Compañía de Minas Buenaventura - Q3 2023
October 31, 2023
Transcript
Operator (participant)
Good day, ladies and gentlemen, and welcome to the Compañía de Minas Buenaventura third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode, and please note that this call is being recorded. At this time, I'd like to introduce your host for today's call, Mr. Gabriel Salas, Investor Relations. Mr. Salas, you may begin.
Gabriel Salas (Head of Investor Relations)
Good morning, everyone, and thank you for joining us today to discuss our third quarter 2023 results. Today's discussion will be led by Mr. Leandro García, Chief Executive Officer. Also joining our call today and available for your questions are Mr. Daniel Domínguez, 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. Raúl 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 the market closed. 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 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 October 30, 2023. Let me now turn the call to Mr. Leandro García.
Leandro García (CEO)
Thank you, Gabriel, and good morning to all, and thank you for joining us for today to discuss the quarterly results of the company. On slide 2 is our cautionary statement, important information that I encourage you to read. We assume that you have already read the results reported yesterday. Moving on to the next slide, our presentation will cover the 5 main topics shown here, and we will be followed by our Q&A session, where our team will be happy to answer your questions. Let's begin with some overview of the key highlights for the first 9 months of 2023. Our EBITDA from direct operations for the first 9 months of 2023 has witnessed a 27% increase as compared to the same period of the previous year.
It is worth mentioning that the figures do not include the hundred million dollars obtained last year from the sale of our stake in Yanacocha. Our cash position remains strong in third quarter 2023, due to a strong performance at El Brocal. We are pleased to share that our dividends received from Cerro Verde during the quarter have contributed to $49 million, strengthening our overall financial performance. It is important to note that Cerro Verde has a record in copper production during the third quarter 2023 of 430,000 tons/day, representing 255 million lbs of copper.
After completing the processing plant operational readiness, we have successfully resumed operations at Uchucchacua on October 29, and also received approval from the for the Yumpag project's Environmental Impact Assessment on September 7, enabling Buenaventura to perform metallurgical tests for up to 125,000 tons of ore from Yumpag's pilot stope. We are determined with our commitment to sustainability and responsible mining practices while fostering production. Although operations at El Brocal, especially, specifically the Colquijirca-Tajo Norte mine, have temporarily been suspended until the approval of the Environmental Impact Assessment, we are able to continue focusing on increasing the underground production to 12,000 tons/day as planned for the following two years. Our consolidated production for copper, silver, and gold across the last three quarters has had the following results: 44,000 tons of fine copper, thanks to the record production at El Brocal.
We are on track to achieve the upper range of their guidance. 4.9 million oz of silver, being El Brocal its main contributor. During the fourth quarter 2023, Uchucchacua and Yumpag will contribute almost with 2.8 million oz to reach the full year guidance. 111,000 oz of gold with a steady production from El Brocal. Moving on to our cost structure in slide five, you can see that our all-in sustaining costs have increased by 34% compared to the nine-month period of the of last year.... This is primarily explained by the gold production decrease at La Zanja, Tambomayo, and Coimolache. However, it is important to mention that these figures does not include El Brocal and Cerro Verde, with excellent cost performance during the third quarter of 2023. Moving on, the costs applicable to sales trend.
As you can see, the prioritization of copper ore at El Brocal with better operating margins is translating into a 10% cost reduction in the last quarter. Silver cost applicable to sales has increased 29% year-over-year, primarily driven by lower head grades at Julcani and Tambomayo. However, we expect to reduce costs during the fourth quarter of 2023, with the contribution of Uchucchacua and Yumpag silver oz. Gold cost applicable to sales has remained relatively flat year-over-year, despite the reserve depletion at La Zanja and lower production at Tambomayo. On the next slide, we are showing the free cash flow generation. During the third quarter of 2023, we have increased our cash position by $20 million, thanks to the excellent performance from El Brocal and the dividends received from Cerro Verde.
The EBITDA to free cash flow reconciliation is explained by the following breakdown of the inflows and outflows. El Brocal, Tambomayo and Orcopampa have been the main contributors for the 9, for the period of 9 months of 2023. While La Zanja, and Uchucchacua had a negative EBITDA due to lower production for the first two assets, care and maintenance in the Uchucchacua mine. However, we expect to have a positive EBITDA for the fourth quarter. Thanks to the resumption of Uchucchacua and the contribution of Yumpag. As we have mentioned before, Buenaventura is going through growth, in a growth phase with an expected CapEx related to Yumpag and San Gabriel. This has been partially offset by the income taxes and the dividends received from Cerro Verde.
Moving on to slide 7, we are focusing the pipeline on the projects that has more than 10 years of life of mine. Also, we have a diversified portfolio of projects in each stage of the viability cycle, enabling Buenaventura to continuously deliver new projects in the following years. The following slides, I would like to illustrate our main two projects, Yumpag and San Gabriel. We are relaunching a new Uchucchacua with the Yumpag mine, almost 6 kilometers away from the current mine. This recent restart will extend the life, the life of mine by around 15 years. Yumpag have successfully obtained its environmental permit and have submitted the financial authorization for the deposit provision.
However, in November, we are going to start processing ore from the Camila vein with a permit that allow us to treat up to 125,000 tons of ore from the pilot stope. Moving on to slide 10. In the next years, Buenaventura will be focusing most of it, its efforts in the San Gabriel project, because it will be a relevant contributor to the company's value. It will add more than 14 years of life of mine to the company. In this slide, you can see the progress of the project quarter-by-quarter. By the following quarter, we expect to start the field work and with the underground construction contract. On the next slide, we are showing the earth movement activities for the processing plant facility.
On slide 11, you can see the layout of the future plant of the San Gabriel project, with its crushing equipment on the left of the picture, going through the milling and the grinding area to finally reach the carbon leach area. We expect to complete 100% of this facility by the first half of 2025. On the next slide, we show a couple of pictures of other components of the project that are progressing as planned, such as the mine, pond, and water treatment plant on the top left. Also, the San Gabriel definitive campsite and the waste dump facility. On the bottom of the slide is the underground mine portal with its ventilation system. Finally, I would like to finish the presentation with a couple of closing remarks.
San Gabriel construction will progress faster, as the main contractors are already in on the project. Total CapEx for the project remains unchanged, and the start of commercial production for the second half of 2025 is maintained. Uchucchacua was successfully restarted after two years of care and maintenance. Yumpag's environmental permit was approved, and production will start in November. El Brocal have a record production of copper this year, despite the open pit temporary suspension. For the nine months of 2023, El Brocal have reduced consistently copper cash cost by 10%, confirming Buenaventura's effort to achieve optimized costs. Thank you for your attention. I will hand over the call back to the operator to open for the line for questions. Operator, please go ahead.
Operator (participant)
Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Please also note, you may present your questions through the webcast by typing and hitting Submit. At this time, we'll pause momentarily to assemble our roster. Our first question today comes from Carlos de Alba from Morgan Stanley. Please go ahead with your question.
Carlos de Alba (Head of Americas Basic Materials Research)
Yeah, good morning, gentlemen. So first question is regarding Tambomayo. In the explanations of the production performance, it is noted that, you know, in order to reach the mine's upper zone, you will require to do more rehabilitation. And then you will be able to access this high-grade ore. When will you be in a position to reach this high-grade zone, and how much expenses or capitalized expenses will you have to incur in order to do so?
Leandro García (CEO)
Thank you. Thank you, Carlos, for your question. Actually, yes, that ore is in the upper part of the mine, but I will let Juan Carlos Ortiz give more explanation of and the timeline to reach that ore. Please, Juan Carlos.
Juan Carlos Ortiz (VP of Operations)
Sure, Leandro. Thank you, Carlos, for the question. In the upper part of Tambomayo, we are already there. We are mining that area. We expect this year to mine at a certain pace, but due to the rock condition, the ground condition, we need to slow down the rate of extraction from that, this area. We need to do more reworks on the ground support, do ancillary accesses on the area in order to have more flexibility to mine the upper area of the mine. So we are already there. We don't need extra CapEx to add this area into production. We are already there. The only difference is the production rate is lower than we expected, so we are carrying on this production from 2023 into 2024.
And the production in that area or the grade in that area is basically silver. It's around 5-7 oz of silver, 2 g-3 g of gold. So it's a substantial production of silver coming from this area. And now we are offsetting this production with other areas of Tambomayo that are more on the gold value than the silver. That's the difference that you see in our guidance for the rest of the year 2023.
Carlos de Alba (Head of Americas Basic Materials Research)
All right. Thank you, Juan Carlos. I appreciate that. Another question is on Julcani. You know, clearly the mine is losing money, you know, cash capital total to sales of 26% in the third quarter. But it is mentioned that there is a new zone of gold and copper that will begin production during the fourth quarter. Would this, I mean, can you talk a little bit more about this zone and what the implications would be for cost and production? Is this going to allow the mine to turn to the black and make money?
Leandro García (CEO)
Yes, of course, Carlos. Actually, the difference against our budgeted production is because the reconciliation of the grades, the actually grade we could reach this quarter and during 2023. However, we are working on this new area called Rosario, and well, Juan Carlos will give you another big picture of what is - what are we finding there. Please, Juan Carlos.
Juan Carlos Ortiz (VP of Operations)
Sure, Leandro. Yes. In Julcani, we, you see, footprint, how it looks like. We have a core area at the center of the deposit, where we have the main, let's say, from a geological point of view, is the hotter area. It's surrounded by a ring, where we have all the lead and silver mineralization. We are producing right now, and historically, we have been producing most of our recent, silver production from the surrounding ring. That's the Acchilla mine. In that mine is where we are hitting now lower than expected grades in the stope that we had planned for 2023. Rosario area is at the center of the deposit, so it's not far, maybe 500, 400 m from the existing stopes in the Acchilla area. So we share a lot of infrastructure with, Acchilla.
This area was originally mined many, many years ago in the upper levels, and now we are accessing this area a lot down below, at the sixth level. We hit the same veins that we have seen evidence in surface, where we have thicker thickness, and with a higher copper and gold grade than we had in the past in that area. So we have a long set of veins. Several of them are in the range of 5 g of gold and 3%-4% copper. So now it's something new for us. Regarding the historical position in the last 2 years, and we are developing this new area. We have, by the developing of this area, around a small campaign of 2,000 tons of ore that we are passing in the last quarter.
In the last month of the year, maybe in December, we will process this after finishing all the pilot tests in the lab. We will do industrial test with this ore, with a value in the order of $350-$400 per ton of value. We believe, we're confident by the areas that we're having so far in the exploration and development, that this area will become a significant player for in the coming two years. We need to still to continue the exploration and develop this new area between 2024 and 2025, in order to have a substantial production as a value from this area.
So when we have continuous operation from the silver areas, we were trying to catch the high grade, high silver grade area, and develop in parallel the area of Rosario. All together, goes to the same cost basis. That's the reason the cost of is going a little bit higher, because we are putting everything that we do as expense development in the Rosario area, in the same basket as the Acchilla, as the Acchilla mine.
Carlos de Alba (Head of Americas Basic Materials Research)
Okay. So, costs will increase, but ultimately this new area will make the mine profitable?
Juan Carlos Ortiz (VP of Operations)
Yes, that's the idea. The idea. This year and the next year, we will invest in developing this area. Will take like at least 12 months-18 months to develop and put this area into full production, to be a substantial part, maybe 25%-30% of the contribution and production in will came from this area. Of course, we need to complete all the tests and be sure that everything goes fine in the technical side, along with the consuming high grade for the Acchilla mine, the historical mine. So it's for the next 12-18 months, we will have a kind of higher than expected cost, and then we'll deliver the additional production for Rosario mine.
Carlos de Alba (Head of Americas Basic Materials Research)
Okay. All right, thank you. I'll get back to the queue for a couple of more questions. Thank you very much.
Juan Carlos Ortiz (VP of Operations)
Mm-hmm. You're welcome.
Operator (participant)
Our next question comes from Cesar Perez Novoa from BTG Pactual. Please go ahead with your question.
César Pérez-Novoa (Managing Director and Senior Equity Analyst)
Yes, thank you, and good morning to all. I have two questions. The first would be on Yumpag. Buenaventura kept the fourth quarter 2023 target date for start of production unchanged. Is there a commercial volume that we should consider from this asset in the final quarter of the year? And if so, at what cost should we assume this for modeling? And my second question relates to the Marcapunta underground mine. You're increasing production from 10,000 tons per day this year to 12,000 tons per day over the next two years. Could you fine-tune the date for this capacity increase, and perhaps guide on the potential copper volume that we should anticipate from the asset in the future? Thank you.
Leandro García (CEO)
Thank you for your question. Please, Juan Carlos.
Juan Carlos Ortiz (VP of Operations)
Yes, on the first one, on Yumpag, we are starting a campaign of about 120,000 tons of ore. It's a part of. It's the final stage of exploration permit. We have a license to process around 120,000 tons of ore into our Uchucchacua processing plant. So we will start right now, actually we start yesterday, doing this test. It's a very high grade ore. It's over 20-25 oz of silver. So, the idea is to produce, as we put in our guidance, in the order of almost 2 million oz of silver in the last quarter, and we put in our guidance coming from this area. The cost for this production in Yumpag is in the order of $11-$12 per oz of silver.
So this is regarding Yumpag. Once we have the operational license, we will continue mining the same ore body from 2024 in advance, at a rate of 1,000 tons per day, with an average rate in the order of 20 ounces, 22 oz of silver per ton. So it's a substantial asset for us. It's a very low cost, so for the combination of Yumpag and Uchucchacua mine. Regarding El Brocal mine, we are now at a production rate in the underground mine, in the order of 12, sorry, 10.5, almost close to 11,000 tons per day, some peaks.
So next year, in 2024, we will, our target is to stabilize the production in the order of 11,000 tons per day, 2024, and keep developing the mine in order to increase the throughput in 2025 to around 12,000 tons per day. So the target is to reach 12,000 tons per day by middle of 2025. That's the, that's the target for the throughput point of view. Regarding copper production, because the underground mine is a purely copper player, we will be our bottom part, of course, is going to be solid production in the rate of 50,000 tons of fine copper. But we are looking for opportunity to go over that, you know, increasing not only the throughput but also the recovery.
Other opportunities that we have basically on the cost side, as you see, we are reducing the costs, the producing costs from the Underground mine, and that's our main target. The main target is not only to increase production, but to decrease the cash costs of the Underground mine.
César Pérez-Novoa (Managing Director and Senior Equity Analyst)
Okay, thank you very much.
Leandro García (CEO)
If I may add, there is no need to add any CapEx to the plant. We have plant capacity enough to treat the 12,000 tons per day. All the efforts are in the mine site to extract the 12,000 tons per day from the mine.
César Pérez-Novoa (Managing Director and Senior Equity Analyst)
Okay. And just to be very clear, my connection is not very stable, but if I heard you correctly, you'll be hitting a stable production of around throughput rates of 11,000 in 2024. In the middle of 2025, you'll be hitting 12,000 tons per day, and your minimum copper production would be in the range or at minimum 50,000 tons, right?
Leandro García (CEO)
That's correct. Or as then.
César Pérez-Novoa (Managing Director and Senior Equity Analyst)
Okay. Thank you very much, gentlemen.
Operator (participant)
Our next question comes from Omar Avellaneda, from Prima AFP. Please go ahead with your question.
Omar Avellaneda (Head of Research)
Hello. Thank you very much for the call. I have a couple of questions regarding Cerro Verde. Do you expect to receive dividends during this last quarter of the year? And do you have any information regarding the tax dispute between Freeport and the Peruvian government related to this royalties? Thanks.
Leandro García (CEO)
Thank you, Omar, for your question. I will answer the first regarding the dividends. We know that, and it's known by everybody that Cerro Verde has an excellent performance. There is some room for dividends, but the decision has not been taken until yet. So, we expect, of course, some dividends, but there is not a 100% confirmation. With respect of the trial in the ICSID, we expect news for May next year. Some confirmation or some communication from the ICSID of the results of this trial.
Omar Avellaneda (Head of Research)
Okay, thanks. If I may, an additional question. Do you have any news regarding this Consulta Previa process in Yumpag?
Leandro García (CEO)
Yes. Well, we are working very close with the Minister of Mines, but maybe here with us is Alejandro Hermoza that can give us more color for the answer.
Alejandro Hermoza (VP of Sustainability)
Yeah. This process is currently under evaluation from the social office of the Ministry of Mines. They're evaluating all the processes that we have had in the past in that operation, and we should have some results from them or some instruction from them in the following weeks. Mm-hmm.
Omar Avellaneda (Head of Research)
Okay. Thank you very much.
Alejandro Hermoza (VP of Sustainability)
Mm-hmm.
Operator (participant)
Our next question comes from Josseline Jenssen, from Lucror. Please go ahead with your question.
Josseline Jenssen (Senior Credit Analyst)
Hello. Thank you very much for taking my question. Do you hear me?
Leandro García (CEO)
Yes.
Josseline Jenssen (Senior Credit Analyst)
Okay. I want to ask about CapEx, if you could provide us more color regarding the CapEx expected for 2024, for the growth projects and also for total. And how much CapEx do you expect for Trapiche? And when do you expect to start building, you know, this project? And how do you expect to fund, you know, that CapEx? We have seen that in this quarter, you have reduced leverage, but do you expect to take more debt on or on which are the available credit lines that you already have?
Leandro García (CEO)
Thank you. Thank you very much for your question. It's a relevant issue. Well, our CapEx for 2024 will be mainly all the efforts will be for San Gabriel. For the sustaining CapEx, normally when Buenaventura has a budget of $80 million, Trapiche will be around 20, between 20 and 30, but maybe Daniel can help us with the more exact figures that we are managing as today.
Daniel Domínguez (CFO)
Thank you, Leandro, and thanks for, for the question. For year 2024, we are expecting a total CapEx of around $300 million. From this, San Gabriel will require between $180 million-$200 million. And, for Yumpag, we, we will, disperse around $25 million. For Trapiche, during 2024, we expect to, disperse around $15 million. Going to, to the second part of your question, how are we going to fund these cash requirements, these, short-term cash requirements? We count with, with the cash that, that we are generating. It's around $200 million of EBITDA. We also count with, with a cash position of also $200 million. We count with, the dividends from Cerro Verde.
If there is a gap that we estimate that it could be around $100 million or $150 million for a short period of time, we are very close to obtain committed revolving facilities with local banks in the order of $150 million. We already count with $50 million for a committed line, so that will be the liquidity that we need for the funding of basically San Gabriel, Yumpag, and our maintenance CapEx.
Josseline Jenssen (Senior Credit Analyst)
Okay. Thank you very much. If I understand correctly, then you said that you already have $50 million in committed credit lines, and you expect to increase it up to $150 million?
Daniel Domínguez (CFO)
Yes, that's correct.
Josseline Jenssen (Senior Credit Analyst)
Okay. Thank you very much.
Operator (participant)
Our next question comes from Tanya Jakusconek from Scotiabank. Please go ahead with your question.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Great, good morning, everybody. Sorry, I fell off the line and had to dial back in, so I really apologize if you've already answered these questions. But I just wanted to know, on San Gabriel, where are we on the power line permit? I thought we were going to get it in Q4 of 2023. I just wonder where we are. Did we get it yet, or are we expecting it?
Leandro García (CEO)
Thank you, Tanya. Thank you, Tanya, for your question. Renzo is with us. He can, he can give you more detail of the process.
Renzo Macher (VP of Projects and Innovation)
Sure, we finished all the workshops with the communities, and in November, we should have the public assembly.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Mm-hmm.
Renzo Macher (VP of Projects and Innovation)
Probably in December, we should have better news. Not better news, but news.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay.
Renzo Macher (VP of Projects and Innovation)
Everything should work fine so far.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. Then, maybe, Daniel, I again apologize if you talked about the Cerro Verde dividends. You know, I think you had given guidance for about $120 million for this year and next. Is this something that we still should be thinking about, or are we getting anything else from Cerro Verde this year?
Daniel Domínguez (CFO)
We are very optimistic of the cash generation of Cerro Verde. They are generating $2 billion of EBITDA. We have already distributed $202 million-$100 million, and of course, we expect an additional dividend, if the results come in the fourth quarter, as we expect.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. And then can I just ask one final question just on the Investor Day that you're hosting in New York on December 4? I'm just trying to understand, because it's at the end of the year, and I'm just trying to understand at that Investor Day on December 4, are you know, besides the updates on the assets like you're giving us and obviously the development pipeline, will we be getting updated reserves and resources on December 4?
Daniel Domínguez (CFO)
Yes, Tanya. We will have news in that day. That is one of the reasons that we postponed the Analyst Day for the last month of this year. So we-
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay.
Daniel Domínguez (CFO)
We will have news for you.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay, so we will have updated year-end 2023 reserves and resources for the company?
Daniel Domínguez (CFO)
Yes, correct.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. Yeah. Okay. And then one other thing, will you be providing us 2024 and longer-term guidance as well at the Investor Day?
Daniel Domínguez (CFO)
Yes. Yes, we will be prepared for giving you those numbers.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. Is it just, I'm just trying to understand, is it 2024 or is it more, more years than 2024?
Daniel Domínguez (CFO)
2024 and 2025.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
25. Okay.
Daniel Domínguez (CFO)
Yes.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
I guess my final question for you is just any updates on just geopolitically, what's happening in Peru for us that are far away and just read what's on CNN? So maybe, you know, we could have someone who actually lives in Peru give us an insight on what's happening. And again, the protests that we keep reading about, et cetera. So maybe it would be really nice if someone can provide some insight into what's happening in Peru from a geopolitical standpoint for investment-
Leandro García (CEO)
Yeah.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
And also for anti-mining and protests? Yeah. Thank you.
Leandro García (CEO)
Yes, Tanya. Well, things are quite still. The political situation is steady. The government, I mean, the current administration is trying to make all the efforts to invoke more investment, more private investment. The President Boluarte is having some travel, some trips, well, like Germany, and this yesterday, the Congress authorized her to go to United States to promote and to call for investment in Peru, given the situation and given all the opportunities we have as a country. There is an effort from the Ministry of Economy to maintain and to pass this difficult economic situation because the lack of investment we have had in the last two or three years due to the political instability.
But we are optimistic that the country is going in the right way. We think that Otárola, the Prime Minister, is trying to politically manage the situation, all the different needs that the country has. That we are much. We feel that we are much better than we were one year ago, so we are very optimistic. I don't know if here with us is, of course, our Chairman, Roque Benavides. I don't know, Roque, if you want to add some ideas?
Roque Benavides (Chairman)
Well, if I may say, the fact of having the Prime Minister, the Minister of Mines, body language, if I may say, which gave a lot of support to the industry. I think there is attitude of helping the industry to develop the project. And then, obviously, the recession that we are living through requires far more investment, and mining is, it's the main source, if I may say.
Leandro García (CEO)
Thank you, Roque.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Okay. So, Roque, you think that then we are gonna see a much more pro-investment support for, you know, investment in Peru going forward because of the recession and things that the current administration is doing?
Roque Benavides (Chairman)
There's no doubt about that. There is no doubt. I think the President traveling to Germany, traveling to the States in the next few days, also shows the interest to attract more investors.
Tanya Jakusconek (Managing Director and Senior Equity Analyst)
Mm-hmm. Okay, great. Thank you so much. Nice to hear from you.
Operator (participant)
Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question is a follow-up from Carlos de Alba from Morgan Stanley. Please go ahead with your follow-up.
Carlos de Alba (Head of Americas Basic Materials Research)
Yeah, great, thanks. It's on El Brocal. Just apparently costs will be increasing in the fourth quarter as the company recognized the deferred stripping costs associated with the lead and zinc inventory. Can you provide a little bit more color? I mean, costs were somewhat elevated in the third quarter, so it would be very interesting to know what the implications would be for this comment made personally.
Leandro García (CEO)
Juan Carlos, please.
Juan Carlos Ortiz (VP of Operations)
Yeah. We have a pre-stripping account, deferred pre-stripping in our books that accounts for about $51 million. Because we finished the mining of the current phase of the open pit, we are speeding up the amortization of this amount of money into up to the end of the year. So it's gonna be this accelerate amortization because the open pit finalize not only the mining, but also the processing of the ore that we broke up to September this year. So all the stockpiles are gonna be processed up to December, of lead and zinc. And based on that processing rate, we'll be doing the amortization of the $51 million that we have in the deferred stripping account in El Brocal mine.
This is pretty much what the main impact on cost, because it's a substantial amount in the coming months. It started in the third quarter, and it's going to follow the same rate of amortization in this fourth quarter of this year.
Carlos de Alba (Head of Americas Basic Materials Research)
Okay, thank you very much.
Operator (participant)
Our next question comes from Rodrigo Murrieta from AFP Integra. Please go ahead with your question.
Rodrigo Murrieta (Investment Analyst)
Hello, how are you? Thank you for taking my call. One question: What are the actions you are actually taking to start San Gabriel in the second half of 2025?
Leandro García (CEO)
Sorry. Sorry, Rodrigo, I didn't heard your question as well as I want.
Rodrigo Murrieta (Investment Analyst)
Oh, can you hear me now?
Leandro García (CEO)
Can you repeat it? Yes.
Rodrigo Murrieta (Investment Analyst)
Of course. So what are the can you explain more, maybe, on the actions you are taking to start production of San Gabriel in the second half of 2025? Because the construction percentage of the CapEx you're already been deploying is, I think, 14%. And you've changed your guidance. So maybe if you can develop more on what are the actions you are doing right now, and if you don't expect any issues with communities, for example, what are the current actions with communities so CapEx could be deployed efficiently or not?
Leandro García (CEO)
Okay. Thank you. Thank you for your question, Rodrigo. Renzo, maybe you can help us with the answer.
Renzo Macher (VP of Projects and Innovation)
Sure. Sure. Thanks for the question. So, this year has been a year where we focus on all the pre-construction services, and so we can receive the main construction teams on site. So by the end of this year, you should have the campsite pretty much terminated, the contractors on the field for the mine work. We are assigning the SMP contract and the concrete installation on November. So we're gonna be focusing on full construction activities during the whole 2024. In parallel, we started our Operational Readiness Group, and so we're gonna, probably towards a year from now, we're gonna have all the manuals, and we're going to start training our people so we can initiate commissioning the first quarter, second quarter of 2025.
In the social aspect, I think we're in good forms with the communities. No major problems there. We keep working with them. We have, like, 30% of our people from within the region, and so we have a good relationship, contract relationship, work relationship with the communities.
Rodrigo Murrieta (Investment Analyst)
Okay. Thank you. And one additional question: Do you have concerns about El Niño phenomenon for next year? Your communities have told you something. What are your current conversations about that topic?
Leandro García (CEO)
Thank you, Rodrigo. Yes, this is an important issue that we have been discussing since April this year. We are working very closely with our operations. We are defining all the critical aspects of how the El Niño effect can affect us, and we have a plan to alleviate all the damage that can be done by this phenomenon. We are working with our manager of safety, and internally, we are coordinating with all the areas to be prepared for this plan.
Rodrigo Murrieta (Investment Analyst)
Okay. And as now, do you have any estimation of, how much would you spend to alleviate, any circumstances due to this phenomenon? Or you're, on or do you have any estimations, nowadays?
Leandro García (CEO)
Well, we are looking. Yeah, primarily, we are reviewing our capacity to have the stock, the inventories of our concentrates. We are viewing also, we are reviewing the alternative routes that way, the ways that we, the way we have to access our mines. So, we are focusing in the two main issues, no? To all the inflow of material we need and how we are going to get out with our concentrates. So we are planning which are the routes that we can use to establish how good and how prepared are the alternative routes that we have today, and also the capacity of how much stock we will have in our for our concentrates, and how stock we need increase, if any, of all our parts and equipment and the material we need to continue production.
Rodrigo Murrieta (Investment Analyst)
Okay, thank you very much, Leandro.
Operator (participant)
Our next question comes from Juan Cruz from Morgan Stanley. Please go ahead with your question.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
Hi, good morning, everybody. Can you hear me okay?
Leandro García (CEO)
Yes.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
Excellent. In light of the CapEx and the projects that you have planned for the next few years, can you tell us what is the minimum cash level that you feel comfortable holding, given where we are in the cycle? And also, how are you guys thinking about the bond maturity in 2026? Understanding that there's still enough time to figure out a plan, but, given where we are, you know, in the rate environment, how much that costs you now, and what would, you know, the potential refinancing costs could be, how are you thinking about that, if you are?
Leandro García (CEO)
Thank you, Juan, for your question. Daniel can help us with the answer.
Daniel Domínguez (CFO)
Thanks for the question. For the minimum cash that we consider, we normally estimate two months of OpEx, which is around $50 million. So that would be our minimum cash. That's the first question. The second question is, the second answer for the, for your second question is, of course, we are, we have a plan for the, for the bond maturity, which is in 2026, in July. We are considering starting the renewal process at the beginning of year 2025. So, we should count with a, with a facility or a bond renewal plan executed by July 2025. We are evaluating the, of course, the interest rates. As of now, they are in a very high level, but we expect that in year 2025, by mid-year, they should have decreased substantially.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
Okay, thank you. And just as a follow-up, given where your cash balance is, which is a healthy one right now at $220-something million, at least as of September, should we expect that you come close to your minimum at any point, or that's not in the cards?
Daniel Domínguez (CFO)
No. No. If we are going as we are getting close to our minimum, we will exercise our liquidity that we have with the local banks.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
And those facilities are committed?
Daniel Domínguez (CFO)
We have one which is committed, and the other ones we are looking for to be committed as well.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
Okay. So that's, that's the ideally up to $150 million.
Daniel Domínguez (CFO)
Exactly.
Juan Cruz (Managing Director and Senior Equity Research Analyst)
Okay. Thank you.
Operator (participant)
Our next question comes from Josseline Jenssen, as a follow-up. Please go ahead with your question.
Josseline Jenssen (Senior Credit Analyst)
Yes, thank you. Just regarding production and the strategy you have going forward, and your expectations for this year, Uchucchacua and Yumpag will produce around 2- up to 2.8 million tons, just in the, you're assuming that that will be just in the fourth quarter?
Leandro García (CEO)
Thank you. Just million ounces, no?
Josseline Jenssen (Senior Credit Analyst)
Yes, yes, sorry.
Leandro García (CEO)
Million ounces.
Josseline Jenssen (Senior Credit Analyst)
Million ounces-
Juan Carlos Ortiz (VP of Operations)
Yes.
Josseline Jenssen (Senior Credit Analyst)
-of silver.
Leandro García (CEO)
Go ahead.
Juan Carlos Ortiz (VP of Operations)
Yeah. Yeah, yes, this is our guidance. As I mentioned, Yumpag is going to be processing this year around 100,000 tons, 90,000-100,000 tons of ore, with a grade over 25 oz of silver per ton this year. And Uchucchacua will be processing also around the same figure, around 90,000-100,000 tons of ore, in the order of 10 oz of silver per ton equivalent, because it's a combination of polymetallic ore with silver, lead, and zinc. The equivalent grade of that material is in the order of 10 ouz of silver equivalent. So the combination of both, that will be processed in campaigns, in batches, in the Uchucchacua processing plant, will bring us into the order of 2.5 million-2.8 million ouz of silver by this last quarter of the year.
Josseline Jenssen (Senior Credit Analyst)
It will be correct, like, to multiply it by four to get to that 2024 number, more or less, or no?
Juan Carlos Ortiz (VP of Operations)
In the case of Uchucchacua, yes. In the case of Yumpag, probably we'll be getting closer to the average grade of the deposit. It's more on the range of 20 oz-22 oz, is the average of a Yumpag mine, instead of 25 oz that we are expecting, putting ahead of time, speeding up production for 2023. So it will not be a little bit late production from Yumpag next year.
Josseline Jenssen (Senior Credit Analyst)
Okay. And going forward, I saw in your presentation from Q2 that you are expecting to reduce the operating unit. Could you give us more color about it? Which operating units are you thinking to close?
Leandro García (CEO)
This is in our presentation of the second quarter?
Josseline Jenssen (Senior Credit Analyst)
Yes.
Leandro García (CEO)
Well, we don't see any current operations to close. It is known by the market that we are struggling with reserves in Orcopampa and Tambomayo due to different reasons. But it's maybe it's that, the reference you have. But however-
Josseline Jenssen (Senior Credit Analyst)
Well, mm-hmm.
Leandro García (CEO)
The idea-
Josseline Jenssen (Senior Credit Analyst)
Well, it sounds like... Mm-hmm. Okay, what there is in the presentation is that you will have, that you actually have seven operation, no, operations, and then you will reduce to five operations in 2026, and to between three and five by 2030.
Leandro García (CEO)
Well, we are concentrating in units that we can support or, at least we are concentrating in operations in mines that have more than 10 years of life of mine. All the efforts are to increase the LOM of our mines, and the strategy is to concentrate in those type of mines. So in the time, if any of the current mines doesn't have that characteristic, in that moment, we will decide to close, to sell.
Josseline Jenssen (Senior Credit Analyst)
Mm-hmm.
Leandro García (CEO)
To not continue working in that mine. But our strategy is to focus on mines that have more than 10 years of life of mine. That is the message.
Josseline Jenssen (Senior Credit Analyst)
Okay. And, the revenue mix will still be 50/50 between base metals and precious metals?
Leandro García (CEO)
We foresee a little change. We were going to be more concentrated in sales coming from copper. It could be around 55%-60% of our revenue coming from copper in the following years, due to the increase in Brocal, the support of Cerro Verde and also the decreased production that we expect for Orcopampa and Tambomayo, somehow offset, of course, by our new project of San Gabriel. In terms of precious metals, we're supported by San Gabriel and Yumpag and Uchucchacua.
Operator (participant)
Ladies and gentlemen, with that, we'll be concluding today's audio question and answer session. I'd like to turn the floor back over to management for any offline questions.
Gabriel Salas (Head of Investor Relations)
Thank you, operator. The first question comes from Lenin Muñoz, from Forte Capital. What is the level of engineering of San Gabriel? Detailed engineering at what percentage? And the CapEx for San Gabriel includes the working capital of the ramp-up?
Leandro García (CEO)
Thank you, Lenin. Renzo can give us more color for that question.
Renzo Macher (VP of Projects and Innovation)
Sure. So we're currently at 90% completion of the engineering at this point. Kind of indicates that we have enough engineering to place all the purchase orders and service orders, and the remaining 10% is usually field engineering, so support of changes during the construction. And to the second question, yes, it does include the working capital, everything it needs until we move to commercial construction.
Gabriel Salas (Head of Investor Relations)
Thanks, Renzo. The second question comes from Tim Lambert from Loomis Sayles. What is the timeline for the resumption of mining at Tajo Norte?
Juan Carlos Ortiz (VP of Operations)
We are planning to resume operation in the open pit, depending on the permits and the timeline for getting all the permits done, but our target is to be resuming stripping by 2026, and production from the open pit into the processing plant by the end of 2026, early 2027.
Gabriel Salas (Head of Investor Relations)
Thanks, Juan Carlos. The third question comes from Javier de Romaní from Nicolás Partners. What guarantees the company have given against the credit lines?
Leandro García (CEO)
Daniel?
Daniel Domínguez (CFO)
These credit lines are unsecured. We don't foresee any guarantees related to these credit lines or any revolving facility that we can obtain for the following years.
Gabriel Salas (Head of Investor Relations)
Thanks, Daniel. At this time, there are no further questions. I would like to turn the call over to the operator.
Operator (participant)
Thank you. At this time, we'll close today's question and answer session for both audio and offline questions, and I'd like to turn the floor back over to Mr. García for any closing remarks.
Leandro García (CEO)
Thank you, operator. Before we finish today with our conference call, I'd like to thank you all very much for making the time to be here with us. I would also like to remind everyone that we are organizing our Investor Day on December the fourth in New York, and you are cordially invited. Thank you again. Thank you very much.
Operator (participant)
Ladies and gentlemen, that concludes Buenaventura's third quarter 2023 earnings results conference call. We would like to thank you again for your participation. You may now disconnect your lines.