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Edited Transcript of BUENAVC1.LM earnings conference call or presentation 26-Jul-19 3:00pm GMT

Q2 2019 Compania de Minas Buenaventura SAA Earnings Call

LIMA Jul 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Compania de Minas Buenaventura SAA earnings conference call or presentation Friday, July 26, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Juan Carlos Ortiz Zevallos

Compañía de Minas Buenaventura S.A.A. - VP of Operations

* Leandro Luis Martin Garcia Raggio

Compañía de Minas Buenaventura S.A.A. - VP & CFO

* Raúl Benavides Ganoza

Compañía de Minas Buenaventura S.A.A. - VP of Business Development

* Rodrigo Echecopar

Compañía de Minas Buenaventura S.A.A. - IR Coordinator

* Víctor Gobitz Colchado

Compañía de Minas Buenaventura S.A.A. - President & CEO

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Conference Call Participants

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* Andrés Cereceda Castro

CrediCorp Capital, Research Division - Associate of Pulp and Paper, Materials, Healthcare, and Pension Fund

* Jens Spiess

Morgan Stanley, Research Division - Research Associate

* John David Bridges

JP Morgan Chase & Co, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Buenaventura Second Quarter 2019 Earnings Conference Call. (Operator Instructions) And please note that this conference call is being recorded.

I'd like to introduce your host for today's call, Mr. Rodrigo Echecopar, Investor Relations. Thank you, you may begin.

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Rodrigo Echecopar, Compañía de Minas Buenaventura S.A.A. - IR Coordinator [2]

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Thank you. Good morning, and welcome, everyone. Presenting on the call today is Mr. Víctor Gobitz, CEO. Also present and available for your questions are Mr. Leandro Garcia, CFO; Mr. Juan Carlos Ortiz, Vice President of Operations; Raúl Benavides, Vice President of Business Development; and Alejandro Hermoza, Vice President of Sustainability.

Before we get started, during today's call, we will make forward-looking statements that reflect the company's current expectations about the future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risk and uncertainties.

I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on July 25, 2019.

With that, I will now turn on the call over to Mr. Víctor Gobitz. Please go ahead.

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [3]

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Thank you, Rodrigo. Good morning to all and thank you for attending this conference call. We are pleased to present our results for the second quarter of 2019 from Compañía de Minas Buenaventura. We have prepared a PowerPoint presentation, which is available in our web page.

Before we go further, please take a moment to review the cautionary statement shown on Slide #2.

Moving on to Slide 3, highlights were as follows. During the second quarter of 2019, Buenaventura generated $11.2 million in additional EBITDA through the company's De-Bottlenecking Program, in line with the company's budget target as reported at the beginning of the year.

Throughout this program, Buenaventura is increasing the efficiency of Tambomayo, Uchucchacua, El Brocal and Orcopampa mines.

In the second quarter, EBITDA from direct operation was $45.7 million compared to $87.4 million reported a year ago, primarily due to a reduction in volume sold at the company's Orcopampa and La Zanja mines. However, showing a positive trend in comparison with the first quarter of this year, 70% higher.

In the second quarter, adjusted EBITDA, including associated companies, reached $128.4 million compared to $190.1 million in the second quarter of 2018.

In the second quarter, capital expenditures were $28.8 million compared to $31.2 million for the same period in 2018, in line with the budget target as reported at the beginning of the year, considering the heavy rains during the first quarter of this year.

In the second quarter, net income was $9.7 million compared to a net income of $41.3 million for the same period in 2018. Buenaventura is working on developing a 10-year-plus business case for Uchucchacua, including Yumpaq and El Brocal mines.

Also, Buenaventura's portfolio of greenfield projects is advancing well. So we intend to declare all results coming from San Gabriel, our gold project; Yumpaq, our silver project; and Trapiche, our copper project, during the first half of 2020.

At Cerro Verde, the concentrator facilities continue performing well, with an average throughput rate in excess of 400,000 metric tons ore per day and also maintaining a robust cash position.

Yanacocha’s performance was above budget, explained by high grades coming from [tampaolo este] pit and less transitional ore sent to pad. And also maintaining a significant cash position.

Moving on to Slide 4. We are showing our strategic map where we, as usual, the capital B from the logo Buenaventura as a visual index for the following slides. In the coming slides, we are going to discuss the financial results of the company.

First, it is important to mention that in general, as was mentioned in the previous conference call, we are starting to see a positive trend in terms of operation and financial results in the second quarter in comparison with the first quarter. This positive trend should continue in the coming quarters.

Moving on to Slide 5, financial highlights. Total revenues during the second quarter were $216.1 million, which is 32% lower in comparison to the second quarter in 2018. This was primarily due to 48% year-on-year decrease in volumes sold of gold and 25% year-on-year decrease in silver.

Furthermore, this decrease was also due to lower prices of silver, minus 9%; lead, minus 21%; zinc, minus 5% and copper, minus 9%.

EBITDA from our direct operations in the second quarter of 2019 was $45.7 million, which is 48% lower in comparison to the same quarter last year, mainly due to the reduction in volume sold at the company's Orcopampa because of prioritizing the De-Bottlenecking Program over extraction in La Zanja as budgeted. This represent a positive sequential quarterly trend, 70% higher in comparison to the first quarter of this year.

EBITDA, including our affiliates, in the second quarter was $128.4 million, which is 32% lower in comparison to the second quarter of 2018. The accumulated EBITDA including associates as of June 2019 is $285.6 million, which is 22% lower in comparison to the same period of 2018.

The net income in the second quarter of this year was $9.7 million compared to the net income of USD 41.3 million a year ago.

In the case of the first semester of the year, our net income was $37 million, which is 47% lower in the same semester of 2018. The CapEx have continue decreasing, having a value of $27.8 million in the second quarter of 2019 compared to $30.4 million in 2018.

During the first semester of the year, the CapEx was $36.3 million. This represents a 30% increase compared to the first semester of 2018. It's in line with the budget target as reported at the beginning of the year and considering the heavy rains during the first quarter of this year.

Despite the negative free cash flow in the first quarter of 2019, the free cash flow in the second quarter of this year was $34.7 million. So during the first 6 months of 2019, the free cash flow was minus $3.5 million.

Moving on to Slide 6. Let me explain our 4-Tier system based on life of mine and profitability. We, as Buenaventura, have defined Tier 1 assets as having both high profitability, greater than $100 million of annual EBITDA and a life of mine which is longer than 10 years. A Tier 2 asset is one which has high profitability but a life of mine shorter than 10 years. A Tier 3 asset is one which has a long life of mine but a profitability lower than $100 million of EBITDA per year.

And lastly, a Tier 4 asset is one, which has low profitability and a short life of mine. Our objective is to convert our Tier 2, 3 and 4 assets into Tier 1 assets with the specific strategies as you can see on the chart.

On the Tier 1 quadrant, we have 3 different assets classified with high profitability and long life of mine. These are Cerro Verde, Uchucchacua and El Brocal.

In the last 2 mines, we are working on developing a 10-year-plus business case. The plan is to give more visibility to our shareholders and will allow to extend the maturity of Buenaventura's total debt.

The Tier 2 assets are Tambomayo and Coimolache. For Tambomayo, the strategy is to continue with the progress in the De-Bottlenecking Program and to focus on the exploration program in new areas to achieve a longer life of mine. For Coimolache, we plan to continue the development of the sulfide project in order to become a Tier 1 asset.

For our Tier 3 quadrant, we can see Yanacocha, specifically, its sulfide project, whose technological route need to be discussed and defined in order to increase profitability and become a Tier 1 asset.

On the Tier 4 quadrant, we have 3 different assets, Julcani, Orcopampa and La Zanja. For Julcani, we are reducing its footprint. For Orcopampa, the focus is on the De-bottlenecking Program and also on the exploration program to increase its profitability and life of mine.

Finally, for La Zanja, we'll continue with the exploration program of its copper sulfide potential. So in essence, we want to move all of our assets to the top-right box.

Moving on to Slide 7, we have included in this presentation an updated guidance of our production and costs expressed as cost applicable to sales.

In the case of gold production, the estimates released at the beginning of the year are still the same, except for Orcopampa. The new guidance for the Orcopampa mine is between 37,000 and 45,000 ounces of gold.

This reduction is mainly explained by the centralization of its underground operations and privatization of its De-bottlenecking Program.

In the case of the cost applicable to sales, it remained the same, except for Orcopampa, while our new estimated cost ranges between $1,120 and $1,240 per gold ounce. This is primarily related to the decrease in the volumes sold during the first semester of the year.

Moving on to Slide 8. In this slide, you can see the updated guidance for the silver production.

In the case of Uchucchacua, the new guidance is between 11.5 million and 12.5 million ounces of silver. This reduction is due to the suspension of operations originated by the strike in January, and also the postponement of the silver oxide project. In the case of Julcani, its guidance remains the same. The cost applicable to sales doesn't change in both mines.

Moving on to Slide 9, in this -- in the case of base metals, specifically zinc and copper, the production estimates haven't been modified. However, we have slightly adjusted the zinc cost applicable to sale estimates due to the increase in commercial terms.

Moving on to Slide 10. As you can see in this slide, we have included the updated estimates related to key financial figures considering the new estimates mentioned before.

The new guidance for total revenues ranges between $900 million and $1,100 million. The updated guidance for the EBITDA from direct operations is now between $260 million and $330 million. The EBITDA including associates has been modified and is now in the range of $600 million and $750 million.

The net income and the estimated CapEx remains the same. The free cash flow has been updated to a range between $130 million and $200 million.

Moving on to Slide 11. Here, again, you can see the capital B as a visual index for analyzing the results of our portfolio of operations.

Moving on to Slide 12 and 13, attributable production. Total gold attributable production in the second quarter of 2019 was 115,000 ounces, which is 22% lower than the figure reported on the same quarter last year.

In this first semester of 2019, total gold attributable production was 228,000 ounces, 26% lower than the same period in 2018.

This reduction is mainly explained by lower production coming from Orcopampa, which suspended operations in the first month of this year.

Silver attributable production for this quarter was 5.5 million ounces, which shows a decrease of 22% compared to the figure reported in the second quarter of 2018.

In the first semester of 2019, silver production was 9.5 million ounces, which is 33% lower than the total sliver production in the same period of 2018. The decrease is mainly explained by lower production in Uchucchacua as a result of the workers union strike at the beginning of January.

In the second quarter of this year, 16,100 metric tons of zinc were produced, 3% greater in comparison to the second quarter of 2018.

During the first semester of 2019, 28,900 metric tons of zinc were produced, which is 10% lower compared to the first semester of 2018. The decrease was mainly due to lower production at Uchucchacua mine. In the case of lead, equity production was 13,000 metric tons in the second quarter of 2019, which is 42% greater in comparison to the second quarter of 2018.

For the first semester of this year, lead production was 21,300 metric tons, 23% greater than the lead production in the first semester of the previous year. Finally, our copper attributable production for the second quarter of the year was 27,200 metric tons, a 10% decrease comparing to the same quarter in 2018.

In the case of the first semester of 2019, total copper attributable production was 55,800 metric tons, 4% lower than in the first semester of 2018.

Moving on to Slides 14 and 15. As you can see, the consolidated volume sold from our direct operations decreased 55% in the case of gold compared to the first semester of 2018, mainly due to lower volume sold from Orcopampa and the La Zanja and higher inventories in Tambomayo.

In the case of silver, the volume sold decreased 32% comparing to the first semester of 2018 due to lower volume sold in Uchucchacua and Tambomayo.

In the case of zinc, during the second quarter of 2019, the volume sold was 17,100 metric tons, in line with the volume sold for the same quarter in 2018.

In the first semester of 2019, the volume sold was 31,800 metric tons, which is 8% lower compared to the first semester of 2018. This decrease is originated by lower volume sold in El Brocal.

In the case of lead, the volume sold increased 43% during the second quarter of 2019 comparing to the same quarter in 2018.

In the first semester of the current year, the volume sold was 34,600 metric tons, which shows a 33% increase compared to the first semester of 2018. This is explained by higher volume sold at Tambomayo and El Brocal.

Finally, in the case of copper, in the second quarter of 2018 -- '19, the volume sold was 9,200 metric tons, which is 13% lower than the volume sold in the second quarter of 2018.

During the first semester of 2019, copper sold was 17,500 metric tons, which is 14% lower comparing to the first semester of the previous year. The decrease is due to lower volume sold in El Brocal.

Moving on to Slide 16, the all-in sustaining cost from our direct operations in the second quarter of the current year increased to USD 790 per ounce of gold, 13% higher in comparison to the same period a year ago.

This is mainly explained by lower volume sold in our gold operations. The cost applicable to sales in the second quarter of 2019 were as follows: For gold, USD 930 per ounce, which is 17% higher than a year ago; for silver, USD 10.47 per ounce, which is 3% higher than a year ago; for lead, USD 1,119 per metric ton, which is 5% lower than a year ago; for copper, USD 5,505 per metric ton, which is 1% higher in comparison to a year ago; finally, in the case of zinc, the cost applied to sales was USD 2,237 per metric ton, which is 36% higher than a year ago.

Moving on to Slide 17, we have included a chart with the estimated CapEx and EBITDA for each of the 3 years that are part of this plan to improve efficiencies, our De-bottlenecking Program.

Moving on to Slide 17, you can see in the graph of the De-bottlenecking Program with the results for the ongoing year. You can see a comparison between the actual results and the guidance we presented on the call we had in February of the present year.

During the second quarter, we generated $11.2 million coming from this program. The distribution of this $11.2 million is as follows. Tambomayo, $4.7 million; Orcopampa, $1.5 million; Uchucchacua, $2.4 million; and El Brocal, $2.6 million.

Moving on to Slide 19, once again, here we can -- you can see that capital B from our logo used for analyzing in more detail the updated information regarding our portfolio of both projects.

Moving on to Slide 20, here we are presenting in one snapshot the current development level for each one of our projects.

Moving on to Slide 21, 22, 23 and 24. Here, it is important to highlight the following aspects.

In the case of San Gabriel, the Environmental Impact Assessment is already approved. We expect to reach the prefeasibility stage by third quarter of this year and feasibility stage during 2020.

We have hired a consulting company, AUSENCO. We are expediting diamond drilling at San Gabriel Norte as we are aiming to declare ore reserves in the first half of 2020.

The geomechanical assessment was completed and mining method has been defined and optimized, which means we -- the concept is to use -- to implement primary stopes with uppercut and fill method with -- plus cemented field, a secondary stopes, mostly long hole stopes.

In the case of Trapiche, the Environmental Impact Assessment is in progress, and we expect to reach prefeasibility stage in the fourth quarter of this year. We are currently drilling geotechnical campaign in order to declare reserves in the first half of 2020.

In the case of Rio Seco, the Environmental Impact Assessment is also in progress. We intend to obtain the prefeasibility stage in the first half of 2020. We have already concluded the batch testing of FLSmidth ROL technology. As you know, through this project, we intend to unlock the value of our copper portfolio.

And in the case of Tantahuatay, which is the sulfide ore body, which is part of Coimolache, the scoping studies is already finished, and we have defined tailing dams location. We have retained Wood as a consultant company for its characterization. And in this case, we expect to reach the prefeasibility stage also in the first half of 2020.

Moving on to Slide 25, thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question here is from Carlos De Alba from Morgan Stanley.

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Jens Spiess, Morgan Stanley, Research Division - Research Associate [2]

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This is actually Jens Spiess. I just want to make 2 questions. In terms of commercial, commercial deductions increased a bit this quarter. Is there any particular reason why that happened, especially compared to the last year basically? And also the realized prices you provide during your production report, do they already include the provisional pricing adjustment or not?

And my second question would be regarding La Zanja, and you have decreased exploration expenses quite a bit there. And I think it was actually $0 this quarter. So how can we reconcile this with the tiering plans of increasing the life of mine at La Zanja?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [3]

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Thank you, Jens. Your first two questions are related to our commercial activities. And Leandro García, our CFO, will be entitled to answer it.

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Leandro Luis Martin Garcia Raggio, Compañía de Minas Buenaventura S.A.A. - VP & CFO [4]

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This is Leandro García. Regarding your first questions, the commercial deductions are directly directed to the current situation of the zinc concentrate market. The terms have been decreased from 1 year to another -- to the -- for next year to this one and this has affected our cost, our targets.

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [5]

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Current price realized.

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Leandro Luis Martin Garcia Raggio, Compañía de Minas Buenaventura S.A.A. - VP & CFO [6]

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Regarding the price, it does not include the deductions there.

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Jens Spiess, Morgan Stanley, Research Division - Research Associate [7]

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No. I mean the provisional pricing adjustment, it was around $10 million, I think. Is it -- it doesn't consider it, right, in the price mix?

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Leandro Luis Martin Garcia Raggio, Compañía de Minas Buenaventura S.A.A. - VP & CFO [8]

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Yes, yes. Correct. I missed that part. Yes, it's included.

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Jens Spiess, Morgan Stanley, Research Division - Research Associate [9]

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It...

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [10]

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It's included. It's included, it's included, yes. So your third question related to regarding La Zanja. As you know, in La Zanja, we are extending the life of mine until 2021. But also we are exploring some opportunities to -- through the oxide -- yes, sulfide deposit. There are many options in La Zanja. We are storing [operatrice] which is an [underground] ore body, but also we have extended these analysis and these exploration program to the north part of the deposit. I don't know if, Raúl, you would like to add some information regarding La Zanja.

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Raúl Benavides Ganoza, Compañía de Minas Buenaventura S.A.A. - VP of Business Development [11]

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The reason that the exploration expense has been reduced, it's because we are not drilling but we will be drilling for hydro and the logical reasons now, and we are going to drill and perhaps it's north -- it's another bridge, but this growth is central, so that we can -- we will expect to have some drilling -- some more drilling coming on in the next few months.

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Operator [12]

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(Operator Instructions) And if there are no further questions, I'd like to turn the floor back over to Mr. Gobitz for any closing comments.

We do -- I'm sorry, we do have one question that just snuck in here from John Bridges from JPMorgan.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [13]

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I was just wondering with Tambomayo, I was expecting that after you commissioned the mine recently that we would see improvements in production or improvements in volumes countering reductions in grades. So I was a bit surprised to see this nice new project disappoint this quarter. Could you give us some indication as to what you expect going forwards in terms of grades and volumes from the mine?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [14]

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Thank you, John. Thank you, John, for your question. That's actually in the case Tambomayo, as we said, it's our newest mine. But we have increased significantly the margin, in this case, the EBITDA coming from these assets through this De-bottlenecking Program. That means we have reduced the cutoff, so we have access to more areas with also good grades. And definitely, we have these counter entities. Yes, we have reduced the production of gold but we have increased the production of zinc, and we are also increasing the total capacity of the processing plant from 1,500 to 2,000 tons per day. So at the end, the borderline and the borderline is we are increasing the margins, the profitability and also extending the life of mine of Tambomayo.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [15]

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So are we to expect the sort of improvements in EBITDA in 2020 and beyond?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [16]

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Yes, that's the case. As we -- in the Slide #6, we present our different assets that are part of our portfolio. We are very confident that we could maintain that profitability of Tambomayo. With each change, we are increasing volume, we reduced a little bit the gold production but increasing the base metal and through these exploration programs in the part of the ore deposit, we are working harder to gain visibility to extend the life of mine.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [17]

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In your prepared remarks, you spoke about positive trends in grades and the results that you see this quarter. Could you extrapolate on that and perhaps give us some indications to where you expect good news in the second half?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [18]

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Yes. We can add this information but also here is Juan Carlos Ortiz, our COO, he will also explain more details regarding this.

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Juan Carlos Ortiz Zevallos, Compañía de Minas Buenaventura S.A.A. - VP of Operations [19]

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John, this Juan Ortiz from operations. One important key point here in Tambomayo for the second quarter is that we are still having high gold inventories in deposits. As we mentioned in the previous quarter, we changed the flowsheet of the processing plant, so we are doing sanitation of the lead concentrate only from -- for the lead concentrate not for 100% of the incoming ore to the plant.

Deposits need these concentrated to be filtered and thus bottleneck that we are solving in June and July, but it's not shut for June is that we still have high level of gold inventories in the (inaudible). So the production would be realized as sales in this quarter, in the third quarter of this year.

As Víctor mentioned, we are increasing the throughput in the processing plant. We are very close to get a license for processing 2,000 tons per day at the processing plant so it will help us to keep up with the cost reduction and looking forward maintain the margin of these operation. The grades are decreasing in comparison to the last year, what we're seeing through the high-grade spots early in the scale of the life of mine. And in the coming years, we are being focused more on the margin -- I'm sorry, on the volume ounces, but on the margin that we generate per ton. And as part of the De-bottlenecking Program, we are progressing very well and the cost reduction is very substantial along the year.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [20]

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Okay. Approximately how many ounces are in the lead concentrate at the mine?

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Juan Carlos Ortiz Zevallos, Compañía de Minas Buenaventura S.A.A. - VP of Operations [21]

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Around 10,000 ounces of gold still in the lead concentrate in the (inaudible), not only lead concentrate but also in the sanitation (inaudible) as part of gold in solution that need to be poured into a gold bar in these weeks.

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [22]

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We expect, let me add to that, we expect to maintain in the system just 2,500 ounces of gold. It's not zero.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [23]

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And then maybe finally, Cerro Verde was disappointing this quarter. Now obviously, we can see a lower copper price impacting that. But for a company -- I'm sorry, the mine of the size and quality of Cerro Verde, its grade seems to vary quite a lot and its production varies quite a lot. Is there a way -- what do you expect to see happening for the rest of the year and is there a way of perhaps giving us some early warning of lower grade to put into our models?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [24]

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Thank you, John. But in the case of Cerro Verde, this has decided as it's our operational decision. In the second quarter, they decided to put most of the fleet in the stripping -- in stripping activity. So they feed the processing plant with stockpiles. And as you know, sometimes stockpiles means lower copper recovery. So we expect -- we see very robust operation and also a very robust financial asset. So that means that in the coming months, we expect a significant improvement in terms of production and also in -- reduction in cost.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [25]

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When do you expect the stripping campaign to finish?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [26]

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It was done, most important objective in the second quarter. So we expect during this third quarter, a change in the -- in these operational activities to return to use part of the fleet in mostly on all fresh port.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [27]

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Okay. That's good. Have you seen the sort of 5-year plan? Do you know when that next big stripping phase begins so we can perhaps put that in our models, too?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [28]

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No, I don't clearly understand your point. You are talking about Cerro Verde?

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [29]

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Yes. I just wondered if there was any sort of early warning as to when the next stripping phase would come. Is it 2 to 3 years away? Is it a year away?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [30]

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No, no, no. I don't have these details but definitely, in terms of processing plant, it's going very well. As we mentioned in the 2 processing plants, they are processing more than 400,000 metric tons. And as you know, with -- in the -- from the open-pit perspective, they have 2 different open pits. And there blending, they are part of this mining plan as usual, probably as you know, in terms of all results, Cerro Verde is an asset with a very extensive life of mine, more than 25 years. So and not any -- I don't have any concerns regarding the stability of these assets.

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John David Bridges, JP Morgan Chase & Co, Research Division - Senior Analyst [31]

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No. It's just the volatility, which is a bit confusing from the analysts' side.

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Operator [32]

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Our next question here is from Andrés Castro from CrediCorp Capital.

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Andrés Cereceda Castro, CrediCorp Capital, Research Division - Associate of Pulp and Paper, Materials, Healthcare, and Pension Fund [33]

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I just have a couple of questions. First one is regarding the Orcopampa focus of this year, it seems clear that you are focusing on only improving efficiency there. However, it is related to lower production for this year. My question is that if we should expect a recovery or a higher production the next year in this unit?

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [34]

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Okay, Andrés, thank you for your question. Definitely, we had time to improve the profitability of these assets and at the same time, we are trying to extend the life of mine to increase the feasibility. So in this regard, we have significant changes in terms of downsize the dimension, in terms of workforce and also as part of this effort to centralize our operations. But here, Juan Carlos Ortiz also, our COO, will explain with more details this concept in numbers.

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Juan Carlos Ortiz Zevallos, Compañía de Minas Buenaventura S.A.A. - VP of Operations [35]

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This is Juan Ortiz. There has been some focusing this year for the centralization process, centralization operations in the underground mine. As a result, so far this year, we have a head count reduction of almost 500 workers. We reduced the number of workers, the number of contractors, we are consolidating the number of contractors in the underground mine in order to have a more smooth and lean operation. The process is well advanced, we expect to finish this process along this year and pull the mine back into blue numbers in the last quarter of this year. We have guidance for this year. We haven't been working on the detail for the guidance of next year. It's a part of the budgeting process that we usually do by the last quarter of every year.

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Andrés Cereceda Castro, CrediCorp Capital, Research Division - Associate of Pulp and Paper, Materials, Healthcare, and Pension Fund [36]

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Okay. Very clear. Just one last question regarding Cajamarca, I know that the tentative date of finish of the construction for this new unit is the first quarter of this year. However, I would like to know if you can share with us some guidance about how much time it would take in the -- around about in that new unit.

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Juan Carlos Ortiz Zevallos, Compañía de Minas Buenaventura S.A.A. - VP of Operations [37]

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No, what we said, it's -- right now, Cajamarca is in the last stage of its ramping up. So in the last quarter of this year, we'll achieve commercial production, which means that the nameplate designs. So that's (inaudible). Okay.

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Operator [38]

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(Operator Instructions) If there are no further questions, I'd like to turn the floor back to Mr. Víctor Gobitz for any closing comments.

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Víctor Gobitz Colchado, Compañía de Minas Buenaventura S.A.A. - President & CEO [39]

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Okay. Thank you, everyone, for joining our conference call this morning. As Buenaventura team, we are committed to developing the full potential of our existing assets through our De-bottlenecking Program, prioritizing the long-term perspective in order to become a more predictable company in terms of production and profitability.

In this aspect, we consider that 2019 is a transitional year in order to achieve these goals. Furthermore, we are implementing a disciplined process of -- for value generation through an enhanced methodology in order to optimize our capital allocation. In this regard, in the first half of 2020, we intend to declare all results coming from our greenfield.

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Operator [40]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.