Compañía de Minas Buenaventura S.A.A.
Q3 2022 Earnings Call Transcript

Published: 28 Oct 2022

[Operator:]

Good day, ladies and gentlemen, and welcome to the Compañía de Minas Buenaventura Third Quarter 2022 Earnings Conference Call. . I would now like to introduce your host for today's call, Mr. Gabriel Salas, Investor Relations. Mr. Salas, please begin.

[Gabriel Salas:]

Good morning, everyone, and thank you for joining us today to discuss our third quarter 2022 results. Today's discussion will be led by Mr. Leandro Luis 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. Alejandro Hermoza, Vice President of Sustainability; Mr. Renzo Macher, Project Manager; Mr. Juan Carlos Salazar, Geology and Exploration Manager; 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 market close. 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 the 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 press release we filed on October 27, 2002. Let me now turn the call to Mr. Leandro Garcia.

[Leandro Garcia:]

Thank you, Gabriel. Good morning to all, and thank you again for attending to this conference call. We are pleased to present the results of third quarter 2022 from Compañía de Minas Buenaventura. As always, 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 mentioned on Slide 2. Moving on to Slide 3. The highlights of this quarter were as follows

[Operator:]

. And our first question today will come from Tanya Jakusconek with Scotiabank.

[Tanya Jakusconek:]

I have three questions I'd like to ask. The first one is just on San Gabriel. Can you give us an update on where we are, like in terms of actually physically starting construction? Like where are we on the social issues that were occurring, have those been resolved? And when do we actually start breaking ground? That's my first question.

[Leandro Garcia:]

Thank you, Tanya. Do you want to continue with the second and third and then we answer? Or one by one?

[Tanya Jakusconek:]

Sure. And then my second question is that we have been hearing from other companies easing of inflation pressures in the costs. There's been a relief in fuel price has been a relief in the supply constraints, some are seeing lower cyanide pricing in consumable steel. I'm interested in what you are seeing in Peru in terms of easing, if any, of these inflation pressures. And then the last one, which is for Daniel, which is the easiest one is on CapEx. Should we still be modeling for 2022 $90 million to $100 million in sustaining and now only $65 million for San Gabriel? Previously, it was $100 million to $105 million. So those are my 3 questions.

[Leandro Garcia:]

Thank You very much, Tanya. Renzo Macher, our Project Manager and Roque will give you comment about our strategy in San Gabriel. And then Daniel will help us with the answers on the number 2 and 3.

[Renzo Macher:]

Sure. So when we started this issue with the , we were kind of starting the preconstruction work. Currently, I would say that we are at 1% of construction, and we have resumed our activities after finding a common one with most of the outside communities and the authorities. So on-site work has already begun, and we have -- we are already training the people from the nearby community so they can help us move this forward at a faster pace. So far, we are at soft start process.

[Tanya Jakusconek:]

Okay. So as I understood it, you've started construction right now, you're only 1% complete, but you started and you've resolved the issues with the communities around that wasn't your communities, the further communities, you've resolved all of that and access to site is fine, and you're starting on that.

[Renzo Macher:]

Yes. So there's already work going on in this on-site.

[Tanya Jakusconek:]

Can I ask, just remind me again of the critical milestones from today to Q1 2025, what are the critical milestones for me to look at for your construction of the site?

[Renzo Macher:]

So towards the second half of next year, we should start our concrete architectural structural job -- work. And then late second quarter 2025, we should be producing our first gold bar, this will be revised probably another quarter. We have been working on -- with no stop on engineering and procurement, so we can recover some of these delays. So probably another quarter.

[Tanya Jakusconek:]

I'm so sorry. So next year -- second half of next year, you're going to start your concrete and structural work. So now you're moving.

[Renzo Macher:]

Toward the second half, we're going to have our final comp, and that's when we can bring most of the people to start construction, full construction, the complete construction, between now and then earthworks.

[Tanya Jakusconek:]

Earthworks, Okay. And then I think I understood that we might have a bit of a slippage in the time schedule from Q1 '25 to Q2 because of this little bit of delay. Did I hear that right?

[Renzo Macher:]

Yes.

[Tanya Jakusconek:]

Okay. Okay. No, I appreciate that. And then maybe, Daniel, if I could, just on the inflationary pressures, where are you seeing easing, if any? And then just on the CapEx?

[Alejandro Hermoza:]

Yes, Tanya .

[Tanya Jakusconek:]

I can't hear anything. Anyone there?

[Alejandro Hermoza:]

Yes, Tanya, this is Hermoza, I just wanted to add something on the social issues of San Gabriel.

[Tanya Jakusconek:]

Yes, for sure.

[Alejandro Hermoza:]

Yes. What we have done after the social project we have. We have approached this further located communities and villages. We've been successful in approaching them and establishing working spaces for them basically to reinforce information on project. We have opened very positive spaces with most of them, and we are confident we are strengthening the whole social climate, and that's why Renzo was explaining that with that confidence, we have resumed many of the field activities oriented to go into the ramp-up construction. So this is an ongoing process, and we feel very confident on what we have accomplished so far, and we will continue on this effort to give a social sustainability to the project.

[Tanya Jakusconek:]

And just on the social front, what have we done? Have we -- have you implemented social programs in their communities? Or have you implemented -- I know that there's jobs for construction of this mine and working, but social have you done to help them along?

[Alejandro Hermoza:]

Yes, along with authorities, from the Minister of Mine, from the environmental authorities in most of the places, we have conducted workshops, information workshops in some cases, which also gotten some agreements and explaining about our environmental management. And of course, as well, we are also working on -- and as Renzo explained, into building local capacities to engage more local workers into the project.

[Operator:]

Okay. Perfect. Good to see that being resolved.

[Leandro Garcia:]

There are two questions left. Daniel?

[Daniel Dominguez:]

Thanks, Tanya. Two additional questions from you. The first one regarding the inflation, yes, we have been we have been seeing some reductions in prices, especially in diesel, in cyanide and explosives, if we can make some .

[Tanya Jakusconek:]

Anything except that you saw some relief in explosive diesel and cyanide, that's it.

[Daniel Dominguez:]

Yes. Sorry, Tanya. We had a problem with the connection. So if we compare the prices of some of the consumables, the 9-month period of this year against the 9-month period of last year, we have that for diesel, there is a reduction of around 10%; cyanide, around 5%; and explosive, between 8% and 10%. As an overall, we would say that we can have a -- for the fourth quarter, we can have a reduction in inflation for consumable prices of around between 5% to 8%. And also, we have labor reducing due to the higher exchange rate that we have again in dollar.

[Tanya Jakusconek:]

Okay. And Daniel, what about freight and transportation, are you seeing any relief there?

[Daniel Dominguez:]

Sorry, Tanya, I didn't get you.

[Tanya Jakusconek:]

Are you seeing any relief in freight, transportation, any transportation ?

[Daniel Dominguez:]

Yes. We do, we do. We also have been -- we see a trend of a decrease in the freights. We cannot -- we don't have right now the amount of the percentage, but we do see this reduction.

[Tanya Jakusconek:]

Okay. That's great. Good color. And just on the labor side, would you say -- do you see a relief, you said a relief there? Would you know how much percent?

[Daniel Dominguez:]

Yes. In labor, we would say that it's around 3% to 4%.

[Tanya Jakusconek:]

Perfect. And then sorry, just lastly, I don't want to have the call, but just on the CapEx, should I still be using $90 million to $100 million for sustaining and $65 million for San Gabriel?

[Daniel Dominguez:]

Well, we have revised our total CapEx for this year. We now can estimate around $190 million, from which $110 million will be devoted to sustained CapEx. From this sustaining CapEx, $40 million will be to construct the project. And in growth, we are expecting close to between $70 million and $80 million, from which $65 million will be devoted to San Gabriel and the remaining for Trapiche and other projects. This is for 2022. And preliminary what we can say that for 2023, the CapEx should be in the order of $340 million to $350 million.

[Operator:]

. And this will conclude our question-and-answer portion of today's conference call. I'd like to turn the conference back over to Mr. Garcia for closing remarks.

[Leandro Garcia:]

Thank you, sir. Before we finish today's conference call, I will thank again for making the time to join us. Please have a wonderful day.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. We'd like to thank you again for your participation, and you may now disconnect.