Compania de Minas Buenaventura SAA (BVN) 2026 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura third-quarter 2026 earnings results conference call. At this time, all participants are in listen-only mode, and 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.

Thank you. Well, good afternoon, everyone, and thank you for joining us today to discuss our third-quarter 2026 results. Today's discussion will be led by Mr. Leandro García, 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. Jose Malca, Vice President of Sustainability; Mr. Juan Carlos Salazar, Vice President of Geology and Explorations; Mr. Roque Benavides, Chairman; and Mr. Raul Benavides, Director.

Before I hand the 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 view and assumptions. While management believes these assumptions, expectations, and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on forward-looking statements. I encourage you to read the full disclosure concerning the forward-looking statements within the earnings results press release issued on October 29, 2026.

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

Thank you, Sebastian. Good morning, everyone, and thank you for joining us today to discuss Buenaventura's third-quarter 2026 results. Today, we will review our operational and financial performance and share our priorities for the coming quarters. After the presentation, we will be available to answer your questions during the Q&A session.

Please go to slide 2, and this slide contains our cautionary statement and important information regarding forward-looking statements. I encourage everyone to review it carefully. With that, let's move to the operational and financial highlights of the quarter.

The third quarter once again demonstrates the strength of our portfolio and the resilience of our business model. Starting with production, consolidated gold production reached approximately 29,000 ounces, 6% lower than in the same period last year. Consolidated silver production was 3.4 million ounces, a decrease of 21%, mainly due to lower plant silver grades at Yumpag. Copper production increased 7% to 13,600 tons, supported by higher ore grade throughput at El Brocal.

Turning to financial performance. Total revenues increased 27% year over year to $545 million. This increase was mainly driven by higher realized prices together with higher copper sales volumes from El Brocal. EBITDA from Direct Operations increased 34% to $261 million, and the EBITDA margin expanded to 48%. Net income increased 50% to $268 million.

Our balance sheet continued to strengthen. We ended September with approximately $1 billion in cash and a net cash position of $307 million. As a result, our leverage ratio improved to negative 0.25 times. This strong financial position also allowed the Board of Directors to approve an interim dividend of $0.5508 per share or ADS, reinforcing our commitment to shareholder returns.

Moving now to operating costs. This slide shows the evolution of C1 cash costs across our key operations. Starting with Uchucchacua-Yumpag, silver cash cost reached $11.00 per ounce. The year-over-year increase mainly reflected the continued use of more selective OCF mining method at Yumpag, additional ground support requirements, the transition to an owner-operated fleet, and lower plant silver grades. These effects were partly offset by stronger by-product credits and lower commercial deductions.

At El Brocal, copper cash cost was $5,474 per metric ton. The increase mainly reflected higher cement consumption for tailings management, scheduled maintenance, and the transition to owner-operated equipment. In contrast, the copper production increased 7% year over year, and the operation reached a processing rate of 13,500 tons per day by quarter end.

At Coimolache cash cost declined to $1,103 per ounce, supported by higher payable gold production and stronger by-product credits. Overall, we continue to focus on cost discipline, productivity improvement, and stable operating performance across the portfolio.

Next, let's review the progress at San Gabriel. Slide 5, please. During the quarter, we continued to advance the initiatives required to support the ramp-up. Mining activities continued throughout the quarter, with the mining rate stabilizing at 1,700 tons per day by quarter end and generating an ore stockpile of approximately 100,000 metric tons. During the quarter, we also commenced undercut mining below cemented fill, and the ramp-up remains ahead of plan.

Within the processing plant, the first phase of the filtration system reinforcement was completed during this quarter. Our focus is now on optimizing filter performance through the first half of 2027. Metallurgical recovery is expected to reach approximately 70% in the fourth quarter of 2026 this year. On the tailings side, filtered tailings compaction also commenced during the quarter. The current facilities are expected to support throughput of 1,500 tons per day in the fourth quarter.

Additional drying areas are expected to be completed by the second quarter of 2027, ahead of the next dry season. While the ramp-up has faced temporary processing constraints, we are addressing these challenges systematically and safely, with a clear focus on reaching full operating capacity.

Let me now turn to our strong cash generation during the quarter. The third quarter was marked by strong cash generation.

Turning to cash flow, strong operational performance and $126 million in dividends received supported the $242 million of free cash flow generation in the third quarter. Consequently, we ended the quarter with a cash balance of $1 billion. This liquidity gives us significant flexibility to advance our growth projects, reinforce operational capabilities, and continue returning value to our shareholders.

Let me go on now to our closing remarks. Before we open the line for questions, I would like to highlight a few key messages from this quarter. First, San Gabriel, we are actively addressing the operational challenges we have identified, and our team remains fully focused on reaching full ramp-up. We are optimizing filter performance and improving recovery rates while tailings storage capacity continues to ramp up.

Second, our flagship operations. We continue advancing initiatives to unlock their full value. On the operational side, we are transitioning to an owner-operated mining fleet and increasing capacity at our mines. In parallel, we have increased our exploration budget, which allows us to extend life of mine, grow our reserves and our resources and develop near-mine targets.

These two fronts complement each other, supporting both near-term efficiency and long-term sustainability. Start preparing for El Niño. We have been working proactively on this front. We have already made significant progress. Our priority is the safety of our people and communities and the continuity of our operations.

Finally, shareholder returns. This quarter, we distributed an interim dividend equivalent to 20% of our net income for the first nine months of 2026, reflecting our commitment to creating long-term value for our shareholders. The annual dividend will be proposed by the Board at its next meeting.

Thank you. And we will now be happy to take your questions.

(Operator Instructions) Carlos De Alba, Morgan Stanley.

So first one is on San Gabriel. If you can give some color as to how the performance in October has been, maybe you can comment on the mining rate, if you continue to be around the 1,700 tons per day or, given the inventory that you have already accumulated, maybe you are slowing down a little bit? And similarly on the processing plant, what is the rate at which -- that you have averaged in October, and just overall, do you expect to see an improvement already palpable in the fourth quarter in terms of production and cost, or this is something that we should maybe only see in 2027?

And then my second question is on Trapiche, if you could maybe provide an update on the latest developments for that project. And also, would you consider developing Trapiche with a partner that maybe not only de-risk the project from a financial point of view, given the size that it could -- the size of the CapEx for the project, but also maybe complement your expertise if you find someone that has open-pit mining at altitude experience for copper extraction?

In general, we have advanced very well with San Gabriel. Juan Carlos should give you more color about how we are going forward with recoveries and production. And in terms of Trapiche, of course, we are open to de-risk the investment, evaluating the possibility to have a partner there. And the current state of the project, maybe Renzo could give you an advance in view of which is the current point of the project.

Please, Juan Carlos.

Thank you, Leandro, and thank you, Carlos, for your question. Regarding San Gabriel, we are running now in the processing plant at an average of 1,400 tons per day. We are continuing with the ramping up of the processing plant. We expect to be running at about 1,700 tons per day in November, December. That should be the expected throughput for 2027.

The processing plant by itself is not the constraint. The constraint is always downstream in the drying of the tailings and the compaction of the tailings. So that's going to be the bottleneck for 2027. Regarding gold recovery, October will reach something around 60%. We are ramping up to 65%, 69%, very close to 70%, along the quarter up to December.

So that's the average that we'll have as an entry point in 2027, 70% gold recovery for 2027. Probably more information on that, we will be giving more color about that during the Investor Day in a couple of weeks on the road in New York.

Please, Renzo.

Yes, in regards to Trapiche, we have resumed some drills, about 20,000 drills, half of it for exploring the primaries and the other half to get new samples, new fresh samples to continue with the investigation on bioleaching to see if we can reduce the acid consumption. And we continue our work to de-risk the project, advancing the engineering and permits for the access road and the power line, which are very important for the project.

Cesar Perez Novoa, BTG Pactual.

Yes. Two questions. Coming back to San Gabriel, with around 100,000 tons of ore stockpiled and the mining rates having stabilized at around 1,700 tons, what processing throughput should we expect by mid-2027? And what is the timeline to reach nameplate capacity, not the repairs, but the effective nameplate capacity and the effective production rates?

And my second question is on El Brocal. You've reached 13,500 tons by the end of the third quarter, but grades and recoveries have declined. How much additional production growth can come from throughput increases versus requiring grade improvement? In the press release, you also comment that cement consumption for tailings continues to pressure costs. Is this a temporary issue, or should we expect the reported cash cost profile in the third quarter to persist into 2027?

Thank you, Cesar. Well, in terms of El Brocal, we are working on the expansion of throughput from 13,000 tons per day to 17,000 tons per day. However, the refined copper, the fines of copper, will be almost the same in the long-term graph. But in the case of San Gabriel, we are preparing our budget for the following year. We are expecting to have a throughput between 2,000 and 2,500 at the end of '27, very close to '28.

And your, sorry, your last question, Cesar, was around the tonnage of?

Yeah. On San Gabriel, the nameplate capacity, which I assume it would be late '27 or beginning '28, and then the production profile from gold ounces.

Yeah. But maybe Juan Carlos can give you more color on the exact number of gold production.

Okay.

The average production for 2027, it's going to be in the order of 600,000 tons, the whole year 2027. In 2028, we expect to be around 800,000 tons per year. But at the end of 2028, we expect to reach nameplate capacity again.

The problem is not in the processing plant. The bottleneck is actually in the capacity of the drying areas and also the available area in the dry stacking in order to compact the whole production in an organized way. So we need to have more available area. Remember that the tailings dam in the case of San Gabriel is dry stacking, and we are starting right now at the bottom of a V-shaped valley. So we have a very small area at the bottom.

And as long as we are making the compaction of the tailings, we move step by step upwards and gain more available area for compaction. The more area translates into more capacity for compaction or more tons of tailings to be compacted. So we will be reaching the full nameplate capacity by the end of 2028.

Okay. All right. Understood.

(Operator Instructions)

Tanya Jakusconek, Scotiabank.

Oh, great. Good morning, everybody. I just wanted to finish off on San Gabriel. Maybe someone can just update me on what the ultimate recovery is expected. Is 70% what we're getting? It seems a bit low. So maybe what the ultimate recovery is and how do we get there?

And then the second thing I want to have an update on San Gabriel is how is the structure of the tailings facility? How's the repairs going, and are we on track to repair the structure?

Thank you, Tanya. Juan Carlos, please.

Yeah. The technical recovery for San Gabriel gold recovery is in the order of 85%. We are ramping up. We have been needing to add additional reagents to facilitate the cyanidation process. So we are in the process of implementing that right now as of today, and that's the reason we are ramping up to 70% by December.

The gap to reach 85%, it's an ongoing process. Probably we need to add additional circuits to our flowsheet in order to achieve that number. That has to be tested. It's something that we have preliminary results so far, but we believe we are going to be reaching that in 2028. So it's going to take a little bit more time to get not only to full nameplate capacity throughput, but also to reach the full project's expected recovery of gold.

Regarding the repairs for the press filters, we are ongoing with the preliminary repairs. We started by the end of September with these works for repairing two of the three filters. We expect to have all the three filters set up, repaired, and with the steel and concrete support ready by April, May next year. So the time after the rainy season in Peru, we will have our three press filters for tailings ready for production.

Okay. And can you remind me when you get to steady state, which is nameplate capacity in 2028, what do you expect your mining cost per ton to be, and what would the production level in ounces be?

Okay. We should be around 1 million tons per year. That's about 3,000 tons per day, and the operating cost at that time will be in the order of $180 per ton.

Okay. And are we looking at production of 150,000 ounces? I just forget what the grade will be ultimately. When I say that because your recovery is moving, your grade's moving, so what do you think a steady-state production level is?

I think it's going to be, Tanya, about 110,000 to 120,000 ounces of gold per year.

Okay, that's helpful. Thank you. And then I wanted to also ask, you mentioned you want to go to owner mining at your operations. Can you, number one, remind me what operations you want to go to owner mining and, number two, what amount of capital should I be thinking about as you buy all the trucks and et cetera? It's going to be high CapEx, is not, to go to owner mining?

Yes. Number one is Yumpag. Yumpag right now is 100% mined and developed by Buenaventura. We already bought in the order of 75% of equipment. We have outstanding deliveries of equipment, underground fleet, for the first quarter of 2027 in the order of $6 million additional equipment. Most of the CapEx has already been already made. The equipment was delivered.

In the case of Uchucchacua, we have about 75% of the mining done by Buenaventura, probably 50% of the development. In the case of El Brocal, we are right now with probably, we will reach the point the other way, we will reach 100% of the production from the underground mine by Buenaventura by the second quarter of 2027. And at the same time, we will reach almost 50% of the developments. The other 50% of the developments in the more extended areas will be done by contractors.

And finally is San Gabriel. We have now 100% of the production and about 75% of the developments done by Buenaventura.

Okay. So when I think of all of the capital you would need to put in for equipment and other, should I be thinking under $50 million? I'm just trying to get a sense of --

For next year, I think putting all together, I think it's in the order of $25 million for next year. All the deliveries of underground fleet that will be delivered by first and second quarter, that it is in the order of $25 million, $30 million.

Okay, that's helpful. Thank you. And then my final question for Daniel. Cerro Verde and the dividend, can you just remind us again what you're expecting? We keep seeing a nice dividend come from them. What are you expecting for dividends for 2026, and how should I be thinking for '27?

Good morning, Tanya. Well, this year Cerro Verde has already disbursed $270 million, and we expect an additional dividend by the end of the year. It should be in the order of $50 million to $70 million.

Okay. So should I be thinking $300 million for next year?

Not necessarily. This is something that we have to discuss first. We are conservative with the plans of Cerro Verde, and we normally consider around $200 million, $150 million, but maybe we will have additional information for that in the Investor Day.

Okay. Thank you so much for taking my questions.

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 Sebastian Valencia, Head of Investor Relations, for any webcast questions.

Thank you, Operator. The last question comes from Luis Rojas of Profuturo AFP. What is the remaining life of mine for Orcopampa and Tambomayo mines as of today? Has any consideration been given to extending the life of mine of them?

Well, regarding that, we are continuing doing exploration in both mines. In the case of Orcopampa, as we said in previous years, we have a short-term life in the area of two, three years to continue mining as we know the structures, but we continue exploring underground and starting exploration in the vicinity of the operations.

In the case of Tambomayo, we are getting, I think, close to the end of the life of mine. And by the second quarter of 2027, we will review if we could continue or make a partial halt of operations in the mine and be focused more on the district exploration, where we are having very good results from the exploration done, performed during this year 2026. So Orcopampa will keep running for at least two to three years more. And in the case of Tambomayo, we will review our expectation to continue mining in the second quarter 2027.

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 of today's conference call. I would like to turn it back over to management for any closing remarks.

Thank you, Operator. I would like to thank you all for your time today, and I wish you an excellent day and best for this year-end. See you in two weeks in Buenaventura Day.

Ladies and gentlemen, that concludes Buenaventura's third-quarter 2026 earnings results conference call. We would like to again thank you for your participation. You may now disconnect.