Buenaventura Mining Company Inc. (BVN)

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Compania de Minas Buenaventura SA (BVN)
Q3 2006 Earnings Call
October 31, 2006 10:00 am ET


Pete Majeski - iAdvise Corporate Communications
Roque Benavides - CEO
Carlos Galvez - CFO
Cesar Vidal - Chief Exploration Geologist


Andrea Weinberg - Merrill Lynch
John Bridges - J.P. Morgan
Rafael Urquía - Citigroup
Victor Flores - HSBC
Geoff Stanley - BMO Capital Markets
Paul Rosenberg - Bear Stearns
Jorge Rodriguez - Centura SAB
Alonso Aramburu - Santander



Good day everyone. Welcome to the Minas Buenaventura Third Quarter Conference Call. As a reminder, today's call is being recorded. At this time for opening remarks and introductions, I'd like to turn the call over to Mr. Pete Majeski, with iAdvise Corporate Communications. Please go ahead, sir.

Pete Majeski

Thank you, Lisa, and good morning everyone. Welcome to Compania de Minas Buenaventura's third quarter 2006 Earnings Call. Joining us today from Lima, are Mr. Roque Benavides, Chief Executive Officer; Mr. Carlos Galvez, Chief Financial Officer; and other members of Buenaventura's senior management. They will be discussing Buenaventura's results for the press release distributed yesterday. If you've not yet received a copy, please call us in New York at 212-406-3694 and we will e-mail it you immediately.

Before we begin, I would like to remind you 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 last page of the company's press release in the disclaimer, and 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, you may begin.

Roque Benavides

Good morning and welcome to all of you. This quarter Buenaventura's net income was $82.4 million, or $0.65 per ADS, which represents an increase of 66% when compared to third quarter '05. Operating income was $67.6 million, 241% higher than the figure recorded in the third quarter '05. Total EBITDA was $189 million, which represented a 49% increase when compared to the third quarter '05. EBITDA for Buenaventura's direct operations was $65 million, $172 million higher than the third quarter '05.

In terms of the financial highlights, it's important to mention that our total revenues were increased quarter-to-quarter on a yearly basis 83%, 241% operating income and EBITDA from our direct operations 172%. In the sense of EBITDA, including Yanacocha and Cerro Verde, the increase was of 49% and net income 66%. Earnings per share increased 66% quarter-to-quarter on a yearly basis.

In terms of our operating highlights, our net sales increased quarter-to-quarter 95%. Average realized price was decreased 3% quarter-to-quarter and the average realized price, when including our Yanacocha participation, increased 28% quarter-to-quarter on a yearly basis. The average realized price at the end of the day was 63% increase and the average -- sorry, this is for silver and -- or less 29%, 178% increase in terms of zinc.

In terms of sales content, we have 22% increase for -- on a quarterly basis; including Yanacocha, a reduction of 16% and, of course, we have increased in terms of silver, lead and zinc.

In terms of our production and operating costs, we have increased our equity production by 8% in terms of gold; including Yanacocha, reduction of 14%, and we have increased in silver and lead with small reduction in zinc. All of our operations have had an impact in terms of our cost due to the exchange rate in Peruvian Nuevos Soles, essentially in Uchucchacua the increase has been substantial due to a number of aspects. First of all, the exchange rate; secondly, the higher supply consumption, mainly reagent for the new cyanidation plant and support materials. As you know, the cyanidation plant started this quarter, this past quarter, and this requires a number of adjustments and this also had an impact on the cost of these mines.

We have had the higher contractor expenses for preparation of a new area of the mine. We want a higher area where we have built the raise borer and raise climber that are building new facilities, and new infrastructure in the mines. And then, higher commercial treatment charge escalated and deductions explained by higher zinc and silver prices, partially offset by higher lead and zinc by-product credits.

In terms of Antapite, we have also had a somewhat higher cost, due essentially to higher prices for mine contractor labor. Certainly, the Colquijirca mine within the Brocal company have had 4% increase in terms of zinc production that accompanied with the zinc price have had an excellent quarter and has contributed to the result we are showing this morning.

In terms of operating expenses, we are reporting for the third quarter $8.4 million, 17% decrease compared to 10.1 million reported in the third quarter '05. This decrease was mainly due to a lower long-term compensation program provision.

In terms of our exploration cost, in non-operational mine sites during third quarter '06 were $8.6 million, a 28% increase compared to 6.7 million in the third quarter '05. Cesar Vidal, our Chief Exploration Geologist is with us and he can comment on that later.

In terms of the share in affiliated company, Buenaventura net income from non-consolidated affiliates was $64.8 million in the third quarter '06, an increase of 17% when compared to $55.5 million reported in the third quarter '05. This increase is explained by higher contribution from Cerro Verde $22.6 million. Yanacocha contribution for this quarter was $41.6 million. For the nine-month period of 2006, income from non-consolidated affiliates was $273 million, an increase of 83% compared to the $149 million reported in 2005.

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