Good day, ladies and gentlemen, and welcome to the Compañía de Minas Buenaventura Second Quarter 2022 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Please note that this call is being recorded. I would now like to introduce your host for today's call, Mr. Gabriel Salas, Investor Relations. Mr. Salas, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our second quarter 2022 results. Today's discussion will be led by Mr. Leandro Garcia, Chief Executive Officer. Also joining our call today and available to your questions are Mr. Daniel Dominguez, Chief Financial Officer; Mr. Juan Carlos Ortiz, Vice President of Operations; Mr. Renzo Macher, Project Manager; Mr. Juan Carlos Salazar, Geology and Exploration Manager; Mr. Roque Benavides, Chairman; and Mr. Raul Benavides, Director. Before I hand our 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 market close. Please note that today's remarks include forward-looking statements that are based on the management current views and assumptions. While management believes that its assumptions, expectations and predictions are reasonable in the 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 forward-looking statements within the press release we filed on July 26, 2022. Let me now turn the call to Mr. Leandro Garcia.

Thank you, Gabriel. Good morning to all and thank you for attending this conference call. Before we start this presentation, we would like to wish you, your family and friend's health and well-being at this difficult time. We are pleased to present the results of the second quarter 2022 from Compañía de Minas Buenaventura. We have prepared a PowerPoint presentation, which is available in our website. Before we go further, please take a moment to review the cautionary statement shown on Slide 2. Moving on to Slide 3, the highlights were as follows: second quarter 2022 EBITDA from direct operations was negative $19.1 million compared to $68.5 million reported in the second quarter of 2021. Second quarter 2022 operating cash flow reached $72.7 million compared to $101.7 million in second quarter of last year. Second quarter 2022 net loss was $39.9 million compared to $37.5 million net income for the same period in 2021. Second quarter 2022 exploration at operating units increased to $18.9 million compared to $14.5 million in the second quarter of 2021. This increase is part of the company's revised strategy to increase its focus on exploration in order to extend life of mine. Second quarter 2022 capital expenditures were $30.5 million compared to $21.4 million for the same period in 2021. Second quarter CapEx includes $11 million related to the San Gabriel project and $60.3 million related to the Yumpag project. The company continued its strategy of progressively reducing fixed costs at the Uchucchacua mine to improve the cost structure efficiency when the operation restarts. COVID-related expenses were reduced from $19.1 million in the second quarter of 2021 to $1.9 million reported in the second quarter 2022. Buenaventura's cash position reached $326.3 million at June 30, 2022. Net debt was reduced to $416.4 million with an…

Thank you. We will now begin the question-and-answer session. . And the first question will come from Jens Spiess with Morgan Stanley. Please go ahead.

Yes, thank you for taking my call. My first question is on the cash that you reported. It was -- the zinc cash was four point, $1,000 per ton, which is above the current spot price. And the copper cash was, I think $7.2 which is close to the current spot price. So just wanted to know what the strategy there is going forward if you're considering, I don't know, stopping operations or what is going on with the costs that you're currently experiencing? Thank you.

Thank you, Jens, for your questions. This second quarter for Brocal, after the land slide that we have in the last days of March, making more complex our operations. However, we have a plan and in more detail when Carlos can answer your question, please. Juan Carlos?

Sure. Thank you, Leandro. Thank you, Jens, for the question. Regarding zinc in Brocal, during this quarter, we -- after the land slide that we had in the open pit, where we produced the polymetalic ore, we have to supply the processing plant with the stockpiles, the low-grade stockpile that we have from previous years. That's the reason we feel low grade into the processing plant for that low grade also has some lower than previously obtained metallurgic recoveries, and that's the reason we have this increased cost for the zinc production. We will continue with this, building this material into the processing plant along this quarter as the rehabilitation works in the open pit progress. And by the last quarter of this year, we will reach the production in normal terms from the open pit. In the case of copper, we have two components working together and this impacted us during this quarter. Number one was the inflation, mainly diesel contractors, we need to renegotiate the cost of the services from the contractors that operate in the underground mine where we fit all the copper to the processing plant. And the second impact that we have is that we are ramping up the production in the underground mine. So we are investing more meters of development underground. We are now almost at stable production of 8,000 tons per day from previously 7,500 tons per day. Now we are at 8,000 tons per day, and we expect to be close to 8,500 tons per day by the end of the year. So now in this second quarter, we invest more meters in development more in infrastructure in order to allow the ramp-up of production from the underground mine. That's the second impact that we have for copper costs in the second quarter.

Okay. So 800,000 tons per day versus how much would you say? And when was that lower comparison last year or last quarter?

At the beginning of the year, we were around 7,500 tons per day. Now we are 8,000 tons. We expect to be 8,500 tons per day by the end of this year.

Okay. Perfect. And if I make a follow-up question. Just any color on Cerro Verde, the results were not very good as well. Were they also impacted by provisional pricing? And along those lines, just to confirm, the provisional pricing impact for you, was it around $30 million. Is that correct?

Sorry, Jens, this is Daniel Dominguez. The impact for Buenaventura in the quarter was $40 million.

$40 million, okay.

Yes, and by the way in the reconciliation, there is a $30 million that is adding up to the loss, the $50 million loss that is -- that should be $40 million. We will correct as soon as we finish this call.

Okay, perfect. And over there, any color there on what's going on? Are they also having -- experiencing higher costs or is it mainly provision price?

They are having -- we are experiencing higher cost due to inflation basically. This should be in the order of 5% to 8%. However, we feel very confident that they will continue distributing dividends. We were not expecting higher dividends for the second quarter. They were approved only $30 million. But for the second half of the year, we do expect higher dividends that should add up for the entire year to at least $100 million to $120 million. Sorry, Leandro.

Sorry, if I may add, also the embedded derivative for the copper price in the provisional invoices affected the sales and revenues for Cerro Verde.

Okay, perfect. Great. Thank you so much.

Thank you, Jens.

. Our next question will come from Tanya Jakusconek with Scotiabank. Please go ahead.

Great. Good morning everyone. Can you hear me? Hello?

Yes, Tanya. Yes.

I'm just going to ask some very quick questions for modeling. Just wanted to come back to three for modeling, please. On royalty income, you had none this quarter. Is this something that we should think about that you're not going to get anything going forward? Or what happened with the royalty income?

The royalty -- hi, Tanya. The royalty income come from the income we used to receive from Yanacocha through our company, Tambomayo, and we should continue receiving this revenue in a lower rate from last year, because we have reduced our participation, and -- all the arrangements with Newmont, we split .

Okay. No worries. I understand that one. Okay. And then…

If I may.

Okay, go ahead.

Yes, Tanya, sorry, as you can see in the current line of royalties, we have zero.

Yes.

We have reclassified this on the others line. We are -- we continue expecting for the entire year around $8 million to $10 million, but we are reclassifying this in others.

Okay. Got it. And then, Daniel, can I also ask two other modeling questions. One has to do with CapEx. It looks like you've done $50 million for six months and previous guidance had been $190 million to $210 million overall. And then you have the separate within their development capital of $100 million to $110 million. Can you give us an idea if that $190 million to $210 million is still valid because you've got a lot to spend in the second half?

We expect to disburse this year for San Gabriel due to the delays around between $100 million and $105 million.

So $100 million and $105 million is that for all CapEx? Or is that just San Gabriel?

This is just for San Gabriel and for our sustaining CapEx, including we expect the $90 million that you mentioned.

So $190 million in total. Like to put all the CapEx together, you still expect the $190 million, including the development CapEx?

Yes.

Okay. Thank you for that. And just, Daniel, lastly, on the modeling question before my last two questions on the assets. Just the revenue. When I looked at the revenue line and I looked at your volumes and your sales and your realized pricing, it still was much lower than I had expected. So I'm just trying to understand how going forward can we do I thought with the provisional pricing, I would have captured all of that, but it was much lower again. So I'm just wondering if there's any clarity from you guys on that, why it was so much lower.

The embedded derivative or the provisional pricing had an impact of $40 million in the quarter. We -- the price we closed -- when we sold this concentrate was in the order of $8,200 and the provisional price -- sorry, $9,200 and the -- at the end of the quarter was around $82. So there's a big gap there. We expect this to revert in the following part.

So should I be thinking that $52 million is coming back in the next two quarters?

Well it depends on the spot price. Now that the QP that we will have the final QP that we will have in our sales, right?

Okay. All right. Thank you. I'll make a stab at that. Maybe just on the San Gabriel. Can I just get an update on what are the social issues that have come about and what are they? And why do you think they will be resolved quickly in the next few weeks? And then where is the project? Where are we on some of the other items? I know you mentioned the procurement and the power line, but we've got some other critical paths to get through this year and next. So maybe just an update for me on that?

Sure, Tanya. Thank you for your question, allow us to clarify the question on San Gabriel. Here, we are with Renzo Macher, our Manager -- Project Manager, and he will give you more color with current situation in San Gabriel. Please Renzo, go ahead.

Yes, Hi, Tanya. So I guess the first thing to comment is that we are not blocked. What we have had is two events, and the first one happened in mid-June, that both of them at less than six hours. And it was communities or people from outside our direct area of influence requirement to be considered as part of the influence. And one of the highlights to mention is that our relationship with our two communities that are part of the actual area of influence are still intact. And we keep working with them to develop the project. What we are doing is we're working with the authorities to open this discussion with each one of these community in a separate table. Meanwhile, we are keeping our field operations at a minimum. That's our decision. Until we find -- so we don't exacerbate this initial problem. You can actually go to the project today. That's not -- it's not blocked. And we don't foresee a major impact at this point, since we are at the beginning of the project. Most of the activities are still engineering and procurement that hasn't -- those activities have not stopped at all. And kind of the main construction will start in the second part of next year. So what we are seeing today is, it's minor delays on preconstruction activities only.

And on the preconstruction activities, anything critical to get to that second part of next year construction?

Nothing that we cannot accommodate because the camp side, for example, is currently being built at the factory. The first modules of the temporary camp are still under construction on the factories, maybe some delays on when to place them on site, but nothing that cannot be accommodated at this point.

Okay. So you're just thinking that the camp is just the critical path to get that in place so that you can start construction in the second half of next year.

Yes. Actually preparing the footing for that come to be placed on top. Again, we have one year to kind of mix and match things and try to minimize things.

Okay. So it's just two events from other communities. So your two communities that you are -- area of influence are fine, other people out of these communities want something from you, and that's what's caused the social issues. Is that a correct understanding?

Yes. That's correct. That's correct. I mean, it's not -- I guess the main point is it is not blocked. You can actually walk through the project. It has been like two ways.

Okay. All right. Thank you for that. And then just -- can I ask on Uchucchacua. I read that you've been doing your underground development and you're increasing your development rate, and you want to do a start-up of this -- restart the mine in Q4 of 2023. Can you just remind me from now until Q4 of 2023, what needs to be done at Uchucchacua to bring the mine back up?

Sure, Tanya. Remember, we are focusing on Uchucchacua and Yumpag as a whole that the specific work that we are doing on Uchucchacua are preparing the mine, gathering all the areas that we are going to stop here. Juan Carlos can give you more detail on that.

Thank you, Gabriel. Thank you, Tanya, for the question. Yes, we have been progressing as planned along this initial two quarters of 2022 for exploration. Most of the tunneling has been done to prepare new areas for exploration as well as the original strategy. Now we reached the level of 700 meters per month that the developing capacity that we already have in place. 100% of it resources. We only have contractor for diamond drilling now. And with this 700 meters per month capacity, now in August and September, we will start to split part of that volume of meters into exploration and gradually increase the percentage of those 700 years into mine development and mine preparation. That's particularly in two new areas that we have confirmed to exploration along the last six months, is one of them. We will prepare that area, the focus of the development will be in that area. And also, we have access some areas in the mine, part of our reserve, we are doing the confirmation drilling there. We are in rehabilitation works on the railroad and the accesses, ventilation or all the facilities that we need to require for future mining. And that's basically the agenda for incoming quarters. It's developed as a new area for mining next year. The regulation in the coming mine cost reduction that we have been mentioning before, we are reducing our size of the operation in Uchucchacua. At the same time, the same team, the same management team is taking care of the development of the Yumpag project. Remember, Yumpag project is only three kilometers straight line from Uchucchacua to Yumpag. So the same team will take care of these two mines to operations. And both together will fit into the Uchucchacua processing plant in the last quarter of next year. So we are doing all of our effort now to try to speed it up, to try to leave a little bit advance that delivery time ahead of the fourth quarter of next year as much as we can into the third quarter of the next year. So it's the main agenda that we have working at the same time with these two operations. Uchucchacua, and Yumpag mine development and all infrastructure from mining, like ventilation, pumping, offices, camps, shops, warehouse, that also will be delivered by the second quarter in Yumpag in the second quarter of next year.

And will you -- with all of this development that you're doing and it looks like you're going to be development in ore and some spots? Will you have a big stockpile ahead of the processing facility when you're ready to go in Q4 of next year?

Yes. That's the plan. The plan is to -- right now, this year, 2022, most of the development will be in waste, developing the ramps and the accesses. Next year, by March, according to the plan, we will start developing in ore in March. So between March and September next year, gradually more developing will be done along the base of the ore bodies.

So can I -- do you have a targeted stockpile size that you will have ready to feed the mill when you are ready?

Well, we believe to have between 10 days, 12 days will be enough. So that's part of the trade-off that we're making to speed up the resume operation of the processing plant. We will have like 90 days of stockpile. Once we have 10, 15 days on a sustaining basis, probably will be the right time to turn on the processing plant again.

So ultimately, so I understand correctly, you will have 90-day stockpile days to start the mill.

No, no. No, the area will be with 15 days -- 10 to 15 days of stockpile in surface next to the processing plant. So if we reach that level of a sustainable, again, with a sustainable level of the other combines, probably that's going to be the time for resuming the operational processing plan. Right now, we are conservative with that for the last quarter of this year, but probably we will reach that level somewhere in the third quarter next year.

Okay. Perfect. Thank you. I will stop asking questions and leave it to somebody else. But thank you so much for the insight.

Thank you.

Thank you.

This is Renzo. I just want to add that it's not only in regards to San Gabriel, that the communities of -- our relationship is not only in fact. They are very proactive, and they send letters to the ministry stating the support for the project. So…

Yes. It just appears that it's just outside or is it just want some, but have something -- a piece of something from you and your communities within your space of influence of where you're going to be operating are in support. So it's just a matter of how do you deal with them, and you said you have the authorities in place helping you. And then obviously, hopefully, some resolution will be quickly with them. Yes, thank you.

Thanks.

. This concludes our question-and-answer session of today's conference call. I would now like to turn the conference back over to Mr. Leandro Garcia for any closing remarks. Please go ahead, sir.

Thank you, sir. Before we finish today this conference call, we want to thank you very much for making the time to join with us and share our information. Thank you, and have a wonderful day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.