Compañía de Minas Buenaventura - Earnings Call - Q1 2025
May 1, 2025
Transcript
Operator (participant)
Good morning, ladies and gentlemen. Welcome to the Companion Gamingas Buenaventura First Quarter twenty twenty five Earnings Results Conference Call. At this time, all participants are in listen only mode. And please note that this call is being recorded. I would now like to introduce your host for today's call, Mr. Sebastien Valencia, Head of Investor Relations. Mr. Valencia, you may begin.
Sebastián Valencia Carrasco (Senior Financial Analyst - IR)
Good morning, and thank you for joining us today to discuss our first quarter twenty twenty five 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 Hermosa, Vice President of Sustainability Mr. Renzo Maher, Vice President of Projects Mr. Juan Carlos Salazar, Vice President of Geology and Explorations Mr. Jorge Benavides, Chairman and Mr. Raul Benavides, Director. Before I hand the call over, let me first touch on a few items. On Buenos Aires website, you will find our press release that was posted yesterday after market close. Please note that today's remarks include forward looking statements and they are based on management's current views and assumptions.
While management believes that these assumptions, expectations and projections are reasonable in view of the current 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 press release issued on 04/30/2025. Let me now turn the call to Mr. Leandro Garcia.
Leandro García (CEO & General Manager)
Thank you, Sebastian. Good morning, and thank you for joining us today to discuss the quarterly results of the company. On Slide two is our cautionary statement, important information that I encourage you to read. Today, we will be discussing our performance for the first quarter of twenty twenty five, highlighting key achievements and strategies moving forward. After the presentation, we will be available for Q and A session, where our team will be happy to answer your questions.
Next slide, please. I would like to highlight a few key areas that contribute to our strong first quarter twenty twenty five results. Our first quarter twenty twenty five EBITDA from direct operations was $126,000,000 compared to $95,000,000 reported in the first quarter of twenty twenty four. This performance is also reflected in a higher EBITDA margin of 41% compared to 38% in the previous year. First quarter twenty twenty five net income was $140,000,000 compared to $61,000,000 in net income for the first quarter of last year.
The year ended with a cash position of $648,000,000 and a total debt of $862,000,000 resulting in a net leverage ratio of 0.46 times. This debt level increased against the previous quarter as it includes Buenaventura two thousand and thirty two notes. It also considers only the outstanding amount of our 2026 notes. The total CapEx for the quarter amounted to $36,000,000 with $22,000,000 allocated to the San Gabriel project. On 04/23/2025, Buenaventura received $49,000,000 in dividends related to its stake in Cerro Verde.
In the first quarter of twenty twenty five, silver production reached 3,700,000 ounces, 20% higher compared to the 3,100,000 ounces producing during the same period of last year. Of this total, 2,200,000 ounces came from Jumpak due to fully scale operation. Copper production decreased 21% year over year, primarily due to the remaining El Brogado pen pit inventories, which were processed in the first quarter of twenty twenty four. Gold production was 27,980 ounces compared to 36,593 ounces produced in the first quarter of twenty twenty four, primarily due to the decreased production at Tambomayo and Orcopampa and partially offset by increased production at La Zanca. Finally, consolidated reserves have been updated as of the end of twenty twenty four.
Gold reserves have increased by 482,000 ounces. Silver reserves have increased by 61,000,000 ounces and copper reserves have increased by 253,000 tons. Moving on to our cost structure in Slide four. The all in sustaining cost for the first quarter of twenty twenty five decreased by 83% compared to the same period in the previous year. It is important to highlight that the year over year decrease in all the in sustaining cost was primarily driven by lower commercial deductions and higher by product rates.
Moving on to cost applicable to sales trend. As you can see, copper cash, cost applicable to sales, increased year over year, mainly due to lower by product credit contributions at El Brocal. Silver cash has increased year over year, but was consistent with the expectations for this quarter. Gold cash has increased year over year, primarily driven by lower volumes in grades at Tambomayo and Orcopampa. On the next slide, we will present free cash flow generation.
The first quarter twenty twenty five cash position increased during the quarter, mainly driven by net cash inflows from financial activities. An additional $100,000,000 was raised through the bond issues issued in February 25 and the remaining amount of the 2026 bond. In addition to these drivers, the EBITDA to free cash flow reconciliation reflects Buenaventura's significant CapEx investment related to San Gabriel. Moving on to Slide six. This slide shows San Gabriel's cumulative progress, reaching 79% overall completion by the first quarter twenty twenty five, primarily driven by finishing the engineering and procurement as well as the construction as it 75% of advance.
As March 2025, San Gabriel's total CapEx has reached $5.00 $5,000,000 The guidance for the full year 2025 has been revised to the range of $220,000,000 to $250,000,000 The construction timeline remains on schedule. We anticipate commencing the ramp up pace in the third quarter of twenty twenty five, followed by the production of the first gold bar in the fourth quarter of twenty twenty five. However, this milestone remains subject to the timely approval to the necessary permits. On the next slide, we are showing the processing plants programs that will operate at 3,000 tons per day. Currently, the primary crusher mechanical works are at 100%.
The SAK and bolt mechanical works are at 98%. And finally, the sealed tanks mechanical works are at 97%. Moving on, we can see the progress of the main components of the plant. Moving on Slide nine, we are showing the progress at the filter tailings plant that currently is at 74%. To conclude the presentation, I would like to share a few final thoughts.
San Gabriel continues to advance steadily with 79% overall progress and on track to produce its first gold bar in the fourth quarter of twenty twenty five. Jumpac is proving to be a key growth driver, delivering 2,300,000 ounces of silver in the first quarter and generating a strong cash flow. We are also driving growth by increasing our gold, silver and copper reserves, led by the strength of our flagship operations. And finally, our focused strategy remains unchanged. We are committed to our corporate guidelines, prioritizing reserve growth, EBITDA maximization and cost efficiency at our flagship mines in our and in our strong pipeline of projects.
Thank you for your attention. I will hand the call back to the operator to open the line for questions. Operator, please go ahead.
Operator (participant)
Thank you, sir. Today's first question comes from Carlos De Alba with Morgan Stanley. Please go ahead.
Carlos de Alba (Analyst)
Yes. Thank you. Good morning, everyone. So on San Gabriel, maybe I'll group some together. So the CapEx increase in 2025, is this does this represent an increase on the overall CapEx of the project?
Or just shifting maybe from what you would expect to invest in 2026 and maybe you are investing it now in 2025? If you could clarify that, it will be great. And given the CapEx that we're discussing now going up, what is the new expected return on this investment that you see as you get closer to completion? And what permits are pending that may prevent you from starting production this year? But assuming that you get those permits, what would be the range of production that you see for 2025 and maybe 2026 out of San Gabriel?
And my second question is if you could maybe give us a reminder of the exploration budget, the exploration expense that you spent to run through your P and L, both for operating unit and non operating unit in 2025. And if you can also comment on the general and administrative expenses, they came a little bit higher in the first quarter. How do you see that line also for the year as well as SG and A? Thank you.
Leandro García (CEO & General Manager)
Thank you, Carlos, for your question. Regarding San Gabriel, is the CapEx that we executed in 2025? There are some geotechnical and hydraulic issues that Renzo will explain you further. In terms of the return, remember that the this project was decided to go on with prices of $1,600 So it will maintain the same profitability for the company. In terms of the permits, we are referring to the construction authorization that sorry, the operation authorization that will be granted once we finish the construction.
And so I don't know if you want to Maybe Riendro, can
Carlos de Alba (Analyst)
you remind us what exactly is the return or the profitability that you are seeing for San Gabriel? And just to clarify, what is now the total CapEx for the project that you see after the increase in 2025?
Leandro García (CEO & General Manager)
The total CapEx should be between $720,000,000 and $750,000,000
Carlos de Alba (Analyst)
Okay. Thank you. And the IRR of the project or the net present value of the project?
Leandro García (CEO & General Manager)
It's around 12%, thirteen %.
Carlos de Alba (Analyst)
Great. Thank you, Daniel.
Operator (participant)
Thank you.
Leandro García (CEO & General Manager)
Sorry.
Operator (participant)
I apologize.
Leandro García (CEO & General Manager)
Yes, there are a couple of questions and the answer for from Renzo. And also there are a couple of questions on exploration expenses and the G and A. We can begin with Lorenzo.
Renzo Macher (VP - Projects and Innovation)
Yes. So in regards to the problems we have with geotech and hydrogeology as well as some excess inadequate material beyond our confidence level. Those problems have been resolved, but we will guide some additional work in the form of slope reinforcement, additional layers of grouting in the water dam. Some to find a place to temporarily place these excess inadequate inventory and add some excess quarry production to compensate. So, all those things have been already done or are in the process of of of being completed.
And that was the what where are we gonna be spending all this money be besides these excess works? We have like $45,000,000 in finishing the electrical and mechanical and commissioning of the plant. The tailings storage facility, another $25,000,000 the mine development, another $35,000,000 and the power line another $50,000,000 We are maintaining our committed date for the first gold ore in the fourth quarter at this point.
Leandro García (CEO & General Manager)
Now we can thank you, Lorenzo. We can continue with the exploration expenses and investment.
Daniel Dominguez Vera (VP of Finance & Administration and CFO)
Yes, Leandro. This is Anil. Thank you, Carlos, for your question. In terms of exploration, we can divide it in two kind of explorations. The first one is the explorations in the operating units.
This is basically for infill drilling to convert the resources into reserves. The normalized amount for the quarters, the next quarters is in the order of 10,000,000 to $12,000,000 For the overall year 2025, we are in the order of $40,000,000 to $45,000,000 In addition to this, we have the non operating areas of explorations, which will be in the order of 4,000,000 to $5,000,000 each quarter. For the entire 2025, we should be in the order of $20,000,000 1 of the most important activities here is the exploration in El Brocal within the areas of Unis and Bojorkas. Regarding the administrative expenses, yes, as you mentioned, it is they are a little bit higher than that we were expecting, but this is basically due to the higher workers' participation that we are registering because of the higher profits that we report from our direct operations. The amount administrative expenses for each quarter this year will be in the order of $15 to $17,000,000 For the entire year, we expect around 60,000,000 to $65,000,000
Carlos de Alba (Analyst)
Thank you very much, Daniel, Lorenzo and Leandro.
Leandro García (CEO & General Manager)
Thank you, Carlos.
Operator (participant)
Thank you. Our next question today comes from Tanya Jakusconek with Scotiabank. Please go ahead.
Tanya Jakusconek (Analyst)
Great. Good morning, everybody. Thank you so much for taking my questions. Maybe Daniel, I'm just going to finish off with you just on some of the forecasting. Can you remind me now what your capital expenditure is going to be for this year?
Previously, we had $330,000,000 to $355,000,000 I'm just wondering if that is still valid with this movement in the San Gabriel capital.
Daniel Dominguez Vera (VP of Finance & Administration and CFO)
Yes, we expect an increase in the CapEx. As Renzo mentioned, San Gabriel will add some additional CapEx for the construction of San Gabriel. We expect for this year in total around $400,000,000 to $420,000,000 From this, we have already spent more than $80,000,000
Tanya Jakusconek (Analyst)
Okay. And maybe just so I understand the delta, I think it's come in $50,000,000 more than Gabriel, fifty million or thereabout more than we expected from the original budget of Q4. Can you just remind me that $50,000,000 what was the overrun?
Renzo Macher (VP - Projects and Innovation)
Hi.
Okay. So the overall runoff, it was based on this inadequate material and hydrogeological underneath the water dam basically. So, we have to move a lot of a lot more inadequate material to the new storage area. We need to do several additional layers of grouting. And obviously, this scrambled a little bit the coordination between the contractors.
So, we're in that process of accelerating certain activities to maintain the date of the first gold bar. That's kind of what was out of the scope.
Tanya Jakusconek (Analyst)
Okay. So maybe just for myself to understand, when you talk about inadequate material, are you talking about waste rock?
Renzo Macher (VP - Projects and Innovation)
No, no, no. I'm talking about like queries, queries that were supposed to have like good filling material. We found some layers of inadequate material.
Tanya Jakusconek (Analyst)
Okay. And so you have to move the facility to another place. Is that the correct understanding?
Renzo Macher (VP - Projects and Innovation)
No, no, no. Need to remove all that inadequate material in order to reach the foundation level. And we need to expand our existing inadequate material deposit to hold these additional quantities.
Tanya Jakusconek (Analyst)
Okay. And is this a water storage facility? I'm just trying to understand what's going be placed on top of that.
Renzo Macher (VP - Projects and Innovation)
No, no. This is where the filtration plant is. The water storage facility The water storage facility have some infiltration problems. So I mean, we initially, we expected to do kind of a couple of layers of grouting, but we ended up putting like seven layers of grouting.
That took some time. And we're going to be reinforcing the size of the water dam as well. At this point, the dam is kind of 35 of its total height so far. We already finished the rainy season, so we're starting to see some increased speed in that.
Tanya Jakusconek (Analyst)
Okay. So, it's two different things, the filtration plant and the water dam. Okay. Got it. Okay.
Yes. Thank you for the explanation on that. Can I then ask what we are going to you talked a lot about the open what's happening on surface at San Gabriel? So I talked a lot about the mill. Can we go to the underground?
So where are we now on the underground with respect to number one, the training of the underground miners? Number two, where are we with respect to stopes development, I. E, getting them ready for production? And number three, where are we on the stockpile on surface? And are we still on target to be at that 300,000 tonne by October? So just those three on San Gabriel.
Leandro García (CEO & General Manager)
Thank you, Barbara. Maybe Juan Carlos can help us with the answers.
Juan Carlos Ortiz (VP - Operations)
Sure, Leandro. Well, regarding training, we are hiring the new crews for Buenos Aventubla in order to be ready by the July that we would our first delivery of equipment, underground equipment. So Epiroc is going to deliver our first crew on a schedule July, August, September and the last crew, the last fleet of October. So we have hired the first crew and the second is on the process of being hired and we are training them. We have the Tambo Mayo mine using these mining methods right now.
So we are bringing the executive, the engineers, the supervisors to Tamo Mayo. They are being trained there in order to know all the details about the mining method under current field. So it's part of the process. We are on track of knowing that. Regarding the stop development, we are opening according to the plan, the galleries across the ore body.
We have right now in order of 60,000 tons of material ore on surface. So it's according to the plan. Right now, we have the contractor, Mas El Rasviris, with three fleets on-site with the capabilities of doing between 600 meters to 800 meters per month. It depends what kind of ground we need to cross each month. So we need to put like steel reinforcement, probably more close to the 600 meters per month.
And if we have another month where we only can advance with shotcrete, probably closer to the 800 meter per month. So depending on the schedule of each month, we are in that range with the contractor. And in July, we will have our first crew of Buenaventura on-site.
Tanya Jakusconek (Analyst)
Okay. So it looks like everything is going to plan. And I know we talked about the ground conditions in your previous conference call that you were requiring concrete cement required and obviously reinforcement is and little water, so you didn't have water underground. Are you still seeing similar ground conditions, nothing worse?
Juan Carlos Ortiz (VP - Operations)
Yes. It's what expected. It's what we call rock mass category four. It's proved ground. It need to be supported with steel arches.
In some cases, we have a little bit better rock. It's called category 3B that can be developed only with short written bolts.
Tanya Jakusconek (Analyst)
Okay. Well, thank you so much for that. And then just my final question, if I can ask on Comalache. I know we were expecting permits in Q1, so we could start construction in Q2 and resume fresh ore leaching in Q3. Can do we know where we are on have we gotten the permits? And have we started construction?
Juan Carlos Ortiz (VP - Operations)
Yes. Yes. We were granted the construction permit in March. We have started construction in April. We are starting construction right now of the expansion of the pad, while at the same time, we are asking for stockpiling fresh ore on top of the existing pad.
So we have two permits running in parallel, one for the lateral expansion of the pad and one for the piling more ore on top of the existing one. So we are according to the plan. We expect to pile fresh ore on top of the pad by August this year. So after we put the ore in there, probably you need to wait sixty days in order to allow the solution to came all the way down to the geomembrane and report to the structural facility. So we start placing ore in August, with this September, October, late October, early November that we will start to see an increase in gold production in Como Lache.
Tanya Jakusconek (Analyst)
Okay. Thank you so much for that and good luck on both Camelache and San Gabriel.
Renzo Macher (VP - Projects and Innovation)
Thank you.
Leandro García (CEO & General Manager)
Thank you.
Operator (participant)
Thank you. Our next question today comes from Alex Hacking with Citi. Please go ahead.
Alex Hacking (Analyst)
Yes, good morning. I just wanted to clarify on San Gabriel. I apologize. You talk about the water dam, are you is that the TSF? Is that where the tailings are being deposited? Thank you.
Renzo Macher (VP - Projects and Innovation)
No. The water dam is where we're going to be storing fresh water to use in the plant. The tailings storage facility, it's a different component, and it's going to be dry stacking.
Alex Hacking (Analyst)
Okay. Thank you. So I just want to clarify that. And so when you talk about the geotechnical and hydraulic issues, those are exclusively and the CapEx overrun, is it exclusively related to that water dam or there are other issues as well? Thanks.
Renzo Macher (VP - Projects and Innovation)
Yes.
The water dam had some the the infiltration that we found underneath the foundation was not according to the to what our original study meant at.
So we have to do a lot more of of of grouting. Yes. We thought that three two to three layers of grouting will be enough. We ended up with seven layers of grouting.
And we reached the infiltration rate the design infiltration rate. That's one problem. The other problem, it's a it's a query that was supposed to have enough material for filling, didn't have enough material. It was inadequate material. So we need to move it to reach the foundation level that of that query and then replace it with another query.
So, that causes some scrambling of the contractor of the construction sequence that we are currently aligning again.
Alex Hacking (Analyst)
Okay. Thank you. Thanks for the clarification. That's helpful. And then I guess just a follow-up question.
I guess around the transition to operating yourself at Uchucchacua, Yumpag, Brocal, I guess any update on how that process is going? Thank you.
Juan Carlos Ortiz (VP - Operations)
Leandro, hello to
Already assigned the contract, the purchase order for Chacoa, Jumpac and Brucal to Zambique. We have a schedule for bringing all the equipment on board. The in the case of Chacoa and Jumpak because our midsized equipment, they are going to be delivering earlier, basically in the third and fourth quarter of the year. Only a small fraction of equipment will be delivered early in 2026. We will replace all equipment.
We will return any rental equipment that we have underground, so to give a more continuity of operations underground. We will have also full service of Sandvik on-site from day zero. In the case of El Brocal, most of the equipment will be delivered on 2026 because this is a very large size equipment, large loaders and large production drills. So most of the equipment will be delivered by early twenty twenty six in the first and second quarter. Again, the strategy there is to save costs by doing the work by ourselves at a larger size.
We have, right now, with the contractor, loaders that are only 10 tons capacity, and we're moving into different size of equipment, more close to between 14 tons longer for development and 17 tons for production to extract the ore from the stopes. So that's the reason we are doing that in La Brocal. And again, it's going to be with SABIC with the same strategy, with full maintenance from day zero on-site.
Alex Hacking (Analyst)
Okay, perfect. Very helpful. Thank you.
Operator (participant)
Thank you. That concludes the question and answer session of today's conference call. I would now like to turn it back over to Leandro Garcia for closing remarks.
Leandro García (CEO & General Manager)
Thank you, operator. Before we conclude today's conference call, I would like to thank you for the time and effort dedicated to joining us. Your participation and input are greatly appreciated. Thank you very much and have a wonderful day.
Operator (participant)
Ladies and gentlemen, that concludes Buenos Aventura's first quarter twenty twenty five earnings results conference call. We would like to thank you again for your participation. You may now disconnect.