Compañía de Minas Buenaventura S.A.A.
Q4 2014 Earnings Call Transcript

Published: 27 Feb 2015

[Operator:]

Good morning. My name is Heidi and I will be your conference operator today. At this time I would like to welcome everyone to the Buenaventura Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the presentation, we will conduct a question-and-answer session. The instructions to ask a question will be given at that time. Thank you for your attention. I would now like to turn the call over to Melanie Carpenter of i-advize Corporate Communications. Ma’am, please go ahead.

[Melanie Carpenter:]

Thank you. Good morning everyone. Welcome to Compania de Minas Buenaventura Fourth Quarter and Full Year 2014 Earnings Conference Call on this February 27, 2015. Today's call is for investors and analyst only. Therefore questions from the media will not be taken. Joining us from Lima Peru are Mr. Roque Benavides, Chairman and CEO; Mr. Carlos Gálvez, Chief Financial Officer and other members of the company's senior management team. They will be discussing the results for the press release distributed yesterday. If you did not receive a copy, please contact I-advice in New York at 212-406-3693. Before we begin, I'd like to remind everyone that any forward-looking statements made by Buenaventura's management are subject to various conditions and may differ materially. These conditions are outlined in the company's earnings release in the disclaimer section. Please refer to that for guidance regarding this matter. And now it's my pleasure to turn the call over to Mr. Roque Benavides, Chairman and Chief Executive Officer of Buenaventura for his presentation. Mr. Benavides, please go ahead.

[Roque Benavides:]

Thank you. Thank you for attending this conference call. I want to add that Mr. Igor Gonzales, he is also with us, our new Chief Operating Officer and we are very pleased that he had joined the team. He used to be a Board Member of ours. He continued to be a Board Member and now he is in-charge of all of our operations. And in the fourth quarter 2014, our EBITDA from direct operations was $39 million and we include our associated companies EBITDA at $267 million. Strong growth production from the Yanacocha in the fourth quarter of 2014 remitted to achieve the high end of the annual guidance. Total attributable production in the fourth quarter 2014 was 245,000 ounces of gold and 5.5 million ounces of silver. Full year 2014 attributable production was 846,000 gold ounces and 19.7 million ounces of silver. At the Tambomayo project, an Environmental Impact study was approved. Our Environmental Impact study was approved in January of 2015 and construction is expected to begin in the second quarter of this year. Gold reserves from direct operations increased 13% due to Tambomayo project. At the San Gabriel Chucapaca project, the critical surface property acquisition was finalized and the company is working to obtain permits for advanced explorations with underground development. Cerro Verde’s plant expansion to 360,000 tons per day is in-line with schedules and budget. Additional production from the expanded plant is expected as early as the first day of 2016. In the fourth quarter of 2014, Buenaventura’s gold equity production from direct operations remained flat 104,166 ounces of gold compared to the fourth quarter 2013. Gold production including associated companies increased 33% due to higher production from Yanacocha. Silver equity production from direct operations increased 14%, due to higher production in Uchucchacua and El Brocal. In Orcopampa, our gold production at Orcopampa increased 14% in the fourth quarter 2014 due to higher ore treated. Cost applicable to sales in the fourth quarter decreased 15% explained by lower reagent cost and the improving efficiencies due to better contractor allocation. Our gold production guidance for Orcopampa in 2015 is between 190,000 and 205,000 ounces of gold. In Uchucchacua, our silver production in the fourth quarter increased 18% compared to the same quarter of 2013 mainly due to higher ore volumes treated and recovery rates. Cost applicable to sales in the fourth quarter decreased 5% compared to the fourth quarter of 2013 mainly extend by lower reagent cost, better contractor terms and infrastructure structure improvements inside the mine. Silver production guidance for Uchucchacua in 2015 is in between 14.5 million and 15 million ounces. This will be a new record for Uchucchacua two in a row because in 2014 we had a record production in all the life of Uchucchacua. In our smaller silver mines Mallay, silver production in the fourth quarter was 6% lower than the fourth quarter 2013 and our silver production guidance for this year is between 1.1 million ounces and 250,000 ounces. At Julcani, our silver production in the fourth quarter was in line with the fourth quarter 2013, this mine is very consistent and very flat in this respect. Our silver guidance for Julcani is in the order of 300 million ounces for 2015. In La Zanja, where we have 53.06% equity participation our gold production in the fourth quarter increased 4% when compared to the fourth quarter of 2013. Cost applicable to sales in this quarter in 326%

[Operator:]

Gentlemen?

[Roque Benavides:]

Hello?

[Operator:]

You may continue.

[Roque Benavides:]

Okay. Hello?

[Operator:]

Yes sir you may continue.

[Roque Benavides:]

Yes we were talking about Tantahuatay. I think that was the last that we mentioned. Our gold production for the fourth quarter 2014 increased 15% compared to the figure of 2013. Cost applicable to sales increased 24% due to higher consumption of reagents and blasting supplies due to higher stripping ratio. Our gold production guidance for Tantahuatay is similar to La Zanja in the order of 140,000 ounces of gold. In El Brocal where we control 54% of the equity during the fourth quarter 2014 zinc production increased 100% compared to the 2013 due to higher volume treated from the Tajo Norte polymetallic copper production increased 15% compared to the same quarter of 2013. Silver production increased 57%. And the cost applicable to sales increased 13% compared to same quarter 2013 due to higher commercial deduction in the zinc and zinc cost applicable to sales increased 5%. Zinc production guidance for 2015 is in the order of 80,000 tons of zinc and copper production guidance is in the order of 35,000 tons of copper. In terms of our exploration in non-operating areas, during the fourth quarter was $17.8 million compared to $9.4 million in the fourth quarter of 2013. During the period, Buenaventura's main explorations efforts were focused on the following projects. La Zanja underground $5.9 million in Tambomayo $3.2 million for the 12 months of 2014. The expense was $50 million which include $20 million in the Alejandra underground exploration in La Zanja and $5 million that on behalf of Brocal on exploration in the surroundings of Juancanlika [ph]. Our share in associated company during the fourth quarter 2014 Buenaventura share in associated companies was negative $113.8 million compared to negative $288 million reported in the fourth quarter 2013 composed essentially because of impairment in Yanacocha. And in terms of Yanacocha during the fourth quarter gold production was 322,000 ounces of gold, 75% higher than the same quarter of 2013. For the 12 months of 2014 gold production was 969,900 ounces, 5% lower than 2013 but in the high end of the guidance given at the beginning of the year. 2015 gold production guidance for Yanacocha is between 880,000 ounces and 940,000 ounces. Despite of the fact that Yanacocha reported $80.6 million of net income under U.S. GAAP, the impact of an impairment loss in accordance to IFRS related to Conga resulted in a loss of $380 million and in the fourth quarter of 2014 cost applicable to sales was $426 per ounce, a decrease of 50% when compared to $849 per ounce in the same quarter 2013 due to lower stripping ratio in accordance with the mining plan. Capital expenditures at Yanacocha were $31.6 million in the fourth quarter and $117 million for all of 2014. Yanacocha still has a strong pipeline of growth projects. Quecher Main is a prefeasibility Chaquicocha Sulphides and Yanacocha Verde scoping and Maqui exploration. At Cerro Verde, during the fourth quarter, copper production was 56,000 metric tons 11,000 attributable to Buenaventura and 19% decrease compared to the fourth quarter of 2013, for full year 2014 copper production was 227,000 metric tons of copper for the 4,500 metric tons attributable to Buenaventura. During the fourth quarter 2014 Cerro Verde reported net income of $55.9 million, 72% lower compared to $196 million in the same quarter of 2013. This was mainly due to lower sales, for the full year of 2014 net income was $377 million, capital expenditures at Cerro Verde including the expansion project were $448 million in the fourth quarter 2014 and $1.75 billion in full year 2014. Cerro Verde plant expansion has an excess of 50% progress and completion is expected by the fourth quarter of 2015, the total CapEx for the project is $4.6 billion. At Coimolache attributable contribution to the net income in the fourth quarter 2014 was $5 million for 2014 the contribution was $22.3 million compared to $20.8 million reported in 2013. The Tambomayo project Environmental Impact Study was approved in January 2015 and the company is in the process of acquiring construction permits Tambomayo has 251,000 gold ounces in reserves and 336,000 gold ounces in resources. The estimated annual production is 110,000 to 120,000 ounces of gold and 3 million ounces of silver. At San Gabriel project, Chucapaca project the company currently in the process of obtaining permits for the advance exploration with underground development of the Canhuire ore bodies and diamond drilling of other prospects. Yesterday we had our Board Meeting and the Board of Directors meeting held on the 26th the following resolutions were passed to call for an annual shareholders meeting to be held on March 27, 2015, the following items will be proposed for approval. Approve the annual report as of December 31, 2014, approve the financial statements as of December 31, 2014, appoint Ernst & Young as an external auditors for fiscal year 2015 and approve the company’s financing operations including but not limited to placements and issuance of obligations and our payment of loans as well as delegation of power to the board for the approval of all the agreement deemed necessary or convenient to determine or approve each and every one of the terms. Characteristics and conditions of the company’s financing activities. With this we are open to any questions that you may have. Thank you.

[Operator:]

Thank you, sir. At this time, we will open the floor for questions. [Operator Instructions]. Our first question comes from John Bridges from JP Morgan.

[John Bridges:]

Good morning Roque, Carlos. Just wondered with these results. Are there any unusual items here things that impact to this Q4 results over and above the payment that you reported at Conga? Things that impact to these results, which are not going to deploy through into 2015?

[Carlos Gálvez:]

Nothing special John, we believe that what we have already included whatever we had to position. There are no additional issues to improve. The only thing that we will continue pushing the exploration underground in Alejandra in order to be able to putting in operation perhaps in earlier plan. But this is the only thing that is impacting that we spend 100% our exploration efforts.

[Roque Benavides:]

Well, if I may add. During this quarter, we have bought the surface line for the San Gabriel Chucapaca project and that is one shot. It may be a smaller amount, but that will not be spent again in the future. The exploration that since Carlos mentioned that Alejandra and La Zanja will continue and it is nothing that we will stop now, so yes that’s the position.

[John Bridges:]

Where the land purchase is represents than the accounts for San Gabriel?

[Carlos Gálvez:]

Well, this is an amount of, total amount in the overall $10 million. But this is capitalize, because this is a land that we purchased you know.

[John Bridges:]

Okay, good. And then Cerro Verde production there down 19%. What should we take away from that to looking forward into 2015?

[Roque Benavides:]

May I ask Raúl Benavides to answer that part please?

[Raúl Benavides Ganoza:]

Yeah, John. There have been a number of issues in Cerro Verde. One is that of course they are using the trucks for construction purposes in Cerro Verde. And they have been processing stockpile, this stockpiles have more off sides in the ore and also you had uranium season right now and we have some but in order to keep in the last 15 days and the one it also generates problem. So that’s about it, this is part of the problem that comes with the expansion, that there in the future I think that there will be no problem. The good news is that certain of our structure are being assembled and we’ll incorporate into the operation to March [ph]. So in addition to that Cerro Verde is reviewing the mining plant in order to catch up with traditional standards of production.

[John Bridges:]

Okay. And the copper revenues from If I recall relatively low, was there something unusual that happened there?

[Raúl Benavides Ganoza:]

Well, that there was an important production on sale of copper, because we focus on that. We sold in total a record production of 162,000 tons of copper concentrate. The bad news is that these copper concentrate includes an important arsenic content. And this is why that the finalization is that high. You know that the treatment charges were very important and for the three months, the treatment charges in Brocal were almost $31 million as compared with this quarter of 2013, there were only $16 million. This is to the arsenic with the copper concentrates.

[John Bridges:]

You overwhelm the market for higher arsenic concentrate this quarter but that's not going to happen in 2015 is that?

[Raúl Benavides Ganoza:]

Well this is we are going to review some of the production sales of copper due to the fact that we are going to normalize our operations sharing 11,000 tons capacity to their polymetallic ore and only 7,000 tons to the copper concentrates. Beside of the fact that coordinating with our purchasers, we stopped delivery copper concentrate within the first two months of the year.

[John Bridges:]

Okay that's great. Finally, the permits to San Gabriel how long do you think those will take.

[Raúl Benavides Ganoza:]

That's a good question. What we are planning to do is to start to ramp down the underground in April. We have already working on the migration process to be ready for going underground. That will begin the process but we will have probably sometime during the year, the permit for construction and then we can go and doing the work for the main installations for the plant and now the work. Remember this is an underground mine and it doesn't require as much infrastructure as in our movement as other big mine.

[Roque Benavides:]

I think we - I can add that there is a worry at the government level that permitting has to be faster, has to be more expedite. And we - I would say that we can get permitting faster than what we used to-date in the past.

[John Bridges:]

So you don't have a permitting problem at all Roque. Congratulations on the progress with your initiatives. Best of luck.

[Roque Benavides:]

Thank you John.

[Operator:]

Thank you. Next question comes from Santiago Perez Teuffer from Credit Suisse.

[Santiago Perez Teuffer:]

Hi Roque, Raul and Carlos. I have two questions if I may sorry, the second one is really Yanacocha. Could you give more colors on the improvements there? I mean you mentioned that it's related to Conga what is reserves - cash. And then we kept expect something similar for 2013 or is this a lower?

[Carlos Gálvez:]

Well this in terms in general that Buenaventura is the only one that incorporate this in the financial statements due to the fact that we use IFRS while that is not a requirement. This is the second in permanent that we calculate. Remember that last year we have terminal one dividend plus 50% may coming from Conga and the other 50% about 50% coming from Yanacocha's operations. This year we Yanacocha reviewed this calculation. There was no necessary to have an additional improvement for Yanacocha's operation while on the IFRS it was necessary to have this $540 million improvement, additional improvement 100% for Conga. We believe that with this we have already included almost 100% of our attributable part of these requirements. We do not proceed any in the future at this from Buenaventura side.

[Santiago Perez Teuffer:]

Perfect very clear. And then in server, it was very useful to share your answer. But can you give us expectations for 2015 in terms of production and also for all in cash cost. And if this are ranging or keep that you mentioned these were in this quarter right on the last 15 days, is this strong impact or how should we think about it?

[Carlos Gálvez:]

Well first of all where the company is, we will have at least this plan up to date that the first two mills from the new floatation plant will be running into timber. That means that we will have some and small production coming in September but this is part of the commissioning so what the Freeport is projecting is that by mid, in the second semester of 2016 we will be improving production but before that.

[Santiago Perez Teuffer:]

The cost in production in 2015?

[Carlos Gálvez:]

The cost have been affected by a number of issues that are ongoing to repeat themselves and we will have a total cost of $1.50. There is a number of good things happening in cost in general improved one is in dollar, dollar appreciation that generally, that labor that is a big part of our cost is going to be less in dollar terms and also the fuel prices have reuse, so at least in server I think you can expect the cost to be in the order of 1.15 total cost that's what we had before because we were going to use also a little bit of delays with the expansion as you can imagine from using a 120,000 tons per day something from the new move to 360, the grades are not going to be kept in the overall 0.5, 0.6 it's going to be reduced but yes we should be producing the 600,000 ounces - tons of copper by the end of 2016 for sure.

[Santiago Perez Teuffer:]

Perfect, thanks. And just understand what you mentioned of our cash flow so, just from U.S. dollar appreciation and the changes in fuel prices you expect cash cost to go down very significantly towards 1.5 this year and then what you are producing on a normalized basis with the - in the mill how do you expect it to be shared because I mean as we mentioned great are going to tend to go lower, so you are going to produce with three times the amount of million capacity just doubled our production so how should we think about in profitability?

[Carlos Gálvez:]

Now, you have consider the evaluation of our currency or our precision of dollar but also the lower diesel price due to the reduction of oil prices in the market that is going to impact positively. On the other hand, the fact that we had not only this ores coming from their stockpiles that had been oxidized, we have a lower recovery impacted and this is going to be some around at the end of this month, February. We expect that it has been announced from March onwards we are going to get back to the traditional operation area with a regular ores with the mining plans several is working on the submission on information that we could at some capacity from October was doing the commissioning we expect to have the cash cost last quarter, we got 1.7 per pound to get that to $1.50. Due to the lower grades in the future we are - we expect to have $1. 50, $1.70 cash cost per pound [indiscernible].

[Santiago Perez Teuffer:]

Perfect, very clear and very useful. Thanks a lot Carlos, thanks a lot.

[Carlos Gálvez:]

You're welcome.

[Operator:]

Thank you. Our next question comes from the Diego [ph] from Merrill Lynch.

[Unidentified Analyst:]

Good morning Raúl and Roque. Thank you very much. This is actually Carel [ph] speaking. So I have two questions first on your direct operations, if I may. Looking at cost we look at [indiscernible] have been kind of offsetting the better cost performance from Orcopampa. How should we expect cost from [indiscernible] if I believe we're driven by higher stripping ratios? How should they evolve along 2015 and in a consolidated way what you expect in terms of gold costs from your direct operations that’s my first question please.

[Roque Benavides:]

First of all [indiscernible] we should speak similar cost in production for this year, La Zanja will be about the same as well so I don’t think mere changes in those costs. Now over the other operations I don’t know if the board wants to comment on...

[Carlos Gálvez:]

In the last quarter of 2014 we’ve embark cost review for our operations and however and we were able to achieve some results and those costs are already including these numbers that have been made public, so however we continue to do that we would continue to try to benefit from the lower activity of all the contractors in mining and therefore try to renegotiate the better rates as we grow.

[Raúl Benavides Ganoza:]

So you can observe that in Uchucchacua South Africa would save cost and cost applicable to sales had reused despite of that we have main fine tuning our operations to the new volumes. We are going to have as well the positive impact of our currency evaluation and the fuel oil prices. In the case of Orcopampa you know that we have completed the ventilation project we had that is [indiscernible] to reduce the crudes, the number of people in the crudes to maintain the operation and the new equipment is smaller than the one that we had in the past, is remaining to help us to focus on our operations with lower dilution so this has a positive impact. We believe that Orcopampa will continue to produce the same cost we reported and Uchucchacua has a room to improve this cost.

[Unidentified Analyst:]

That’s great. Thank you. If I may second question here on the San Gabriel project the old Chucapaca if you get your license this along this year when could we expect the project to effectively start up let's say if you get the licenses by mid-year and what size of project are we talking about in terms of volumes and maybe CapEx if possible. Thank you.

[Raúl Benavides Ganoza:]

Okay we’re going to finish the Environmental Impact Study probably in April we will submit to the ministry and that’s why I told you we would like to we’re expecting to have some permit before the end of this year to begin construction so we can do our movements around there but we have generated some the permit before that so that it will permit us, within the [indiscernible] with the ramping on April in term of the installations can be constructed. This means that we can construct the mine probably we can do it in one year time. The best we could do is 2017 to have the mining production. I think that you can expect by mid-2017 and we don’t have the enough information because permits would be delayed and things that we don’t control but if everything goes okay by mid-2017 we could have that mining production a three pulse impulse per day in floatation so that we can get the maximum out of these ores. The grades that we are expecting are over 8 grams per ton and that means that we could be producing in the order of 200,000 ounces per year and the CapEx of --

[Roque Benavides:]

In the order of $500 million.

[Raúl Benavides Ganoza:]

Hope that remains on that.

[Roque Benavides:]

And hope let’s see, if you remember the original project with the open pit was something like $2 billion. We have review the CapEx substantially and the production will be solid 200,000 ounces plus.

[Raúl Benavides Ganoza:]

And the one thing that is very good about San Gabriel is that we have a lot of information for the expiries and everything from the first feasibility study made by [indiscernible]. So these makes this year to go forward then in project and Roque mentioned we have the blessing of having our own property we need right now and that said what the main restriction for that project.

[Unidentified Analyst:]

That is great gentlemen. Thank you very much.

[Operator:]

Thank you. Next question comes from Carlos De Alba from Morgan Stanley.

[Carlos De Alba:]

Good morning, gentlemen. And the first question is, if you can give us any comments regarding this 12 million other income that benefited the results of this quarter. And clearly for these a lot of legal items you’ve - that’s about fine, but it’s a significant element that drove that some number, I would appreciated what a big change quarter-on-quarter? And the second question would be when did you believe you can start-up Tambomayo given the progress that has already been made and what sort of ramp up do you expect in that project? And then finally, if you can comment on the CapEx guidance for this year that will be great?

[Carlos Gálvez:]

Well, in Tambomayo, we have already the Environmental Impact Study approved. And we are asking for permission to start constructing. What always planning is that we can make all the construction of steel and that we can doing in Arequipa? So that we can have pre-assembled in Arequipa and this will review this time of construction probably we could be producing, I don’t know probably next year by next year.

[Roque Benavides:]

In addition to that in Tambomayo we have 85% of the detail engineering completed and we have purchase all the principal equipment, all the main equipment for the processing facilities. So that supply to us and a size all we have to develop once we get the construction permission to build the plant.

[Carlos Gálvez:]

Yeah, in the case of $12 million you mentioned Carlos this is a non-recurring income from our annually item. So if I could review this in detail, but there is no only one thing that I can explain this other income that is net of difference.

[Carlos De Alba:]

In the CapEx guidance for this year.

[Carlos Gálvez:]

The CapEx guidance for this year is $270 million to $300 million, which includes when we have already mentioned. Tambomayo explaining 52% of that, San Gabriel in the order of 18% of this figure and well Brocal - sustained CapEx. One other thing we mentioned in Tambomayo is that the grade is going to be about 10 grams of gold and 10 ounces of silver per ton and we will have a throughput of 1,500 tons per day.

[Carlos De Alba:]

Okay. And how much is maintenance out of the CapEx?

[Carlos Gálvez:]

From this CapEx, sustaining CapEx is 24%. The difference is growth.

[Carlos De Alba:]

Okay, great. Thank you. And just Tambomayo the mailing capacity how much 50,000 tons per day?

[Carlos Gálvez:]

1500 tons per day capacity, but initially we are going to work at 1,000 tons per day.

[Carlos De Alba:]

Okay. Thank you.

[Operator:]

Thank you. Our next question comes from Patrick Tyler [ph] from HSBC.

[Unidentified Analyst:]

Yes. Good morning gentlemen. Just a question on the reserves, just a number of the projects obviously, the reserves including Tambomayo quite a short mine life and I'm wondering if you could comment on what resources you have behind those reserve to maybe add to reserves and when we see some of that come through.

[Roque Benavides:]

I think we have many times explained that underground mining doesn't have us much reserves as an open pit mine. And when we are talking of our Uchucchacua and Orcopampa or even Tambomayo that is there are underground operations. We essentially feel confident and comfortable with four five years in advance and obviously committed to continued exploration. This have been the top record of the company for over 60 years and that is what we are going to continue doing. It is very expensive to maintain the tunnels and all the infrastructure to account for reserves in underground mining and that's the reason for probably not having that much of our reserves in our account.

[Carlos Gálvez:]

In the case of Tambomayo these two begin - the construction of this project we have already count on three years life of mine in terms of reserves plus two years in terms of resources to be developed plus potential for sure in order to continued story and developing the mine.

[Roque Benavides:]

And expanding. Because we continued --

[Carlos Gálvez:]

And if I may add also operationally speaking one of the targets of the project that this year is of course to find more resources and also to some resource conversion. So it's not that we've taken our ice out of that particular subject. We are aware of that and we have a campaign for this already planned for Tambomayo.

[Unidentified Analyst:]

Thank you. Okay. And just on the similar subject San Gregorio obviously doesn’t come into the reserves yet. Are you expecting to make a conversion at the end of this year?

[Roque Benavides:]

Well we are making substantial progress with the community. And we are very pleased that well we are getting to terms there is more confidence between the parties. But we cannot assure that this was happened by the end of the year. We continue working with as I say we are positive in this respect.

[Unidentified Analyst:]

And actually how about San Gabriel as well in terms of the reserve conversion potential there.

[Roque Benavides:]

Well that we are also very confident though. We need to go underground that will not only commit that to open and to take samples to do all the testing work that it may remain needed. But also it will enable us to deal from underground which will be far more efficient than what we are doing right now. And obviously it will be from weather standpoint it will be easier to do it.

[Carlos Gálvez:]

In addition to that Patrick you have to bear in mind that to report these resources as of reserve. We need to count on the PCB in the study that we are working on. Once we complete that we are going to confirm part of the resources into reserves.

[Roque Benavides:]

And as Raul mentioned we are gaining our pending the permits right now for the Focus magazine and hopefully we're going to start doing the underground work by May of this year. That’s within the schedule. So it's only the date that we can convert where we have into reserves but that we have to do some development on that ramp first before we start converting reserves.

[Unidentified Analyst:]

But that will be by the end of this year you have the study done I guess and you start the construction in the best case.

[Roque Benavides:]

That's correct. But in the both projects the philosophy is same in the case of Tambomayo we will have five years of reserves and resources and the area is while that gear is going we will make more reserves and resources in order to cover the reserves. We ticked off Chucapaca San Gabriel we are seeing quite more conservative because that 3000 tons per day we have almost 10 years lifetime. That's the reason that we were where we have the possibility of expanding that plan in both cases to double the capacity.

[Unidentified Analyst:]

Alright. Okay, so that would be to double potentially in future the capacity is to 6000 tons a day is that as prior to that. Okay, I just remind us what's the resources of San Gabriel to total resource and gold ounces. Is that change in the.

[Roque Benavides:]

We are talking at the level at the grade of this scope study but it was 6.5 grams per ton. At the total result 2.5 million ounces but with information that Raul is sharing that it could be in the order of eight you have to add, flat volumes that we have to confirm with the underground development that we expect to complete, we are going to give.

[Unidentified Analyst:]

So I didn't get that, did you say 8 grams or 8 million ounces.

[Roque Benavides:]

8 grams instead of 6.5 that this number is used for the scope...

[Unidentified Analyst:]

Okay got it. Thank you.

[Carlos Gálvez:]

That are of 2.5 million ounces as Igor is saying.

[Roque Benavides:]

What happens is that our experience is that normalizing revenue, diamond will you lose you find and the ore that you find is 10% to 20% higher grade. Now that's something that we cannot prove but it's the experience we have.

[Unidentified Analyst:]

Yeah. And just too quickly on the asset sales. I know last year I thought there was some discussion about selling some of the smaller assets. Have you made any progress on that or have you changed the plans?

[Carlos Gálvez:]

Yes we are almost done with [indiscernible]. We have proposals for Shila-Paula and for Poracota. So and we have two or three companies almost ready to make a bid for [indiscernible]. So I would say that you can be confident that by mid-year we could be longer with this.

[Unidentified Analyst:]

Okay and the Julcani as well or not.

[Carlos Gálvez:]

No sir but I kind of - for us. We will keep on producing Julcani, and Julcani is making money and it's finding more ore. And it's no problem with Julcani.

[Unidentified Analyst:]

Good, okay.

[Roque Benavides:]

Julcani is producing in excess of 3 million ounces of silver and generating cash and generating profit. It is probably last year was the second record year for Julcani. So there is no reason for selling a good asset like that and have exploration potential.

[Carlos Gálvez:]

And important to mentioned that the average cash cost of Julcani is $12.50 and we have now '14 last during the last quarter higher cost applicable to sales cost due to the fact that capital important inventory [indiscernible] they had to deliver abroad to be consider as a whole. So this is a reason to have these higher or important addition in the average.

[Unidentified Analyst:]

Okay great. Well thanks very much, gentlemen.

[Operator:]

Thank you. Our next question comes from James Bender from Scotia Bank.

[James Bender:]

Hi good morning. Roque, Carlos and Igor and team. I just have a few questions, the first one would be on the income statements. Carlos I believe you mentioned that the $12 million gain in other that's not it's non-recurring is that correct?

[Carlos Gálvez:]

Yeah the other this $12 million are reported in the last year is in our recurring - by the view which we could have the business around these retail in order to share with you.

[James Bender:]

Okay thank you. And then on the asset held for sale and the loss of discontinued operations. Is that related to the four assets that we're mentioned in the previous question?

[Carlos Gálvez:]

Yes the question is that we have separated these expenses in order to have a tier according to our rules we have to ensure separate way those operations that well those operating units that have revised. And this is just to control that we are reducing dramatically the expense there. Normally we are expanding that $400,000 in total just to maintain on the current - these units onto reserve.

[James Bender:]

Yeah absolutely I understand it but that would be Antapite, Shila-Paula Poracota and yeah okay. Okay, [indiscernible] yeah. Those are my income statement questions. Now on Tambomayo, previously you had I think it was in the Q3 conference call you had mentioned that the total CapEx was about $200 million. And the cash cost were about 350 an ounce on byproduct basis. Is that still the case or has that changed?

[Carlos Gálvez:]

In other CapEx for Tambomayo will be $250 million including the development of mine that we have. The second part of your question was sorry?

[James Bender:]

The life of mine cash cost on a bi-product or coal product where we --.

[Carlos Gálvez:]

In terms of gold we consider that we'll be about $550 to $600 per ounce of gold given the byproduct rate of silver protection that will be the order of 3 million ounce per day.

[James Bender:]

And just to confirm the 550 to 600 is that just the gold co-product or is that byproduct including the byproduct...

[Carlos Gálvez:]

Including the byproduct credit of the silver 3 million ounces per year.

[James Bender:]

Okay perfect. And just to confirm what was previously mentioned the throughput capacity is expected at 1500 tons per day will start at about 1000. And the gold grade is about 10 grams per ton.

[Roque Benavides:]

Yes and 10 ounces of silver.

[James Bender:]

And 10 ounces of and what's the expected recovery.

[Carlos Gálvez:]

In Tambomayo about 90% in both there we also are going to make some addition filtration. It's the lesser ore, the upper level transition but then we will need filtration.

[James Bender:]

Okay. Perfect, that's it for Tambomayo. And then my last question is on guidance. Usually provide overall guidance for production and cost by metal. But I don't think your presentation is up yet so you will be able to provide some this morning.

[Carlos Gálvez:]

From guidance for cost. It is big gear the guidance for the year it is overall 800,000 ounces of gold. In silver will be in the order of 24 million to 25 million ounces and then zinc production attributable to us will be in the order of 60,000 to 70,000 tons of zinc and in terms of - for copper would be [indiscernible]. And for zinc will be about 37,000 to 40,000 tons during the year.

[James Bender:]

Okay. And on the cost side.

[Carlos Gálvez:]

Well we have to calculate the average, the compound average of that.

[James Bender:]

Okay I can speak with Daniel after. That's it from me. Thank you very much.

[Roque Benavides:]

Thank you.

[Operator:]

Thank you. Our next question comes from Ana Anser [ph] from Credit Suisse.

[Unidentified Analyst:]

Good morning Roque and Carlos well most of my questions have been answered. But I have one last question regarding cash cost expectations for El Rico.

[Carlos Gálvez:]

Unfortunately we don't have a final answer to this because we are in the middle of the run. We are fine tuning the issues in the question particularly. And we haven't achieve the final solution to that. Perhaps Igor add some.

[Igor Gonzales:]

Yeah as Carlos mentioned we're doing the ramp up process and we're trying to be a metallic as possible so we find some issues first at the primary question. The question where we saw now the secondary question system is being divide we have some issues with liners there we're trying sale those. Now we're moving into the tertiary question and washing section and then down onto the all the classification circuit. So it's going to take a few weeks before or maybe two three months to be --this and only Daniel will start worrying about throughputs which is what we're expecting to have a combined throughput of 18,000 tons per day.

[Unidentified Analyst:]

Thank you. And also we saw a share of margin contraction. Do you expect this to continue or do you expect 2015 to recover.

[Igor Gonzales:]

Can you repeat that please?

[Unidentified Analyst:]

Oh that we saw share of margin contraction at El Rico. Do you expect this to this trend to continue in 2015 or should we expect a recovery.

[Igor Gonzales:]

Contraction that's what you said?

[Unidentified Analyst:]

Yeah margin contraction.

[Igor Gonzales:]

We expect Brocal to have far more normal year this year than last year. Last year was the ramp up and it was difficult. There were machinery that essentially were not up to our expectations. There were machineries both in Sweden and in Canada and first class suppliers. But that's we're not to - have to our expectations of performance. This year is going to be far more normal and obviously the fact that we have hired Gonzalo [ph] this new management younger people we expect to have a better results in Brocal this year.

[Unidentified Analyst:]

Okay thank you very much.

[Igor Gonzales:]

Alright.

[Operator:]

Thank you. Our next question comes from Gauthier [ph] from HSBC.

[Unidentified Analyst:]

Hi everyone, couple of quick questions from me. It looks like you repaid about $118 million in debt obligations in Q4. Yet your total debt has not declined its flat from Q3. Can you please help me reconcile that?

[Carlos Gálvez:]

Yeah we're quite a bit that Brocal, some loans and convert it into - transaction which is leaseback.

[Unidentified Analyst:]

I see okay. Okay I think that's it from me all the questions have been answered.

[Carlos Gálvez:]

Thank you.

[Operator:]

Thank you. Our next question comes from Thiago [ph] from Merrill Lynch.

[Unidentified Analyst:]

Hi guys this is Thiago again, a follow up questions here, first on Yanacocha we are very positive the surprise on the cash cost guidance for this year between 550 and 590. Looking at to 2015 what do you expect in terms of evolution after that should we see is that was the new normal for the coming at say three four years or could they rise after 2015 just for so how do you think.

[Roque Benavides:]

We have been discussing with our partners of Newmont in fact we had a meeting last week on Tuesday in Denver. We are evaluating different projects. Essentially we still are very optimistic that Yanacocha will continue to be mine. We think that a mine that has produced in excess of 35 million ounces of gold in this last 20, 25 years. It is a world class district. We are working on the possibility of developing the sulphide that at Yanacocha we will start the underground evaluation by August of July this year and I can assure you that Yanacocha has still a long life to go and we are confident that we will find additional projects. In 2015 we will be producing close to 900,000 ounces and if we are successful in developing all these projects, we will essentially continue producing at these levels in ounces equivalent.

[Unidentified Analyst:]

That's great. And on cost just you think that we can see stable in 2016, 17 or could there be a rise after that?

[Roque Benavides:]

We don't have comment on that, we still don't all the information to have an answer to that.

[Unidentified Analyst:]

No problem. Thank you very much. And just last one if I may on asset sales that you mentioned, how much could you, we could raise in terms of cash on that or I know you mentioned what you're going to also not spend on explorations on that assets but what are we talking about in terms of cash benefits?

[Roque Benavides:]

These are smaller assets. What matters here is to focus at the management team on Buenaventura focus on the operation that do generate profits and EBITDA. So the amounts are essentially for all mine in the case Shila-Paola is a very old mine, in the case of Poracota was an exploration, in the case of [indiscernible] is a very old mine and Tapti [ph] is run out of reserves. So the thing is it is smaller amount I would say that altogether will be at the most in the order of $10 million but nothing more than that.

[Carlos Gálvez:]

The most important part in our PA annual we sell that is to eliminate the provision we have for reclamation of these deposit that altogether means in the earlier beginning $25 million to $30 million plus the cash that Roque mentioned.

[Unidentified Analyst:]

That's great. Thank you all very much for all the questions.

[Operator:]

Thank you. At this time I am showing no further questions and I now would like to turn the call back over to Mr. Benavides for closing remarks.

[Roque Benavides:]

Well thank you again for this long conference call, on your side and obviously we appreciate that interest. I just want to tell you those of you that are in North America that our team will be visiting some investors and we'll be in the West Coast, and we will be together with hosted by JP Morgan and we'll be on the West Coast and myself and then Carlos will join, we'll be in the East Coast, we will travelling tomorrow night and we'll be all week in North America. And then on Friday, we are hosting breakfast meeting at the New York Palace, I'll work in breakfast in order to expand on all the information that we have passed you this morning. So whoever has not received an invitation, please and you feel like coming, please let us know and you are most welcome. With this, we thank you for your attention and have a great day. Bye-bye.

[Operator:]

Thank you ladies and gentlemen this concludes today's conference. You may now disconnect.