Compañía de Minas Buenaventura S.A.A. ($BVN)

Good morning, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura First Quarter 2026 Earnings Results Conference Call. [Operator Instructions]. And please note that this call is being recorded. I would now like to introduce your host for today's call, Mr. Sebastian Valencia, Head of Investor Relations. Mr. Valencia, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our first quarter 2026 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, Vice President of Geology and Exploration; Mr. Roque Benavides, Chairman; and Mr. Raul Benavides, Director. Before I hand the 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 these assumptions, expectations and projections are reasonable in view of the current available information, you are cautioned not to place under reliance on these forward-looking statements. I encourage you to remit the full disclosure concerning forward-looking statements within the earnings results press release issued in April, on April 29, 2026. Let me now turn the call over to Mr. Leandro Garcia.

Thank you, Sebastian. Good morning, and thank you for joining us today to discuss the quarterly results of the company. On Slide 2 is our cautionary statement, important information that I encourage you to REIT. Today, we will talk about our first quarter 2026 performance. our main achievements and our priorities for the future. After the presentation, we will be available for Q&A session. We where our team will be happy to answer your questions. Next slide, please. I will start with a summary of our operational results for the quarter, follow by an update on our permitting status. Gold production was 30,000 ounces, up 80% year-over-year, mainly due to the ramp-up operations at San Gabriel. As production volumes continue to ramp up, the company expects to begin recovering sales in the second quarter of 2026. Silver production reached 3.9 million ounces, up 6% year-over-year compared to 3.7 million ounces in the same period last year. This increase was mainly driven by higher production at El Brocal. The result is in line with the mine plan for the quarter with focus on processing ore that had been previously classified as low-grade silver ore. Uchucchacua and Tombomayo also contributed to this result. At Uchucchacua, production increased due to higher throughput and higher silver content. At Tambomayo, production improved as we prioritize higher grade ore from the upper sections of the mine. Copper production in this first quarter reached 10.9,000 tons, down 11% year-over-year. This decrease was mainly driven by lower production at El Brocal as we focus on processing silver ore. Turning now to permitting. I will briefly review the permits received. During the first quarter of 2026, we received Stage 1 of the operating permit for San Gabriel. This approval authorizes us the start of operations to process and commercialize the mine for. Also at San Gabriel in April 2026, we received the water use license. This permit allows the storage and use of water at the Agani dam. At Yumpaq, the second ITS received in the second quarter of 2026, allows us to increase our extraction to 12,000 tonnes per day. In addition, we expect to receive the mine plan modification in the third quarter of 2026, as planned, which is required to achieve this level of production. At El Brocal, the first ITS approved in the first quarter of 2026 increases mine extraction capacity to 17,000 tonnes per day, in line with the company's medium-term strategy. Finally, Trapiche, the Environmental Impact Assessment approved in the first was approved in the first quarter of 2026. This permit provides environmental certification for the construction and operation of the project. Overall, this permitting milestones help and low capacity support ramp-up and increase operational certainty across our portfolio. Moving on the next slide, I would like to summarize our first quarter results, starting with revenues. Total revenues reached $625 million in the first quarter. more than doubling year-over-year, reflecting stronger operating performance and a more favorable market environment. Looking at EBITDA from direct operations, we achieved $386 million, more than 3x higher year-over-year with margins improving from 41% to 62%. And stronger operations resulted in a net income of $355 million, 142% year-over-year increase. On the capital allocation side, this quarter totaled $81 million, mainly focused on San Gabriel, alongside sustaining investment and Trapiche aligned with our growth priorities. After the quarter end on April 2026, Buenaventura received $59 million in dividends from its stake in Cerro Verde. Total dividends received year-to-date 2026 amounted for around to $157 million. Finally, all of this is reflected in our balance sheet strength. The quarter ended with a cash position of $760 million and a total debt of $708 million, resulting in a net cash positive position. Moving on the cost applicable to sales starting with the corporate cash, changes are mainly explained by developments at El Brocal, where we see higher personnel costs. These are mainly driven by increased workers' profit trading provisions, reflecting improved profitability. In addition, higher cement consumption and foreign exchange impact affected cost. These effects were partially offset by improved commercial terms. Silver cash increased due to higher personnel costs. personnel costs, together with higher commercial deductions related to escalators, mainly at Uchucchacua in June. Gold Cash increased versus the same period last year due to higher personnel costs, lower throughput, reducing scale efficiencies and higher exploration costs at Orcopampa and Tombomayo. On the next slide, we highlight our strong free cash flow generation in the first quarter of 2 solid operating performance supported by dividends received allow us to close the quarter with a cash position of $760 million. To conclude the presentation, I would like to share a few final thoughts. First, San Gabriel entered the ramp-up phase during the first quarter of 2026 and began contributing to Buenaventura's results in line with expectations. Number two, -- we continue to make progress on permitting or regulatory approvals across the portfolio, supporting the disciplined execution of the company's long-term strategy. Third, execution across the portfolio remain consistent, delivering predictable results are reinforcing balance sheet strength and financial flexibility. Finally, cash generation remained robust and well diversified across direct operations and affiliate companies supported by continued inflows from several. 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 Instructions]. The first question today comes from Carlos De Alba with Morgan Stanley. Your line is now live. Please ask your question.

Thank you. Good afternoon, everyone. So I have three questions, if I may. The first one, can you provide more color and details on how San Gabriel ramp-up is going? What are the challenges might be bottlenecks that you are facing at this stage? And what is the expected output for the second quarter at San Gabriel? The second question is on Trapiche strategy. Clearly, you've got now the environmental approval you have a very strong balance sheet. Have you decided if you are going to pursue this project and build it on your own? Or is doing it together with a partner is more likely. And then finally, on dividends, what are the expectations for further dividend from Cerro Verde in addition to the ones that you have received today, including the $59 million in April. Thank you.

Thank you, Carlos, for your questions. Well, in beginning for the -- for the first question about San are. As you know, we are in the first stage of the ramp-up, we have challenges. But up to now, we are in line with expectations. Maybe Juan Carlos Ortizs can give you more details about how we are going with San Gabriel. Please, Juan Carlos.

Sure, Leandro. Thank you, Carlos, for your question. The problem that we have in the first quarter in San Gabriel were related to the conclusion of the commissioning, the training of our team and starting to run all the machines as a sequence of a system, right? It's a crushing, milling, elevation filtration of the [indiscernible]. So we have some progress in that regard. We are almost finishing with all the commissioning part, the mechanical assurance that everything is in place. Now we are training our people and start doing the tuning of every single sir. For instance, we have some challenges with the high moisture of the ore getting a stick in the conveyor belt for the crushing secret. This is going to be solved in the coming weeks. First because we are entering the right season and two, because we are changing the system to remove the plays in the screening of the crushing ship. There in the milling circuit. We have some function of electronic device. We already found the trouble, and we switched the that is that part with a new one. So we are running okay right now with the grinding mill incentivation from the mechanical point of view, we have a small challenge like the speed of the pumps and some resizing of some small boxes. So to avoid any potential to avoid potential filling of lari. And in the filtration part, we are pretty much a 50% delivery from the vendor. We finished all the commissioning part, and now we are putting the enterprises to filter the tails with a 50% program. We are running with 8 bars of pressure. We are moving step by step up to reach the 14 bars is considered in the design. So that's from the press in the processing plant in the tailing down, we are starting right now in second half of May, we will start putting the tailings out of the temporary reservoir start to drive the tailings and probably you will start placing the tailings in the tailing down. So that's going to be the first time we do that in San Gabriel. We anticipate some training process to be transferred to the team from the time of Tambomayo to the Trapiche to do exactly what we learned to do in Tombomayo, how to drive the tailings, how to renew the mosture, how to place the tails in the tail reservoir and how to compact those days. So that's exactly the agenda of the second quarter stage that we have, we expect to solve most of the majority of the most sensitive issues for the throughput and from the mechanical availability of the producing plant in the second quarter. And as we anticipated earlier previous conference call, the main constraint will be the area that we have available in Italia is a ruble, and we have started working at the bottom of the ballot. So we don't have that much area available. Everything call live we compacted, we gained additional areas. So gradually, we will increase tonnage as an average. We expect to finish 2,000 tonnes per day by the end of December 2026 and reached full capacity 3,000 tonnes per day by the end of 2027. So that's pretty much what we're doing right now, Carlos.

Yes. Going back to the -- your second question about -- we are far from that decision. If we go alone or we call for a partner to construct and to develop that project. We are in stage of investigating all geotechnical, more drillings we need. Maybe Renzo can help us what we are facing this year and the following 2 years until we reach the feasibility study. Please, Renzo, go ahead.

Sure, Carlos. We're going to be continue derisking the project in regards to asset consumption, asset pricing and asset logistics does not to be one of our main goals to continue exploration of the primary -- and we're going to be starting -- as we finish the environmental impact assessment study, we're going to be starting with the next permit or the next social permit, which is the previous consultation from this place.

Carlos, going back to your question about dividends from Sorowar. Well, we foresee an excellent year for Sorowar. The operations are going as planning. And that we don't have dividend payment policy, but I think this year in cash generation, will be extremely good. But we have some expectations, Daniel, please.

Leandro, thank you, Carlos, for your question. Yes, as Leandro was saying, [indiscernible] will generate a lot of cash this quarter or this year. considering that the price of copper is over $12,000 per ton. We expect [indiscernible] to generate in excess of $2.5 billion of EBITDA. They have small CapEx, $350 million to $400 million. In taxes, they should be paying around $1 billion. We don't have any debt -- so the free cash flow for this year in Cerro Verde, considering the current prices for copper should be in the order of $1.2 billion to $1.3 billion. They already have cash in their balance, the minimum cash required for the operations. So they should be distributing around $200 million to $200 million to intra from which they have already distributed $160 million from January to April.

The next question comes from Tanya Jakusconek with Scotia Bank.

Great. Good afternoon, everybody. I wanted to follow back on San Gabriel. I appreciate all of the hard work you're doing on getting the ramp-up and there's always something going on mechanically and other. But I must say I am surprised about the clay in the ore I didn't realize that there was play in the ore. Can you just remind me what exactly what minerals do you have? And how are you removing this? And are you surprised you have play in New York?

Yes. We will have two types of claims. I don't know if [indiscernible] properly, but it's one more year or [indiscernible] that's a kind of expansive trade that we have in the deposit varies from 1% to 8% in different places of the deposit. When we transfer the ore from the mine. So when we track the ore from the mine, we will usually have between 4% to 5% more, no more than that. But we will put the ore in the stockpile surface during the rainy season, the most can go up to 40%, only for the rating coming down into the stockpile. And this play because it's an expensive selling play, I think that's a technical term. generate a lot of problems in the crushing curette because it's very sticky. And start getting into the boxes in between the tannery point of the crusher into the conveyor belt or at the end of the convert belt, either stockpile or into the stockpile into the figures to the mill. The solution to that -- there are two things that we are analyzing, using screen that you use water, so we can spray water on top of the ore while is passing through the surface of the screen to remove the flat fraction. That's one option. It's not going to take that much time. And the other is you see what we're using Brocal or where we use also can, that's a drum where we have like screen around the surface of the drum. So we can wash the reset travel tho the run. That is something that we're using Brocal for many, many years when we process the ore from the open pit. And also we use that in [indiscernible] because the ore the ground also has -- depending on the area that might have a high convened complicated questions he would -- so that's going to be the solution for the play areas. Underground for the next rainy season that is starting in December, January next year.

Is this play consistent throughout the ore body or is it just in patches. And have you seen -- like once you get it through the crushing circuit and through the conveyor, does it negatively impact your recoveries.

No, it's not impacting tile recovery. We need to make a little adjustments in the density of the slurry in order to reduce the cost. We go to 1,400 grams per liter the cast goes too high. So we need to go down to 20, 1,320 grams per liter. So in order to have a fluid slurry. That have all the geological properties as has been designed and the interaction between the cyanide, the gold and the activated carbon works as flat. So it's not sensitive issue is also something that we need to find a way, how operatively treat this material whenever we are bringing that into the processing plant.

Okay. And sorry, did you answer if it's all over the ore body? Or is it in specific areas?

We are studying that because we have a detailed distribution of. We have information, but we have not developed a model of clay distribution in deposits. We have a distribution of coal silver, cargo, organic carbon, but we don't have a distribution of play. So we're working on that because we have the information in the login record. So we are building that model in order to make probably a blending and try to avoid being over, let's say, 6% total place into the feeling of the processing plant. Right now, we have certain days were maybe sometimes 9% place. That's when we start getting problems along with the resistant is not going to be a problem.

Okay. And the second, maybe someone can answer for me. As you're aware, with the volatility of oil prices and other things going on around the world. I just wanted to understand how you in Peru are managing supplies coming in country. And I just want to understand whether you are seeing any constraints in getting supplies into country and/or to your mine site like we did in COVID, are you planning to increase your working capital or stockpile selective consumables. So maybe just where are you seeing any pressures on the supply chain front for your company, if any?

Daniel?

Thank you, Leandro. TnnyaTania, we are not -- we have not seen any major disturbance or problems in the supply chain. Diesel has increased price rather than being difficult to get more diesel. The price has increased 50%. And also this component, the diesel is around 5% of the total OpEx that we have. So the percentage of increase in our costs is around 2% to 2.5%. We think that this will be the case for the entire year. Regarding the other supplies like cyanide or sulfuric acid. We don't see any problems in the supply of these reagents or supplies. We have in our minds, the 1 month of stock for the continuous operation. And also in Lima, in the port of Kayao, we have an additional 3 months for our critical supplies. So we don't foresee any problems with any supplies.

So Daniel, it's not a supply issue getting to side is more a cost issue of just going to cost you more.

Yes, exactly.

Okay. And then my final question, if I can, and someone in the team wants to take this, maybe for us sitting in North America. Just a flavor of -- with the elections going on, what is happening in Peru from both a fiscal regime and maybe social as well with new leader in place. Can someone give us some insights into the politics of that [indiscernible].

Thank you, Tanya. Well, finally, the two candidates that will pass for the value for the [indiscernible] are not finally defined. [indiscernible] is for sure there, but still counting the votes for [indiscernible]. But the important thing here is the new composition of the Senate and the deputy camera. If you see those results, you will appreciate the distribution that is more center and center right. We do not foresee any changes in legislation. Of course, there will be some demand. But I think the -- we feel comfortable how the new -- this new Congress has been elected. That will guarantee some kind of piece in terms of new ideas or new things that they normally the social unrest can ask. But -- and the campaign has been quite EC has not been much we might problems in the regions. So we are confident that the business area and business performance will go ahead well in the following years.

So can we assume that there's no changes to taxes and/or royalties?

There should be some voices that would ask, but I don't think that the composition of the Congress, the new Congress will pass that call.

Okay. And what about on the permitting front, is there the potential for this new government to make permitting and getting permits a lot easier?

Well, if depends on who is finally the winner. We try always to communicate the difficulty and the bureaucracy and the length that it takes to be granted a permit. So it's a common ask from the mining sector and from the investor sector to facilitate the granted on permitting, right? We all hope, right?

[Operator Instructions]. The next question comes from Cesar Perez-Novoa with BTIG.

Yes. Going back to the San Gabriel contained Clay. If I heard correctly, when you incept the screen mass panel, which I think it's what you're going to use, will that have an impact over OpEx at the mine, and will this have any additional CapEx spend? I guess not, but I want to confirm if this is technically feasible or not?

Well, the -- we're in the stage of developing the options. As I mentioned, we have two options to have what we call Banana screen. That's something that has a shape with a higher low at the beginning. And then you watch quite -- that machine cost in the order of $300,000, probably at a rule of thumbs, 3 to -- the total CapEx for that piece of machine has been working on site is around $1 million. That wouldn't be the additional cap we need to incur to be sure that credit note to be a problem in the crushing and right sequin the future. From an operating point of view, maybe now $0.10 per ton. That's a very, very small additional cost that we expect to run these additional sequence in San Gabriel. So it's more of the CapEx of the year, an additional $1 million to add this component to the flow sheet of the processing plant.

Okay. No, that's very clear. It's essentially a relevant cost for the incremental spend.

Thank you. SP1 Ladies and gentlemen, with that, we will be concluding today's audio question-and-answer session. I would like to turn the floor back over to Sebastian Valencia, Head of Investor Relations for any webcast questions.

Thank you, operator. The fourth question comes from Jorgen Rosano from Calpasac. We have seen some cost pressures related to personnel expenses. Is this something you expect to continue through the year? And could you provide more color on the main drivers behind this increase and whether it's related to wage adjustments, higher headcount, contractor costs or [indiscernible] of San Gabriel.

Sorry, the increase in the costs related to personnel is coming from the higher workers' profit sharing. We -- as we are having higher profits in Buenaventura and in Brocal, we have to pay more pro-worker profit sharing, so it has increased from $2.5 million last year to almost EUR 19 million this year. But this is most of these go to the cost of sales in the -- for each mine and also it goes to the administrative expenses. And in terms of wages, there have been no major increases. We have increased only with the inflation rate. And in terms of head count, in the mines, specifically El Brocal and Uchucchacua, we had additional operators for the new equipment, but these have not made a big difference compared to last year. So basically, the difference is because of the higher workers' profit sharing.

Thank you, Daniel. And the final question comes from [indiscernible] Buenaventura policy is still to remain in hedge in copper, gold and silver?

Yes, Sebastian. Yes, our policy right now really, we can't hedge, but we prefer not to hedge. We will go with the market. probably everybody is aware we have a lot of problems with [indiscernible] the past for some hedging. And as far as I know, any outage from Sun of the mining companies is positive, and we prefer not to hedge for the time being.

Thank you, Leandro. At this time, there are no further questions. I would like to turn the call over to the operator.

That concludes the question-and-answer session of today's conference call. I would like to turn it back over to management for closing remarks.

Thank you, and after -- before we finish, I want to thank Alejandro Hermoza, Vice President of Sustainability, that this is his last conference call with us. He has been with us almost 25 years. He has been an important pillar of this team. And of course, we foresee continued -- Alex, to be a continued part of our family. And doors always are open, and we will miss a couple of coffees with you. Thank you, Alex for all your effort and the best for you in this new stage. And for all our -- for all that we are with us today. I would like to thank for your time and effort dedicated to joining us. Your participation and input are greatly appreciated. Thank you again, and have a wonderful day.

Ladies and gentlemen, that concludes Buenaventura's First Quarter 2026 Earnings Results Conference Call. We would like to thank you again for your participation. You may now disconnect.