Compania de Minas Buenaventura Announces Second Quarter 2010 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 2010. 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, Buenaventura’s Chief Executive Officer stated:
“Net income during second quarter was US$110.9 million, a 17% decrease when compared to the figure reported in 2Q09 (US$134.4 million).
EBITDA from Buenaventura’s Direct Operations was US$88.4 million, 3% lower than the figure reported in 2Q09 (US$91.0 million), while EBITDA including Yanacocha and Cerro Verde decreased 7%, from US$264.0 million in 2Q09 to US$245.6 million in 2Q10.
These results were mainly driven by a lower volume of gold and silver volume”.
During 2Q10, net sales were US$212.0 million, a 7% increase when compared to the US$198.1 million reported in 2Q09. This was explained by the higher realized prices in all metals despite a decrease in the volume of gold, silver, zinc and lead sold.
Royalty income in 2Q10 totaled US$13.4 million, a 7% decrease when compared to the US$14.6 million reported in 2Q09 due to lower gold volume sold at Yanacocha.
Accumulated net sales in 2010 were US$399.6 million, an 11% increase compared to the same period of 2009 (US$361.2 million), while royalty income was US$27.5 million, a 2% decrease when compared to the US$28.4 million reported in the comparable period of 2009.
Production and Operating Costs
Buenaventura’s equity production(1) in 2Q10 was 109,974 ounces of gold, 11% higher than the 99,322 million ounces reported in 2Q09. Silver production in 2Q10 was 3.4 million ounces, a 9% decrease when compared to the 3.7 million ounces reported in 2Q09.
Equity production(1) in the six month period 2010 was 207,744 ounces of gold and 6.4 million ounces of silver. This represented a 3% increase in gold production (202,170 ounces in 1H09), and a 17% decrease in silver production compared to 2009 (7.7 million ounces).
Orcopampa’s (100%) total gold production was 80,482 ounces, 12% higher than 2Q09 production (71,923 ounces). Production from the Chipmo mine in 2Q10 was 74,924 ounces, 20% higher than the 62,398 ounces reported in 2Q09, which was complemented by the old tailings treatment that produced 5,558 gold ounces (9,525 ounces in 2Q09). Accumulated total gold production in the six-month period 2010 was 152,601 ounces, a 5% increase when compared to 2009 (144,910 ounces). (Appendix 2)
Cash operating cost in 2Q10 was US$357/oz, 22% higher when compared to 2Q09 (US$293/oz). This was explained by a 42% increase in contractor costs due to a 40% increase in diamond drilling and a 25% increase in drifting work.
At Poracota, gold production in 2Q10 was 14,968 ounces, an increase of 29% when compared to 2Q09 (11,579 ounces), while the cash operating cost increased 22%, from US$754/oz in 2Q09 to US$917/oz in 2Q10. This increase was due to a 52% increase in diamond drilling and a 59% increase in drifting work to replace gold reserves. Accumulated gold production for the six-month period 2010 was 28,897 ounces, 17% higher than the figure reported in 2009 (24,676 ounces).
Total royalties paid to the government at both Orcopampa and Poracota in 2Q10 totaled US$3.7 million.
At Uchucchacua (100%), total silver production in 2Q10 was 12% lower than 2Q09 (2.4 million ounces and 2.7 million ounces, respectively) due to a 5% decline in ore treated, 3% lower silver grade and 5% lower recovery. Zinc production decreased 18% (from 2,280 MT in 2Q09 to 1,881 MT in 2Q10), while lead production decreased 29% (2,806 MT in 2Q09 vs. 2,002 MT in 2Q10). Accumulated production in the six-month period 2010 was 4.4 million ounces of silver, 21% lower than in 2009 (5.6 million ounces); 3,397 MT of zinc, a decrease of 28% when compared to 2009 (4,711 MT) and 3,758 MT of lead, 27% lower than the figure reported in 2009 (5,183 MT).
Cash operating cost in 2Q10 was US$11.69/oz, a 24% increase compared to the $9.39/oz in 2Q09. This was best explained by:
- A decrease in silver ounces produced due to a decline in the tonnage treated, as well as the silver grade and recovery ratio resulting from selective exploitation, while controlling manganese content.
- A 25% rise in contractor expenses explained by a 14% increase in diamond drilling and a 3% increase in drifting work as well as higher costs per meter due to an increase in contractors salaries.
Total royalties paid to the government at Uchucchacua in 2Q10 totaled US$0.7 million.
At Antapite (100%), total production in 2Q10 was 9,560 ounces of gold, an increase of 21% compared to 2Q09 (7,926 ounces), mainly due to a 14% increase in the gold grade (Appendix 2). Accumulated gold production was 16,630 ounces, a 10% increase when compared to 2009 (15,135oz).
Gold cash operating cost in 2Q10 was US$742/oz, 5% lower than in 2Q09 (US$780/oz) due to a 5% decline in diamond drillings.
Total royalties paid to the government at Antapite in 2Q10 totaled US$0.2 million.
At El Brocal (45.97%), Stage One of the concentrator plant expansion project was completed to increase capacity from 6,000 TPD to 10,000 TPD. In order to leverage higher copper prices, the Company will prioritize copper production at the Marcapunta operation, increasing ore treated from 1,000 TPD to 4,000 TPD. The remaining capacity of 6,000 TPD, will be used to treat the polymetalic ore from Colquijirca.
At Marcapunta, copper production for 2Q10 was 3,036 MT, 49% higher than 2Q09 (2,039 MT). Accumulated copper production in 1H10 was 5,178 MT, a 28% increase when compared to 4,031 MT in the same period 2009. Cash cost at Marcapunta for 2Q10 was US$4,075/MT, a 40% increase when compared to US$2,901/MT reported in 2Q09.
At Colquijirca, total zinc production was 9,668 MT in 2Q10, a 49% decrease when compared to the 18,802 MT reported in 2Q09 due to a 32% decline in tonnage of polymetalic ore to allow higher copper ore treatment and a 20% decrease in ore grade (Appendix 2). Total silver production in 2Q10 was 560,481 ounces, a 34% decrease when compared to the 844,838 ounces reported in 2Q09, mainly explained by the previously-mentioned decline in tonnage treated and a 14% decrease in the silver ore grade. Total lead production for 2Q10 was 3,642 MT, a 24% decrease when compared to 4,816 MT in 2Q09.
For 1H10, total zinc production was 21,569 MT, a 37% decrease when compared to the 34,022 MT reported in 1H09. In the case of silver, total production decreased 37%, from 1.9 million ounces in 1H09 to 1.1 million ounces in 1H10. Lead production for the first six-months 2010 was 6,915 MT, 26% lower than the same period in 2009 (9,295 MT).
Zinc cash cost in Colquijirca increased from US$590/MT in 2Q09 to US$1,096/MT in 2Q10. This was due to a higher stripping ratio (16.7 in 2Q10 vs. 10.0 in 2Q09).
Total royalties paid to the government at Colquijirca and Marcapunta in 2Q10 totaled US$0.5 million.
General and administrative expenses in 2Q10 were US$28.4 million, 49% higher than the figure reported in 2Q09 (US$19.1 million) due to the “mark to market” provision for long-term compensation (US$17.0 million). General and administrative expenses in the six-month period 2010 totaled US$39.0 million, a 9% increase when compared to the US$35.8 million reported in the same period of 2009.
Exploration Costs in Non-Operational Mining Sites
Exploration costs at non-operational mining sites, which include care and maintenance, in 2Q10 were US$10.3 million, a 3% increase compared to the US$10.0 million reported in 2Q09. The main efforts were focused at the Castrejon prospect at La Zanja (US$1.1 million), Mallay (US$2.4 million), Marcapunta (US$1.3 million), Colquemayo (US$0.6 million) and Breapampa (US$0.5 million) projects.
Exploration costs at non-operating mining sites in the six-month period 2010 were US$18.2 million, a 5% increase when compared to the same period in 2009 (US$17.2 million).
Greenfield projects currently being drilled are:
- The Coripuquio prospect at the Colquemayo project (12,600 hectares) in Moquegua, with 3,000 meters drilled this far, with interesting results at CQQ-10-06 showing 109.7 meters with 0.51 g/t of gold in shallow oxides from 15.46 meters deep.
- Chaje (18,000 hectares), surrounding the Chucapaca area, also in Moquegua, where a second diamond-drill hole is testing depth potential of narrow gold-bearing veins in sandstone and carbonaceous shales.
In Central Mexico, Buenaventura has designed an exploration program and positioned the responsible team for the Pachuca – Real del Monte project, which consists of a silver-rich vein project optioned from Solitario Resources.
Operating income in 2Q10 was US$54.7 million, a 23% decrease compared to the US$71.4 million reported in 2Q09. This result was mainly explained by higher operating costs and administrative expenses.
Accumulated operating income for the period was US$122.3 million, a decrease of 6% when compared to the figure reported in 2009 (US$130.4 million).
Share in Affiliated Companies
During 2Q10, Buenaventura’s income from non-consolidated affiliates was US$86.2 million, 12% lower than the US$98.3 million reported in 2Q09. Yanacocha’s contribution to these results decreased 8%, from US$68.4 million in 2Q09 to US$62.7 million 2Q10, while contributions from Cerro Verde decreased from US$29.9 million in 2Q09 to US$25.9 million in 2Q10.
Accumulated income from non-consolidated affiliates in the six-month 2010 period was US$198.1 million, an increase of 11% compared to the US$178.2 million reported in 2009.
At Yanacocha (43.65%), 2Q10 gold production was 352,556 ounces of gold, a decrease of 32% compared to 2Q09 (516,693 ounces). Gold production in the six-month 2010 period was, according to guidance, 775,354 ounces, but a decrease of 24% compared to the 1,015,610 ounces reported in the same period 2009.
Cost applicable to sales (CAS) at Yanacocha in 2Q10 was US$406/oz, 21% higher than the figure reported in 2Q09 (US$336/oz) due to lower gold production, higher waste mining and maintenance costs, partially offset by higher by-product credits.
Net income at Yanacocha in 2Q10 was US$144.3 million, a 9% decrease when compared to the 2Q09 figure (US$157.8 million). Accumulated net income in 2010 was US$306.8 million, 4% higher than 2009 (US$295.7 million).
During 2Q10, EBITDA totaled US$254.0 million, a decrease of 10% compared to 2Q09 (US$282.6 million). This decrease was explained by the 13% decline in revenues (US$424.4 million in 2Q10 vs. US$488.8 million in 2Q09) due to a 33% decrease in ounces of gold sold. EBITDA for 1H10 was US$528.1 million, mostly in-line with the US$522.2 million reported in 2009.
The Company continues to expect 2010 total gold production at Yanacocha of between 1,460,000 and 1,550,000 ounces, with costs applicable to sales near the high end of the outlook range of $360 and $400 per ounce. This is due primarily to higher royalties and worker participation costs as a result of higher realized gold prices.
CAPEX in 2Q10 was US$53.6 million, while for the cumulative period, it totaled US$110.7.
At Cerro Verde (19.26%), 2Q10 copper production was 75,386 MT, a 2% decrease when compared to 2Q09 (76,812 MT). Accumulated copper production in 1H10 totaled 150,339 MT, in-line with the same period 2009 (152,526 MT).
During 2Q10, Cerro Verde reported net income of US$136.8 million, a 14% decrease when compared to US$159.6 million in 2Q09. Accumulated net income in 1H10 was US$375.4 million, a 41% increase compared to the same period 2009 (US$265.8 million).
CAPEX in 2Q10 totaled US$22.4 million, and US$45.6 million for the six-month period 2010.
This quarter, Buenaventura’s net income was US$110.9 million; representing US$0.44 per share compared to US$134.4 million in 2Q09 (17% decrease). This was mainly explained by the 23% decline in operating income and the 12% decrease in contributions from Yanacocha and Cerro Verde.
Net income for the six-month period 2010 was US$266.1 million (US$1.05 per share), a 13% increase when compared to the US$234.7 million (US$0.92 per share) reported in the same period 2009.
- 2nd stage old tailing retreatment to recover 38,000 oz of gold and 1.1 M oz of silver. As of June 2010, all equipment has been purchased. This project will be completed in 4Q10. Total investment as of June, 2010 was US$3 million out of a total budget of US$5.5 million.
- Tailing Dam #4 expansion for an additional 1.8 years is 85% completed and expected to be finished in 3Q10. Total investment as of June, 2010 was US$10 million out of a total budget of US$10.4 million.
- The engineering study for the chemical plant to clean manganese content from lead-silver concentrates to obtain better commercial terms and improve the mining process is underway. Currently, the location has been identified and the Company is working on the environmental permits.
As of June 2010, the Company has completed the following facilities for the project:
- Bramadero Dam
- Main access road
- Processing Plant ADR
- Leach pad (10 Has)
- Solution and torment dams
- Camps, office, and general store
The Company is awaiting the final inspection by the Ministry of Mining to obtain the processing plant permit to start operations in August. Total CAPEX totaled US$73.2 million (including US$12.5 million for working capital).
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, Poracota, Uchucchacua, Antapite, Julcani and Recuperada). Has controlling interest in three mining companies (El Brocal, La Zanja and CEDIMIN) 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 19.26% in Sociedad Minera Cerro Verde, an important Peruvian copper producer.
If a printed version of the Company’s 2009 Form 20-F is requested, please contact the persons indicated above otherwise, download a PDF format file from our web site.
(1) Production includes 100% of operating units, 100% of CEDIMIN and 45.97% of El Brocal.
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.
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: firstname.lastname@example.org Contacts in New York: Maria Barona / Peter Majeski i-advize Corporate Communications, Inc. Tel: (212) 406-3690 Email: email@example.com
SOURCE Compania de Minas Buenaventura S.A.A.