Compania de Minas Buenaventura SAA (BVN) 2024 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Compania de Minas Buenaventura first-quarter 2024 earnings results conference call. (Operator Instructions) And please note that this call is being recorded.

I would now like to introduce your host for today's call, Mr. Gabriel Salas, Investor Relations Officer. Mr. Salas, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our first-quarter 2024 results. Today's discussion will be led by Mr. Leandro Garcia, Chief Executive Officer, also joining our call today and available for your questions are Mr. Daniel Dominguez, Chief Financial Officer; Mr. Juan Carlos Ortiz, Vice President of Operations; Mr. Aldo Massa, Vice President of Business Development and Commercial; Mr. Alejandro Hermoza, Vice President of Sustainability; Mr. Renzo Macher, Vice President of Projects; Mr. Roque (inaudible) , Chairman; and Mr. Raul (inaudible) , 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 close. Please note that today's remarks include forward-looking statements that are based on management's current views and assumptions.

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 April 29, 2024.

Let me now turn the call to Mr. Leandro Garcia.

Thank you, Gabriel, good morning to all, and thank you for joining us today to discuss the quarterly results (inaudible) on slide 2 is our cautionary statement, important information relating (inaudible) pickup of a couple. Today, we will be discussing our performance for the first-quarter 2024 highlighting key achievements and strategies moving forward. After the presentation, we will be available for our Q&A session, where our team will be happy to answer your questions. The next slide, please.

I would like to highlight a few key areas that contribute to our strong first-quarter '24 results. Our EBITDA from direct operations for the first quarter has increased 83% compared to the previous year, primarily driven by improved performance at El Brocal and Yumpag. This is also reflected in a higher EBITDA margin of 38% compared to 28% from the previous year.

First quarter '24 operating income reached $46.9 million compared to the last year's $12.6 million. Copper production increasing 26% year over year, driven by (inaudible) provisional rate at El Brocal, which surpasses 10,500 [Boes] per day in the underground mine. Silver production reached 3.1 million ounces, a significant increase compared to the 1.3 million ounces produced last year for the same period.

From these 1.5 million ounces come from Uchuchacua and Yumpag, where we got approval of the final mining operating permit earlier than expected. Gold production decreased 4% year-over-year, reaching [36,500] ounces since we are now mining lower grades at Orcopampa and Tambomayo. We are pleased to inform that the variance from Cerro Verde received on April 26, last Friday.

These dividends will strengthen our overall financial understanding. We're improved our CapEx in first-quarter 2024 total $58 million, which includes $38 million allocated to San Gabriel. Our cash position reached $174 million with a total debt of $699 million. We continue the de-leveraging the company reaching a net debt EBITDA ratio of 1.78 times, lowest in two years and within our target range.

Moving on to our cost structure in a slide 4, please. First quarter '24 all-in sustaining costs have reduced by 58% year over year. This reduction is primarily attributed to the copper production at El Brocal and Silver contribution from Yumpag. However, it is important to mention that part of the input costs have been considered to be CapEx. Normalize all in sustaining cost should be around [USD3600] per tonne of copper still below than the previous year.

Moving on the cost applicable to sales strength. As you can see, the prioritization of copper or El Brocal and the ramp-up in the underground mine is translating into a continuous cost reduction plan. Silver has decreased year over year, primarily driven by higher contribution of Uchuchacua and Yumpag silver ounce.

Normalized costs, including Yumpag cost is expected to be between $17 and $18 per ounce. Gold cash has decreased year over year and even quarter over quarter, primarily driven by higher grades and ore milled at El Brocal underground mine despite lower grades at Orcopampa and Tambomayo.

On the next slide, we will be presenting the free cash flow generation. During the first quarter 2024, we reduced our cash position by $46 million, primarily due to the intensive capital expenditures campaign, which includes San Gabriel. (inaudible) free cash flow reconciliation is explained by the following breakdown of inflows and outflows.

El Brocal and Orcopampa have been the main contributor for the first quarter 2024. As we have mentioned before, we are going through our growth phase with an intensive CapEx related to San Gabriel. The previously reported, (inaudible) will be registered in the second quarter of 2024.

Moving on to slide 6 in the next years, whenever (inaudible) will be focusing most of its efforts in the San Gabriel. On this slide, you can see the projects. The new lettings program, reaching a 47% overall progress by the first quarter 2024, primarily driven by the full installation and operation of a concrete plan. The key milestone we are closely monitoring for the next quarter is the start of the mine development tunnelling and the start of the SAG new assembly.

On the next slide, we are showing the competition of the definite campsite that is fully operational since February. We have more than 2,000 sleeping beds installed considering that definite an organic (inaudible) water treatment plant, offices and dining areas are fully operational.

On the next slide, we are showing the progress -- the processing plant of platform. Here is the milling area where we are planning to start there. SAG new assembly during the next quarter. And on the next slide, you can see the installation of the Thickener.

Finally, I would like to finish the presentation with a couple of closing remarks. First, encouraging production results at Yumpag are a clear reflection of our success delivering mining growth with final mining permits secured. We are now focusing on achieving a stable and efficient production of 1,000 tons per day. This will be reflected in a significant increase in revenues in the following quarter.

Excellent performance at El Brocal in line with plan to reach 11 tons per day by the end of this year, supported by a positive trend in copper prices.

Third, we are proud to announce that we have achieved a significant San Gabriel project now standing at an impressive 47% overall completion on track as we aim of our first gold bar by the second half of 2025. Currently, we are assessing the project CapEx to ensure an accurate total cost while we define opportunities to optimize the cost structure.

We continue our efforts to transform our mining operation into assets with plus 10 years of life of mine and focus on optimization, them to achieve greater cost efficiency.

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.

Thank you. We will now begin the question-and-answer session. (Operator Instructions)

Caesar Perez Nuvoa, BTG Pactual.

Thank you, good morning, everyone. If I may, I have three questions. The first one relates to your guidance. Essentially, we have seen a meteoric rise in Base & Precious Metals. And given the implications that it has for revenues and byproduct credits, is management looking to review the volumes of revenue and EBITDA that you outlined in the previous call for this year?

My second question relates to costs. There was an important 71% drop in Cass in Gold Cass at (inaudible) $2,000. Is this due to higher volume or specific initiatives? I believe you mentioned in the press release that the company could not place fresh ore on the pads, which makes me think that, there may be some room for improvement.

And finally at El Brocal cost went down to and wanted to understand if this was due to efficiencies attained in the first quarter or if the company used stockpile mind inventories to dilute the costs? Those would be my questions, gentlemen, thank you.

Thank you, Ceaser for your question. In terms of if we can change the guidance, we are ever raising all the operation date, we may we can change the guidance at the end of the second quarter, if things are -- I as we are thinking, that will be in terms of a Gold (inaudible) remember that last year we didn't even produce any also (inaudible) saw.

So maybe this is a comparison this quarter to the last quarter to the first quarter of last year. The information do you have with respect of the -- we are not allowed to put more or in production. It's true. We are just waiting the permit to construct to build the new platform to put more and more ore.

And we expect any moment that permit by the production will begin in the first quarter of a version of four, we begin in the next quarter of the following year. So we issue this big increase the production of gold ounces in the second quarter of 2025. And in El Brocal, actually, we are making many airports to be more efficient.

I pass the microphone to Juan Carlos, maybe he can give more color of your question.

Thank you Leandro, I think it's a tougher question? Yes, it will be the increasing price. Of course, there is a lot increase of production, we are reviewing our mining ones. But at this moment, we are looking more to be the upper range of our pack of our guidance the annual guidance. So probably we want to be more closer to the upper range of that guidance any further reviewed by Leandro comment will be probably announce it if there is any for the next conference call.

In the case of (inaudible) last year at the end of last year. In December, we have a window of opportunity because there was not going in the same area, so we placed almost 200,000 [loans] of all in the back in the last few days of 2023. So we have an advanced work in 2023 that the reason we have the ounces of gold in 2024.

But part of the cause was (inaudible) was incurred during the last quarter of 2023. So that's the reason we have had good notably calls in the cap calls of Coolidge bad. As Leandro mentioned, we stop the production of fresh ore is February this year. We will be waiting for the permits and the construction of the new areas in the past, probably by the end of the year and construction at the same time, the operation of new close -- the breaking of fresh ore would be the first quarter of this year and probably the ounces of gold start coming down 25 in the second quarter 2025.

So probably in the coming quarters because of cumulative cash cost accumulation, we can slightly up because we are not we most fresh ore and production of gold really start to decrease in the coming quarters. And next year that we will resume if we achieve appreciable revenue broke out.

Yes, where there was a lot of improvements in the integration, we are close to 10.5 kilotons per day in production. We are looking forward to reach 11,000 tons per day by the end of this year. We are well track on that purpose, and we are reducing costs. We have been down these increasing production without any additional people or any addition (inaudible) prime or retract it just a matter of improved where we put (inaudible) around dispatching system that we have been a lot of ability for equivalent and we are a review of the results of that investment in the previous quarter. So just some modelling improvement and operational expertise that we are reaping of the benefits and it is our low cost-saving program.

All right, guys, (multiple speakers) Yes.

This is Daniel. I think it has a couple of additional comments to use this (multiple speakers) Just to put some numbers, just to put some numbers to your to your question for regarding the EBITDA. At the beginning of the year, we considered the metal prices of $8,500 for copper, $1,900 for gold and $23 for silver. And our EBITDA was an estimated EBITDA of between $250 million and $270 million.

Today, we have higher prices and considering $9,000 for copper, $2,100 for gold and $25 for silver. In addition to the production from Yumpag that is coming along since March, we are estimating a consolidated EBITDA of between $300 million and $320 million, but that would be the improvement or the additional EBITDA that we expect.

Okay. Thank you very much, Daniel. So it's a large $50 million swing at the EBITDA level. Very clear (inaudible) Thank you all, gentlemen, for your detailed questions. Thank you.

Carlos De Alba, Morgan Stanley.

Yeah, thank you very much and good morning, everyone. (technical difficulty) can you please quantify what the impact was of not having -- not taking the cost of Yumpag and through the P&L and they were capitalized according to the exploration permit as you definitely, that was a positive surprise, but I just wanted to understand how much of EBITDA impact that represented the fact that it was not run through cost but take into CapEx.

And second your any comments on several rather that we saw that sort of rather paid $29.4 million for the second quarter dividends that is down from the 41 level or so that the company had been in the (technical difficulty) Can you provide any color is the expectation that this is the new range that we'll see in the coming quarters?

Or do you think that there is upside to increase some but not know what you're saying, but more like what Freeport has said they will do. Thank you.

Thank you, Carlos. Thank you for your question. It be in the impact of the cost assigned to the CapEx instead of the operating costs is kind of difficult to calculate, but we expect the cost of Yumpag will be around $16 per ounce between $16 and $17 ounces per annum from beginning the second quarter, we will have the exact calculation revealed in our financial effect.

In the case of Cerro Verde dividend, actually, we were not expecting any dividends in this quarter coming from the profit for us was surprised by this deal. We maintain the expectation to have in the total of the year a total dividends between [$120 and $150]. We believe that with this level of prices, that figure a company called can be completed (inaudible) fulfill at the end of the of the year. I don't know, maybe Juan Carlos or Daniel you wants to add some comment.

We are right on the Yumpag, we have a total CapEx total [$8 million] in the first quarter. That was not only part of the operational, but to the whole package of construction, whereas breaking the oil and transportation of the ore into the Chalco facility. So as Leandro mentioned, is kind of a bulk number, but probably more linked to the production, not only from the quarter that sort of at least the whole year. So it's a number that needs to be taking locations because it doesn't match exactly the amount of ounces of silver that we produce in the quarter is a combination of property CapEx and part of the effort dedicated to creating the ore and transport all Yumpag into the Chartwell processing facility. Maybe Daniel has some color (inaudible)

I would like to comment about sort of where discretion. We had this level of prices sort of what they should be generating an EBITDA of around $1.8 billion. The working capital that we expect is around $0.7 billion to $0.8 billion with very small CapEx, around $300 million to $350 million, which gives us a free cash flow of around $750 million. These are at a level of prices of close to $9,000.

It happened there the minimum cash already in their balance, they should be distributing dividends in the order of $750 million, which gives us the $150 million that Leandro mentioned at the beginning.

Great that will be great news I just follow up on that, Daniel, is this has this been approved by (inaudible) the Board or these just an expectation at this stage (multiple speakers) --

These are numbers that were shared by the rollout of it. Of course, at a lower price of copper. We have adjusted them internally, but there is no -- as you know, there is no dividend policy, but what they normally do is to pay a dividend of the in excess of the cash that they have in excess of the minimum cash that they have, which is a $500 million.

Thank you. Thank you very much.

(Operator Instructions)

Tanya Jakusconek, Scotiabank.

Good morning, everyone. Thank you so much for taking my questions. Daniel, I just have some very simple modeling questions for you. And then I have some other questions on the asset. So can I just start on the simple modeling questions.

Can I just then your DDNA was kind of low $42 million in Q1, as was your G&A at 10 and as was the CapEx at $58 million, can you review with me, what you're expecting for those three numbers for the year?

Hi Tanya. For this DNA as you know, we cause in the last two quarter of last year, we had -- we recognized the first stripping that we had in the assets for El Brocal reserves. So in the first quarter it was a minimum of $5.5 million for the we recognized of or related to this the deferred stripping in the third and fourth quarter, this amortization was over $20 million, $23 million. So what we expect for the following quarters is there something about $35 million from depreciation and amortization,

$35 million a quarter for the next three?

Yes, for quarter DNA.

Okay. And then G&A?

G&A, as you know, we have a sold contractor and there is a decrease in G&A from that. We are not considering anymore the conduct of figures, and we have been doing also other adjustments to our expenses for example, we have reduced the size of our location, our headquarter. So we expect third quarter around $12 million of G&A.

Okay, perfect. And then the CapEx, which I think was originally guided around $300 million for the year. It looks like you would have only done $58 million in Q1. So is that $300 million still viable?

Yes, so it's really should be catching up the rate of expenditures. So we still believe that the total CapEx for the year should be between $300 million and $320 million.

Okay Allright, that's -- perfect. Thank you, that's the easy one, maybe still to you, Daniel, because this does impact the balance sheet. Can you just give me an update? I know on Q4 call, I asked about the sale of the Yanacoch to royalty. I thought we mentioned it would be done in April. Can we just talk about the balance sheet?

Yes, we are going to get moneys coming from the Cerro Verde dividend, which is great. But, can you talk to me about what else are you seeing in terms of sources of cash, but size your operating cash flow that's coming from your mind, but other sources of cash from sales and or banks and lending?

Yes, apart from our operating or our EBITDA generated by our operations there. We do expect the sale of one asset we should be receiving this year between $180 million and $200 million from that sale. Then we expect these are already dividends, which could be between $120 million or $150 million. And in addition to that, we have already compromised three RCF revolving facilities with three local banks. And these three massive facilities of up to $200 million. Currently, they are undrawn, but probably we will use them between the third and fourth quarter in order to fund any requirements for San Gabriel.

Okay. And the one asset sale, is that an asset or royalty this like the different ones announced that on one of the royalty?

Royalty.

Royalty okay, that's helpful. Thank you. And then if I could ask one more question. I'm very interested in San Gabriel and what is happening there. And I see from the slide that, you are you've done quite a bit. You've got it. You've got the bags that you've got to assemble. You've got the underground tunneling the development of the underground ramp, and I guess it's ramp and additional deep declines on levels. Can someone just walk me through the second half of this year into 2025 again, what needs to be done.

And then Daniel, for you, the last capital I remember on this mine was $450 million to $470 million. Can you let me know how much we have spent to date and when we're getting this new CapEx number? Thank you.

Of course, Tanya here with us Renzo Macher, he can explain you all your questions (inaudible)

Thank you.

Hi, Tanya. As you can see the pictures and there's great progress in earthmoving. It's out of the way of the critical path in we have started. We are the concrete placement. We have the mechanical steel and piping contractor on site. So we are going to see a lot of advance in that area.

The underground contractor for development, the mine is already on site. So we're going to see the first in the next whatever we're going to see the first mine development advancing in and then electrical and signal conference where we should be closing that contract towards end of May, beginning of end of May beginning of June. So you're going to see all those three main contractors, which is pretty much all of them the remaining big contracts for your more dose (inaudible) area?

Again, we have this 90%, 98% of engineering and procurement side. It's about managing this advantage is they (inaudible)

Okay. So these three contracts are going to be placed. It looks like in Q2. So the concrete, steel, the underground development and the electrical, right, these three are going to be placement or awarded in Q2. You're going to have all of that work obviously done Q2 onwards and when do we actually expect the mill to start to partly to turn in a wet commissioning dry commissioning (inaudible)

There's a we already have from those three contracts. You mentioned the concrete mechanical pipe into steel. It's already signed and it's planning now, underground mine and we'll be producing now, electrical and signal is the one that we need to wait the final stage of the bidding process, so it should be finished by May and awarded on May. Now inhibitors. You can see that we are constructing the mill already. Foundations to personal vision has been pushed towards the -- we're going to be finishing construction towards the early second quarter of next year and that tenant wind commissioning is going to start.

Okay. And how long do you think commissioning will take is it like, 60% up capacities for 30 days in terms of getting to commercial production.

(inaudible) towards early fourth quarter, we should be.

Okay, so Q4 to then take it two quarters to go commercial?

Yes. I mean, we're very advancing well done, and we very advanced in construction. So we can start commissioning earlier for sure. (multiple speakers)

You should start thinking commercial in Q4 when we start taking this through the income through revenue. Okay. And Daniel, just for you. Can I just get an update on the CapEx number? Like, [$450 million to $470 million] was the last number I have. Maybe you can give me a little bit of an idea when a new one is coming and where are you seeing changes in this CapEx number positive and negative.

Yes Tanya, we are still evaluating the total CapEx. We will have a better figure for the next quarter conference call. But we expect from the initial CapEx of $470 million, we expect around 10% to 15% increase. And currently, we have been -- we have already disbursed since 2022 until the end of last quarter, $220 million for San Gabriel.

Okay, that's right. And then I guess in Q2, someone can give me an idea about when you're doing your development, the development is coming in terms of cost for the underground as well. Thank you so much for helping me.

Yes, Tanya. if I may to pass the microphone to Aldo, he wanted to make a little more, give you a little more color about the sale of the total loan volume.

Hi Tanya. I wanted to clarify a little bit of time for the sale of our royalty of Yanacocha. We have time until July 15, if we don't reach the price that the higher price, we can go to the second phase and ask for a lower price first to Newmont and then to the interested in that variance. But the idea to tried to finish that cell during this year. But in the first state, we have signed until July 15.

Okay. So if I understand correctly, you have until July 15 in this first phase, if you do not get the price you want and you go to a second phase? And how does this second phase differ from the first phase? It's a just different (multiple speakers) What about then you can you go back to Newmont because Newmont, I think has the right of first refusal on it?

It's a right of first offer is a little bit different, but we have to ask for a price from Newmont. Even if they don't accept to buy at that price, we also can go to a market again. this is our idea.

Again, these are the assets.

Okay. Got it. Okay. All right. So if we don't get anything by July 15, then we'll go into Phase two,

Yes, exactly.

Okay, great. Thank you for the clarification. I really appreciate it.

Thank you.

Ladies and gentlemen, with that, we will be concluding today's audio question-and-answer session. I would like to turn the floor back over to Gabriel Salas, Investor Relations Officer for any webcast questions. Please go ahead.

Thank you, operator. The first question comes from Orlando Ariga from Credit Corp Capital. Can you please comment on commercial deductions decreased in a per ton of units sold basis. So I would appreciate some color on that.

(multiple speakers)

Sorry, (inaudible) , thank you for the question and happen two things in the market. The first one is that the commercial division has a go lower a lots. We have a better commercial terms for this year. That's why one of the reasons why the commercial chances is going down. And the second one was that we sold 13 dry metric tons of concentrate during the first Q with no worse in El Brocal and that gives us a of course, better terms, a lower deduction. That was the two main reasons why the rational was so low in this quarter.

Thank you, Aldo. At this time there are no further questions. I would like to turn the call over to the operator.

Thank you. That concludes the question-and-answer session for today. I would like to turn it back over to management for any closing remarks.

Thank you, operator. And before we finish today's conference call, thank you. I wanted to thank you for very much for making the time to join us and the interest in our conference. Thank you again and have a wonderful day.

Ladies and gentlemen, that concludes today's conference call. We would like to thank you again for your participation. You may now disconnect.