Earnings Transcript for BVN - Q4 Fiscal Year 2022

Operator: Good day, ladies and gentlemen. Welcome to the Compañía de Minas Buenaventura Fourth Quarter and Full Year 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Please note this call is being recorded. At this time, I'd like to introduce your host for today's call, Mr. Gabriel Salas. You may begin.

Gabriel Salas: Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2022 results. Today's discussion will be led by Mr. Leandro 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. Aldo Massa, Vice President of Business Development and Commercial; Mr. Alejandro Hermoza, Vice President of Sustainability; Mr. Renzo Macher, Vice President of Projects; Mr. Juan Carlos Salazar, Geology and Explorations 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 earnings results press release issued on February 28, 2023. Let me now turn the call to Mr. Leandro Garcia.

Leandro Garcia: Thank you, Gabriel, and good morning to all and thank you for your attending to this conference call. We are pleased to present the results for our fourth quarter and full year 2022 from Compañía de Minas Buenaventura. 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 shown on slide number two. Moving on to slide three. The highlights were as follows

Operator: Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] And our first question today comes from Carlos De Alba from Morgan Stanley. Please go ahead with your question.

Carlos De Alba: Good morning everyone. Thank you for the presentation. My question Leandro is maybe on CapEx, right? The guidance of $350 million to $370 million came above market expectations. So, if you could allude or explain a little bit what drove this, I think it's also a little bit higher than what you had -- the company had mentioned before, it was planning on spending in 2023? So if you can provide maybe a little bit of color as to what is driving that increase or apparent increase. And also, what are the expectations in terms of bridging the gap between your fairly reduced cash flow operations at least as of late and this CapEx. I don't know if you can comment maybe Cerro Verde, dividends is what is going to bridge that gap or if you will have to issue debt or maybe are you planning on selling some assets? If you can maybe address this question on free cash flow that will be interesting to understand what the company is planning. And then we noticed, obviously, the increase in exploration spending. Can you talk about what the budget is for the two lines that flow into your income statement, the exploration in operating units and the exploration in non-operating areas for 2023? Thank you.

Leandro Garcia: Thank you Carlos. The increased CapEx for the following year mainly is explained because of the stoppage we have in San Gabriel. And we have to continue doing the work into 2023. For the difference, the cash and the CapEx we are going to need in 2023, we are -- we do have a plan. We state also the dividends of Cerro Verde. And some -- maybe some financing is needed for this year to cover the increased CapEx. Maybe Daniel and Juan Carlos can give you more color of those questions.

Daniel Dominguez: Thank you, Leandro. Thank you, Carlos for your question. As Leandro mentioned this increase in the guidance for the CapEx of 2023 is due to the carry-forward that we have from the delays at San Gabriel in 2022. The figure we expect for this year, 2023 is around $350 million to $360 million. And the breakdown of this is at San Gabriel, we will need around $190 million for developing new impact close to $50 million And at El Brocal, the tailing dam management to be able to expand the plant capacity and the capacity of the tailing dam, we will devote around $50 million there. In terms of the exploration budget for 2023, we are expecting between $80 million and $90 million. The distribution of these are close to $50 million in exploration for our operations and $30 million to $35 million to our greenfield projects. Going back to how we're going to fund this CapEx requirement for this year. We have $250 million in cash that we are going to use. We expect, as Leandro mentioned, some dividends from Cerro Verde. It could be in the order of $100 million, $120 million. And of course, when we need the cash, we could be raising something close to $50 million or $100 million. As we have already mentioned, we have between $50 million and $100 million already committed with local banks.

Carlos De Alba: Thanks for those detail. So, no -- you don't think that the company will have to meet -- will have to sell assets?

Daniel Dominguez: Not at this point in time, Carlos.

Carlos De Alba: That’s great.

Operator: [Operator Instructions] And at this time, we have a follow-up question from Carlos De Alba from Morgan Stanley. Please go ahead with your follow-up.

Carlos De Alba: Yes. Thank you, guys. Just coming back to La Zanja here, Leandro what is the level -- so you mentioned that the leasing will continue as long as it is profitable to do so. What is that level in terms of gold prices and for how long? How much more material do you think you can potentially strike there?

Leandro Garcia: Thank you, Carlos. The planned output this year is 5,000 ounces this 2023. We will continue leaching La Zanja during all the time, we are converting this unit and developing the copper gold sulfide project. Juan Carlos, I don't know if you want to comment something about La Zanja regionally?

Juan Carlos Ortiz: Yes. Sure, Leandro. Currently we have a very conservative budget of about 5,000 ounces of gold to be struck for the existing leaching pad in 2023. We expect to be above that figure, but it's a very conservative initial figure, because it's something that you're learning the process how much you can get out. In parallel, we are working on a project to do some geophysics on the pad to know what are the kind of dry areas where the solution is not running through that could be potentially wet, with additional drilling in order to, pump with low pressure the cyanide solution in order to, extract gold from the right areas that the past were not completely leached, because of the way the pad is being built. There is some local experience doing that with success. So, it's a kind of innovative process that we will build on this year, in order to extend the profitable or economic leaching of the pad for -- we don't know how much, but probably one or two more years to go.

Carlos De Alba: Thank you. And so the cost attributable to sales at La Zanja is around -- was in the fourth quarter at least 1,649, which was better than the full year of 1,820. So around those levels or is the breakeven potentially below that, would you stop leaching, or would you just carry on and extract all the material for the next one to two years that you mentioned?

Juan Carlos Ortiz: Yes. Well, that is a good question because the cost actually record all the expenses that we make in the La Zanja unit. It includes also part of the exploration, part of the progressive closure, that we do and some other areas that we are not going to be mining in the future, some studies that we do regarding the sulfide projects. So, we have a separate kind of split cost accounting for, are related to the extraction of gold from the pad, in addition to, what we do for exploring and developing the copper gold sulfide projects that we have in the same footprint. So kind of, it mix together right now, but in our accounting we will follow what is profitable from the leaching operation itself, regardless of what additional costs we need to do to develop the copper sulfide project in La Zanja.

Carlos De Alba: Okay. All right. Thank you.

Operator: [Operator Instructions] And ladies and gentlemen, at this time in showing no further questions this will conclude today's question-and-answer portion. I'd like to turn the floor back over to Mr. Garcia, for closing remarks.

Leandro Garcia: Thank you. Before we finish today, I would like to thank you for your time to join us, and have a wonderful day. Thank you very much, again.

Operator: Ladies and gentlemen, that concludes Buenaventura's Fourth Quarter and Full Year 2022 Earnings Results Conference Call. We would like to thank you again, for your participation. You may now disconnect your lines.