July 30, 2008
Compania De Minas Buenaventura Announces Second Quarter 2008 Results
LIMA, Peru, July 30 /PRNewswire-FirstCall/ -- Compania de Minas Buenaventura S.A.A. ("Buenaventura" or "the Company") (NYSE: BVN; Lima Stock Exchange: BUE.LM), Peru's largest publicly traded, precious metals mining company, announced today its results for the second quarter 2008. All figures have been prepared according to Peruvian GAAP and are stated in U.S. dollars (US$).
Comments from the Chief Executive Officer: Mr. Roque Benavides, Chief Executive Officer of Buenaventura, stated:
"Net income in 2Q08 was US$121.7 million, or US$0.48 per ADS, which represents a significant increase when compared to 2Q07, but in-line with net income after adjusting for the non-recurring expenses reported in 2Q07.Operating income in the second quarter was US$92.7 million, in-line with the figure reported in 2Q07, while EBITDA from Buenaventura's direct operations totaled US$106.3 million, 4% lower than the figure achieved in 2Q07. This decrease is explained by the higher costs reported at most of the Company's mines. Total EBITDA during the second quarter increased 37% due to higher contribution from Yanacocha and Cerro Verde."
During 2Q08, net sales were US$204.3 million, a 13% increase when compared to the US$181.4 million reported in 2Q07, mainly due to higher volumes of silver and zinc sold, as well as an increase in the realized prices of gold and silver. This was partially offset by a decrease in the volume of lead sold, as well as lower zinc prices.
Royalty income during 2Q08 totaled US$12.1 million, a 90% increase when compared to the US$6.3 million reported in 2Q07. This was due to higher sales at Yanacocha.
Net sales for the six-month period of 2008 were US$416.3 million, a 25% increase compared to the same period of 2007 (US$332.3 million), while royalty income was US$26.3 million, a 79% increase when compared to US$14.7 million in 2007.
Production and Operating Costs
Buenaventura's equity production(1) during 2Q08 was 103,651 ounces of gold, 6% higher than the 98,177 ounces reported in 2Q07; and 3,937,250 ounces of silver, an 11% increase when compared to the 3,539,363 ounces reported in 2Q07.
Equity production(1) for the accumulated six-month period was 202,511 ounces of gold and 7,860,151 ounces of silver. This represented an increase of 5% in gold production (192,525 ounces in 2007), and a 9% increase in silver production compared to 2007 (7,244,352 ounces).
At Orcopampa (100%), total gold production in 2Q08 was 70,019 ounces, a 7% increase when compared to the 65,587 ounces reported in 2Q07. Accumulated gold production was 132,214 ounces, a 3% increase when compared to 2007 (128,805 ounces).
Cash operating costs during 2Q08 were US$249/oz, 53% higher when compared to 2Q07 (US$163/oz). This was explained by:
1. An increase in the consumption of mining support supplies. 2. The appreciation of the PEN(2)
At Poracota, gold production in 2Q08 was 11,396 ounces, while cash operating costs were US$543/oz.
Total royalties paid to the government at both Orcopampa and Poracota in 2Q08 were US$1.7 million (US$1.3 in 2Q07).
At Uchucchacua (100%), total silver production during 2Q08 was 2,897,646 ounces, a 34% increase when compared to 2Q07 (2,168,184 oz), mainly due to a 16% increase in recovery rates and a 14% increase in ore mined. Likewise, zinc production increased 82% (2,216 MT in 2Q08 vs. 1,220 MT in 2Q07), while lead production increased 36% (2,149 MT in 2Q08 vs. 1,583 MT in 2Q07).
Accumulated production for the six month period 2008 was: 5,798,800 oz of silver, 39% higher than in 2007 (4,174,372 oz); 5,203 MT of zinc, an increase of 116% when compared to 2007 (2,414 MT) and 2,149 MT of lead, 35% lower than in 2007 (3,304 MT).
Cash operating costs in 2Q08 were US$7.18/oz, a 24% increase compared to $5.79/oz in 2Q07. This was best explained by:
1. The lower lead and zinc by-product contribution due to lower prices and commercial terms. 2. An increase in diamond drilling (10,163m in 2Q08 vs. 6,313m in 2Q07) and drifting work (7,693m in 2Q08 vs. 9,320m in 2Q07). 3. The appreciation of the PEN.
Total royalties paid to the government at Uchucchacua in 2Q08 were US$1.6 million (US$0.7 in 2Q07).
At Antapite (100%), total production in 2Q08 was 9,546 ounces of gold, a decrease of 48% when compared to 2Q07 (18,395 ounces), mainly due to a 51% decrease in gold grade from 0.39 Oz/ST to 0.19 Oz/ST. Accumulated gold production was 24,408 ounces, a 34% decrease when compared to 2007 (37,058 oz).
Gold cash operating costs in 2Q08 were US$695/Oz, a 93% increase when compared to US$360/Oz in 2Q07. This increase was due to:
1. The lower gold content due to lower grades. 2. An increase in diamond drilling (5,822m in 2Q08 vs. 4,791m in 2Q07).
Total royalties paid to the government at Antapite in 2Q08 were US$0.2 million (US$0.2 in 2Q07).
At Colquijirca (El Brocal) (34.29%), total zinc production was 23,845 MT in 2Q08, a 17% increase when compared to the 20,382 MT reported in 2Q07 due to an increase in ore mined. Total silver production during 2Q08 was 1,172,068 ounces, a 9% decrease when compared to the 1,289,448 ounces reported in 2Q07 due to a lower silver grade.
For 1H08, total zinc production was 44,850 MT, a 14% increase when compared to the same period of 2007 (39,366 MT). In the case of silver, total production decreased 29% from 3,363,726 ounces in 2007 to 2,388,396 ounces in 2008.
Zinc cash operating costs for 2Q08 were US$327 per MT, an increase of 26% when compared to 2Q07 (US$259 per MT), due a decrease in lead and silver contribution.
In Marcapunta, copper production for 2Q08 was 1,918 MT and 3,297 MT accumulated for 2008.
Total royalties paid to the government at Colquijirca in 2Q08 were US$1.0 million (US$1.4 in 2Q07).
General and administrative expenses for 2Q08 were US$9.7 million, a 27% decrease compared to the US$13.3 million reported in 2Q07 due to a lower Long- Term Compensation provision (US$0.4 million in 2Q08 vs. US$4.6 million in 2Q07). General and administrative expenses for 1H08 were US$37.2 million, a 73% increase when compared to the US$21.6 million reported in the same period of 2007.
Exploration Costs in non-operational mining sites
Exploration costs at non-operational mining sites during 2Q08 were US$15.7 million, a 38% increase compared to the US$11.4 million reported in 2Q07. The main efforts were focused at the Marcapunta (US$2.8 million), Mallay (US$2.5 million), La Zanja (US$2.0 million) and La Llave (US$1.3 million) projects. Exploration costs at non-operating mining sites during 1H08 were US$27.2 million, a 33% increase when compared to the same period in 2007 (US$20.4 million).
-- Environmental Impact Studies have been presented for the La Zanja and Mallay projects to the regional and national authorities. Both projects had successful Public Hearings on July 3, 2008 and July 24, 2008, respectively. The Company expects final permitting to take place early next year. La Zanja and Mallay are currently upgrading engineering designs, developing local infrastructure and building mutual trust with the corresponding communities.
-- At the Trapiche project, a new agreement was signed with the Mollebamba community. Mollebamba voted in favor of a long-term lease agreement for 2,500 hectares in surface rights. Exploration drilling will commence in August to extend the project 30,000 m into the Southeast Trapiche porphyry and the Millocucho skarns and porphyry.
-- At Tantahuatay, a new 400 m x 200 m zone of auriferous oxide breccia was found with 39 channel samples that averaged 0.58 g/t Au (96% CN soluble) and 9.20 g/t Ag. The corresponding environmental impact study was presented on July 8, 2008 to the regional and national authorities.
-- At the Pucagallo prospect in the Newmont's Brea Pampa project, two continuous channel samples over outcropping ledges gave the following gold oxide results:
37.50 m @ 1.80 g/t Au (84% CN soluble) 14.40 m @ 1.05 g/t Au (70% CN soluble) Operating Income
Operating income in 2Q08 was US$92.7 million, a 1% decrease compared to the US$94.0 million reported in 2Q07. This result was mainly due to the previously mentioned increase in costs at the Company's mining operations.
For 1H08, operating income was US$195.4 million, a 14% increase when compared to the US$172.1 million reported in 1H07.
Share in Affiliated Companies
During 2Q08, Buenaventura's income from non-consolidated affiliates was US$98.6 million, an increase of 88% when compared to the US$52.4 million reported in 2Q07. This increase is explained by the US$43.3 million contribution from Yanacocha (US$9.5 million in 2Q08) and the US$55.3 million contribution from Cerro Verde (US$41.7 million in 2Q07). In 1H08, income from non-consolidated affiliates was US$244.3 million, an increase of 127% compared to the US$107.5 million reported in 2007.
At Yanacocha (43.65%), 2Q08 gold production was 441,911 ounces of gold, an increase of 46% when compared to 2Q07 (302,590 ounces). Gold production for the six-month 2008 period was 942,289 ounces, an increase of 31% when compared to the 720,760 ounces reported in the comparable period of 2007.
Costs applicable to sales (CAS) at Yanacocha during 2Q08 were US$386/oz, which represented an 11% decrease from the US$436/oz reported in 2Q07. This is explained by the 39% increase in gold ounces sold (432,614 ounces in 2Q08 vs. 311,465 ounces in 2Q07).
Net income at Yanacocha during 2Q08 was US$99.6 million, a 578% increase when compared to the 2Q07 figure (US$14.7 million). Net income in 1H08 was US$285.8 million, 240% higher than the same period of 2007 (US$84.0 million).
During 2Q08, EBITDA totaled US$193.8 million, an increase of 221% compared to 2Q07 (US$60.5 million). This increase was due to an increase in volume of gold sold and higher realized gold prices, which increased from US$667/oz in 2Q07 to US$896/oz in 2Q08. EBITDA in 1H08 was US$493.5 million, an increase of 147% when compared to the US$200.0 million reported in 2007.
CAPEX for 2Q08 was US$45.7 million. CERRO VERDE
At Cerro Verde (18.50%), 2Q08 copper production was 81,023 MT, a 26% increase when compared to 2Q07 (64,487 MT). Copper production in 1H08 totaled 156,393 MT, 36% higher than the figured reported in the same period of 2007 (115,369 MT).
During 2Q08, net income was US$301.3 million, a 33% increase compared to 2Q07 (US$226.9 million), best explained by higher sales revenue, which increased 52% from US$453.1 million in 2Q07 to US$687.1 million in 2Q08.
For 1H08, net income was US$653.4 million, a 74% increase compared to 1H07 (US$375.5 million). Net sales in 1H08 were US$1,398.5 million, an increase of 81% compared to 1H07 (US$770.8 million).
CAPEX in 2Q08 totaled US$40.1 million. Net Income
This quarter, Buenaventura's net income was US$121.7 million, representing US$0.48 per ADS, a 571% increase when compared to the US$18.2 million reported (US$0.07 per ADS) in 2Q07.
Net income for the six-month period 2008 was US$58.8 million (US$0.23 per ADS), an increase of 7% when compared to the US$54.8 million (US$0.22 per ADS) reported in the same period of 2007.
Project Development UCHUCCHACUA -- The deepening of the Carmen and Socorro mines includes:
Carmen Mine: The deepening of the Master Shaft from level 3990 to level 3930 to include:
-- Infrastructure auxiliary work began in March 2008, and is 75% complete, with final completion estimated for 4Q08. -- The development of level 3990, which includes drifting 2,394 meters to communicate with the Socorro mine, is 64% complete, and expected to be finished by 4Q08.
Socorro Mine: The construction of ramp 626 to reach level 3920 (1,250 meters) is 48% complete and is expected to be concluded by 1Q09. The development of level 3990 begun in 3Q07 is 68% complete, and is expected to be finished by 1Q09. The work to deepen the Luz Shaft to reach level 3920 from level 4060 will begin after the completion of level 3990.
During 2Q08, total investment was US$1.3 million (accumulated US$9.4 million) of a budgeted US$10.3 million.
-- The plant expansion from 2,500 STPD to 3,000 STPD to treat additional Lead/Zinc materials from lower levels of the mine includes a 13'x 20' grinding mill, flotation cells, a 25' x 10' thickener and 1 press filter. All equipment has been installed except for the mill and the thickener, which are currently being assembled at the plant. The project is expected to commence operations in September 2008. Total investment is US$8.5 million.
-- For 2008, work devoted to deepen the Nazareno Shaft from level 3290 to level 3170 includes:
-- 56 meters (total project includes 120 meters) of deepening work, which started in April 2008 and is 11% complete. -- The construction of ramps 15 and 16 to reach level 3230 from level 3290 started in January 2008 and includes 720 meters of drifting. At the end of 2Q08, work is 16% complete.
Accumulated investment during 2008 was US$2.3 million from an estimated investment of US$4.5 million.
-- The deepening of the Prometida Shaft from level 3440 to level 3290 (150 meters) commenced in October 2007 and is 34% complete. This project is expected to be concluded in 2Q09. Accumulated investment at the end of 2Q08 was US$2.1 million from a total investment of US$3.8 million.
-- The construction of facilities to treat the old flotation tailings to permit the recovery of approximately 53,000 ounces of gold in 2008 and 2009 will be completed in July. This project includes 6 cyanidation tanks, 2 thickeners and a desorption circuit. The project is 90% complete and accumulated investment is US$7.9 million from a total investment of US$9.2 million.
Compania de Minas Buenaventura S.A.A. is Peru's largest publicly traded, precious metals company and a major holder of mining rights in Peru. The Company is engaged in the mining, processing, development and exploration of gold and silver and other metals via wholly owned mines as well as through its participation in joint exploration projects.
Buenaventura currently operates several mines in Peru (Orcopampa, Uchucchacua, Antapite, Julcani, Recuperada and Caraveli). Has controlling interests in two mining companies (CEDIMIN and El Brocal) as well as a minority interest in several other mining companies in Peru. The Company owns 43.65% in Minera Yanacocha S.R.L. (a partnership with Newmont Mining Corporation), an important precious metal producer, and 18.50% in Sociedad Minera Cerro Verde, an important Peruvian copper producer.
To request a printed version of the Company's 2007 annual report on Form 20-F contact the persons indicated below.
Note on Forward-Looking Statements
This press release may contain forward-looking information (as defined in the U.S. Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including those concerning the Company's, Yanacocha and Cerro Verde's costs and expenses, results of exploration, the continued improving efficiency of operations, prevailing market prices of gold, silver, copper and other metals mined, the success of joint ventures, estimates of future explorations, development and production, subsidiaries' plans for capital expenditures, estimates of reserves and Peruvian political, economical, social and legal developments. These forward-looking statements reflect the Company's view with respect to the Company and Yanacocha's future financial performance. Actual results could differ materially from those projected in the forward-looking statements as a result of a variety of factors discussed elsewhere in this Press Release.
(1) Production includes 100% of operating units, 100% of CEDIMIN and 34.29% of El Brocal.
(2) The Peruvian Nuevo Sol (PEN) appreciation versus the U.S. dollar was 10% when comparing the average exchange rates of 2Q08 (S/.2.88 per 1 US$) with 2Q07 (S/.3.17 per 1 US$). This directly affected labor and contractor expenses.
Contacts in Lima: Roque Benavides / Carlos Galvez Compania de Minas Buenaventura S.A.A. Tel: (511) 419-2538 / 419-2540 Investor Relations: Daniel Dominguez Tel: (511) 419-2536 Email: [email protected] Contacts in New York: Maria Barona / Peter Majeski i-advize Corporate Communications, Inc. Tel: (212) 406-3690 Email: [email protected]
Compania de Minas Buenaventura S.A.A.
CONTACT: Lima, Roque Benavides, +011-511-419-2538, or Carlos Galvez,+011-511-419-2540, or Investors, Daniel Dominguez, +011-511-419-2536,[email protected], all of Compania de Minas Buenaventura; NewYork, Maria Barona or Peter Majeski, +1-212-406-3690,[email protected], both of i-advize Corporate Communications forCompania de Minas Buenaventura
Web site: http://www.buenaventura.com.pe/