Compania de Minas Buenaventura SAA (BVN) 2026 Q2 法說會逐字稿

Good day, and welcome to the Compania de Minas Buenaventura second quarter 2026 earnings conference call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Sebastian Valencia. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss our second quarter 2026 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. Renzo Macher, Vice President of Projects; Mr. Juan Carlos Salazar, Vice President of Geology and Explorations; Mr. Jose Malca, Vice President of Sustainability; Mr. Roque Benavides, Chairman; and Mr. Raul Benavides, Director.

Before I hand the call over, please let me touch first 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 current views and assumptions. While management believes that assumptions, expectations, and projections are reasonable in view of current available information, you are cautioned not to place under 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 July 30, 2026

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 talk about our second quarter 2026 performance, our main achievements, and our priorities for the future. After the presentation, we will be available for Q&A session, where our team will be happy to answer your questions.

Next slide, I would like to begin with a brief overview of our operational performance during the second quarter of 2026. Consolidated gold production increased 12% year over year to 30,500 ounces, primarily driven by the continued ramp-up at San Gabriel.

Consolidated silver production increased 2% year over year to 3.6 million ounces, mainly supported by higher production at Yumpag, while copper production increased 2% year over year to 13,500 tonnes, reflecting a stable production at El Brocal.

San Gabriel produced 2,800 ounces of gold during the quarter and began commercialization in the second quarter of 2026, marking its first contribution to Buenaventura sales volumes. More details on the project's ramp-up and key developments are presented in the following slides. In addition, after quarter end, we received approval to increase Yumpag's mining throughput from 1,000 tonnes per day to 1,200 tonnes per day, an important milestone toward unlocking additional production capacity.

Our capital allocation remains focused on projects and assets that enhance productivity, support growth, and create long-term value for shareholders. CapEx totaled approximately $98 million, primarily allocated to San Gabriel, El Brocal, and Uchucchacua, Yumpag, supporting productivity, operational reliability and future value creation.

Moving on the next slide, I would like to summarize our second quarter financial performance. Our operational performance, combined with the favorable metal prices, translated into another quarter of robust financial results.

Total revenues increased 43% year over year to $529 million. EBITDA from direct operations reached $277 million, increasing 113% compared to the same period last year. Importantly, EBITDA margins expand from 35% to 52%. Net income reached $261 million, representing a 165% increase year over year and reflecting a stronger operational performance across our core assets.

Our balance sheet remains a key strength of the company. We closed the quarter with $759 million in cash and $692 million in total debt, maintaining a net cash position of approximately $67 million. Net debt to EBITDA remained at negative 0.05 times, underscoring the financial flexibility of the company.

At Huanza, our power generation subsidiary, we reduced the outstanding balance of the financial lease from $63 million to $50 million, with the remaining balance to be amortized through 2031. Year-to-date, dividends from Cerro Verde reached $274 million, including $118 million received in July.

Moving on the cost applicable to sales strength, starting with copper. Cash performance remained stable year over year, mainly at El Brocal. Silver cash increased compared to the same period last year, primarily reflecting higher commercial deductions associated with price-based escalators at Uchucchacua and Yumpag.

And finally, gold cash was impacted by the commencement of commercial sales at San Gabril. During the quarter, the operations recorded costs applicable to sales for the first time as it continued progressing through its ramp-up phase. As production and sales volumes remain below expected steady state levels, current unit costs are not yet representative of the operations' long-term cost profile.

Next slide, please. As mentioned earlier, San Gabriel continued progressing through its ramp-up phase during the second quarter. While throughput remained constrained by tailings management and filtration challenges, the operations continue advancing across all key areas of development, and we remain focused on achieving a stable and sustainable ramp-up.

At the mine, we have completed the primary ventilation infrastructure and continue advancing the development of the full mining fleet, which will support future production growth. At the same time, we expect to begin undercut mining below cemented field during the third quarter, representing another important operational milestone.

Within the processing plant, our priority remains stabilizing throughput and improving operating performance. Current efforts are focused on moisture control, filtration performance, and metallurgical optimization, with recoveries expected to continue improving during the second half of the year.

On the tailings slide -- on the tailings slide, we expect filtered tailings compaction to begin during the third quarter, while ongoing expansion works are designed to progressively support higher throughput level as the operation advances toward steady state conditions.

On the next slide, we highlight our strong free cash flow generation, the second quarter of 2026. Solid operation performance supported by dividends received allowed us to close the quarter with a cash position of $759 million. The chart also reflects the dividend payment we made in May. Importantly, this balance does not yet reflect the $118 million dividend received from Cerro Verde in July following the quarter end.

Before opening the line for questions, I would like to leave you with four key messages. First, San Gabriel continued advancing through its ramp-up phase during the quarter. The operation began recording commercial sales in the second quarter of 2026 and is now starting to contribute to Buenaventura's results. While we continue working through the challenges inherent to any ramp-up process, our focus remains on achieving stable and efficient operations that will become an increasingly important contributor to the company's growth.

Second, we continue executing our growth strategy across the portfolio. A key milestone was achieved at Yumpag, where we received approval to increase the mining rate from 1,000 tonnes per day to 1,200 tonnes per day. This represents the first step toward unlocking the operations' full potential while we continue advancing the next phase of expansion.

Third, explorations remains part of our DNA. As we continue unlocking growth opportunity across our portfolio, we remain committed to extend our life of mine and supporting the long-term sustainability of our production growth. We believe that growing production and replenishing resources must go hand in hand to ensure long-term value creation.

The combination of strong operating performance, disciplined capital allocation and fiber commodity prices environment continues to strengthen our cash generation and balance sheet. These financial strengths give us the flexibility to invest in our growth portfolio, execute our long-term strategy, and continue delivering value to shareholders through our dividend policy.

Thank you for your continued interest and support. We appreciate your time today and look forward to answering your questions. Operator, please go ahead.

(Operator Instructions) Tanya Jakusconek, Scotiabank.

Great. Good morning, everybody. Thank you for taking my questions. I have four questions if I could. I'm going to start with San Gabriel first. Maybe someone can just provide me some insight into how the mining and the processing are doing relative to your block model now that you've gone commercial.

And also, in the underground and in the processing facility, what do you still need to do to optimize any -- I saw the recoveries need to be optimized, but anything else to get you to that steady state?

Thank you, Tanya, for your question. As I told you before, we are very focused on San Gabriel. We have a plan to deliver what was our guideline for 2026 and ending the ramp-up in the middle or the midst of 2027.

Maybe Juan Carlos can give you more color in this topic, please. Please, Juan Carlos.

Sure, Leandro. Tanya, regarding the mine, the underground mine, we're feeling comfortable with the product that we have in the new mining method, the undercut and fill. We are already in the first undercut. We need the original mining layer with cemented backfield.

So we are doing okay, according to the plan. We are ramping up production. We are opening new phases, and now we are according to the plan.

So the underground mine is moving ahead. It's according to our plans. We will have the fourth fleet for underground mining for Buenaventura by the end of August and two additional fleets for future developments on the ground with the contractor by November, according to the plan. So the underground mine is moving along.

Regarding the processing plant, we have two lines of work. One is related to the increase of throughput, and the second one is increasing recovery. Regarding the throughput, we are facing some problems with the press filters. Remember that we are using dry stacking for tailings disposition. So we need to filter all the tailings.

We are having some problems with the structure basis of the foundation of the filters. Remember, they are high-pressure filters. So when they are loaded with full pressure, they start to generate a back movement in the structures. And according to the tolerance that we have to have in these structures, we are on top of that, beyond that. So we need to do further work to reinforce the structure, put some additional steel and reinforce with new structures, additional structure on top of what we have in the building.

We have three filters, so we need to do one by one to reinforce the filters. Once these tasks are committed, we are on track to reach full capacity from that processing plant. Regarding the recoveries, coal recoveries. It's a very complex ore. We are following all the parameters that we do have. We need to fine-tune our set point for all of them and put and use additional reagents.

We have some preg-robbing coal in the ore, generating a lot of troubles. So we need to add additional reagents, new reagents that we don't have in Peru. So we are bringing these reagents in August to start testing it at industrial scale. We already tested them at a lab scale. They are giving good results. They are part of the solution.

And probably, we will start finding the right dosage of the reagents for reducing impact of the preg-robbing that we are already facing in the second quarter. With that, we expect to reach about 70% gold recovery by the end of 2026. The following actions to go beyond 70% recovery, gold recovery probably are linked with an additional circuit for flotation. Probably we need to remove all the coal, all the organic matter that we have in the ore, not only use the reagent that I mentioned at the beginning of my comments, but probably we need to remove that coal in order to avoid further complications in the process.

So the flotation circuit is being designed. Probably, we need to get all the permits and all the designs ready by the end of the year and make the implementation of this new flotation circuit for coal and partial sulfides, refractory sulfides by the end of 2027. So there are two milestones. The first one, reaching 70% gold recovery by the end of 2026. And beyond that 70%, close to the 85% that we have in our budget, probably by the end of 2027.

Okay, and just so I understand, the issue that you're having with the recovery has got to do with organic matter that's sitting with the gold?

Yes, it's organic matter, and there is a small fraction of the gold that is into sulfite. It's becoming a little bit harder to extract that gold out of the sulfite, so we believe that this option is to do a complete flotation, not only for the organic matter coal, but in addition to that, the flotation of the sulfide as well.

Okay, so two things, both the sulfide and organic matter. Okay, thank you for that one.

And then the second question I have is just on the cost overall. Besides the inflationary pressures you are seeing from higher fuel prices and maybe royalties paid, are you seeing any other inflation in terms of labor or any other or consumables or any issues with the supply chain in what you need for your costs?

This is Daniel. We don't see or we don't foresee at this point in time any major inflation effects. As we were speaking last quarter, the impact of higher diesel prices had an effect of around 5% in our OpEx, probably having diesel at the same levels as the last quarter, the impact could be around 5% to 7%. Also, as you mentioned, the workers' profit sharing is also increasing slightly our costs, but nothing else. We don't have energy issues and other reagents or consumables are keeping the same price for Buenaventura, at least.

Okay, Daniel, thank you for that. That's good to see. And I guess when I have you on, what about expectations for dividends from Cerro Verde for 2026 and longer term? I mean, we're doing above the guidance range you provided. So what would you guide for us for Cerro Verde dividends?

Well, for the first half of this year, Cerro Verde has already distributed close to $160 million. We have already reported another $120 million. This is for Buenaventura stakes. We have already reported $120 million of dividends that will be -- or have been already paid in July. So this adds up to around $274 million.

We expect between $50 million to $100 million in addition to this by the third or by the fourth quarter. So in total, we should be receiving between $350 million, $380 million of total dividends for this year.

Daniel, should I be thinking similar level for next year?

Probably. Yes, depending on the price, could be $50 million or $80 million less. Remember that the dividend that we received in January was a dividend that came from the previous year.

Yeah, so maybe $300 million.

Yes, which is higher than what we have been receiving.

Oh, absolutely. That's great. Thank you so much for taking my questions.

Carlos de Alba, Morgan Stanley.

Good to be here. Just in terms of all the initiatives that you are pursuing in San Gabriel to address the challenges, what are the CapEx and OpEx implications? How much CapEx are you investing in those initiatives? And is cost going up? And if you can maybe just remind us what are the CapEx expectations for this year and maybe next year? And then what is the cost looking like the OpEx for San Gabriel once you stabilize the operation?

Carlos, the total CapEx we expect to spend this year is around $500 million. We already have expended in the first half around $200 million, $220 million. All the investment we have to do in San Gabriel and El Brocal and all our flagships are according to what we expected in the guidelines and mainly are related also in opportunities that we have found taking advantage of the prices that we have opportunities to do the CapEx for -- keep the CapEx for next year, we can go forward a little bit.

Another type of CapEx that we are identifying is the -- how we are going to prepare for the El Nino phenomenon. So we -- that will be the guideline for this year.

In terms of especially the CapEx for San Gabriel, it's around -- the rest of the year is around $60 million, around that number.

I don't know, Juan Carlos, if you want to give us some more idea.

Yes, Leandro. In the case of San Gabriel, all the comment that I made regarding the increase in recovery for 2026 are not material in regard to OpEx and CapEx are more on the fine-tuning of the existing infrastructure and using additional reagents that replace other reagents that we have been used before. In the case of the increasing throughput, as I mentioned, we need to reinforce the structures that hold the three filters, press filter for tailings.

We are working on the engineering for this reinforcement. Top of my head, I would say something between $5 million to $10 million. But probably we need to do the engineering and probably will be in the lower range, but it's something that we need to still work on to have something that really solve the problem. But at the same time, it's fast to be implemented with the existing constraint because the filters are already mounted on their bases.

So Juan Carlos, it's basically an impact that more impact on CapEx, but not real impact on OpEx.

No, we will probably follow our budget for OpEx in the year. Of course, the impact would be a lower throughput than expected that will impact the cost by ton, but not the overall amount of dollars that we spend along the year.

Okay. And what will be the cost of adding the additional flotation circuit?

We haven't finished engineering so far. We expect it to be in the order of $15 million, probably for next year.

Sorry, $50 million or $15 million?

$15 million.

And that does not increase the cost significantly, the OpEx cost, the additional circuit there?

No, maybe $1 or $2 per ton out of $130. So it's not material, maybe 1% increase on cost to capture 10% more on recovery.

Right. Okay. Yeah. So you will be getting closer to 80% recovery. Okay, okay. All right.

And then on Cerro Verde, great to see the CapEx coming through. Just on production, what is the expected copper production this year and next in Cerro Verde?

It's the same guidance. It's a little lower than the prior year, but it has not been any change in the guidelines. Let me --

If you allow me, Leandro, the production of the six months of 2026 is about 187,000 tons of fine copper, 187,000. Probably it's a very steady operation, probably we can expect the same production for the remaining six months of 2026. So it's going to be around 370,000, 380,000 tons of copper for 2026.

Thank you. And you will be getting -- and what will be the will the percentage of the Cerro Verde production that you are getting change in the coming quarters?

No, we have a contract of 40,000 tons of concentrate.

Then on Julcani, there was a big shift in the production mix between gold and silver and what is the outlook for the remainder of the year? And I don't know if you have a view on 2027?

We have -- after the more production we have, we have changed where we are concentrating in another area of the production. That's the reason why the production of silver lower a little bit from our guideline. However, the gold increased for the new areas we are working.

As you know, we are in a process that in this quarter, we expect to have some news of -- if we have arrived a final decision to to sell Julcani and we have the plan until 2026. But however, we -- once we end this process, we will see if we continue -- we can give you the guideline for the 2027 year.

Okay. But for the second half of 2026, this mix of gold and silver should remain stable or the mining plan suggests something different?

No, we continue with the same in the same areas, yes.

Okay. All right. And then finally, on Uchucchacua and Yumpag CAS, there was a significant increase, almost doubled, and it is mentioned there that it was driven by price-based escalators. So as silver has come down, how do you see CAS adjusting it back down? Just if you can share any color given the importance of that operation and the big increase in CAS that we saw in the second quarter.

Well, as I understand, the base escalator, the price that we use as base for the contracts of this part of the year, the first six months was around $35. For the new contracts, I think we are fixing that base in $50. I don't know, Aldo maybe can give you more information.

Yes, Leandro, you are right. For the first half of the year, we have this floor price of $35 per ounce. And these contracts are going to end in August this year. And from September to December, we're going to start with a new base of $50 per ounce.

Okay. All right. Thank you.

(Operator Instructions) Cesar Perez-Novoa, BTIG.

My first question relates to Yumpag. You received the approval to increase your throughput rates by 20%. My question is, how is this expected to impact silver production going forward? And could you actually quantify this potential increase and discuss whether this scale-up might affect improve the cost structure of this asset?

Yes. Taking consideration that we have received at the half of the year, we are now ready to begin production at 1,200 tons per day. We expect that 10% increase of what we were thinking at the beginning of the year.

Okay. And is this going to have, Leandro, any impact or improvement on the cost structure for this mine?

Yeah, sure. Juan Carlos, please.

Yes, it's going to have a positive impact. We dilute our fixed cost by 20%. But in addition to that, by the fourth quarter of this year, we are connecting the Yumpag operation with the national electrical grid. So we replace all the power generated by electricity -- cheaper electricity.

So the outcome by the end of the year is going to be a double effect. The effect is going to be a cost reduction in the order of 15% to 17% lower than the operating cost of the initial -- the first half of the year.

All right. Thank you very much. Can you also assess the current progress on the Trapiche copper greenfield? Given how high copper prices are, the cash flow that you're generating, the substantial dividends you're getting from Cerro Verde, is there any scope to accelerate the development timeline?

Thank you, Cesar, for this question. Here with us is Renzo Maher, and he can give you an idea of what we are going on in Trapiche. Please, Renzo, go ahead.

Yes, thanks. Thanks for the question. Yes, actually, due to these increasing copper prices, the opportunity of exploiting the primaries, which are currently open underneath the secondary sulfates, it becomes -- i's getting closer to our reality. So we're going to be spending the next year, 1.5 years in understanding if it's a business. And meanwhile, we're going to keep reducing the current risk of the project, which is the access role, the power line and the licenses, and try to get a deeper deep into the asset consumption.

All right. And this is my last question. Has El Nino had any operational impact to date? Or any -- do you have any concerns about future effects? If so, which mining areas, operations or logistics, do you see at most risk, if any, of course?

Yes, Cesar, thank you for your question again. We have identified some risk in our risk management meetings. We have seen all our main operations and what will be the effects. We are part of the increase -- a little increase in CapEx is related and is added to what we thought in the beginning of the year, we are going to spend in that. So we have had additional CapEx around $12 million.

And maybe Juan Carlos can give you the idea -- exact idea on what are the activities we are making and what we are preventing.

Sure, Leandro. Since the end of April that we have the early alert of El Nino, a strong El Nino (inaudible), we start treating our safety committees for preventing any potential damage from these impacts, heavy rains. So we already put a committee in each of the mines. Each of the mines have a map, all the potential risk that we have. And we authorized an increase in CapEx of about $12 million to be spent in the rest of the year 2026 in order to be prepared for larger rainfall, increased pumping capacity, power for the pumps, water treatment facilities, reinforcement of certain critical structures like water dams or reservoirs.

So we are working on that regard. We have a very strong technical committee working on that regard. So far, we haven't had any damage like probably you heard the news about the damage for heavy rainfalls in Chile. We don't have that in Peru. But we are preparing for probably a strong rainfall in the next rainy season starting in December 2026.

All right, that's fairly detailed. Thank you very much, all of you. Thank you.

This concludes the audio portion of the Q&A session. I'd like to turn it over to Sebastian Valencia for webcast questions.

Thank you, operator. The last question comes from [Durac Dominique] from (inaudible). Given the recent price drop in gold, any risk that production in Orcopampa, Tambomayo could be reviewed?

I think that my first answer is no. We permanently are reviewing the value that we add that with any ounce we produce, but we are building a plan for Orcopampa, Tambomayo for the following years. We continue in that trend.

Thank you, Leandro. At this time, there are no further questions. I would like to turn my call over to Leandro for final remarks.

Okay, thank you, Sebastian. Before we conclude today's conference call, I would like to thank you for the time and effort dedicated to joining us today. Your participation and input are really appreciated.

Thank you again, and have a wonderful day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.