Compania de Minas Buenaventura SAA (BVN) 2024 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura fourth quarter 2024 earnings results conference call. (Operator Instructions) Please note that this call is being recorded. I would now like to introduce your host for today's call, Mr. Sebastian Valencia, Head of Investor Relations. Mr. Valencia, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our fourth 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. Juan Carlos Salazar, Vice President of Geology and Explorations; Mr. Roger Benavides, Chairman; and Mr. Raul Benavides, Director.

Before I hand our call over, let me first touch on a few items. On Buenaventura's website, you will find our press release that was posted yesterday after 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 these 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 in February [20], 2025. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Sebastian. Good morning to all and thank you for joining us today to discuss the quarterly results of the company. On slide 2 is our cautionary statement, important information that I encourage you to read.

Today, we will be discussing our performance for the fourth quarter 2024, highlighting key achievements and strategies moving forward. After the presentation, we will be available for a Q&A session where our team will be happy to answer your questions.

Next slide, please. I would like to highlight a few key areas that contribute to our strong fourth quarter 2024 results. Full year EBITDA 2024, our EBITDA of 2024 from direct operations, excluding the sale of Chaupiloma Royalty Company, reached $431 million compared to $199 million reported in full year 2023, excluding the sale of Contacto. This performance is also reflected in a higher EBITDA margin of 37% compared to the 24% in the previous year.

Full year 2024 net income, including the August 2024 sale of Chaupiloma Royalty Company was $402.7 million compared to $19.9 million in net income for the full year of 2023, including the sale of Contacto. The year ended with a cash position of $478 million and a total debt of $627 million, resulting in a leverage ratio of 0.34 times.

On February 4, 2025, Buenaventura issued senior unsecured notes for $650 million maturing in 2032 with a 6.8% annual interest rate coupon. The proceeds will be used to refinance our 5.5% senior notes due 2026 and for general corporate purposes.

Simultaneously, Buenaventura completed a tender offer for the purchase of any and all of its bonds maturing in 2026, successfully repurchasing $401 million or 72.98% of the total outstanding bonds. On December 12, 2024, Buenaventura received $78.3 million in dividends related to its stake in Cerro Verde and received a total of $166.5 million in dividends for the full year 2024. The total CapEx for the year 2024 amounted to $378 million with $291 million allocated to the San Gabriel project.

In the full year 2024, silver production reached 15.5 million ounces, 69% higher compared to the 9.2 million ounces produced during the same period in last year. Of this total, 10.5 million ounces came from Uchucchacua and Yumpag complex. Finally, Buenaventura's Board of Directors has proposed a dividend payment of USD0.2922 per share. We have resumed dividend payment policy, reaffirming our commitment to delivering returns to our investors.

Moving forward to our 2025 guidance in the next slide. We anticipate a stable copper and silver production at both El Brocal and Uchucchacua, maintaining consistent output level. Regarding gold production, our primary focus will be on the San Gabriel project, which is expected to become our main gold-producing asset in the coming years, playing a key role in our long-term growth strategy.

Moving on to our cost structure in slide 5. The all-in sustaining cost for the fourth quarter of 2024 increased by 26% compared to the same period in the previous year. This rise is primarily driven by increased exploration activities aimed at supporting the company's long-term growth and resource development strategy. It is also important to highlight that the year-over-year decrease in all-in sustaining cost was primarily driven by lower commercial deductions and high by-product credits mainly from Yumpag.

Moving on to cost applicable to sales strength. As you can see, copper cash increased in the quarter mainly due to lower by-product credit contributions at El Brocal. Silver cost applicable to sales has increased year-over-year but was consistent with the expectations for this quarter. Gold cost applicable to sales has increased year-over-year, primarily driven by lower grades at Tambomayo and Orcopampa.

On the next slide, we will present free cash flow generation. The fourth quarter 2024 cash position increased during the quarter, driven mainly by the strong performance of El Brocal, Uchucchacua, and Yumpag and dividends, of course, received from Cerro Verde, despite the investment made in San Gabriel and the fact that we fully paid the outstanding debt at El Brocal, around $50 million. In addition to these drivers, the EBITDA to free cash flow reconciliation reflects Buenaventura's growth pace with significant CapEx investment related to San Gabriel and El Brocal's debt payment.

Moving on to slide 7. This slide shows San Gabriel's cumulative progress, reaching 71% overall completion by fourth quarter 2024, primarily driven by finishing the engineering and procurement. The construction time line remains on schedule.

We anticipate commencing the ramp-up phase in the third quarter of 2025, followed by the production of the first gold bar in the fourth quarter of 2025. However, this milestone remains subject to the timely approval of the necessary permits.

On the next slide, we are showing the processing plant's progress that will operate at 3,000 tonnes per day. Currently, the primary crusher mechanical works are at 97%. The SAG and Ball mechanical works are at 75%. And finally, the CIL tanks mechanical works are at 87%.

Moving on to slide 9, we can see the progress of the main components of the plant. In slide number 10, we are showing the progress at the filtered tailings plant that currently is at 55%. As we move to slide 11, I would like to highlight our progress with implementation of the UDF mining method, which aims to optimize ore recovery and reduce dilution.

Our structure implementation program includes three key initiatives: first, engaging dedicated expert with over 15 years of experience in this mining method; conducting a trial mine at Tambomayo to evaluate and refine its application; carrying out benchmarking business to four mines in Nevada, USA, to gather best practices and insights. This will ensure a successful and efficient integration of the UDF method.

To conclude the presentation, I would like to share a few final thoughts. First, we have strengthened our balance sheet through successful bond issuance. This has improved our financial position, providing us with greater liquidity and flexibility to support future growth.

Second, the year 2025 will be a significant transition for us as the commencement and ramp-up of production at San Gabriel will mark an important milestone in our growth strategy and set the stage for long-term success.

Third, we are seeing a stable copper and silver production with consistent performance from our flagship assets, El Brocal, Uchucchacua and Yumpag. We are maintaining a steady output on operational stability. Finally, we are committed to returning value to our shareholders. We have resumed dividend payments by affirming our commitment to delivering returns and creating value for our investors. These reflect our dedication to sustainable growth and shareholder value. Thank you for your attention. I will hand the call to the operator to open the line for questions. Operator, please go ahead.

(Operator Instructions)

Carlos De Alba, Morgan Stanley.

Thank you. Good morning, everyone. So on San Gabriel, construction is 63% completed. Obviously, you have four more quarters to go. But what are the key elements of the construction of the project that are still pending? And what would be in -- from your perspective, the most critical aspect of them or the top 1, top 2 critical aspects of the construction that you're spending?

And then if you could remind us, as you obviously further move the project along and with the new realities of commodity prices and cost inflation, can you remind us a little bit on the economics that you see for the project? What is the cost, the cash cost, and the all-sustaining cost that you expect for the project maybe in terms of profitability or IRR for the investment? How have you seen that now? I have a couple of other questions.

Of course. Thank you, Carlos, for your questions, for both questions. Here with us is Renzo that can give you an update of the next milestones that we have in the project. Please, Renzo, go ahead.

Thanks for the question. So as you mentioned, we have all the contractors on site running. Now it's about completing things, so we are starting with the first commissioning for the electric in the crusher circuit and next is going to be the commissioning, the C1 and C2 commissioning of the crusher area, and after that, the carbon leaching area. So that's kind of the three main goals for the next three months, something like that.

Thank you, Renzo. And any comments on the profitability?

Sure. Please, Carlos. Let Juan Carlos Ortiz to give the --

Sure. Thank you, Carlos, for the question. Yes, the cost is going to be in the rate of $1,400 per ounce of gold. That's going to be the cash cost for the project, and we expect to produce in a full year basis in the 120,000 ounces of gold per year. So depending on the price, you can play with the scenarios of EBITDA that we can generate from San Gabriel.

Right. Yes, fair enough. Thank you very much, Juan Carlos. The other question I had is on dividends. So we saw the proposed dividends that will be discussed in the next shareholders' meeting. Is there -- from a management perspective, is this the only dividend payment that, if approved, will take place in 2024? And then perhaps only in 2025, once San Gabriel is starting to ramp up, potentially you have an increased dividend payment? Is that the way we should think about it?

Well, Carlos, you know our dividend policy's 20% of our -- at least 20% of our net profit. We are in permanently evaluation of the possibility to give dividends. If there is any window that in the following quarters to give an additional dividend, we will do it and evaluate it and do it.

Right. But haven't you been paying less than that, Leandro?

Excuse me?

I thought you have been paying less than 20%.

Yes. We -- in the last three years, we have been paying $20 million, and the reason of this limited payment was because we were engaged in the construction of San Gabriel. We have some operational programs that we have resolved in the last three years. But now we are in different position and we have to reward the passions of our investors.

Okay. So what -- so in another way, you may pay more than $20 million in dividends in 2024 or that would only take place in 2025? That's basically what I'm asking.

In 2024, we paid $20 million.

Sorry, sorry. Yes, my mistake. 2025, sorry, or only 2026? So in 2025, would you pay $20 million only and then in 2026, you will potentially pay a little bit more?

No, no, no. The dividend -- the management -- the Board is proposing these days to the Annual General Meeting is around $80 million. It's 20% of our net profit.

Okay, that's clear. Okay, excellent. And then last question. How is the relationship going with Antofagasta? What are -- what do you think that you, as a management team and when as a company, can lever off this partnership or this investment at Antofagasta you did a few -- a couple of years ago and the two Board seats that they have? Can you maybe provide some examples of initiatives or things that you could do together, please?

Well, let me tell you that we, as a management team, we feel comfortable with the strategy. We have proposed to the Board and Antofagasta as part of the award, both of them are very supportive to the team strategy. And we are continuing with the same strategy that we proposed a couple of years ago or a year ago. So we continue with our plan with our flagships, our effort to increase visibility of our company. No, we feel comfortable with them also. We feel them very supportive.

Great. Thank you very much, Leandro, Juan Carlos, and Renzo.

You're welcome, Carlos. Thank you.

Cesar Perez-Novoa, BTG Pactual.

Yes. Good morning, gentlemen. Just continuing here on San Gabriel, I'm just going to piggyback on what -- on Carlos discussion. My question specifically is if there is any risk related to completion of the asset. I know that you are well advanced and the assembly risk is minimal. But is there anything that investors should consider in relation to weather or perhaps rain in the -- as we go into the winter months? That would be my first question.

And my second question relates to El Brocal. Your costs increased by around 36% year-on-year in the quarter. And as Leandro mentioned, this relates to lower by-product contributions. So should we assume that cost for the copper circuit will remain at this level throughout 2025? That is circa around $6,800 per metric ton at least that's what on the report, considering, of course, that your silver guidance for this unit is expected to fall in 2025? Or is there anything that will reverse this?

Thank you, Cesar. For San Gabriel, Renzo can give you an idea. He's, of course, our Vice President of Project. He's in charge of San Gabriel, and also he's part of our management committee risk. So we continuously are evaluating the risk for all our operations and especially for San Gabriel. Please, Renzo, go ahead.

Thanks for the question. There's no risk around procurement because everything has been ordered already. The engineering is complete. In regards to rain, the rainy season in Peru is from December to March with the highest rain on February. So we're about to finish the rain. Of course, there are some small delays due to the rain and the storm, but nothing that we can't recover in the following months.

Commissioning, and this is on the south part of Peru so it's very dry, so I don't foresee any problems with the weather. We passed the worst part already. There's, of course, the social issues is always pending. We're managing that so far. We haven't had a single stop day so I don't foresee any bigger problems there. And at the end, the last one is the permits.

So as soon as we finish construction, we are going to start working with the permits. And there's an authority process that we need to go through as we are aiming at completing construction towards May, June. So we have some time to work with the authority to get the permit to operate.

Thank you, Renzo. And for the question related to El Brocal, Juan Carlos is here, Cesar.

Thank you, Cesar, for the question. Yes, we expect to be in the range of $6,500 per tonne of copper, calls for El Brocal. We are getting stable at that range. And that this is a combination of two things. We are lowering our unit costs in the mine by reducing the unit cost per tonne moved from the mine, processed in the processing plant.

And at the same time, while getting closer to the average grade of copper of our reserves, we have been mining slightly over our average grade in the reserve. So getting closer and closer, kind of catching up with the average grade.

So it's a balance between increasing the tonnage, reducing the cost, and reducing the grade, getting closer -- with copper grades getting closer to the average of our reserve to build an asset of more than 15 years life of mine. So under all these combination of factors, we expect to have either around $6,500 per tonne of copper, the average cost for El Brocal.

All right. And sorry, Juan Carlos, just one more. At Coimolache, per the stated mine plan, gold production in 2025 is going to grow as you expand your leach pad. How much of this expansion will translate to cost? I believe that your average cost last year was around $1,600 per ounce. Is this going to move this year?

Yes. The cost is going to keep the same for the initial three quarters of the year up to August, September, in which we will get the permitting for the fresh into the leaching pads. So for these nine months, eight months up to August, September, we will keep the same cost as we had in 2024.

From the time we start placing fresh into the pads, August, September, November, December this year, the project cash cost will come down. So this is going to be an inflection point also for Coimolache. Once we get the permit, when we get the full production, our production costs, our cash flows will came down in the last quarter.

Alright. Thank you very much, Juan Carlos, Renzo, and Leondro. Thank you very much.

Thank you Cesar.

Tanya Jakusconek, Scotiabank.

Great. Good morning. Thank you so much for taking my question. Just wanted to come back on San Gabriel and thank you for the slide showing the progress. It's great to see. I can see everything pretty much on surface and that's great. But I wanted to move to the underground, if I could, and maybe someone can help me.

Can I just get an update on where we are on the underground in terms of getting the stopes ready? Because the mill will be ready, but I need to understand where are the stopes in terms of preparation for ore to be delivered to surface.

And most important, I would like to understand how your ground conditions are. And the testing of these four mines in Nevada, can you kind of give me what mine you benchmarked against and sort of the costing there and maybe what you are experiencing here? I know you're doing a trial test at Tambomayo. Maybe you haven't done one yet at San Gabriel, but I'm just trying to understand how the underground is being positioned to be ready to deliver ore.

Thank you, Tanya. Thank you for your question. Please, Juan Carlos?

Sure. Well, regarding the progress on the mine, we are on track against our plans. We have two set of crews developing the mine with a local contractor, the mining contractor. So we are on track of what we plan to do. We already have, right now, like 20,000 tonnes of ore already in surface, along with the development through the ore body. We are stockpiling that materially in surface right next to the processing plant.

We expect to grow that stockpile up to almost 300,000 tonnes by October, November this year. And of course, we will be playing the surface to catch up with the start-up of the processing plant with the commissioning and the final operational settings of the processing plant. So we feel comfortable with the progress in the mine.

Along with that, we placed an order with Epiroc to a complete fleet for our mine development and mining activities. That fleet is going to be delivered by Epiroc since July this year. June, July and August, all the fleet will be delivered, our conventional equipment, nothing fancy. So we don't expect any risk. We are training our people already. The new people that we are hiring around the San Gabriel footprint. So everything for the plants are working together.

Regarding the ground condition, we knew that it's going to be a ground, so it's something that we can't control right now with. But there is no water on the ground so it's plus on the sense that we don't need to deal with that problem from the ground condition standpoint. Regarding the benchmark that we make, we are using all the parameters like this one mine that belongs to [I-80], it's Runny Creek. The other is Cortes mine that is operated by Nevada Gold Mines.

But we are taking up the cost but the production grades, like the KPI of how many tonnes you need to break with the jumbo, how many tonnes you need to hole with MAC with loader, et cetera, et cetera, et cetera. And we use those KPIs and translate that into our local metrics of operating costs. We have to take into consideration that an average operator in the States is in the range of $100,000 or $120,000 per year.

In Peru, the same operator is a fraction of that. So we are taking that into consideration in order to make the local reconstruction of the operating costs for San Gabriel. So that's the reason we expect to be in the range of $140 to $160 per tonne. Hole unit is in the mine, the processing plant and place in the tailings in the dry stacking system. I hope I answered the question, Tanya.

Yes. The only thing I you've got the [programs], you're doing the shock trade. You said you have no water so that's good, right? You said no water?

Yes, that's correct.

Yes. And you've got that $140 to $150 per tonne. What do you think in terms of the ore that you've extracted, the 20,000 tonnes, which I'd like to have the grade of what that stockpile is and what that 300,000 tonne stockpile will also be. Is the grade exactly what you expected it versus the block bottle?

Well, we are pretty much in line. We are slightly above that, slightly above. We expect it to be running along blocks with 4 grams to 5 grams per tonne. We are more on the over the 5 grams range of the material that we already have in surface, for the 20,000 tonnes that we have in surface. For the whole year, we expect to place the surface either at 4.5 to almost 5 grams that the overall grade of the material that we're going to extract from the mine alone this year.

And when you proposed your stopes, what sort of mining dilution is in your stope models? Is it meeting what dilution you expected? I'm just looking at the on Page 11, the little photos of the underground. I don't even know if it's San Gabriel.

Yes. We don't -- at this moment, we are not having any dilution because we are opening the tunnel, what we call the first route. While we have placed the backfill and we need to make the secondary brakes in which we will have waste on the left, and the right side of the of the new tunnel in between these two backfill areas is where we start expecting to have some dilution.

Dilution for those blocks is expected to be around 12%, but we will monitor that because it's a consequence of several factors like really blasting control, the quality of the filling. So probably we'll need to fine-tune that at the early stage of the mine. And probably after a few months, we will have a good assessment of, is that more close to 10% or more close to 15%? Right now, our assessment is in the range of 12% dilution.

Okay. And can I ask also just finishing off San Gabriel? I saw on the reserve that you didn't report reserves for San Gabriel and you're under -- you're redoing your reserves. I was a bit confused about that because I would have assumed all of your reserves would have been reported under a specific standard.

What was it about San Gabriel that didn't meet standard? And should I be concerned that these reserves are going to go down? I'm just trying to understand why the -- why did you have to redo the reserves only at that mine and nowhere else.

Yes. Remember that in, I think it was in the third quarter of 2024, we report an update on the operating cost of the mine. That was a material difference between the operating cost that we have in the feasibility study. So based on that, we need to review the whole analysis in order to report kind of a fresh report for a 20-F. So we are working on that.

As you mentioned, we -- as I mentioned, we are taking into consideration the increased operating cost. The new block model, we additionally field drilling that we made up to October last year and all the parameters of operational control, like dilution, as you mentioned, taking into consideration on a more detailed sequence.

So yes, we are working on that. We will report that on a 20-F. We will see so far because it's not finished yet that probably we need to make an adjustment to reduce a little bit of the reserve that we reported in order of 1.9 million ounces of gold at reserve, and probably, we will report a little below that in this updated 20-F report.

Okay. And when's the report coming out?

April 30, I think.

April 30, yes.

Okay. Well. Thank you so much. I'm going to leave this to someone else to ask question. Very helpful on understanding San Gabriel and thank you for the photographs.

Thank you, Tanya.

(Operator Instructions) 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 Sebastian Valencia, Head of Investor Relations for any webcast questions.

Thank you, operator. The first question comes from Enrique of Morgan Stanley. Do you expect any dividends from Cerro Verde? Daniel?

Yes. Well, Cerro Verde, as you know, has paid close to $170 million of dividends associated to the year 2024. For the year 2024, we don't expect more dividends. However, Cerro Verde on a full year is generating in excess of $2 billion. They have no debt. The CapEx that they spend every year is around $300 million to $350 million. And working capital plus taxes is in the order of $700 million.

With this, they are generating close to $1 billion of cash per year. Considering that they ended 2024 with close to $700 million, which is in excess of their minimum cash, we do expect at this level of prices of $9,000 per tonne, additional dividends for 2025 in a similar amount than what we received in 2024.

The next question comes from of (inaudible) I was wondering if you can comment on your plans for Trapiche this year and the coming milestones for the project. Also, can you comment on the project you were granted by (inaudible) For this question, maybe Renzo and Aldo can help us.

Sure. In Trapiche, as you remember, we have on-site cone leaching plants. We are unloading the last set of testing for viability. We have over QP team, all the QP team for the feasibility study visiting the site last month. So that's one of the big milestones for this year to get a 60% advance in the final world-class feasibility study.

We also, in the permit section, we finish answering all the questions from the environmental impact assessment, and we're waiting for any second question. But if not, we're expecting to have that towards the end of the year. And finally, we keep working with the communities to secure the remaining 20% of the potential power line. That's going to be the plan for this year.

And regarding the Algarrobo project, this project will be executed to transfer an option agreement between Buenaventura in Barton. It consists in three stages. The first stage consists of a period of three years to reach a social agreement with that community in Once this agreement is reached, it's going to start a period of five years to obtain permits and authorizations. Of course, we have to execute a project of water supply. That will cost $5 million approximately.

Then a mineral exploration and, of course, make a feasibility study. And then Buenaventura will decide to exercise the option or not. The third stage will proceed consisting in the construction of the mining operation if we decide to exercise that option. And the CapEx will be between $400 million and $800 million.

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

That concludes the question-and-answer session of today's conference call. I would like to turn it back over to management for closing remarks.

Thank you, operator. And before we conclude today's conference call, I would like to thank you for the time and effort you gave joining us today. Your participation and are greatly appreciated. Thank you very much and have a wonderful day.

Ladies and gentlemen, that concludes Buenaventura's fourth quarter 2024 earnings results conference call. We would like to thank you again for your participation. You may now disconnect.