Buenaventura Announces Third Quarter 2012 Results

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Buenaventura Announces Third Quarter 2012 Results

LIMA, Peru--(BUSINESS WIRE)-- Compañia de Minas Buenaventura S.A.A. ("Buenaventura" or "the Company") (NYS: BVN) (Lima Stock Exchange: BUE.LM), Peru's largest, publicly-traded precious metals mining company, announced today results for the third quarter 2012. All figures have been prepared in accordance with IFRS and are stated in U.S. dollars (US$).

Comments from the Chief Executive Officer:


Mr. Roque Benavides, Buenaventura's Chief Executive Officer, stated:

"Net income in the third quarter was US$185.6 million, 11% lower than the figure reported in 3Q11 (US$208.7 million). EBITDA from Buenaventura's Direct Operations was US$158.5 million, 37% lower than the figure reported in 3Q11 (US$252.3 million), while EBITDA including Affiliates decreased 14%, from US$446.5 million in 3Q11 to US$384.4 million in 3Q12.

These results were mainly explained by lower gold volume sold from Buenaventura's direct operations, as well as lower silver and base metal prices. Higher costs also impacted results due to an increase in contractor expenses as well as higher supply costs.

 

Financial Highlights (in millions of US$, except EPS figures):

 
   3Q12  3Q11  

Var%

  9M12  9M11  

Var%

Total Revenues  411.9  435.3  -5%  1,139.4  1,154.3  -1%
Operating Income  120.6  214.0  -44%  331.6  540.3  -39%

EBITDA

(BVN Direct Operations)

  158.5  252.3  -37%  439.7  643.3  -32%

EBITDA

(inc. Associates)

  384.4  

446.5

  -14%  1,137.5  1,237.8  -8%
Net Income  185.6  208.7  -11%  545.6  631.0  -14%

EPS*

  0.7  0.8  -11%  

2.1

  2.5  -14%
            

(*) As of September 30, 2012, Buenaventura had 254,232,571 shares outstanding.

Within this release, Buenaventura presents financial measures in accordance with IFRS, as well as on a non-GAAP basis.

Operating Revenue

During 3Q12, net sales were US$394.0 million, 6% lower than the US$418.1 million reported in 3Q11. This was explained by lower metal prices and gold volume sold.

Royalty income increased 4% from US$17.1 million reported in 3Q11 to US$17.9 million in 3Q12 due to higher revenues at Yanacocha.

            

Operating Highlights

 3Q12 3Q11 Var % 9M12 9M11 Var %

Net Sales (in millions of US$)

 394.0 418.1 -6% 1,084.7 1,108.9 -2%

Average Realized Gold Price Gold (US$/oz)*

 1,671 1,695 -1% 1,672 1,543 8%

Average Realized Gold Price (US$/oz) inc. Associates

 1,656 1,677 -1% 1,653 1,542 7%

Average Realized Silver Price (US$/oz)*

 29.68 38.99 -24% 29.93 37.33 -20%

Average Realized Lead Price (US$/MT)*

 2,030 2,378 -15% 1,973 2,441 -19%

Average Realized Zinc Price (US$/MT)*

 1,868 2,235 -16% 1,909 2,276 -16%

Average Realized Copper Price (US$/MT)*

 7,989 9,066 -12% 8,119 9,244 -12%

(*) Buenaventura's Direct Operations

     
 
             
Sales Content
  3Q12 3Q11 Var % 9M12 9M11 Var %

Gold (in oz)*

 113,563 134,863 -16% 347,400 381,469 -9%

Gold (in oz) inc. Associates

 287,284 283,091 1% 631,544 765,476 -17%

Silver (in oz)*

 4,392,833 4,069,550 8% 11,882,677 10,427,079 14%

Lead (in MT)*

 8,391 8,217 2% 19,996 15,511 29%

Zinc (in MT)*

 15,613 12,114 29% 37,987 28,243 35%

Copper (in MT)*

 3,886 4,383 -11% 10,394 15,061 -31%

(*) Buenaventura Direct Operations

 

Accumulated net sales in the first nine-month period 2012 were US$1,084.7 million, 2% lower than the figure reported in the same period 2011 (US$1,108.9 million), while royalty income was US$54.6 million, a 20% increase when compared to the US$45.4 million reported in 2011.

Production and Operating Costs

Buenaventura's equity production1 in 3Q12 was 112,750 ounces of gold, 5% higher than the 107,157 ounces reported in 3Q11 mainly due to an increase in Orcopampa and Tantahuatay production. Silver production in 3Q12 was 4.7 million ounces, a 12% increase when compared to the figure reported in 3Q11 (4.2 million oz).

Equity production1 in the first nine-month period 2012 was 337,761 ounces of gold and 13.2 million ounces of silver. This represented a 2% decrease in gold production (344,751 ounces in 2011), and a 17% increase in silver production compared to 2011 (11.2 million ounces).

 
Equity Production1
  3Q12 3Q11 Var% 9M12 9M11 Var%
Gold (oz) Direct Operations 112,750 107,157 5% 337,761 344,751 -2%
Gold (oz) inc. Yanacocha 267,144 256,887 4% 822,327 769,089 7%
Silver (oz) 4,678,811 4,189,062 12% 13,203,863 11,244,038 17%
Lead ( MT) 7,942 5,698 39% 19,450 13,819 41%
Zinc ( MT) 13,073 9,971 31% 32,328 19,474 66%
Copper (MT) inc. Cerro Verde 15,648 16,297 -4% 44,683 52,779 -15%
      

1 Production includes 100% of Buenaventura's operating units, 100% of CEDIMIN, 53.06% of La Zanja, 40.04% of Tantahuatay and 53.76% of El Brocal.

Orcopampa's(100% owned by Buenaventura) total gold production in 3Q12 was 70,588 ounces, 17% higher than the 60,171 ounces reported in 3Q11. Production from the Chipmo mine in 3Q12 was 65,362 ounces, 25% higher compared to the 52,265 ounces reported in 3Q11 due to a 16% increase in tonnage treated and 6% higher ore grade (See Appendix 2). The old tailings treatment produced 5,226 gold ounces (compared to 7,906 ounces in 3Q11). Accumulated total gold production in the first nine-month period 2012 was 200,599 ounces, a 6% decrease when compared to 2011 (213,906 ounces).

Cash operating cost in 3Q12 was US$537/oz, 3% lower when compared to 3Q11 (US$554/oz). This was mainly explained by the 16% increase in gold ounces recovered due to higher tonnage treated and better ore grades.

At Uchucchacua(100% owned by Buenaventura), total silver production in 3Q12 was 2.79 million ounces, a 1% increase when compared to 2.75 million ounces in 3Q11 due to a 4% higher recovery rate (See Appendix). Zinc production in 3Q12 was 2,628 MT, 57% higher than the figure reported in 3Q11 (1,673 MT), while lead production increased 14% (2,259 MT in 3Q12 vs. 1,975 MT in 3Q11). In the first nine-month period 2012, silver production was 8.25 million ounces; zinc production was 6,879 MT, while lead production was 6,145 MT vs. 7.30 million ounces, 4,625 MT and 5,308 MT, respectively, in 2011.

Cash operating cost in 3Q12 was US$16.8/oz, in-line with the US$16.7/oz in 3Q11. It is important to note that efficiency improvements at Uchucchacua have permitted the Company to offset the increase in contractor, labor and supply costs, which have affected the entire industry.

At Julcani (100% owned by Buenaventura), total production in 3Q12 was 589,838 ounces of silver, 3% lower compared to 3Q11 (605,346 ounces). In the first nine-month period 2012, silver production was 1.82 million ounces, 0.5% higher than in 3Q11 (1.82 million ounces).

Silver cash operating cost in 3Q12 was US$14.6/oz, 15% higher than the 3Q11 cash cost (US$12.52/oz). This was mainly due to:

1. A 9% increase in labor costs

2. Contractor costs rose 25% due to higher labor costs, which impacted unit prices, as well as a 39% increase of DDHH work.

La Zanja (53.06% owned by Buenaventura) total production in 3Q12 was 29,702 ounces of gold, a 24% decrease when compared to 3Q11 (39,262 ounces). This was in-line with the 2012 mining plan. Accumulated gold production in the first nine-month period 2012 was 83,718 ounces, 17% lower when compared to first nine-month period 2011 (101,333 ounces). Cash operating cost in 3Q12 was US$620/oz, 72% higher than 3Q11 (US$360/oz) due to a higher stripping as well as an increase in supply costs (mainly explained by an increase of reagent consumption and prices). These costs were in-line with the 2012 budget.

Tantahuatay (40.04% owned by Buenaventura) total production in 3Q12 was 39,194 ounces of gold (15,678 ounces attributable to Buenaventura). In the first nine-month period 2012, gold production was 105,929 ounces (42,372 attributable to Buenaventura). Cash operating cost in 3Q12 was US$326/oz.

At El Brocal(53.76% owned by Buenaventura), Zinc production in 3Q12 was 13,298 MT, a 5% decrease when compared to 3Q11 (14,025 MT). Silver production increased 22% from 1.0 million ounces in 3Q11 to 1.2 million ounces in 3Q12. Lead production was 4,816 MT, 3% higher than 4,693 MT reported in 2011. During the first nine-month period 2012, total zinc production was 34,949 MT, a 48% increase when compared to the 23,675 MT reported in 2011. In the case of silver, total production increased 16%, from 2.5 million ounces in 2011 to 2.9 million ounces in the first nine-month period 2012. Lead production in the first nine-month period 2012 was 12,329 MT, 30% higher than 2011 (9,504 MT).

Zinc cash costs was US$975/MT in 3Q11 compared to a negative US$458/MT in 3Q12. This was explained by a decrease in silver by-product contribution due to lower prices.

At Marcapunta, copper production was 3,754 MT, 17% lower than the 4,549 MT reported in 3Q11. For the first nine-month period 2012, copper production decreased 41% (15,944 MT in 3Q11 versus 9,438 MT in 3Q12). Cash cost at Marcapunta was US$6,754/MT in 3Q12 (vs. US$3,922/MT in 3Q11).

General and Administrative Expenses

General and administrative expenses in 3Q12 were US$22.9 million, 2% higher than the figure reported in 3Q11 (US$22.3 million). This figure included US$4.0 million in metallurgical research studies. For the first nine-month period 2012, general and administrative expenses were US$77.7 million versus US$58.8 million in 2011 (a 32% increase).

Exploration Costs at Non-Operational Mining Sites

Exploration costs at non-operational mining sites, which include care and maintenance, in 3Q12 were US$27.4 million, a 114% increase compared to the US$12.8 million reported in 3Q11. Buenaventura's main exploration efforts were focused at the Trapiche (US$5.1 million), Tambomayo (US$4.4 million), San Gregorio (US$4.0 million), Chancas/Focus (US$2.8 million) and Breapampa (US$2.1 million) projects.

Exploration costs at non-operational mining sites in the first nine-month period 2012 reached US$73.2 million, 106% higher than 2011 (US$35.5 million).

Operating Income

Operating income in 3Q12 was US$120.6 million, a 44% decrease compared to the US$214.0 million reported in 3Q11. This decrease was mainly due to a 27% increase in operating costs, while revenues decreased 5%.

For the accumulated first nine-month period 2012, operating income was US$331.6 million versus US$540.3 million in 2011 (a decrease of 39%).

Share in Associated Companies

During 3Q12, Buenaventura's share in associated companies was US$116.3 million, 8% higher than the US$107.7 million figure reported in 3Q11. Yanacocha's contribution to these results decreased 18%, from US$79.8 million in 3Q11 to US$65.1 million in 3Q12, while Cerro Verde's contribution increased 38% from US$31.8 million in 3Q11 to US$43.7 million in 3Q12.

For the first nine-month period 2012, Buenaventura's share in associated companies was US$374.3 million, 9% higher than the US$343.9 million reported in 2011.

YANACOCHA

At Yanacocha (43.65% owned by Buenaventura), 3Q12 gold production was 353,710 ounces of gold, 8% higher than 3Q11 production (328,411 oz). Accumulated gold production in the first nine-month period 2012 was 1,110,117 ounces, 16% higher than in 2011 (958,290 oz).

Costs applicable to sales (CAS) at Yanacocha in 3Q12 were US$539/oz, 15% lower than the figure reported in 3Q11 (US$633/oz) due to higher production and lower mining costs. Net income at Yanacocha in 3Q12 was US$150.5 million, 18% lower compared to the 3Q11 figure (US$183.3 million). Accumulated net income in the first nine-month period 2012 was US$550.8 million, 24% higher than in 2011 (US$443.1 million).

During 3Q12, EBITDA totaled US$316.1 million, a 3% decrease compared to 3Q11 (US$327.2 million). This decrease was mainly due to an increase in other expenses related to unexpected employee terminations. Accumulated EBITDA in the first nine-month period 2012 was US$1,055.9 million, 31% higher than 2011 (US$805.3 million).

Capital expenditures at Yanacocha were US$262.6 million in 3Q12 and US$822.9 for the first nine-month period 2012.

CERRO VERDE

At Cerro Verde (19.58% owned by Buenaventura), 3Q12 copper production was 69,150 MT, a 3% decrease compared to the figure reported in 3Q11 (71,255 MT). Accumulated total copper production in the first nine-month period 2012 was 200,775 MT, 12% lower than 227,622 MT in 2011.

During 3Q12, Cerro Verde reported net income of US$219.7 million, a 33% increase when compared to US$164.9 million in 3Q11. This was mainly due to a 22% decrease in sales revenues (US$575.0 million in 3Q12 versus US$470.1 million in 3Q11). Accumulated net income in the first nine-month period 2012 was US$625.9 million, 29% lower than US$875.8 million in 2011.

Capital expenditures at Cerro Verde in 3Q12 totaled US$148.8 million and US$400.8 in the first nine-month 2012 period.

CANTERAS DEL HALLAZGO (Chucapaca project)

At Canteras del Hallazgo (49% owned by Buenaventura), expenses attributable to Buenaventura totaled US$6.7 million, mainly due to social expenses (US$8.2 million in 3Q11). For the first nine-month period 2012, attributable expenses were US$20.1 million (US$21.3 million in 2011).

COIMOLACHE (Tantahuatay operation)

At Coimolache (40.04% owned by Buenaventura), attributable contribution was US$13.5 million (US$4.4 million in 3Q11). For the first nine-month period 2012, attributable contribution was US$31.4 million (US$3.5 million in 2011)

Net Income

Buenaventura's 3Q12 net income was US$185.6 million (US$0.73 per share), an 11% decrease compared to the US$208.7 million (US$0.82 per share) reported in 3Q11. Accumulated net income in the first nine-month period 2012 was US$545.6 million, 14% lower when compared to 2011 (US$631.0 million).

Project Development

LA ZANJA DEVELOPMENT PROGRAM

  • Pampa Verde Project will allow the development of a new open pit, an expansion of the current leach pad and improvements to the operation's road access. Construction began in 2Q11. The project's total investment is US$70.4 million. Completion is expected in 1Q13.
      
     Progress as of September 30, 2012
San Pedro Sur Leach Pad Stage II    100%
San Pedro Sur Leach Pad Stage III    22.34%
San Pedro Sur Waste Rock Deposit    100%
Pampa Verde Pit    60.00%
Pampa Verde Top Soil Deposit    30.00%
Pampa Verde Waste Soil Deposit    60.00%
Pampa Verde Acid Water Plant    75.00%
Pampa Verde Auxiliary Access    87.00%
Pampa Verde Waste Rock Deposit    70.00%
Pampa Verde Haul Road to SPS    70.00%
    

TANTAHUATAY DEVELOPMENT PROGRAM

  • The acid water dam was completed
  • Cienaga Norte project: The Environmental Impact Assessment approval is expected by the end of 4Q12.

PORACOTA - ULTRAFINE MILLING

  • The Poracota Ultrafine Milling project began in 1Q12. The project's total investment is US$4.5 million.
  • The objective of this project is to process material from Manto Aguila. Project completion is expected by the end of 1Q13.
      
     Progress as of September 30, 2012
Civil Work    58%
Structure Fabrication    100%
Plant Construction    0%
    

RIO SECO MANGANESE SULFATE PLANT

  • Buenaventura continued with the construction of the manganese sulfate plant. The project's total budget is US$ 90.0 million.
  • The project includes an acid leaching facility, a sulfuric acid production plant and a manganese sulfate crystallization plant.
  • Pilot tests for the leaching processing facilities are expected in 4Q12. The operation of the sulfuric acid and the manganese sulfate plant is expected in 1Q13.

BREAPAMPA

  • As of September 30, 2012, construction at the Breapampa Project was completed for a total budget of US$48.0 million.
  • Currently, the Company is waiting for water and operating permits.

HUANZA HYDROELECTRICAL PLANT

  • Construction progress at the Huanza Project included:

1. Water Conduction Tunnel: 10,074 meters of excavation was completed, representing 100%.

2. Powerplant: civil work was 90% complete.

3. Pallca Dam: 97% was complete (48,500m3 of concrete).

4. The construction of electromechanical equipment is nearly complete, and will be delivered on schedule. Equipment construction is 20% complete.

Other Information

At the Board of Directors meeting held October 30, 2012, the following resolutions were passed:

Declaration of a cash dividend of US$0.20 per share, or ADS, to be paid in U.S. dollars on November 30, 2012 to shareholders of record as of November 16, 2012.

Company Description

Compañía de Minas Buenaventura S.A.A. is Peru's largest, publicly traded, Precious Metals Company and a major holder of mining rights in Peru. The C

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