Compania de Minas Buenaventura Announces Fourth Quarter 2006 Results
3 March 2007
Compania de Minas Buenaventura S.A.A. ("Buenaventura" or "the Company") (NYSE: BVN); (Lima Stock Exchange: BUE.LM), Peru's largest publicly traded precious metals mining company, announced today its results for the fourth quarter of 2006. All figures have been prepared according to Peruvian GAAP and are stated in U.S. dollars (US$).
Comments from the Chief Executive Officer:
Mr. Roque Benavides, Chief Executive Officer of Buenaventura stated: "We are pleased to report a very good performance from our direct operations for the quarter. As a result, operating income was US$108.7 million, 328% higher than the figure recorded in 4Q05. This increase was explained by higher sales revenues, which partially offset the lower contribution from non-consolidated affiliates.
"Net income in 4Q06 was US$78.8 million, or US$0.62 per ADS, which represents a decrease of 19% when compared to 4Q05.
"EBITDA from Buenaventura's direct operations was US$110.1 million, 190% higher than the figured achieved in 4Q05."
In 4Q06, net sales were US$179.3 million, a 122% increase when compared to the US$80.7 million reported in 4Q05 mainly due to higher volumes of silver, lead, zinc and gold sold, as well as an increase in the realized prices of zinc, silver and lead.
Royalty income during 4Q06 totaled US$9.2 million, a 41% decrease when compared to the US$15.8 million reported in 4Q05. This was due to lower sales at Yanacocha.
Accumulated net sales for 2006 were US$548.1 million, a 93% increase compared to 2005 (US$283.4 million). Accumulated royalty income was US$48.5 million, a 5% increase when compared to US$46.1 million in 2005.
Buenaventura's equity production[1] during 4Q06 was 100,394 ounces of gold, 10% higher than the 91,138 ounces reported in 4Q05; and 4,156,784 ounces of silver, a 20% increase when compared to the 3,478,239 ounces reported in 4Q05.
Equity production[1] for the accumulated twelve-month period was 405,383 ounces of gold and 15,450,953 ounces of silver. This represented an increase of 13% in gold production (359,968 ounces in 2005) and a 15% increase in silver production compared to 2005 (13,482,293 ounces).
At Orcopampa (100%), total gold production in 4Q06 was 65,624 ounces, an 11% increase when compared to the 58,948 ounces reported in 4Q05 mainly due to a higher grade. Accumulated gold production was 254,631 ounces, a 9% increase when compared to 2005 (233,182 ounces).
Cash operating cost during 4Q06 was US$155/oz, 8% higher when compared to 4Q05 (US$143/oz). This was best explained by an increase in tunneling and diamond drilling, as well as higher reagent prices for the cyanidation plant. Cash operating cost for 2006 was US$145/Oz, 7% higher than the figure reported for 2005 (US$135/Oz).
Total royalties paid to the government at Orcopampa in 4Q06 were US$0.7 million. For 2006, royalties totaled US$2.1 million.
At Uchucchacua (100%), total silver production during 4Q06 was 2,458,477 ounces a 2% decrease when compared to 4Q05 (2,513,737), mainly due to lower grade (15.2 Oz/ST in 4Q06 versus 16.8 Oz/ST in 4Q05). Accumulated silver production was 9,692,300 ounces, a 5% decrease when compared to 2005 (10,213,933 ounces).
Cash operating cost in 4Q06 increased 52% from $3.65/oz in 4Q05 to US$5.55/oz. This was best explained by:
1. Higher contractor expenses for ventilation facilities (Raise Borer and
Raise Climber), in the Huantajalla area, which was completed in
December 2006
2. Higher reagent consumption for the new cyanidation plant
3. Higher royalties paid to the government
4. Lower silver content due to lower silver grade
Cash operating cost for 2006 was US$4.50/Oz, 39% higher than the figure reported for 2005 (US$3.23/Oz).
Total royalties paid to the government at Uchucchacua in 4Q06 were US$1.03 million. For 2006, royalties totaled US$2.7 million.
At Antapite (100%), total production in 4Q06 was 24,444 ounces of gold, a decrease of 5% when compared to 4Q05 (25,787 ounces), mainly due to a 6% decrease in the gold grade from 0.59 Oz/ST to 0.56 Oz/ST. Accumulated gold production was 103,370 ounces, in-line with 2005 production.
Gold cash operating cost in 4Q06 was US$291/Oz, a 35% increase when compared to US$216/Oz in 4Q05. This increase was due to:
1. The lower gold content due to lower grade
2. Higher diesel consumption for thermal energy generation and an increase
in reagent prices for the cyanidation plant
3. An increase in contractor expenses for operational maintenance
Cash operating cost for 2006 was US$246/Oz, 18% higher than the figure reported for 2005 (US$209/Oz).
Total royalties paid to the government at Antapite in 4Q06 were US$0.26 million. For 2006, royalties totaled US$0.7 million.
At Colquijirca (34.29%), total zinc production was 18,906 MT in 4Q06, a 17% increase when compared to the 16,147 MT reported in 4Q05 due to an increase in tonnage treated despite the lower grade. Total silver production during 4Q06 was 3,044,927 ounces, a 95% increase when compared to the 1,565,409 ounces reported in 4Q05 due to a significant increase in the ore grade, as well as higher ore treated.
For 2006, total zinc production was 65,700 MT, a 15% increase when compared to the same period of 2005 (57,151 MT). In the case of silver, total production increased 134% from 4,394,940 ounces in 2005 to 10,269,511 ounces in 2006.
Zinc cash operating costs for 4Q06 was a negative US$190 per MT due to a significant silver and lead by-product credit contribution. For 2006, cash operating cost was US$233 per MT, a 64% decrease when compared to the US$643 per MT reported in 2005.
Total royalties paid to the government at Colquijirca in 4Q06 were US$2.9 million.
General and administrative expenses for 4Q06 were US$11.1 million, a 4% decrease compared to the US$11.5 million reported in 4Q05. Accumulated general and administrative expenses for 2006 were US$36.6 million, a 6% increase when compared to the US$34.4 million reported in 2005.
Exploration costs in non-operating areas during 4Q06 were US$11.9 million, a 41% increase compared to the US$8.4 million reported in 4Q05. The main efforts were focused at the Marcapunta, La Zanja and El Milagro projects. Accumulated exploration costs in non-operating areas during 2006 were US$36.2 million, a 30% increase when compared to 2005 (US$27.8 million).
Operating income in 4Q06 was US$108.7 million, a 328% increase compared to the US$25.4 million reported in 4Q05. This result was mainly due to the 92% increase in operating revenues, which largely offset the increase in the total cost of operations and operating expenses.
For 2006, operating income was US$317.3 million, a 218% increase when compared to the US$99.7 million reported in 2005.
Buenaventura's income from non-consolidated affiliates was US$43.0 million in 4Q06, a decrease of 66% when compared to the US$125.0 million reported in 4Q05. This decrease is explained by the lower contribution from Cerro Verde (US$18.9 million) and Yanacocha (US$25.3 million). For 2006, income from non- consolidated affiliates was US$313.2 million, an increase of 19% compared to the US$264.0 million reported in 2005.
At Yanacocha (43.65%), 4Q06 gold production was 456,032 ounces of gold, a decrease of 57% when compared to 4Q05 (1,064,371 ounces). Gold production for 2006 was 2,612,199 ounces, a decrease of 22% when compared to the 3,333,088 ounces reported in 2005. For 2007, the Company estimates full-year production of 1.6 million ounces.
Cash cost at Yanacocha during 4Q06 was US$261/oz, which represented a 75% increase compared to a cash cost of US$149/oz in 4Q05. This is explained by the decrease in gold production due to lower grade, an increase in the price of diesel, cyanide, lime and other commodities, as well as higher worker participation and royalties to third parties. For 2006, cash cost was US$202/oz, a 35% increase when compared to 2005.
Net income at Yanacocha during 4Q06 was US$58.1 million, a 72% decrease when compared to the 4Q05 figure (US$204.8 million). For 2006, net income was US$525.4 million, similar to the figure reported in 2005.
In 4Q06, EBITDA was US$113.6 million, a decrease of 68% compared to 4Q05 (US$351.7 million). This decrease was due to the lower volume of gold sold despite the higher realized gold prices, which increased from US$484/oz in 4Q05 to US$614/oz in 4Q06. Accumulated EBITDA for 2006 was US$930.2 million, a decrease of 2% when compared to the US$950.9 million reported in 2005.
CAPEX for 4Q06 was US$87.9 million, a 45% increase when compared to US$60.5 reported in 4Q05, mainly devoted to the construction of the Gold Mill to treat transitional ore.
At Cerro Verde (18.50%), 4Q06 copper production was 29,736 MT, a 24% increase when compared to 4Q05 (24,072 MT). For 2006, copper production totaled 100,573 MT, 8% higher than the figured reported in 2005 (93,550 MT).
In 4Q06, net income reached US$101.9 million, a 10% decrease compared to 4Q05 (US$113.6 million), best explained by the US$40 million expense related to the construction of a water treatment plant as part of the agreement between the Company and the Committee for the Defense of the Interests of Arequipa. For 2006, net income was US$444.6 million, a 90% increase compared to 2005 (US$233.4 million).
Net sales at Cerro Verde increased 52% from US$118.9 million in 4Q05 to US$181.1 million in 4Q06. Accumulated net sales for 2006 were US$667.7 million, an increase of 86% compared to 4Q05 (US$358.9 million), mainly due to higher realized copper prices (US$3.21/Lb in 4Q06 versus US$1.95/Lb in 4Q05).
CAPEX for 4Q06 totaled US$110.1 million, of which US$80.8 million was allocated to the completion of the Primary Sulfide Project. We expect full capacity operations prior to the end of first half 2007.
This quarter, Buenaventura's net income was US$78.8 million, representing US$0.62 per ADS, a 19% decrease when compared to the US$96.7 million reported (US$0.79 per ADS) in 4Q05. This was mainly due to lower contribution from non-consolidated affiliates. This figure includes a provision of US$1.8 million for the "Voluntary Contribution for Social Responsibility."
Accumulated net income for 2006 was US$428.1 million (US$3.36 per ADS), an increase of 48% when compared to US$288.4 million (US$2.27 per ADS) in 2005.
The total hedge book mark-to-market value as of December 31, 2006 was a negative US$585.66 million (US$526.4 million as of September 2006).
Per a filing with the SEC in January 2007, the Company restructured its hedge book.
Greenfield and Brownfield exploration expenditures during 2006 totaled US$ 36.2 million, of which US$10.2 was spent on the acquisition and maintenance of properties. Buenaventura directly controls 286,845 hectares, and through joint ventures or lease/option agreements an additional 119,597 hectares for a total of 406,442 hectares, excluding our own operations, Cerro Verde and Yanacocha.
Exploration projects currently being licensed for start-up of new mining production in 2007 are Marcapunta by Soc. Minera El Brocal, and Pozo Rico and Poracota by Buenaventura. Minera La Zanja has successfully concluded its exploration program and will complete its environmental impact study and seek permitting to construct two open pits, and a heap-leach facility in 2008 for the Pampa Verde and San Pedro Sur deposits.
During 2007 our exploration focus will be centered on the oxide-gold prospects of Tantahuatay and Breapampa, the silver-rich, base-metal deposits of Hualgayoc, Mallay and El Milagro, and the copper (molybdenum) porphyry at Trapiche. Detailed programs and budgets await approval, but expenditures in the order or US$ 20.0 million are anticipated.
UCHUCCHACUA
-- During 4Q06, the deepening of the Master Shaft reached level 3990
(67% of the total), where a sub-station for shaft equipment is
currently under construction. From this level, two ramps are being
developed in the Carmen and Socorro mines, which are expected to reach
level 3920 during 1Q08. As of December 2006, investment was
US$3 million out of a budget of US$10.3 million.
-- As of January 2007, the Pozo Rico project commenced operations
contributing 5.3 million silver ounces to the Uchucchacua mine
reserves.
ORCOPAMPA
-- The deepening of the Prometida and Nazareno mines at level 3340 is
currently in its final stage, which includes an integration adit and
ventilation facilities. This project is expected to be completed by
the end of 2007. The project will improve the communication and
transport or both personnel and materials between the mines. Total
investment for this project is expected to be US$6.6 million.
-- The expansion of the treatment plant to increase capacity from 1,200 MT
to 1,800 MT is currently in the testing stage, treating small amounts
of Poracota ore material. This facility will permit a good assessment
of Poracota's ore metallurgical behavior. Total investment as of
December 2006 was US$4.6 million.
ANTAPITE
-- The expansion of the Tailing Dam to increase capacity by 1.2 million
DST (five additional years) began in May 2006, and is expected to be
completed by the end of 2007, with a budgeted investment of US$7.9
million (US$2.2 million expended as of December 2006).
At the Board of Director's meeting, held February 28, 2007, the Board passed the following resolutions:
1. Approval of the financial statements as of December 31, 2006.
2. The calling of the Annual Shareholders Meeting to be held on March 28,
2007
3. Proposing a cash dividend of US$0.37 per share or ADS to be paid in
U.S. currency.
For a full version of this release, please visit http://www.buenaventura.com.pe
Company Description
Compania 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 Company is engaged in the mining, processing, development and exploration of gold and silver and other metals via wholly owned mines as well as through its participation in joint exploration projects.
Buenaventura currently operates four mines in Peru and also has controlling interests in four mining companies as well as a minority interest in several other mining companies in Peru. The Company owns 43.65% in Minera Yanacocha S.R.L. (a partnership with Newmont Mining Corporation) which is one of the most important precious metal producers in the world and 18.50% in Sociedad Minera Cerro Verde S.A.A, an important copper Peruvian Company.
Note on Forward-Looking Statements
This press release may contain forward-looking information (as defined in the U.S. Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including those concerning the Company's, Yanacocha and Cerro Verde's costs and expenses, results of exploration, the continued improving efficiency of operations, prevailing market prices of gold, silver, copper and other metals mined, the success of joint ventures, estimates of future explorations, development and production, subsidiaries' plans for capital expenditures, estimates of reserves and Peruvian political, economical, social and legal developments. These forward-looking statements reflect the Company's view with respect to the Company and Yanacocha's future financial performance. Actual results could differ materially from those projected in the forward-looking statements as a result of a variety of factors discussed elsewhere in this Press Release.
[1] Production includes 100% of operating units, 100% of CEDIMIN and
34.29% of El Brocal
Contacts in Lima:
Roque Benavides / Carlos Galvez
Compania de Minas Buenaventura S.A.A.
Tel: (511) 419-2538 / 419-2540
Investor Relations: Daniel Dominguez
Tel: (511) 419-2536
Email: ddominguez@buenaventura.com.pe
Contacts in New York:
Maria Barona / Peter Majeski
i-advize Corporate Communications, Inc.
Tel: (212) 406-3690
Email: buenaventura@i-advize.com
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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