Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) Q1 2024 Earnings Call Transcript

Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) Q1 2024 Earnings Call Transcript April 30, 2024

Compañía de Minas Buenaventura S.A.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day ladies and gentlemen and welcome to the Compañía de Minas Buenaventura First Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a 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. Gabriel Salas Investor Relations Officer. Mr. Salas you may begin.

Gabriel Salas: 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 Benavides, Chairman; and Mr. Raúl 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 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 29th, 2024. Let me now turn the call to Mr. Leandro Garcia.

Leandro Garcia: Thank you, Xavier. Good morning to all and thank you for joining us today to discuss the quarterly results of Compañía de Minas Buenaventura. On Slide 2, it’s our cautionary statement, important information that we encouraged you to read because a couple of certainties severities. 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 2024 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. Third quarter 2024 operating income reached $46.9 million compared to the last year’s $12.6 million. Copper production increasing 26% year-over-year, driven by steady provision rate at El Brocal, which surpassed 10,500 tons 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 this 1.5 million ounces come from Uchucchacua and Yumpag where we got approval of the final mining operating permit earlier than expected. Oil production decreased 4% year-over-year, reaching 36,500 ounces since we are now mining lower rates of Orcopampa and Tambomayo.

We are pleased to inform that the dividends from Cerro Verde were received on April 26 last Friday. These dividends will strengthen our overall financial standard. Buenaventura’s CapEx in first quarter 2024 total $58 million, which includes $38 million allocated to the San Gabriel Project . Our cash position reached $174 million with a total debt of $699 million. We continued deleveraging the company reaching a net debt EBITDA ratio of 1.78 times, lowest in the two years — in two years and within our target range. Moving on to our cost structure in Slide 4, please. First quarter 2024 all-in sustaining costs are reduced by 58% year-over-year, this reduction is primarily attributed to the copper production at El Brocal and see the contribution from June.

However, it is important to mention that part of the Uchucchacua, have been considered to be CapEx. Normalized all-in sustaining cost should be around US$3,600 per ton of copper, still below than the previous year. Moving on the cost applicable to sales strength. As you can see the prioritization of copper ore at El Brocal and the ramp-up in the underground mine is translating into a continuous cost reduction trend. Silver CAS has decreased year-over-year, primarily driven by higher contribution of to Uchucchacua and Yumpag Silver ounces, normalized cash including Yumpag cost is expected to be between $17 and $18 per ounce. Gold CAS has decreased year-over-year and even quarter-over-quarter primarily driven by higher grades and ore nil at El Brocal underground mine, despite lower grades at Tambomayo and Orcopampa.

On the next slide, we will be presenting the free cash flow generation. During the first quarter of 2024, we reduced our cash position by $46 million, primarily due to the intensive capital expenditures campaign which includes San Gabriel. The EBITDA to free cash flow reconciliation is explained by the following breakdown of inflows and outlets. El Brocal, Yumpag and Orcopampa have been the main contributor for the first quarter 2024. As we have mentioned before, Buenaventura is going through a growth based placed with an intensive CapEx related to San Gabriel. The previously reported dividend from San Gabriel will be registered in the second quarter of 2024. Moving on to Slide 6. In the next year Buenaventura, we will be focusing most of its efforts in the San Gabriel Project.

On this slide, you can see the projects, the Buenaventura progress reaching a 47% overall progress by the first quarter 2024, primarily driven by the full installation and operational 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 Mill 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 the definite and organic Campsite. Water treatment plant, offices and dining areas are fully operational. On the next slide we are showing the progress the processing platform. Here is the Milling area where we are planning to start the SAG Mill 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 resource at Yumpag a clear reflection of our success delivering mining products. With final mining permit approved, we are now focusing on achieving a stable and efficient production rate at 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 the year, supported by a positive trend in copper prices. Third, we are proud to announce that we have achieved a significant progress at The 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 reassessing the project’s CAPEX to ensure an accurate total cost while identifying opportunities to optimize the construction. We continue our efforts to transform our mining operations 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 question. Operator, please go ahead.

See also 40 Perfumes Celebrities Actually Wear (but aren’t paid to) and 20 Biggest Oil Producing Countries in Asia.

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session [Operator Instructions] And the first question will come from Cesar Perez-Novoa with BTG Pactual. Please go ahead.

Cesar Perez-Novoa: 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 basin precious metals. And given the implications that it has for revenues and by-product credits, is management looking to review the volumes the revenue and EBITDA that you outlined in the previous call for this year? My second question relates to cost. There was an important 71% drop CAS – in Gold CAS at Coimolache to $1000. 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 in the pads which makes me think that there may be some room for improvement. And finally at El Brocal costs went down too and wanted to understand if this was due to efficiencies attained in the first quarter or if the company used stockpiled mined inventories to dilute the costs. Those would be my questions, gentlemen. Thank you.

Leandro Garcia: Thank you, Cesar for your question. In terms of – if we can change the guidance, we are evaluating all the operation day. We maybe can change the guidance at the end of the second quarter, if things are as we are thinking that will be. In terms of Coimolache, remember that last year we didn’t produce any ounces in Coimolache. So this is a comparison this quarter to the last quarter through the first quarter of the last year. The information you have with real respect of – we are not allowed to put more ore in production. It’s true. We are just waiting the permit to construct to build the new platform to put more ore. And we expect any moment that permit. But the production will begin in the first quarter of the provision ore, where we will begin in the next quarter of the following year.

So we should expect to increase the production of gold ounces in the second quarter of the 2025. And 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.

Juan Carlos Ortiz: Thank you, Leandro. Thank you for the question. Yes, with this increase in price of Coimolache, there is a lot of incentives to increase production. We are reviewing our mining plans but at this moment, we are looking more to be in the upper range of our guidance the annual guidance. So probably we’re going to be more closer to the upper range in that guidance. Any follow review, Leandro comment, we probably announced if there is any for the next conference call. In the case of Coimolache, last year, at the end of last year in December, we have a window of opportunity because there was no rain in the area. So we placed almost 200,000 tons of ore in the past, in the last few days of 2023. So we have an advanced work in 2023.

And that’s the reason we have the ounces of gold in 2024 that part of the call was done, was incurred during the last quarter of 2023. So that’s the reason we have a good looking the cost — in the cash cost of Coimolache. But as Leandro mentioned, we stopped the production of fresh ore in February this year. We will be waiting for the permits and the construction of the new areas in the Yumpag, probably the permit by the end of the year and construction at the same time the operation of new — obviously, the breaking of fresh ore will be in the first quarter of next year and probably the ounces of gold start coming down from Yumpag in the second quarter of 2025. So, probably in the coming quarters the cost of Coimolache — the cash cost of Coimolache will be coming slightly up, because we are not doing more fresh ore and production of gold will start to decrease in the coming quarters, and the next year that we will resume the placing of fresh ore.

And regarding Brocal, yes, where there was a lot of improvements in the operation. We are close to 10.5 kilo tons per day in production. We are looking forward to reach 11,000 tonnes per day by the end of this year. We are well track on that purpose. And we are reducing cost. We have been done this increase in production without any additional people or any additional scope or track. It’s just a matter of improvement. We would only around this budget system that we helping a lot to increase the productivity of our equipment and we are ramping up the results of that investment in the previous quarter. So, just more on the improvement and operational expertise that we are working off the benefits and getting this no cost in El Brocal.

Cesar Perez-Novoa: All right, guys. [indiscernible]

Leandro Garcia: So this is Daniel, I think there’s a couple of additional comments to you Cesar.

Daniel Dominguez: Good morning, Cesar.

Cesar Perez-Novoa: Okay. Thank you.

Daniel Dominguez: Just to put some numbers to your question 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 gold and $2,500 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. That will be the improvement of the additional EBITDA that we expect.

Cesar Perez-Novoa: Okay. Thank you very much, Daniel. So it’s a large 50 million shrink at the EBITDA level. Very clear. Thank you all gentlemen, for your detailed questions. Thank you.

Operator: Your next question will come from Carlos De Alba with Morgan Stanley. Please go ahead.

Carlos De Alba: Yes. Thank you very much, and good morning, everyone. A couple of questions. First one is can you please quantify what the impact was of not having — not taking the cost of Yumpag through the P&L and since they were capitalized according to the exploration permit as definitely that was a positive surprise, but I just wanted to understand how much of a EBITDA impact that represented, the fact that it was not run through cost but take into CapEx. And second, any comments on Cerro Verde? We saw that Cerro Verde paid $29.4 million for the second quarter dividends. That is down from the $41 million or so level that the company had paid in the last six — can you provide any color? Is the expectation that this is the new range that we will see in the coming quarters? Or do you think that there is upside to increase but not what you think, but more like what Freeport has said they will do? Thank you.