Buenaventura Mining Company Inc. (Compañía de Minas Buenaventura S.A.A.) — FY 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB and reported in U.S. dollars. Buenaventura mines gold, silver, copper and other metals in Peru, and holds a 19.58% interest in copper producer Cerro Verde.
Financial and operating performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Operating income | $824.8 million | $900.5 million |
| Gross profit | $61.3 million | $87.3 million |
| Operating profit (loss) | $(39.0) million | $(66.0) million |
| Profit from continuing operations | $124.4 million | $124.8 million |
| Net profit (loss), including discontinued operations | $602.9 million | $(262.8) million |
| Cash flow from operating activities | $41.7 million | $(233.5) million |
| Cash and cash equivalents at year-end | $253.9 million | $377.0 million |
| Total assets | $4.50 billion | $4.56 billion |
| Total shareholders’ equity | $3.16 billion | $2.54 billion |
Gross margin was approximately 7.4%, down from 9.7%; operating margin improved but remained negative, at approximately (4.7%) versus (7.3%). The large reported net profit chiefly reflects $478.5 million of profit from discontinued operations, including the Yanacocha sale; it does not represent a comparable improvement in continuing operations.
- Revenue and costs: Sales of goods declined 7% to $801.2 million. Silver sales fell 50% and zinc sales 25%; copper sales rose 8% and gold sales 14%. Operating costs decreased 6% to $763.5 million, while exploration expense at operating units increased 43% to $80.8 million.
- Cash flow: Investing activities provided $205.8 million, primarily including $300 million proceeds from the Yanacocha sale and $45 million received toward La Zanja closure costs. Financing activities used $370.5 million, including repayment of the syndicated loan. Cash declined by $123.1 million during the year.
- Debt and liquidity: Financial obligations were $738.5 million at year-end, versus $1.058 billion in 2021; this includes $542.0 million carrying value of the 5.5% senior notes due 2026. The syndicated loan was fully repaid in 2022. El Brocal and Huanza also have financing obligations; Huanza extended major lease installments to 2027. The filing reports $253.9 million of cash and $379.6 million of current liabilities.
- Cerro Verde: The associate reported 2022 revenue of $3.98 billion and profit of $925.4 million, down from $4.20 billion and $1.19 billion in 2021. Buenaventura’s equity-method share of associate and joint-venture results fell 27% to $176.3 million, principally reflecting lower Cerro Verde earnings. Cerro Verde copper production rose to 973.5 million recoverable pounds from 887.1 million; Buenaventura received $78.3 million in Cerro Verde dividends, compared with $137.1 million in 2021.
Material changes and unusual items
- Buenaventura sold its entire Yanacocha interest to Newmont in February 2022 for $300 million cash, with up to $100 million of additional contingent payments linked to the Sulphides Project and metal prices. Newmont also transferred its 46.94% interest in La Zanja to Buenaventura and paid $45 million toward La Zanja closure costs.
- The Uchucchacua mine remained temporarily suspended throughout 2022 after operational and preparation delays; management planned a restart in the second half of 2023. El Brocal’s north-pit operations were disrupted by a March 2022 landslide. A related mineral-stock write-off reduced 2022 results by $16.4 million; ore extraction in the affected zone resumed in 2023.
- La Zanja’s reserves were depleted by December 31, 2022. The filing also states that reserve and resource reporting for La Zanja and Julcani was discontinued, citing cost and materiality considerations.
- The Company reported a $617.7 million income-tax receivable related to disputed tax assessments and other tax matters. Buenaventura says it is pursuing appeals; collection and recovery depend on legal outcomes.
- No dividends were paid in 2021. A 2022 interim dividend of $0.073 per share was declared and paid; the filing’s stated policy targets annual cash dividends of at least 20% of net income generated by majority-owned operations, subject to available distributable earnings and approvals.
Outlook, risks and controls
- Management budgeted 2023 capital expenditures of approximately $350–$370 million and exploration investment of approximately $50–$65 million. The filing does not provide consolidated production or earnings guidance.
- Key risks include volatile gold, silver and copper prices; operating costs and reserve replacement; permitting and environmental obligations; community opposition and social conflict; political instability and roadblocks in Peru; labor, geotechnical and tailings-dam risks; climate-related disruption; and access to financing. Buenaventura and Cerro Verde are generally unhedged for gold and copper prices; El Brocal had limited copper hedges for 2023.
- Moody’s downgraded Buenaventura’s unsecured corporate rating from B1 to B2 in September 2022; Fitch downgraded it from BB to BB- in February 2023.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 because of a material weakness in accounting controls for transactions between controlling and non-controlling shareholders. The identified transaction error was corrected in the 2022 financial statements. The auditor issued an adverse opinion on internal control, but an unqualified opinion on the IFRS financial statements.
Investor verification priorities
- Reconcile the $602.9 million net profit to continuing operations and the Yanacocha-related discontinued-operations gain; assess the contingent sale payments and closure funding.
- Verify the recoverability, status and accounting of the $617.7 million disputed-tax receivable, related appeals and any further assessments.
- Track remediation of the disclosed material weakness and whether controls over acquisition, ownership-change and tax accounting are operating effectively.
- Monitor Uchucchacua’s restart, El Brocal’s pit rehabilitation and production recovery, La Zanja’s post-depletion plan, and delivery of 2023 capital and exploration budgets.
- Review debt service, covenant compliance and liquidity alongside the $550 million senior notes due 2026 and subsidiary financing obligations.
- Check how Peru’s political and social conditions, permitting, community relations and environmental obligations affect operations and project schedules.