Greetings, ladies and gentlemen and welcome to the Compañía de Minas Buenaventura Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that this call is being recorded. I'd now like to introduce your host for today's call, Mr. Rodrigo Echecopar, Investor Relations. Mr. Echecopar you may begin.

Good morning and welcome everyone. Presenting on the call today is Mr. Victor Gobitz, CEO. Also present and available for your questions are Mr. Leandro Garcia, Vice President and CFO; Mr. Juan Carlos Ortiz, VP of Operations; Raúl Benavides, VP of Business Development; and Alejandro Hermoza, Vice President of Sustainability. As we normally do we will be making certain forward-looking statements during the call. Such statements are based on assumptions of future events that may not prove to be accurate unless such being both risk and uncertainties. It is therefore possible that the actual results may materially differ from any forward-looking statements that we may make today. We lead to you our cautionary statements in the press release we filed on July 25, 2018. With that, I will now turn the call over to Mr. Victor Gobitz. Please go ahead.

Good morning to all and thank you for attending this conference call. We are pleased to present the second quarter of 2018 results of Compañía de Minas Buenaventura. First of all we would like to welcome Juan Carlos Ortiz our new vice-COO. His experience within mining industry, particularly with underground operations will add an important dimension to our team. We have prepared a short PowerPoint presentation, which is available in our website. Before we go further, please take a moment to review the cautionary statement shown here on Slide 2. Moving on to Slide 3, highlights were as follows: In the second quarter, our EBITDA from direct operations was $88.4 million, a 58% increase compared to $56 million reported in the same quarter a year ago. In the second quarter, our adjusted EBITDA, including associated companies reached $191.1 million, a 73% compared to $110.2 million in the second quarter in 2017. In the second quarter, our net income was $41.3 million compared to a negative $6.2 million for the same period in 2017. Buenaventura's net debt-over-EBITDA ratio was reduced to 0.8 times. The company’s de-bottlenecking program is in progress, with results that will be reflected in Tambomayo and El Brocal operations during the second half of this year. At Cerro Verde, a total dividend of $200 million was paid on April 24th and $39 million of which was to Buenaventura. At Yanacocha, Sumitomo Corporation purchased a 5% stake of the company in exchange for a payment of approximately $48 million. Buenaventura’s stake in Yanacocha returned to 43.65%. Moving on to Slide 4, financial highlights. Total revenues in the second quarter were $322.6 million, which is 26% higher in comparison to a year ago. EBITDA from our direct operation was $88.4 million, which is 58% higher in comparison to last year,…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Thank you. The first question comes from the line of John Bridges with JP Morgan. Please proceed with your questions.

I just wanted the Rio Seco development. The -- is that related to -- because it’s improving the recovery of that material, you were thinking about this technology I know for Yanacocha, but Yanacocha seems to be more of an underplay situation. Now, that's my first question.

Thank you, John. Yes, let me simply say that it's a project with a concept -- with a purpose to reduce the arsenic content from copper content -- copper concentrate which for example in the case of Marcapunta. But here is Raúl Benavides, he will explain with more details of the project. Raúl Benavides: Good morning, John. Well, the area in Rio Seco, we have really managed down there and we have the land. We have been piloting the concentrates of [quality silica] and with success. So within that the thing is mature in order to do some atmospheric bleaching of the concentrate so that we can -- we will get copper cut-offs. And we will probably make a plant of 40,000 tons per day -- per year of pure copper. And we had pick up little in Arizona, in Canada with HATCH. So the project is growing.

Yes for us -- let me add. John for us, the Rio Seco project is a boost to increase the value for Marcapunta. By far, as we mentioned in the past, El Brocal, we become 100% copper producer in the future. And this project will boost the value of these assets.

Okay. Could you offer us a little bit more detail on the split of Tajo Norte and Marcapunta throughput through the end of this year and into next year on this changing throughput rates?

Yes. So we have changed this mix. We received a support of our clients and employees. And here Juan Carlos Ortiz our Vice President of Operation will explain the details.

Hi. Well the split right now is almost 8,000 to 9,000 tons per day coming from the underground mine, main copper production, the Marcapunta ore. And we are right now running at about 13,000 tons per day of polymetallic ore from the Tajo Norte open pit. These two together, we are running the process with two processing plants at an average range above 20,000 per day.

Okay. And that's going to be the same through the end of the year or into 2019, or have you plans to change that as you expand the copper underground?

We are ramping up the production from the underground mine as we mentioned before in the past. So the ramp up from copper will increase also in the next year particularly. We are still preparing the budget for this year, but the trend is to keep growing the production from the underground mine and try to use the highest capacity of the processing plant and try to get over 20,000 tons per day on average annual basis in these two processing plants.

Yes, let me add just that -- in the -- let met add just that in last quarter we expect to achieve to reach 10,000 tons per day coming from the underground mine.

That’s helpful. Thank you. And then just finally, the San Gabriel, almost was -- as I understand it, was on the point of being developed a couple of years ago and now in your schedule we’re waiting until the end of 2019 for a pre-feasibility study. So, something seems a bit strange there. What’s pushed it backwards? I know you have the issue with the mining method, but I thought I was -- I thought I was well advanced.

Yes, we are working on that, John. As we mentioned, we have established this discipline with metallurgy to analyze and to develop our project. But here also Raúl Benavides will explain with more details where we are. Raúl Benavides: Yes, John. We -- that we are still struggling with these geotechnical issues. We need to be sure on how to deal with the mining in the San Gabriel. And if you go the page where we chosen San Gabriel, we can see in darker green.

19. Raúl Benavides: Page is 19, you can see in the darker green the advance in San Gabriel. Compared to the other projects, this project has not advanced as much as we would like. But the -- we need to have clear answer from the geotechnical issues and we have hired a very confident senior engineer, that is over viewing all this space. And he will have an answer in the next month or so.

Okay. Thanks, Raúl. Thanks, victor. I’ll get out of the way. Thank you.

You’re welcome, John, as usual.

The next question is from the line of Botir Sharipov with HSBC. Please proceed with your question.

Good afternoon, Victor and the team. A couple of questions from us, following up on John’s question on the Rio Seco plant. It’s nice to see that it’s coming to the TSX level hopefully by the end of the year. Do you guys maybe have an idea at this point by how much your commercial deductions will decline maybe a ballpark at El Brocal, the copper concentrate, given the arsenic content will decline? That’s the first question. And the second one is on Coimolache. If you could maybe give us a color on what the grades were during the quarter? And I know you’re treating some of the Gold Field or at that mine maybe you could also tell us what the grade are going to be going forward and how long you have this agreement with Gold Fields for treating their ore?

Okay. Thank you, Botir. And the first question will be answered by Raúl and the second one by Juan Carlos. Raúl Benavides: Botir, these only really have a straight number. What these will give us is a leverage to negotiate these concentrates. Today, if you want to sell copper, arsenic concentrate, it’s very difficult. But we have this refinery we would be able to negotiate with the smelters. And we have -- as Victor said, we’re building this as a [showcase] for -- with Marcapunta ores. But we know that we have some copper arsenic in Coimolache and in Yanacocha. So this is kind of more than treatment for all the ores. It will be strategic to generate better conditions for the concentrates.

Yes. Further we call it a booster and the best way to unlock the value behind these copper deposits with higher content of arsenic. So your second question was related to Coimolache and the mix. Juan Carlos will answer it.

Well, the production for Coimolache mix, as you mentioned, we are bringing more from Gold Fields. We expect to keep running this business for the next three years 2018, ‘19 and ‘20. The grades that we are bringing from Gold Fields are above 1 gram, 1.2 grams, above that in the grades right now. The grade that we’re mining from our own operation at Tantahuatay is about 4.43 grams per ton. That’s pretty much the two sources that make a blend for the quarter of about 0.6 grams per ton of gold.

And then quickly if I could follow-up and I’ll get out of the way. Your CapEx was a pretty low for the quarter. Did you guys offset it by the sale of interest in Yanacocha or I guess what -- why was it so low and what do you guys see it as in the second half?

Yes. I’m trying to understand, Botir. Your question was regarding the -- our guidance in terms of CapEx. If it is really the case, Leandro Garcia will answer it.

In the first -- hi, Botir. In the first semester, we spent $52 million. Our guidance was for the whole year from between $180 million and $220 million. We’re expecting to reach a number close to $160 million. As we mentioned, there’s -- we have a low CapEx foreseeing because of well somehow many reasons. We have budget buying some lands that our negotiations have hold behind. And we’re not going to finish buying those budgeted lands, also there are all -- some permits, I’m getting behind from our -- the ministers and we are falling behind the -- all the paperwork we have to present and all the -- return -- the timetable, it’s longer than we expect. Basically those are the reasons.

Your next question comes from the line of Carlos De Alba with Morgan Stanley. Please proceed with your question.

So first question or both questions are related to Orcopampa and the reduction in guidance. There was a pretty material reduction to 130, in the midpoint 130,000 tons of – ounces, sorry, of gold for the operation. And so, I mean I heard the comments but maybe Victor, you could elaborate a little bit more us to what led to this sudden change in production or mining plan? And why was it taken now you’re like in the middle of the year? If you could provide more details that will be really useful. And related to this is, how do you see now -- given the first half of the year is done, how do you see the EBITDA guidance that was provided earlier in the year including affiliate, the range opf between $700 million to $800 million? Thank you.

Thank you, Carlos. Yes, clearly that's the key question. So as we -- you know in Buenaventura, we are managing our portfolio and we have to gain advantage that if you see in this portfolio the performance of Tambomayo and the performance that we see in the second semester coming through El Brocal, we have decided to take action in Orcopampa. And instead of dealing with these two different aspects, production and also the de-bottlenecking program, the investment in the improvement of the mining infrastructure, we decided to prioritize the de-bottlenecking program and we explained that in these two slides. And clearly at the bottom-line, because of the results coming from Tambomayo and El Brocal are going very well, we still keep -- we still have the same guidance for the full year.

Okay.

Okay?

Thank you.

You are welcome, Carlos.

Our next question is from the line of Tanya Jakusconek with Scotiabank. Please proceed with your question.

Great. Good afternoon, everybody. I just wanted to follow-up on the CapEx question. So because of the delay in the permits and some of the land acquisitions, you're going to have CapEx this year of $160 million. Is the 182 million to 220 million a good CapEx number going forward let’s say for 2019?

Hi, Tanya. Thank you for your question. Yes, we have change in this guidance. And Leandro will explain that we are in the range of 160 million and 165 million.

Sorry 2018?

‘18, ‘19?

Yes, that's not for ‘18, that.

‘19. No, for ‘19 this is too early to analyze that, that’s a case of the advance -- the progress in Tambomayo for example Orcopampa and as well in Coimolache.

Now, what's the range about sustaining capital for you?

In a range of 150 million.

150 million. Okay.

Yes.

Okay. And then can I come back to your de-bottlenecking program? I asked this question last quarter. And we talked about the benefits of the $15 million to $25 million which I think you broke out nicely on Slide 13, the majority of it coming from the processing plant tuning at El Brocal. And you said most in the second half but in -- on the Q1 conference call you said a lot of these will be in Q4. So I am just wondering what the breakdown is for Q4, let's say for the $14 million to $16 million, is the majority in Q4?

No, in that case, we used to analyze the Slide 13 in the case of processing plant tuning. We are taking advantage of these improvements in Tambomayo and also El Brocal. So the second semester where we’ll take advantage of these improvements. And we have calculated these numbers in that range.

Yes and now I understand that. So I see $3 million to $4 million of EBITDA contribution from Tambomayo. And I see $14 million to $16 million from El Brocal. But you said all of this in the second half. I'm trying to get an idea of in the second half what's coming in Q3 and what's coming in Q4?

Yes. We have -- also we mentioned in terms in the processing tuning in Tambomayo, we completed this project in the second quarter. So we are taking advantage. These numbers we will see during the second semester, the second half of this year as well as attach rate of El Brocal, we have finished with to repair the ball mill, the biggest ball mill and we are taking advantage of these improvements for the full second half of the year.

Yes. So your guidance of $15 million to $25 million of EBITDA improvements for 2018, what -- does $15 million come in Q3 and then the remaining $10 million in Q4? I'm just trying to understand the breakdown.

Hi Tanya, this is Juan Carlos from operations. Well the split of this $16 million we’ll be using along the next two quarters. There is no ramp-up. We’ve already reached full capacity right now.

Okay. So even, okay, thank you. And then my other question comes from the free cash flow. You're generating a lot of free cash flow now given your capital spend was lower in Q1 and Q2, you'll have to ramp-up. But can you talk a little bit about your capital allocation? Is all of this free cash flow going to be allocated to some of your development projects that you've highlighted or are you looking at M&A? So maybe a little bit about your capital allocation or debt repayment maybe, yes, just on capital allocation?

Yeah good question, Tanya. This year we had Board meeting and we have decided to discuss particularly on this topic in the following Board meeting that will take place on October 25th, and probably in the coming conference call on October 25th we'll be able to share our final decision. But clearly we have to balance the financial figures of the company are very robust. And we have to balance probably to increase our dividend, reduce debt and also to take a look of any opportunity in terms of M&A.

And can you remind me on your -- yes, no, no, I understand and you're going to be sharing with us that. Obviously internal opportunities, the dividend, reducing debt, M&A. Can you just remind us of your M&A strategy, whether it's still focused in Peru? Whether you're looking at early stage development or producers? Can you just review with us your strategy on M&A?

Yes, right now, kind of our footprint is located in Peru. But we think that we can import -- sorry, export this acknowledge these capability in a region, some places like Chile, Mexico or Colombia. But probably at the moment, we have been more opportunistic. We are not specific program looking for because right now as you seen we have significant organic growth portfolio. But Raúl probably -- Raúl Benavides has noticed that there is some potential piece in business development, he will add some comments.

Okay. Raúl Benavides: Yes, Tanya. We are -- as Victor said, we are -- we have our antenna there and we’re looking for opportunities in Latin America and we keep on sending our geologists to look into opportunities. But our amount of projects in Peru are important and we are focusing our activity in the projects firstly. And secondly, opportunities here in Peru that are coming to us, we are -- we think that we will eventually we have some opportunities to look at. But there is -- we’re really not aggressive in looking to outside of Peru, to put it in sense.

And Raúl within Peru, will you look at early stage from exploration all the way to producing assets? Raúl Benavides: Whatever makes money, Tanya.

I like that. Raúl Benavides: We never discriminate.

Alright, I like that. Thank you very much.

Yes. You’re welcome, Tanya.

[Operator instructions]. The next question is a follow-up from Carlos De Alba with Morgan Stanley. Please proceed with your question.

Right, yes, thank you. Just coming back to the guidance, the EBITDA guidance for the year and then the de-bottlenecking and the changes in Orcopampa. So presumably, the $15 million to $20 million in EBITDA expected to come in 2018 from the de-bottlenecking program were included in the $700 million to $800 million EBITDA guidance provided earlier in the year. So is it then fair to say or to assume that the results in Tambomayo and El Brocal are coming above what you were expecting earlier in the year and that would more than compensate or compensate the reduction in EBITDA from Orcopampa this year, and therefore, you can keep their guidance stay well as it was at the beginning of the year. But it also means that basically we’re not going to see any -- yes, there is no incremental benefit from the better performance in Tambomayo and El Brocal, correct?

Yes, the sole answer is yes. Yes, Carlos. We expect in the second half of the year a significant improvement is coming from Tambomayo and El Brocal. And in our guidance in terms of EBITDA has begun to get these improvements coming from the de-bottlenecking program.

Alright. And so going forward in 2019 and 2020, will we see upside to the $40 million and -- to $50 million EBITDA incremental next year and $65 million to $75 million into summer ‘20 because of this “sacrifice or acceleration or focus on Orcopampa”? Would you be able to -- so basically get back the -- your incremental benefit from the de-bottlenecking that is now being so sacrificing by the changes in Orcopampa or would you stick to the current guidance that you have?

Carlos, it’s too early to discus regarding 2019, 2020. But you have to be sure that we are working in order to create a long-term business plan. And if we have to take -- and we have to -- also we have to take advantage that we manage our portfolio. So we have enough space to deal with. We’ll require more time in the case of Orcopampa in order to create a profitable long-term business case. But trying to set number for 2019 or 2020 is, to be honest, too early.

Thank you. Our next question is a follow-up from the line of John Bridges with JP Morgan. Please proceed with your question.

Just a follow-up. You mentioned the capital spending was a bit below behind because of delays with permits. Were the permits on the particular projects or just across the board?

It’s across the board, John, but we have some delays in Coimolache, for example. We have some delays also in many exploration programs that are part of our strategy for growth.

So is this something, which has happened recently, because we used the idea that permits are relatively easy and predictable in Peru?

No. Let’s take advantage that our Vice President of Sustainability, Alejandro Hermoza, is here. He will answer and trying to show you that how we deal with these topics.

Thank you. Yes. Hi, this is Alejandro. Yes. As you mentioned, this goes across the board. There’s nothing specifically going but just authorities taking some more time. We have to take into account many changes have been gone on different specific ministers, secretaries, due the political context and some delays have been both then on the processes of getting those permits. But we expect to get that solved by the second semester on different projects, specifically on exploration projects.

Excellent. Okay. Many, many thanks and well done with the results. Thank you.

Thank you. At this time, I will turn the floor back to Victor Gobitz for closing remarks.

Okay. Finally, thank you everyone for joining our call this morning. As a Buenaventura team, we are committed to reach the 2018 targets in terms of profitability and free cash flow generation. In addition, we are developing the full potential of our existing assets, prioritizing its long-term perspective. And in the case of our growth, we are implementing a disciplined process for value generation through a comprehensive methodology to develop our organic growth portfolio. Thank you again and have a great day.

Thank you. This will conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.