Business context and reporting period
Compañía de Minas Buenaventura S.A.A. (Buenaventura; NYSE: BVN) filed this Form 20-F for the fiscal year ended December 31, 2023. The Peruvian gold, silver and base-metals miner reports under IFRS. Results include consolidated subsidiaries; Buenaventura’s 19.58% investment in Cerro Verde is accounted for using the equity method, so Cerro Verde’s revenue and cash flow are not consolidated line by line.
Financial and operating metrics
Amounts below are U.S. dollars unless otherwise stated.
| Metric | 2023 | 2022 |
|---|---|---|
| Operating income (sales of goods, services and royalties) | $823.8 million | $824.8 million |
| Gross profit | $91.2 million | $61.3 million |
| Operating profit (loss) | $21.1 million | $(39.0) million |
| Profit from continuing operations | $39.5 million | $124.4 million |
| Net profit | $32.7 million | $602.9 million |
| Net profit attributable to parent owners | $19.9 million | $602.6 million |
| Basic and diluted EPS attributable to parent owners | $0.08 | $2.37 |
| Cash and cash equivalents at year-end | $219.8 million | $253.9 million |
| Total assets | $4.534 billion | $4.503 billion |
| Total shareholders’ equity | $3.169 billion | $3.163 billion |
Gross margin was approximately 11.1% of operating income, compared with 7.4% in 2022; operating margin was approximately 2.6%, versus negative 4.7%. These percentages are calculated from reported figures.
- Cash flow: Operating cash inflow was $227.1 million, versus $41.7 million in 2022. Investing activities used $205.5 million, including $238.7 million of additions to property, plant and equipment. Financing activities used $55.7 million. Operating cash flow less reported property, plant and equipment additions was approximately negative $11.6 million.
- Debt and liquidity: Reported financial obligations were $706.6 million at year-end, comprising $34.2 million current and $672.4 million non-current. The company also reported $10.3 million of lease liabilities within financial obligations. Its $550 million, 5.5% senior notes mature in 2026; subsidiary debt includes El Brocal financing and Huanza leases. The filing provides no consolidated current ratio or other headline liquidity ratio.
- Production: Selected operating data for consolidated subsidiaries, excluding discontinued operations and excluding Cerro Verde, show 146,789 oz of gold, 7.87 million oz of silver and 35,463 tonnes of copper in 2023.
- Exploration and capital investment: Exploration expense was $62.7 million in 2023 ($49.2 million at operating units and $13.5 million in non-operating areas), down from $95.0 million in 2022. Capital expenditures, as defined by the company and excluding exploration, were $238.7 million, up from $152.0 million.
Material changes versus 2022
- Net profit fell by $570.3 million, largely because 2022 included $478.5 million of profit from discontinued operations, principally the Yanacocha sale. Buenaventura sold its Yanacocha interest to Newmont in 2022 for $300 million cash, with up to $100 million of contingent consideration.
- Operating profit improved by $60.1 million, from a loss to a profit, as total cost of sales declined and operating expenses were lower. Gross profit rose $29.9 million.
- Sales of goods increased 1% to $811.0 million. Copper sales rose 27% to $466.6 million and silver sales rose 24% to $196.3 million; gold sales declined 7% to $279.7 million, while zinc sales fell 57% to $46.6 million. Commercial deductions increased to $196.9 million.
- Finance costs more than doubled to $119.3 million, including $58.5 million related to the SUNAT tax dispute and a $4.7 million fair-value charge on contingent consideration. The company also recognized a $113.2 million liability related to a portion of disputed tax receivables.
- Operating cash flow increased, but cash and cash equivalents declined $34.1 million. Capital expenditures increased substantially, particularly at San Gabriel and Uchucchacua.
- Uchucchacua restarted operations in September 2023 after a suspension that began in 2021. El Brocal suspended open-pit mining late in 2023 because of permit delays and tailings-deposit constraints; underground operations continued.
Outlook, commentary, risks and unusual items
- 2024 plans: Buenaventura budgeted $300–$320 million for capital expenditures and approximately $55–$60 million for exploration. It expects operating-unit exploration of $41–$44 million and non-operating-area exploration of $14–$16 million. The filing does not provide a clear consolidated production or earnings guidance range.
- Projects and operations: San Gabriel was under construction, with 94% engineering progress and 24% construction progress at year-end 2023. The company describes Tambomayo as nearly depleted, with approximately one year of mine life, and plans to discontinue reserve and resource reporting for it. Orcopampa’s stated mine plan extended through 2024, subject to exploration. El Brocal planned to raise underground output to 11,000 tonnes per day in 2024 and 12,000 in 2025; timing depends on execution and operating conditions. Yumpag received final authorizations in March 2024, and the company expects it to contribute 1,000 tonnes per day to 2024 silver guidance.
- Peru and operating risks: The filing highlights political and social instability, community relations and consultation, permitting, regulatory and tax changes, extreme weather and water risks, labor, energy and input costs, tailings facilities, geotechnical hazards, reserve estimation and metal-price volatility. Buenaventura and Cerro Verde are substantially exposed to metal prices; Buenaventura and its wholly owned subsidiaries do not hedge gold or silver, and Cerro Verde does not hedge copper. El Brocal reported a fatal accident at Tambomayo in 2023, despite a lower reported accident rate.
- SUNAT dispute: The dispute concerns tax treatment of 2007–2010 transactions and tax losses. Buenaventura paid the disputed assessments in 2021 and recorded the related amounts as receivables while appealing. In 2023, management recognized a $113.2 million liability after advisers assessed recovery of part of the 2009–2010 amounts as less than 50% probable; the filing says this recognition did not itself require a new cash payment. Further constitutional appeals were filed in April 2024. The proceedings remain ongoing.
- Cerro Verde: On a 100% basis, the associate reported 2023 revenue of $4.143 billion and profit of $779.0 million, down 16% from $925.4 million in 2022. Buenaventura recognized $152.2 million of equity-method earnings from Cerro Verde, down from $181.2 million. Cerro Verde’s operating cash flow was $1.367 billion and investing cash outflow was $654.0 million. Its results include increased operating expenses associated principally with tax penalties and other items.
- Controls and audit: The auditor issued an unqualified opinion on Buenaventura’s IFRS financial statements and internal controls over financial reporting. Management said controls were effective at December 31, 2023 after remediation of a material weakness identified in 2022. Cerro Verde’s statements were also audited under IFRS; its auditor did not opine on Cerro Verde’s internal controls.
Most important facts an investor should verify
- How much of the $639.7 million in Buenaventura’s reported tax-claim receivables is realistically recoverable, and how the ongoing appeals may affect the $113.2 million liability or future results.
- Whether the El Brocal open pit can resume after tailings expansion and permitting, including the status of land negotiations with the Colquijirca community and the planned underground production ramp.
- Whether San Gabriel’s construction schedule and cost remain consistent with the project plan, and when it can begin production.
- Whether exploration and mine development can replace reserves amid depletion at Tambomayo and a short stated mine plan at Orcopampa; note that reserve estimates exclude Julcani, La Zanja and Tambomayo from certain aggregate tables.
- Debt maturities, covenant headroom and cash needs relative to the $300–$320 million 2024 capital expenditure budget; confirm the scope and definitions of reported debt and capital expenditures.
- Metal-price, production, water, community and permitting sensitivities, and the sustainability of Cerro Verde dividends that supported Buenaventura’s 2023 operating cash flow.