Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) Q4 2023 Earnings Call Transcript
Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) Q4 2023 Earnings Call Transcript March 1, 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. Welcome to the Compañía de Minas Buenaventura Fourth Quarter 2023 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. Mr. Salas, you may begin.
Gabriel Salas: Good morning, everyone, and thank you for joining us today to discuss our fourth quarter 2023 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 Exploration; Mr. Roque 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 the market closed.
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 February 29, 2024. Let me now turn the call to Mr. Leandro Garcia.
Leandro Garcia: Thank you, Gabriel. Good morning, 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 this. We assume that you have already read the full year 2023 results reported yesterday. Moving on the next slide. Our presentation will cover the five main topics shown on this agenda and will be followed by our Q&A session, where our team and myself will be happy to answer your questions. Let's begin with some overview of the key highlights of the 2023. Our EBITDA from direct operations for 2023 has increased 38% compared to the previous year. It is worth mentioning that the figures do not include the $300 million obtained last year from the sale of our stake in Yanacocha.
Our cash position remains strong in the fourth quarter of last year due to a strong performance at El Brocal, resulting in a leverage rate of 2.05 times, the lowest in two years and within our target range. Full year 2023 net income was 33 million, negatively impacted by $113 million non-cash provision related to former SUNAT dispute. Capital expenditures in 2023 totaled $239 million, including $94 million allocated to the San Gabriel Project. Additionally, Buenaventura made an extra investment of $33 million in advanced payments for the San Gabriel Project. When taking into account both aspects, the total disbursement for San Gabriel Project amounted to $127 million. We are pleased to share that our dividends received from Cerro Verde during the quarter have contributed up to $49 million, strengthening our overall financial performance.
The company received a total of $147 million in dividends for the full year 2023. Production from Yumpag's pilot stope began in November 2023, producing 2.3 million ounces of silver by year-end. Yumpag continued processing ore from the pilot stope through January 2024, after which mineral processing was suspended until definitive operating permits are obtained, expected by the end of the first quarter of this year. Yumpag is therefore expected to reinitiate mineral processing in the second quarter of this year. Record 2023 copper production resulted from successful migration to massive underground method, enabling El Brocal to ultimately achieve an average of 10,800 tons per day during the fourth quarter 2023, surpassing its targeted 10,000 tons per day underground mine exploration rate.
Our consolidated production of copper, silver and gold throughput 2023 has yielded in the following results: 58,000 tons of fine copper attributed to the exceptional production at El Brocal, meeting the upper range of the guidance; 9.2 million ounces of silver achieving the full year guidance, during the fourth quarter of 2023, Uchucchacua and Yumpag contributed with 2.6 million ounces; 155,000 ounces of gold with consistent production of Orcopampa. This production enabled us to surpass the upper range of the guidance. Moving to our cost structure in Slide 5. Aligned with our strategy to increase our corporate exposure, we are showing the all-in sustaining cost figures as copper and gold equivalent. Here, you can see that our 2023 all-in sustaining costs have reduced by 8% and 27%, respectively, year-over-year.
This reduction is primarily attributed to the copper production at El Brocal and silver production at Yumpag. However, it is important to mention that both figures are as consolidated basis and include 100% of Buenaventura's La Zanja and El Brocal. Moving on the cost applicable to sales strength. As you can see, prioritization of copper ore at El Brocal and the ramp-up in the underground mine is translating into a 10% cost reduction year-over-year. Silver CAS has decreased 3% year-over-year, primarily driven by lower cost during the fourth quarter of 2023 with the contribution of Uchucchacua and Yumpag silver ores. Gold CAS has remained relatively flat year-over-year despite the reserves depletion at La Zanja and lower production in Tambomayo.
On the next slide, we will be presenting the free cash flow generation. During 2023, we reduced our cash position by $34 million, primarily due to the intensive capital expenditure campaign, which includes San Gabriel. The EBITDA to free cash flow reconciliation is explained by the following breakdown of inflows and outflows. El Brocal, Orcopampa and Tambomayo have been the main contributors for the 2023 while La Zanja, Julcani and Uchucchacua had a negative EBITDA due to the lower production for the first two assets and care and maintenance at Uchucchacua for the first nine months. However, we recorded a positive EBITDA for the fourth quarter of 2023, thanks to the resumption of Uchucchacua and the contribution of Yumpag. As we have mentioned before, Buenaventura is going through a growth phase with an extensive CapEx related to Yumpag and San Gabriel.
This has been partly offset by the dividends received from Cerro Verde. In the following slides, I would like to illustrate our main four flagships: first, Yumpag producing at full potential once the definite operating permits have been obtained expected by the end of the first quarter of 2024; second, El Brocal underground mine expansion at 12 tons per day in the following two years; third, San Gabriel ramp-up and the first gold bar during year 2025; and fourth, Cerro Verde dividend distribution for approximately between $120 million and $150 million in the following year. As you can see, our collection of mines offer over 10 years of uninterrupted reserve and resource extraction. We have updated our resource and reserve values shown. In copper, we have 1.9 million tons of reserves, along with an additional 3.1 million tons of resources.
In silver, we have and 128 million ounces of reserves with Yumpag making a significant contribution. Additionally, we have 199 million of resource. Lastly, in gold, we have 2.8 million ounces of reserves with San Gabriel being our primary future gold production source. Additionally, we have 3.5 million ounces of resources. Moving forward to our 2024 guidance. As evident, the prioritization of copper ore at El Brocal and the ramp-up in the underground mine will enable us to maintain an annual copper production in 2024 between 55,000 tons and 60,000 tons per year. Silver production will see a 65% year-over-year increase primarily due to the contributions of Uchucchacua and Yumpag silver ounce. Gold production will decrease by 12% year-over-year, primarily due to the reduced contribution of Tambomayo gold ounces.
Lastly, it is also relevant that in 2024, we estimate executing between $300 million and $320 million of CapEx with approximately $220 million allocated to development of San Gabriel. The total CapEx estimate for the project are being reviewed due to some delays and escalation costs. We are continuously looking for optimization and efficiencies in the project to control the CapEx as much as possible. Moving on to Slide 10. In the next year, Buenaventura will be focusing most of its efforts in San Gabriel Project because it will be a relevant contributor to the company's value. It will add more than 14 years of life of mine to the company and another 14 years if we consider the reserves. On this slide, you can see the project's progress quarter-by-quarter.
In the upcoming quarters, we will complete the installation of the concrete plant and the construction of the campsite. On the next slide, we are showing the earth movement activities for the processing plant facility. On Slide 11, you can see the progress of the construction until the end of the third quarter of 2023, while in Slide 12, we can see an update on the construction towards the end of the fourth quarter of 2023. By 2023 year-end, we have filled over 80,000 cubic meters of material and cut over 250,000 cubic meters. On the next slide, we show a couple of other components of this project, along with the update as of the end of the fourth quarter of 2023. At the top, you can see the San Gabriel definite campsite with a 98% of progress and over 1,000 beds already installed.
The photograph at the bottom show the progress of the main storage area, where we already have 40% of the equipment on site. 30% of the equipment have already arrived to Peru but are pending to be transported to the site. Finally, I would like to finish the presentation with a couple of closing remarks. First, San Gabriel will allow us to stabilize our gold production at 130,000 to 150,000 ounces yearly in the midterm. We are on track as we aim for our first gold bar by the second half of 2025. The ongoing success of Yumpag confirms its status as a world-class asset, marked by constantly high silver grades. As we have mentioned, the definite operating permits are expected by March 2024. El Brocal is strategically focusing on the copper underground mine, maximizing margins and gearing up for a robust ramp-up to 12,000 tons per day in the midterm.
We are ensuring full funding for our growth projects and sustaining capital expense. Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
See also 15 Countries Where Much or Most of Population Lives in Cities and 15 Countries With Most Effective Gun Control In The World.
To continue reading the Q&A session, please click here.
