Compañía de Minas Buenaventura S.A.A. (BVN) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Compania de Minas Buenaventura Third Quarter 2026 Earnings Results Conference Call. [Operator Instructions] 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.

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss our third 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. Renzo Macher, Vice President of Projects; Mr. Jose Malca, Vice President of Sustainability; 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 the market close. Please note that today's remarks include forward-looking statements that are based on management's current view and assumptions. While management believes these 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 the forward-looking statements within the earnings results press release issued on October 29, 2026. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Sebastian. Good morning, everyone, and thank you for joining us today to discuss Buenaventura's Third Quarter 2026 results. Today, we will review our operational and financial performance and share our priorities for the coming quarters. After the presentation, we will be available to answer your questions during the Q&A session. Please go to Slide 2. In this slide -- this slide contains our cautionary statement and important information regarding forward-looking statements. I encourage everyone to review it carefully. With that, let's move to the operational and financial highlights of the quarter. The third quarter once again demonstrated the strength of our portfolio and the resilience of our business model. Starting with production. Consolidated gold production reached approximately 29,000 ounces, 6% lower than in the same period last year. Consolidated silver production was 3.4 million ounces, a decrease of 21%, mainly due to lower planned silver grades at Yumpag. Copper production increased 7% to 13,600 tonnes, supported by higher ore grade throughput at El Brocal. Turning to financial performance. Total revenues increased 27% year-over-year to $545 million. This increase was mainly driven by higher realized prices, together with higher copper sales volumes from El Brocal. EBITDA from direct operations increased 34% to $261 million, and EBITDA margin expanded to 48%. Net income increased 50% to $268 million. Our balance sheet continued to strengthen. We ended September with approximately $1 billion in cash and a net cash position of $307 million. As a result, our leverage ratio improved to negative 0.25x. This strong financial position also allowed the Board of Directors to approve an interim dividend of $0.5508 per share or ADS, reinforcing our commitment to shareholder returns. Moving now to operating costs. This slide shows the evolution of C1 cash costs across our key operations. Starting with Uchucchacua and Yumpag, silver cash cost reached $11 per ounce. The year-over-year increase mainly reflected the continued use of more selective OCF mining method at Yumpag, additional ground support requirements, the transition to an owner-operated fleet and lower planned silver grades. These effects were partly offset by stronger byproduct grades and lower commercial deductions. At El Brocal, copper cash cost was $5,474 per metric ton. This -- the increase mainly reflected higher cement consumption for tailings management, scheduled maintenance and the transition to owner-operated equipment. Importantly, copper production increased 7% year-over-year and operation reached a processing rate of 13,500 tonnes per day by the end -- quarter end. At Coimolache, cash cost declined to $1,103 per ounce, supported by higher payable gold production and stronger byproduct credits. Overall, we continue to focus on cost discipline, productivity improvement and stable operating performance across the portfolio. Next, let's review the progress of -- at San Gabriel. In Slide 5, please. During the quarter, we continued to advance the initiatives required to support the ramp-up. Mining activities continued throughout the quarter with the mining rate stabilizing at 1,700 tonnes per day by quarter end and generating an ore stockpile of approximately 100,000 metric tons. During the quarter, we also commenced undercut mining below cemented fill, and the ramp-up remains ahead of plan. Within the processing plant, the first phase of the filtration system reinforcement was completed during this quarter. Our focus is now on optimizing filter performance through the first half of 2027. Metallurgical recovery is expected to reach approximately 70% in the fourth quarter of 2026 this year. On the tailings side, filter tailings compaction also commenced during the quarter. The current facilities are expected to support throughput of 1,500 tonnes per day in the fourth quarter. Additional drying areas are expected to be completed by the second quarter of 2027, ahead of the next dry season. While the ramp-up has faced temporary processing constraints, we are addressing these challenges systematically and safely with a clear focus on reaching full operating capacity. Let me now turn to our strong cash generation during the quarter. The third quarter was marked by strong cash generation. Turning to cash flow, strong operational performance and $126 million in dividends received supported the $22 -- the $242 million of free cash flow generation in the third quarter. Consequently, we ended the quarter with a cash balance of $1 billion. This liquidity gives us significant flexibility to advance our growth projects, reinforce operational capabilities and continue returning value to our shareholders. Let me go on now to our closing remarks. Before we open the line for questions, I would like to highlight a few key messages from this quarter. First, San Gabriel. We are actively addressing the operational challenges we have identified, and our team remains fully focused on reaching full ramp-up. We are optimizing filter performance and improving recovery rates, while tailings storage capacity continues to ramp up. Second, our flagship operations. We continue advancing initiatives to unlock their full value. On the operational side, we are transitioning to an owner-operated mining fleet and increasing capacity at our mines. In parallel, we have increased our exploration budget, which allow us to extend life of mine, grow our reserves and the resources and develop near-mine targets. These 2 fronts complement each other, supporting both near-term efficiency and long-term sustainability. Third, preparing for El Niño. We have been working proactively on this front. We have already made significant progress. Our priority is the safety of our people and communities and the continuity of our operations. Finally, shareholder returns. This quarter, we distributed an interim dividend of equivalent to 20% of our net income for the first 9 months of 2026, reflecting our commitment to creating long-term value for our shareholders. The annual dividend will be proposed by the Board at its next meeting. Thank you, and we will now be happy to take your questions.

[Operator Instructions] The first question will come from Carlos De Alba with Morgan Stanley.

So first one is on San Gabriel. If you can give some color as to how the performance in October has been. Maybe you can comment on the mining rate, if you continue to be around the 1,700 tonnes per day or given the inventory that you have already accumulated, maybe you're slowing down a little bit. And similarly, on the processing plant, what is the rate at which that you have average in October? And just overall, do you see -- do you expect to see an improvement already palpable in the fourth quarter in terms of production and cost? Or this is something that we should maybe only see in 2027? And then my second question is on Trapiche. If you could maybe provide an update on the latest developments for that project? And also, would you consider developing Trapiche with a partner that maybe not only derisk the project from a financial point of view, given the size that it could -- the size of the CapEx for the project, but also maybe complement your expertise if you find someone that has open pit mining at altitude experience for copper extraction.

Thank you, Carlos, for your question. In general, we have advanced very well with San Gabriel. Juan Carlos should make -- give you more color about how we are going forward with recoveries and production. And in terms of Trapiche, of course, we are open to derisk the investment, evaluating the possibility to have a partner there. And the current state of the project, maybe Renzo could give you an advancing view of which is the current point of the project. Please, Juan Carlos.

Thank you, Leandro. Thank you, Carlos, for your question. Regarding San Gabriel, we are running now in the processing plant at an average of 1,400 tonnes per day. We are continuing with the ramping up of the processing plant. We expect to be running at about 1,700 tonnes per day in November, December. That should be the expected throughput for 2027. The processing plant by itself is not the constraint. The constraint is always downstream in the drying of the tailings and the compaction of the tailings. So that's going to be the bottleneck for 2027. Regarding gold recovery, October will reach something around 60%. We are ramping up to 65%, 69%, probably close to 70% along the quarter up to December. So that's the average that we will have as an entry point in 2027, 70% gold recovery for 2027. Probably more information on that. We will be giving more color about that in -- during the Investor Day, a couple of weeks down the road in New York.

Please, Renzo?

Yes. In regards to Trapiche, we have resumed some drills, about 20,000 drills (sic) [ 20,000 meters ], half of it for exploring the primaries and the other half to get new samples, new fresh samples to continue with the investigation on bioleaching to see if we can reduce the acid consumption. And we continue our work to derisk the project, advancing the engineering and permits for the access road and the power line, they are very important for the project.

The next question will come from Cesar Perez-Novoa with BTG Pactual.

Yes. Two questions. Coming back to San Gabriel with around 100,000 tonnes of ore stockpiled and the mining rates having stabilized at around 1,700 tonnes, what processing throughput should we expect by mid-2027? And what is the time line to reach nameplate capacity? Not the repairs, but the effective nameplate capacity and the effective production rates? And my second question is on El Brocal. You've reached 13,500 tonnes by the end of the third quarter, but grades and recoveries declined. How much additional production growth can come from throughput increases versus requiring grade improvement? In the press release, you also comment that cement consumption for tailings continues to pressure costs. Is this a temporary issue? Or should we expect the reported cash cost profile in the third quarter to persist into 2027?

Thank you, Cesar. Well, in terms of El Brocal, we are working on the expansion of throughput from 13,000 tonnes per day to 17,000 tonnes per day. However, the copper -- the refined copper -- the fines of copper will be almost the same in the long-term run. But in the case of San Gabriel, we are preparing our budget for the following year. We are expecting to have a throughput between 2,000, 2,500 at the end of '27, very close to the '28. And -- sorry, your last question, Cesar was around the tonnage of...

Yes. On San Gabriel, the nameplate capacity, which I assume would be late '27 or beginning '28 and then the production profile from gold ounces.

Yes. But maybe Juan Carlos can give you more color in the exact number of production.

Yes. The average -- thank you for your question. Yes, the average production for 2027 is going to be in the order of 600,000 tons, the whole year 2027. And in 2028, we expect to be around 800,000 tonnes per year. But at the end of 2028, we expect to reach nameplate capacity. Again, the problem is not in the processing plant. The bottleneck is actually in the capacity of the drying areas and also the available area in the dry stacking in order to compact the whole production in an organized way. So we need to have more available area. Remember that the tailing dam in the case of San Gabriel is dry stacking, and we are starting right now at the bottom of a V-shaped valley. So we have a very small area at the bottom. And as long as we are making the compaction of the tailings, we will move step-by-step upwards and gain more available area for compaction. The more area translate into more capacity for compaction or more tons of tailings to be compacted. So we will be reaching the full nameplate capacity by the end of 2028.

[Operator Instructions] The next question will come from Tanya Jakusconek with Scotiabank.

I just wanted to finish off on San Gabriel. Maybe someone can just update me on what the ultimate recovery is expected. Is 70% what we're getting? It seems a bit low. So maybe what the ultimate recovery is and how do we get there? And then the second thing I want to have an update on San Gabriel is how is the structure of the tailings facility? How's the repairs going? And are we on track to repair the structure?

Thank you, Tanya. Juan Carlos, please.

Yes. The expected recovery for San Gabriel, gold recovery, is in the order of 85%. We are ramping up. We are doing all the -- we are -- we have been needed to add additional reagents to facilitate the cyanidation process. So we are in the process of implementing that right now as of today. And that's the reason we are ramping up to 70% by December. The gap to reach 85%, it's an ongoing process. Probably we need to add additional circuits to our flow sheet in order to achieve that number. That has to be tested. It's something that we have preliminary results so far, but we believe we are going to be reaching that in 2028. So it's going to take a little bit more of time to get not only to full nameplate capacity throughput, but also to reach the full project expected recovery of gold for gold. Regarding the repairs for the press filters, we are ongoing with the preliminary repairs. We started by the end of September with these works for repairing the 2 of the 3 filters. We expect to have all the 3 filters set up, repaired and with the supports, the steel and concrete support, ready by April, May next year. So at that time, after the rainy season in Peru, we will have our 3 press filters for tailings ready for production.

Okay. And can you remind me when you get to steady state, which nameplate capacity in 2028, what do you expect your mining cost per tonne to be? And what would the production level in ounces be?