that correct? And second, regarding potential dividends on Cerro Verde. I know that you still don't have a decision on that, but it's fair to assume that at a certain point some part of the cash will be reimbursed to the investors. Do you have at least a time line or expectation when this could happen?

Thank you. Thank you, Thiago. Yes, your first question is, yes, the debottlenecking program for 2018 is in the range of $25 million to $30 million. And your second question regarding Cerro Verde, we agree with you, the cash position is very robust. But at the moment, we don't have a time line to share with you. But I will share with you as, obviously, when we have this information.

(inaudible)

Sorry?

Our next question comes from Carlos de Alba with Morgan Stanley.

Just wanted to go back again to the debottlenecking program. Do you have already a view on 2019? And also I guess, 2020 will be just the remaining. But how much of the incremental EBITDA do you expect to achieve in 2019? And also, Victor, do you expect to report progress on this target on a quarterly basis or just at the end of the year? And then finally, maybe for Raul. Was there any particular reason why the transaction or the bought out of the IFC happened with Yanacocha cash as opposed to the 2 shareholders, Newmont and Buenaventura, buying the stake directly?

Okay, Carlos, thank you for your 2 questions. Yes, regarding the debottlenecking program, yes, we have a breakdown for 2018 and 2020. In a few minutes, Gonzalo will explain that. And also, the second question, Raul will answer.

Yes. Carlos, for, as I mentioned before, for 2018 is from $15 million to $25 million. 2019 will be around $35 million to $50 million. And 2020, we expect to be from $65 million to $75 million. And why in 2018 is lower? It's because we are under the implementation of certain projects. So we expect that most of the gains on these projects will be in 2019. That's the reason.

And clearly, every quarter will be shared with you the advance of this project, sure.

Carlos, about the IFC, the reason why the IFC sold is completely theirs. They have been with us since 1993. And they considered that their investment strategy was -- had complied longer than they expected, so they were always looking into doing some transaction. Finally, with the knowledge we have of the sulfides and the new findings in Yanacocha, Newmont and ourselves, we feel very confident that the future of Yanacocha is going to be a very good one. So we're convinced that that's a good buy, so finally, the IFC left. So now we're looking forward to the sulfides. And in other projects, we have a view of the future of Yanacocha that goes even further than the sulfides. And then probably, you will see Yanacocha in a decade from now, a copper mine and not a gold mine.

Understood. And just as a follow-up on that point. Do you see Yanacocha's having excess cash right now or in the coming years? And that is why the transaction with the IFC was restructured as a share buyback?

No. You said that the financial position -- the cash position of Yanacocha is around $700 million. But as a company, we prefer to keep this money into the banks because it's one way to share and try to take control of our [closure] plan.

It's money that we will spend in the sulfides so -- and the sulfide project is going to -- I mean, we're looking into the numbers and it will be...

$2 billion.

It will be at least -- maybe up to $2 billion. So we think that we will need that cash. So there's no sense in retiring that cash before time. And as Victor mentioned, it's kind of an insurance for this closure. But once we have the sulfide project, the feasibility that the closure will reduce its value because we have a project going.

Yes, that's what I thought. But I just -- it was a surprise to me that the purchase of the IFC stake happened with Yanacocha's cash when the company is going to face some CapEx expenditures in the future.

Our next question comes from the line of Tanya Jakusconek with Scotiabank.

I have 2 questions, one has to do with the debottleneck program, and the second one has to do with guidance. So just mainly on the debottleneck program, and thank you very much for the breakdown on each of the years. I just wanted to come back and ask you how the scope has changed from Q3? When we talked about the debottleneck program, the EBITDA improvements were going to be between $80 million and $85 million, and the cost was going to be $10 million to $15 million to implement. Now the cost to implement is $35 million to $45 million, and the EBITDA improvements are $120 million to $150 million. So we've seen an improvement in the EBITDA contributions. Can you talk about what you're seeing that was different than Q3?

Okay. Tanya, thank you for your question regarding the debottlenecking program. Gonzalo, who is here close to me, will explain it, will detail Q-by-Q the program.

Yes, Tanya, what we have done is since Q3 is putting more details on this debottlenecking program. What I can say is that now, we have a detail of each of the projects that we will implement during this year and the next year. And for sure, we have improved other things that we didn't saw before, and that's why we have an increase in CapEx and also an increase in EBITDA. Those are the reasons. But these are, for sure, it's something that we will be revising. And probably, it will be -- we expect that this is -- it will be better than now. These numbers are numbers that we believe are conservative numbers, and we would expect that this would be -- this could be better.

And when you said you added new things that were not part of last quarter, as an example, what are some new things you added?

For example, a drainage system. We found in 2 of our operations that we need to improve the drainage system to decrease the operating cost and also in ventilation systems. That's mostly the major CapEx investments.

Okay. And then, maybe on the second question, which has to do with my -- the guidance. Can you let us know what your cost guidance is and your CapEx guidance is for 2018? And also, will you be providing long-term guidance at your Investor Day, so maybe 2019, 2020, '21?

Tanya, thank you for your question. Yes, we have the details in terms of CapEx and cost for 2018. But for the coming years, we are still working on it. We have to, as I said, we have to increase the visibility in terms of our ore reserves in underground mines. For that reason, we are implementing this debottlenecking program. But for sure, for 2018, Leandro Garcia will share with you these numbers.

Tanya, our budgeted CapEx for 2018 is around $180 million to $220 million. As consolidating, including our affiliate Coimolache, will be around $60 million more. Costs? What's the second part, it's the cost?

Yes, the cost. So do you have a target for gold cash cost, all-in sustaining cost or silver cost?

Yes. We will have a cost, a cash cost for gold between $650 to $700; a silver cost, around from $9 to $10.50; basically, copper will have $1.47. The average cost we'll have for, yes, Cerro Verde...

Yes, let me explain it in a different way, Tanya. In the case of gold, we expect a better results coming from Tambomayo because it's a full year of total production -- total capacity. And also, we expect a significant change improvement in the case of Uchucchacua, which is our silver asset -- our main silver asset. And also, in the case of copper, we expect a significant increase in terms of production and reduction in cost in El Brocal through this expansion of the underground mine, Marcapunta Norte. So these are the main drivers in terms of production and reduction of cash cost for 2018.

Okay. Did I hear correctly that copper was $1.47 a pound?

Let me check this number because we, in that case, we depend on the cash cost of Cerro Verde. But you see only our number, only Marcapunta Norte, which is our copper asset. The cash cost will be in the range of $1.5.

$1.5.

USD 1.5 per pound.

Our next question comes from the line of Carlos De Alba with Morgan Stanley.

Carlos?

I was on mute. Just wanted to see, Victor, if you have any comment on Yumpaq, San Gabriel or Trapiche. Do they keep on advancing. What is the latest update that you use on that?

Thank you, Carlos, for the question. Yes, we have prepared a small, a short explanation. Raúl Benavides who's in charge of this business development, will answer it.

Well, let me tell you about Yumpaq. We are done in the ramp. The idea is that the ore body is kind of flat and dipping into the -- towards Uchucchacua. So we're working on this because we haven't been able to do much more in drilling from the surface. We lose the -- it's too far, too long the drillings, and we're losing a lot of holes. So we have (inaudible) resources of 1.12 million ounces.

(technical difficulty)

[0.8 ounces] of gold -- of silver and with manganese for sure. So that makes 26 million ounces of silver. Then in Trapiche, we -- today, where we have -- the methodology that we generated was done by [Ron Hickson] and Terry Owen. We have Terry Owen today in -- this week in Lima. He has gone to Trapiche to check, or double check on where we are. And we should finalize the scoping level review this week. And then if we can finish this community agreement, we -- just to put you up to date, we have an agreement with the community, but we need access to the area. And because of that, we have been discussing with the community how to deal with this. And of course, these things take time and you never can predict when they are going to finish. The only thing that is really getting us into -- we're not that up to date is in the geometallurgy. The metallurgist would like to do some piloting of the leach part of the deposit in order to be ready to cope with this prefeasibility that should be ready before the end of the year. In the case of San Gabriel, we are now -- we have made some geotechnical studies in Australia. And from there, the people from Mamic that are doing the studies, these rock type studies, they are looking into new mining methods, and they need more drilling. So we're not going to drill in order to be sure that we will have all the geomechanics ready so that we can be sure of the mining method. With that -- and we're reviewing the feasibility at the scope level. And we should have the prefeasibility ready by midyear or third quarter of the year. That's where we are in these 2 projects.

Excellent. And finally, why did Buenaventura not decide to bid for Michiquillay?

Well, good question. That's a good question. Well, first of all, the exposure of Buenaventura to Cajamarca is very big already. Socially, they begin to say in Cajamarca that we were coping with all the mineral deposits in the area and we were the kind of the monopoly of the mineral resources in Cajamarca. So it would have been very difficult for us to do it. Plus we have an agreement with Newmont that we should look at this deposit as part of our joint venture. So -- and the other thing is that we think that a third party can really generate a business case that includes that the taking ores to our plant where -- that is designed already for Conga and using the tailing dam of Conga. So this is -- I think that having Southern in Michiquillay is a great opportunity for us. We were playing with the government. Our role of promoting Michiquillay because by having a new kid in the block is very, very good for us, so that we can work together in getting these deposits done.

Carlos, let me add just a few information. Michiquillay is part of the district -- copper district, which shares the area with Galeno and Conga. So it makes sense, as Raul said, to analyze the synergies between these 3 different projects. And as Buenaventura, as part of Yanacocha, we have a portion of Conga. And also, this copper district is very close to the existing footprint of Yanacocha. It's located to the east part of Yanacocha, a very close distance, around 20 kilometers. So we are in the area, and as Raul said, it makes sense a third party that will be part of this effort to develop mining activities in Cajamarca.

And just to clarify -- and just to clarify, this agreement that the company has Newmont to participate together in projects is just for the Cajamarca deposit?

Yes, this is part of -- we consider that Michiquillay is part of the orbit of Yanacocha. It doesn't make sense that we're competing there. We have to cooperate, and we think that there is the opportunity, as Víctor said, to make a mega project with the facility that we had in Conga with (inaudible) and maybe with Galeno. And if Michiquillay comes into equation, then it will be, I think, a very good project. And with copper as it is today, I think that we have to look at it more closely. And we will invite Southern to be part of this study and see if we can generate a very important project for Cajamarca.

(Operator Instructions) Our next question comes from the line of Edder Castro from Profuturo AFP.

Both of my questions are regarding guidance. The first one is, if you can share with us some guidance about exploration expenses, differentiating between brownfield and greenfield projects. My second question is regarding the production guidance for 2018 related to La Zanja, Julcani and Mallay? I understand that in this quarter -- this last quarter, you processed some of the material from Uchucchacua in Mallay. Is this a trend that will continue in the future? And also, if these lower trends in the production of gold in La Zanja and silver in Mallay is a good reflection of what we should expect in the following years?

Thank you for your 2 questions. Let me start for the last one related to the guidance for our assets. As you know, Mallay and Julcani are 2 small underground mines. Julcani is our emblematic mine. We started 65 years ago in Julcani. And we have in Julcani a program to reduce volume and to increase the ore grade; that means to increase the profitability of these assets. It's small. It has a very small impact in economic terms. And in the case of Mallay, it's another underground mine, very small underground mine, where we faced some difficulties in terms of mine drainage. So we have decided to suspend, we suspended the deepening of the underground mine, and we are taking advantage of -- that Mallay has a processing plant, which is located very close to Uchucchacua. So we are generating more profitability using the main part of the Mallay capacity as a (inaudible) plant to treat the excess of ramp of mine that is coming from Uchucchacua. Finally, in the case of La Zanja, La Zanja, as you know, has a low, a very low life of mine. We are working an exploration program in the process to replicate the model that we have in Coimolache and also in Yanacocha because, as you know, La Zanja is also located in this area, in Cajamarca. In the bottom part of the oxide deposit, there is potential to generate a business case through copper deposits. We're working in that program, and that's it. In general terms, the economic or the financial impact of these 3 assets is very small. We have different programs for each one. In the case of Julcani, it's our emblematic mine, we started up and really it's part of the history of Buenaventura. In the case of Mallay, we have a short-term plan, trying to take advantage of the location. But in the long-term plan, probably we have to discuss a different way to deal with this small asset. And in the case of La Zanja, we are working together with Newmont to increase our exploration programs in order to create a long-term business case based on copper deposits. Your second question -- or your first question was related to the exploration guidance. Raúl Benavides has some information.

Yes. Well, this year -- last year, we had an exploration expense in our balance sheet of $23.75 million, and this is exploration brownfield. The greenfield was just $3.4 million. And the drilling was -- we drilled 35 -- 36 kilometers. And this year, we plan to drill about 50 kilometers. This is what we have today. And as you can imagine, we're focusing in brownfield. We're doing very little greenfield because, today it's a time where you have to work on brownfields that complement your operations. And greenfield seems to be very costly for greenfield exploration. And also, there's a lot of competition.

Our next question comes from the line of John Bridges with JPMorgan.

I was just wondering, the proposed new mining method for San Gabriel, what are you testing the rock for?

Well, the idea, John, behind this is, if we have to do cut and fill or we can use long drill holes on that, so it depends on the quality of the rock in order to do one or the other. As you can imagine, the cost of one against the other is very big. So we need to have, really, an insurance that we can use these long drill holes with -- we have to put new waste filling or tailing filling anyway, but we will -- we need to know the quality of the rock in order to know what mining method. And that makes a lot of money into the internal rate of return.

Understood. And yes, I was just thinking you might have been trying to do something unusual. The -- and then, on the reserves and resources, when do you think you'll be able to put out your resource update? You've been doing a lot of extra drilling, I believe, to sort of beef up your -- the visibility on your inventory reserves and resources. When will we see how much progress you've made on that?

Probably in the coming Annual Report, you will see part of this information. But let me add also that in comparison to a year ago, in this year, in 2018, we have invested at least more than 30% more in order to increase, as I said, visibility of our core reserves. But at the end, during the -- in the Annual Report, you will see that information. And in the coming quarters, it's a good point to share with you our debottlenecking program and also our progress in terms of exploration.

Okay. Great. Could the reserves and resources be available for the Investor Day? Is that possible?

Yes, it will be available. Yes.

Thank you. Mr. Gobitz, there are no further questions at this time. I'll turn it back to you for any final comments.

Thank you. As Buenaventura's team, we are committed to reach the 2018 targets, and in addition, to develop the full potential of our existing assets through the debottlenecking program, and also to implement a disciplined process for value generation for the development of our portfolio of greenfield projects. Finally, we would like to invite you to the Compania de Minas Buenaventura Investor Day that will take place on Tuesday, March 30, in New York City. Please contact our IR team for further information. Thank you again, and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.