Buenaventura Announces Q2 and H1 2016 Results

LIMA, Peru--(BUSINESS WIRE)--Compañia 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 results for the second quarter (2Q16) and six-month (6M16) periods ended June 30, 2016. All figures have been prepared in accordance with IFRS (International Financial Reporting Standards) on a non GAAP basis and are stated in U.S. dollars (US$).

Second Quarter 2016 Highlights:

• In 2Q16, EBITDA from direct operations was US$ 109.4 million, a 270% increase compared to US$ 29.6 million reported in 2Q15. Adjusted EBITDA (including associated companies) increased 84% (US$ 188.9 million in 2Q16 compared to the US$ 102.4 million in 2Q15).
• All In Sustaining Cost (AISC) decreased 34% in 2Q16 (US$ 610/oz in 2Q16 compared to the US$ 929/oz in 2Q15). This confirms the cost reduction trend, already shown in the 1Q16.
• Total attributable production in 2Q16 was 153k gold ounces and 6.0 million silver ounces, compared to 181k gold ounces and 4.4 million silver ounces in 2Q15.
• The Tambomayo project remains on schedule and within budget. Total project progress is at 81%. Production ramp up is expected by 4Q16.
• Buenaventura raised US$ 275 million in long-term debt. The proceeds were mainly used to reprofile its current short-term debt (US$ 245 million).
• At San Gabriel the Public Hearing was successfully held on June 17, as an important step in the process receiving the Environmental Impact Assessment approval by the end of the 2016.

(*) as of June 30, 2016 Buenaventura had 254,186,867 outstanding shares.

Operating Revenues

During 2Q16, net sales were US$ 279.4 million, an 18% increase compared to the US$ 236.6 million reported in 2Q15. This was mainly explained by an increase in gold and silver prices as well additional volume sold of all metals.

The higher revenues from our operations partially offset a royalty income decrease of 21%, to US$ 5.9 million in 2Q16 compared to the US$ 7.4 reported in 2Q15. This was due to lower revenues at Yanacocha (19% lower QoQ).

For 6M16, net sales increased 7%, from US$ 466.9 million in 6M15 to US$ 500.1 million in 6M16. Royalty income for 6M16 was US$ 12.5 million (US$ 16.5 million in 2015).

Production and Operating Costs

In 2Q16, Buenaventura’s gold equity production from direct operations was in-line compared to the figure reported in 2Q15 (84,997 gold ounces in 2Q16 vs 86,334 gold ounces in 2Q15). Gold production including associated companies in 2Q16 was 152,884 ounces, 15% lower than the amount reported in the same period 2015. This is explained by a decrease in production from Yanacocha. Silver equity production from direct operations increased 35%, mainly due to higher production at the Uchucchacua mine and the Mallay mine (5.7 million silver ounces in 2Q16 vs 4.2 million silver ounces in 2Q15).

Gold production at Orcopampa decreased 8% in 2Q16 (compared to 2Q15) mainly due to lower ore grade (Appendix 2). Cost Applicable to Sales (CAS) in 2Q16 was US$ 704/oz of gold, in line with the Cost Applicable to Sales (CAS) reported in 2Q15.

Gold production guidance for 2016 is 190k – 200k ounces.

Silver production in 2Q16 increased 57% compared to 2Q15, due to higher volumes of ore treated (29-day stoppage in May 2015) and higher ore grade (Appendix 2). Cost Applicable to Sales (CAS) in 2Q16 decreased 29% compared to 2Q15, primarily due to lower labor expenses resulting from a reduced headcount and lower reagent cost and consumption.

Silver production guidance for 2016 is 15.5 million – 16.5 million ounces.

Silver production in 2Q16 increased 45% compared to 2Q15, due to increased amounts of ore treated (Appendix 2). Cost Applicable to Sales (CAS) in 2Q16 was 7% lower compared to 2Q15 due to more volume sold, lower reagent cost and consumption.

Silver production guidance for 2016 is 1.5 million – 1.9 million ounces.

Silver production in 2Q16 increased 7% compared to 2Q15 production, mainly due to a higher ore grade (Appendix 2). Cost Applicable to Sales (CAS) in 2Q16 was 7% lower than 2Q15, primarily due to fewer meters drifted and lower reagents cost and consumption, despite lower volume sold.

Silver production guidance for 2016 is 3.0 million – 3.4 million ounces.

Gold production in 2Q16 decreased 5% compared to 2Q15. CAS in 2Q16 decreased 35% compared to 2Q15, primarily due to i) lower headcount generated by new synergies with Tantahuatay mine, ii) lower reagent prices and consumption, and iii) lower contractor expenses due to better prices.

Gold production guidance for 2016 is 130k – 140k ounces.

Gold production in 2Q16 increased 14% compared to the figure reported in 2Q15. CAS in 2Q16 decreased 6% compared to 2Q15 mainly due to lower reagent consumption and prices.

Gold production guidance for 2016 is 145k – 155k ounces.

During 2Q16, Copper production increased 22% compared to 2Q15, due to a higher ore volume treated and ore grade. Moreover, in 2Q16 zinc production increased 18% due to higher ore treated and recovery rate.

(*) Since May 2016, the new ownership of El Brocal is 59.26%.

In 2Q16, Zinc CAS was in line with the Cost Applicable to Sales (CAS) reported in 2Q15. Copper CAS in 2Q16 decreased 9% compared to 2Q15 mainly due lower commercial deductions per ton due the renegotiation of the commercial contracts.

Zinc production guidance for 2016 is 60k – 70k MT, while copper production guidance for 2016 is 35k – 45k MT.

General and Administrative Expenses

General and administrative expenses in 2Q16 were US$ 19.8 million, 8% higher compared to the US$ 18.3 million in 2Q15. For 6M16, the expense was US$ 41.2 million (US$ 39.0 million in 6M15).

Exploration in Non-Operating Areas

Exploration in non-operating areas during 2Q16 was US$ 5.0 million compared with the US$ 9.7 million in 2Q15. During the period, Buenaventura’s main exploration efforts were focused on the Tambomayo project (US$ 1.71 million), San Gabriel project (US$ 0.96 million) and Marcapunta (US$ 0.88 million). For 6M16, the expense was US$ 8.5 million (US$ 20.4 million in 6M15).

Share in Associated Companies

During 2Q16, Buenaventura’s share in associated companies was US$ 20.7 million, compared to US$ 12.0 million reported in 2Q15, composed by:

YANACOCHA

At Yanacocha (43.65% owned by Buenaventura), during 2Q16, gold production was 155,524 ounces, 28% lower than 2Q15 production (215,924 ounces). For 6M16, gold production was 335,872 ounces, 28% lower than 463,979 ounces in 6M15.

Gold production guidance at Yanacocha for 2016 is 630k – 660k ounces.

In 2Q16, Yanacocha reported a net loss of US$ 3.5 million compared to a net income of US$ 18.9 million reported in 2Q15. CAS in 2Q16 was US$ 790/oz, 22% higher than the US$ 648/oz reported in 2Q15 mainly due to: i) a higher inventory write-down (US$ 26.0 million in 2Q16 compared to US$ 17.9 million in 2Q15), and ii) lower volume sold (154,486 gold ounces in 2Q16 vs 203,413 gold ounces in 2Q15).

Capital expenditures at Yanacocha were US$ 22.3 million in 2Q16, while for 6M16 was US$ 36.0 million.

Currently, Yanacocha is focusing its exploration efforts on the Quecher Main project. An oxide deposit that could extend Yanacocha operation mine life to 2024. This project is currently in the feasibility stage of development and could potentially add an average of 200,000 ounces gold per year starting in 2020.

CERRO VERDE

At Cerro Verde (19.58% owned by Buenaventura), during 2Q16 copper production was 126,143 MT (24,699 MT attributable to Buenaventura), a 169% increase compared to 2Q15 (46,920 MT and 9,187 MT attributable to Buenaventura). For 6M16, copper production was 249,557 MT (48,863 MT attributable to Buenaventura).

During 2Q16, Cerro Verde reported a net income of US$ 80.8 million compared to net loss of US$ 0.9 million in 2Q15. This was primarily due to: i) a lower cash cost, and ii) more volume sold. For 6M16, net income was US$ 177.7 million (compared to US$ 39.8 million in 6M15).

Capital expenditures at Cerro Verde were US$ 143.3 million in 2Q16, and US$ 306.3 million in 6M16.

Copper production guidance at Cerro Verde for 2016 is 500k MT – 550k MT.

COIMOLACHE (Tantahuatay operation)

At Coimolache (40.10% owned by Buenaventura), attributable contribution to net income in 2Q16 was US$ 6.4 million (US$ 3.9 million in 2Q15). For 6M16, the contribution was US$ 12.1 million, compared to US$ 6.0 million reported in 6M15.

Project Development and Exploration

The Tambomayo Project (100% ownership)

• Detailed engineering currently at 100% of development.
• Overall project progress is at 81% (As of July 2016)
  • Exploration and mine development are at 100% of progress.
  • The construction of the facilities are at 70% of progress.
• CAPEX: US$ 340 M (Total disbursement as of 2Q16 US$ 232 M):
  • Exploration and mine development US$ 122 M (Disbursement as of 2Q16 US$ 122 M).
  • Civil works and Equipment US$ 218 M (Disbursement as of 2Q16 US$ 110 M).

The San Gabriel Project (100% ownership)

• The project has been rescheduled in order to preserve cash flow.
• Environmental Impact Assessment (EIA) of the project´s construction is expected to be approved in 4Q16 (the Public Audience was successfully held in June).
• Objective for 2S16:
  • Drilling program: 7,000 meters in order to confirm resources and certainty
  • Metallurgical studies to be completed in order to improve recovery in the first years of production

Company Description

Compañía 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*, Mallay*, Julcani*, El Brocal, La Zanja and Coimolache) and is developing the Tambomayo and San Gabriel projects.

The Company owns 43.65% of Minera Yanacocha S.R.L (a partnership with Newmont Mining Corporation), an important precious metal producer; 19.58% of Sociedad Minera Cerro Verde, an important Peruvian copper producer.

For a printed version of the Company’s 2015 Form 20-F, please contact the investor relations contacts on page 1 of this report, or download the PDF format file from the Company’s web site at www.buenaventura.com.

(*) Operations wholly owned by Buenaventura

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’s 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, economic, social and legal developments. These forward-looking statements reflect the Company’s view with respect to the Company’s, Yanacocha’s and Cerro Verde’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.

Note:

EBITDA (Buenaventura Direct Operations) consists of earnings before net interest, taxes, depreciation and amortization, share in associated companies, net, loss on currency exchange difference, other, net, provision for workers’ profit sharing and provision for long-term officers’ compensation.

EBITDA (including associated companies) consists of EBITDA (Buenaventura Direct Operations), plus (1) Buenaventura’s equity share of EBITDA (Yanacocha) (2) Buenaventura’s equity share of EBITDA (Cerro Verde), plus (3) Buenaventura’s equity share of EBITDA (Coimolache). All EBITDA mentioned were similarly calculated using financial information provided to Buenaventura by the associated companies.

Buenaventura presents EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) to provide further information with respect to its operating performance and the operating performance of its equity investees, the affiliates. EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) are not a measure of financial performance under IFRS, and may not be comparable to similarly titled measures of other companies. You should not consider EBITDA (Buenaventura Direct Operations) and EBITDA (including affiliates) as alternatives to operating income or net income determined in accordance with IFRS, as an indicator of Buenaventura’s, affiliates operating performance, or as an alternative to cash flows from operating activities, determined in accordance with IFRS, as an indicator of cash flows or as a measure of liquidity.

APPENDIX 4: COST APPLICABLE TO SALES RECONCILIATION

Reconciliation of Costs Applicable to Sales and Cost Applicable to Sales per Unit Sold

Cost applicable to sales consists of cost of sales, excluding depreciation and amortization, plus selling expenses. Cost applicable to sales per unit sold for each mine consists of cost applicable to sales for a particular metal produced at a given mine divided by the volume of such metal produced at such mine in the specified period. We note that cost applicable to sales is not directly comparable to the cash operating cost figures disclosed in previously furnished earnings releases.

Cost applicable to sales and Cost applicable to sales per unit of mineral sold are not measures of financial performance under IFRS, and may not be comparable to similarly titled measures of other companies. We consider Cost applicable to sales and Cost applicable to sales per unit of mineral sold to be key measures in managing and evaluating our operating performance. These measures are widely reported in the precious metals industry as a benchmark for performance, but do not have standardized meanings. You should not consider Cost applicable to sales or Cost applicable to sales per unit of mineral sold as alternatives to cost of sales determined in accordance with IFRS, as indicators of our operating performance. Cost applicable to sales and Cost applicable to sales per unit of mineral sold are calculated without adjusting for by-product revenue amounts.

The tables below set forth (i) a reconciliation of consolidated Cost of sales, excluding depreciation and amortization to consolidated Cost applicable to sales, (ii) reconciliations of the components of Cost applicable to sales (by mine and mineral) to the corresponding consolidated line items set forth on our consolidated statements of profit or loss for the three and six months ended June 30, 2014 and 2015, and (iii) reconciliations of Cost of sales, excluding depreciation and amortization to Cost applicable to sales for each of our mining units. The amounts set forth in Cost applicable to sales and Cost applicable to sales per unit sold for each mine and mineral indicated in the tables below can be reconciled to the amounts set forth on our consolidated statements of profit or loss for the three and six months ended June 30, 2014 and 2015 by reference to the reconciliations of Cost of sales, excluding depreciation and amortization (by mine and mineral), Selling Expenses (by mine and metal) expenses and Exploration in units in operations (by mine and mineral) to consolidated Cost of sales, excluding depreciation and amortization, consolidated Selling Expenses and consolidated Exploration in units in operations expenses, respectively, set forth below.