Buenaventura Mining Company Inc. (BVN)

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

Q2 2013 Earnings Conference Call

July 31, 2013 11:00 AM ET

Executives

Maria Barona – i-advize Corporate Communications

Roque Benavides Ganoza – President and Chief Executive Officer

Carlos E. Gálvez Pinillos – Vice President and Chief Financial Officer

Analysts

John D. Bridges – JPMorgan Securities LLC

Carlos F. De Alba – Morgan Stanley

Alex Hacking – Citigroup

Tanya Jakusconek – Scotiabank

James Bender – Scotiabank

Presentation

Operator

My name is Katie and I will be your conference operator today. At this time, I’d like to welcome everyone to the Buenaventura Second Quarter 2013 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be questions-and-answer session.

I would now like to turn the call over to Ms. Maria Barona, on behalf of i-advize Corporate Communications. Ma’am, please begin.

Maria Barona

Thank you, and good morning everyone. Welcome to Compania de Minas Buenaventura's second quarter 2013 earnings conference call on this July 31, 2013. Today’s call is for investors and analysts only. Questions from the media will not be taken today.

Joining us from Lima are Mr. Roque Benavides, Chairman and Chief Executive Officer; Mr. Carlos Gálvez, Chief Financial Officer as well as other members of the Company's senior management team. We’ll be discussing Buenaventura's results for the report issued yesterday. If you did not receive a copy of the report, or you wish to join the mailing list, please contact us in New York at 212-406-3691.

Before we begin, I’d like to remind everyone that any forward-looking statements made today by Buenaventura's management are subject to various conditions, and may differ materially. These conditions are outlined in the Company's earnings report in the disclaimer. We ask that you refer to it for guidance.

It is now my pleasure to turn the call over to Mr. Roque Benavides. Mr. Benavides. Please begin sir.

Roque Benavides Ganoza

Good morning, welcome and thank you for attending this Buenaventura's conference call. This quarter has been difficult for the whole industry and due to a number of factors, metal prices declining, that having significantly impacted our results and the inventory results, but in addition to that in the case of Buenaventura we have had lower production in Uchucchacua due to a 10 days strike. We have lower revenues and quotation period adjustments in El Brocal and Cerro Verde, and in addition to that, we had an impairment and write-down adjustments at Yanacocha. All of these have impacted our quarterly results.

As a consequence, results were lower than expected. Net income in the second quarter was $19 million, 88% lower than the figure reported in second quarter 2012. EBITDA from Buenaventura’s Direct Operations was $40 million, 65% lower than the figure reported in the second quarter 2012, while EBITDA, including Associates, decreased 47%, from $351.8 million in the second quarter 2012 to $187.5 million in the second quarter, 2013.

The Company has taken some steps and focusing its activities on value creation. First, we are stopping production in non-profitable operations; Antapite, Poracota, Shila-Paula, that are smaller operations, but that we were loosing money, and we are evaluating the performance of the other units obviously.

Secondly, we’re focusing mine exploration activities on high grade and accessible targets.

Thirdly, increasing mining operation efficiency, our Orcopampa and Uchucchacua we have continued working with (inaudible) to improve efficiency in this two mining operations. Fourthly, focusing on brownfield exploration to reduce risk as opposed to greenfield operations.

We are going to concentrate 80% of our effort in exploration brownfield, compared to 20% in the Greenfield.

And finally capital expenditure control and concentrating on cash generation, cash position that is the name of the game that’s in.

During the second quarter 2013, net sales were $273 million, an 18% decrease compared to $331 million reported in the second quarter 2012. This was explained mainly due to lower metal prices. Our net sales for the six months of 2013 were $ 614 million, 11% lower than in the first six months of 2012.

We are now into that equity production. In the second quarter 2013 was 98,200 ounces of gold, 8% lower than the 107,168 ounces reported in the second quarter 2012. Mainly due to our production decline in our Orcopampa and Poracota. This was offset by a production increases in La Zanja and Breapampa.

Silver production, including associated companies, during the second quarter 2013, was 4,420,000 ounces, 2% decrease when compared to the figure of the second quarter 2012.

Our equity production in the six months of 2013 was 203,600 ounces of gold and 9.1 million ounces of silver. At Orcopampa, our total production in the second quarter 2013 was 54,988 ounces 9% lower than the 60,700 ounces reported in the second quarter 2012.

Production from the Chipmo mine during the second quarter 2013 was 50,196 ounces, 12% lower compared to the 56,700 ounces reported in the second quarter 2012, due to lower ore grade and the production from the old tailings treatment produced 4,791 ounces of gold that and total production in the second semester or the first semester, the first six months of the year was 8,900 ounces, an 18% decrease when compared to the semester to the six months of 2012.

Essentially in Orcopampa, we are very optimistic that we have that time successful exploration at Nazareno drain in it, and we are finding additional ores, where we have been successfully finding additional ores in going over an important ponds geological ponds that we have in this area, and drains that we thought were exhausted, we are finding additional resources on the other side of this pond. So we are very optimistic about Orcopampa and the possibility of going back to the higher production that we have had in the past.

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