Buenaventura Mining Company Inc. (NYSE: BVN) — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide clear Q4-only financial results. Financial statements are prepared under IFRS in U.S. dollars. Buenaventura is a Peru-focused precious- and base-metals producer, with operating mines and equity-method interests in Yanacocha, Cerro Verde and Coimolache.
Key financial and operating metrics
| Metric | FY2019 | FY2018 |
|---|---|---|
| Total operating income | US$867.9 million | US$1,150.7 million |
| Net sales of goods | US$821.9 million | US$1,106.3 million |
| Gross profit | US$68.3 million | US$183.0 million |
| Operating profit (loss) | (US$58.0 million) | US$58.3 million |
| Net profit (loss) | (US$28.5 million) | (US$11.7 million) |
| Net loss attributable to parent shareholders | US$12.2 million | US$13.4 million |
| Cash from operating activities | US$47.1 million | US$346.3 million |
| Cash and cash equivalents at year-end | US$210.0 million | US$369.2 million |
| Total assets | US$4,107.3 million | US$4,217.2 million |
| Total shareholders’ equity | US$2,968.2 million | US$3,029.6 million |
- Cash used in investing activities was US$105.6 million; cash used in financing activities was US$100.6 million. Cash declined by US$159.2 million during the year.
- At year-end, bank loans were US$55.0 million and financial obligations were US$571.7 million. Contractual cash obligations totaled US$870.9 million, including payables, debt and contingent consideration.
- Consolidated gold production was 191,281 ounces and silver production was 20.3 million ounces, excluding production from mines classified as discontinued. Reported proven and probable gold reserves increased 36% to 6.0 million ounces; silver reserves rose 2% to 241.67 million ounces.
- Buenaventura’s equity-method share of earnings from associates and joint ventures was US$47.7 million, versus a loss of US$1.1 million in 2018. This included US$76.5 million from Cerro Verde, offset in part by a US$41.6 million loss from Yanacocha.
Material changes versus FY2018
- Total operating income fell 25% and net sales of goods fell 26%, mainly reflecting lower metal volumes sold. Gold sales declined 38% and silver sales 18%; realized gold and silver prices increased 11% and 8%, respectively, but did not offset lower volumes.
- Gold sold decreased 44% and silver sold decreased 24%. Management cited the Orcopampa debottlenecking program and reduced extraction, a 21-day Uchucchacua strike and lower ore grades at Tambomayo. La Zanja gold sales also fell as production declined.
- Total operating costs decreased 17%, including lower production and exploration costs. However, gross profit dropped to US$68.3 million and the company reported an operating loss, partly reflecting lower revenue and higher other net expenses.
- Operating cash flow fell US$299.2 million, largely because proceeds from sales declined, tax recoveries were lower and 2018 included US$38.8 million of insurance proceeds. 2019 also included US$36.3 million paid in connection with tax litigation.
- Buenaventura recorded a US$2.1 million impairment loss for Julcani; in 2018 it had recorded a US$5.7 million impairment reversal for La Zanja. Mallay was reclassified as a discontinued operation in 2019, with comparative-period results reclassified.
Outlook, risks and unusual items
- Before the pandemic-related shutdowns, management budgeted 2020 capital expenditures of approximately US$85–105 million and exploration spending of US$35–55 million: US$25–35 million in operating units and US$10–20 million in non-operating areas. These plans are subject to change; the filing does not provide a revised budget reflecting COVID-19.
- As of the April 2020 report date, Peruvian emergency restrictions had halted processing facilities, except for minimum essential and safety operations. The company said it intended to resume operations when authorities lifted restrictions, but could not predict the effects on production, sales, cash flow, financing access or covenant compliance.
- Buenaventura and its subsidiaries are unhedged on gold and silver prices; Yanacocha and Cerro Verde also generally do not hedge their principal metal exposures. Commodity prices, production, costs, permits, environmental requirements, labor actions, community relations and political conditions in Peru are key risks.
- Yanacocha’s 2019 loss increased to US$95.3 million, including a US$142.1 million non-cash reclamation expense, primarily associated with higher estimated water-treatment costs. Its cash and cash equivalents were US$818.5 million and operating cash flow was US$272.4 million.
- Yanacocha’s Quecher Main project reached commercial production in October 2019 and is expected to extend mine life to 2027. Conga remains suspended and in care and maintenance amid community and political opposition; development is not anticipated in the foreseeable future.
- Yanacocha’s Supreme Court tax dispute over contractual rights was decided against it in early February 2020; the filing reports potential fines and interest of up to US$61 million. Cerro Verde faced substantial disputed royalty and mining-tax assessments, with installment payments and litigation or arbitration described in the filing.
- Buenaventura’s mine-closure provision was US$252.3 million at year-end. The company reported two fatal injuries in 2019. Its auditor issued an unqualified opinion on the consolidated IFRS financial statements and concluded internal control over financial reporting was effective.
- On April 2, 2020, Buenaventura amended its US$275 million syndicated term loan: interest was LIBOR plus 1.90%, with semiannual principal installments beginning October 2022 and a final payment due April 2025.
Most important facts for investors to verify
- Current operating status, restart timing and updated production, capital-spending and cash-flow assumptions after the COVID-19 shutdowns.
- Liquidity, near-term debt and contractual-obligation maturities, covenant headroom, and the terms and availability of credit facilities.
- Progress and financial impact of the Yanacocha tax judgment and Cerro Verde royalty and tax disputes, including payment schedules, appeals and recoverability of amounts paid.
- Whether lower production at Buenaventura’s mines is temporary or indicates lasting changes to grades, mine plans, costs or reserve replacement.
- Assumptions behind reserve estimates, mine-closure provisions and impairment testing, particularly commodity prices, water-management costs and project timelines.
- Whether the stated 2020 exploration and capital-expenditure budgets remain achievable and appropriately funded.