Compañía de Minas Buenaventura S.A.A. (BVN) Q1 2013 Earnings Report, Transcript and Summary

Hello. My name is Taylor, and I will be your conference operator today. At this time, I'd would like to welcome everyone to the Buenaventura First Quarter 2013 Conference Call. [Operator Instructions] I now like to turn the call over to Maria Barona on behalf of I-advize Corporate Communications. Ma'am, please go ahead.

Thank you, Taylor, and good morning, everyone. Welcome to Buenaventura's First Quarter 2013 Earnings Conference Call on this April 30, 2013. Today's call is for investors and analysts only. Questions from the media will not we taken. Joining us today from Lima are Mr. Roque Benavides, Chairman and Chief Executive Officer; Mr. Carlos Galvez, Chief Financial Officer; as well as other members of the company's senior management team. They will be discussing Buenaventura's results per the press release distributed yesterday. If you have not received a copy of the report or wish to join our mailing list, please contact us in New York at (212)406-3691. Before we begin, I'd like to remind everyone that any forward-looking statements made today by Buenaventura's management are subject to various conditions and may differ materially. These conditions are outlined in the company's earnings report in the disclaimer and we ask you -- we ask that you refer to it for guidance. It is now my pleasure to turn the call over to Mr. Roque Benavides. Mr. Benavides, please begin, sir.

Good morning, and thank you for attending this quarter conference call. Net income of Buenaventura for the first quarter of 2013, $102.7 million, and our EBITDA for our direct operations, $93.8 million, while EBITDA including affiliates decreased 36% from $418 million in the first quarter of 2012 to $268 million in the first quarter 2013. These results were mainly due to lower metal prices, higher operating costs and lower contributions from both affiliates Yanacocha and Cerro Verde. During the first quarter 2013, our net sales were $340.9 million. And in terms of our production and operating costs, our equity production in the first quarter 2013, 119,000 ounces of gold, 1% higher than the 117,000 ounces reported in the first quarter of 2012, mainly due to higher production from La Zanja and Tantahuatay, despite temporary stopped production at Poracota and Antapite, while where we continue developing additional resources. Silver production during the first quarter 2013, including affiliates, was 4.7 million ounces, a 14% increase compared to the figure reported in the first quarter of 2012. At Orcopampa, total gold production in the first quarter was 62,480 ounces, and our cash operating cost for this same quarter was $639 per ounce. At Uchucchacua, our total silver production in the first quarter 2013 was 2.93 million ounces of silver, 7% higher when compared to 2.74 million ounces in the first quarter 2012. The cash operating cost in the first quarter 2013 was $17.73 per ounce, 1% lower than the figure reported in the first quarter 2012. At Julcani, total production in the first quarter 2013 was 612,000 ounces of silver, 3% lower than the same quarter 2012. The silver cash operating cost in the first quarter 2013 was $14.49 per ounce. At Breapampa, we commenced operations in November 2012. And our total production in the first quarter 2013, which is the first quarter of production of this new mine, was 20,484 ounces of gold, with a cash cost of $500 per ounce. At La Zanja, total production in the first quarter 2013 was 31,200 ounces of gold, and the cash operating cost for this mine in this quarter was $645 per ounce. At Tantahuatay, total production in the first quarter 2013 was 34,300 ounces of gold, and the cash operating cost was $341 per ounce. At El Brocal, where Buenaventura holds 53.76% ownership, silver, zinc and lead production in the first quarter '13 was 484,914 ounces, 6,950 metric tons and 2,892 metric tons, respectively. Zinc cash cost decreased 45%, from $1,346 per metric ton to $742 per metric ton due to lower treatment charges and higher silver by-product contribution. Copper production was 4,536 metric tons, 22% lower than the 5,600 metric tons reported in the first quarter 2012. Copper cash cost was $6,230 per metric ton, 25% higher than the first quarter 2012. There are some comments on general and administrative expenses, exploration in nonoperating areas and operating income. And our share in associated companies during the first quarter 2013, Buenaventura's share in associated companies was 82 -- $84.2 million, 38% lower than in the first quarter 2012. At Yanacocha, in first quarter 2013, gold production was 285,475 ounces of gold. Costs applicable to sales at Yanacocha in the first quarter 2013 was $607 per ounce. At Cerro Verde, in the first quarter 2013, copper production was 55,200 metric tons, and Cerro Verde reported a net income, for this first quarter 2013, of $138.8 million. We -- at Coimolache, we have attributable contribution decreased 2% to -- from -- to $8.1 million in the first quarter 2013. In Canteras del Hallazgo, our joint venture with Gold Fields at the Chucapaca Project, our value-engineering phase was initiated to improve the project's financial returns from completion of the feasibility study. Additional studies will be directed towards evaluating potential options, especially an underground mining scenario, a review of capital expenditures, along with our recommencement of the exploration phase at the Chucapaca area of interest. In the first quarter of 2013, Buenaventura's total disbursement at the Chucapaca Project was $2.1 million. Buenaventura's net income for the first quarter of 2013 was $102.7 million, 40% -- $0.40 per share. In terms of project development, we have continued working at La Zanja, Rio Seco and the Huanza hydroelectric plant. And at La Zanja, the Pampa Verde Project will allow to develop a new open pit, an expansion of the current leach pad and improvements to the operation's road access. Construction began into -- in the second quarter of 2011. Total investment in this project is $78 million, and we expect to be completed by the third quarter 2013. Buenaventura continued the construction of the manganese sulfate plant, and total budget for the project is $90 million. As of the end of the first quarter of 2013, total expenditures reached $82 million, and we expect to have this plant operating in the course of this year. At the Huanza hydroelectric plant, construction progressed at the project during the quarter, including the water conduction tunnel, 10,074 meters of construction, 100% completed. The power plant, the civil works are completed. The Pallca Dam fully completed. The penstock is also completed. And the construction of electromechanical equipment is nearly completed. And we are expecting to be in full production by year end, and we will probably have some production before the middle of this year. With this, we are open to any questions that you may have. I'm here with our Chief Operating Officer, Mr. Francois Muths; our Chief Exploration Geologist, Mr. Cesar Vidal; and our Chief Financial Officer, Mr. Carlos Galvez. Thank you.

[Operator Instructions] Our first question comes from Carlos de Alba with Morgan Stanley.

First question is, can you comment a little bit about the prospects to reduce costs at your different operations, given the reduced precious metal prices that we have seen lately? And second, can you comment on the prospects of Chucapaca? I know that the value-engineering phase is starting, but we have seen a substantial decline in gold prices. So I wanted to get your comments as to how much has this fall in prices affected the prospects of Chucapaca. Is there a possibility that the value engineering will not find the project very profitable in the near reality?

We have been working last year in the reduction and the efficiencies at Uchucchacua with the support of Proudfoot, a renowned international advising company, engineering advising company, and we have been able to find a number of areas where we can improve efficiencies. In fact, the case is that the costs at Uchucchacua have not continued increasing, and we expect that this will come down in the next few months with all the changes that we have put in place. In addition to that, Proudfoot team is already working at the Orcopampa mine in order also to find this efficiency that could lead us to reduce costs. We are working on -- with a team of our executives to reduce costs in all of our mines. And I understand that at Yanacocha and Cerro Verde, they are doing exactly the same thing. So yes, it is a worry that the industry is facing, and we expect to show some results. Carlos wants to add to this.

Yes. If I can add, we are working in our different operating units in terms of concentrate contractors, companies we have, so we are going to simplify our operations. Secondly, we have to review the way of working because we have worked with a nontypical scheme. That means that we have 14-by-7 days of working days with our workers. This is well applicable to our executives that normally live in Lima or far away of the operating units. However, when applying these to our workers in the operating units, to live [ph] next to the operation is just increasing the cost, so we are going to review this. When talking about our Uchucchacua mine, do not forget that we have higher-grades areas to be exploited as soon as we complete the manganese oxide plant. On the other hand, when working -- when talking about our Orcopampa mine, it is sure that we are reporting higher costs because we are doing an important effort in the exploration side in order to connect the current operating area with our area of Pucay, and we are exploring and developing the area in order to connect that without adding production from the site yet.

Carlos, are there any -- sorry, Roque. Just to complement this response, is -- are there any mines that you may consider closing, either on gold or silver, given the high cost and the new prices? Antapite I don't think is operating, right?

For sure this is something we have to review. We are working on that. By the way, Antapite is not producing now, it's just we have this under exploration right now. In the case of Poracota, as you know, we are not only exploring and preparing the future. And not only Francois Muths here, but also Cesar Vidal can comment on the additional findings we are getting with whether structures with higher grades than -- that permit us to think that we're getting back to the operation, perhaps, in July, we could add certain cheaper production in this area. There are others there that we have to review seriously, considering the current prices. And well, on even exploration, but we have to be much more selective.

In terms of your question on Chucapaca, if you ask me, my experience tells me that we have a deposit that will be developed that is required maybe some selective mining initially, but that are resource of in excess of 8 million ounces, with areas of higher grade can be developed and that will fly, I have no doubt. If it's going to be open pit, if it's going to be a mix of open pit and underground. Or as we would like, but depends on these studies that we have to work on, if we go for an underground, I think this will be certainly a mine. We still have some work to do, and we'll get back to you on this project.

Our next question comes from Santiago Perez Teuffer with Crédit Suisse.

I wanted to ask if you could give us more color, sort of breakdown of your exploration costs. How much was allocated to currently operating mines and how much to projects? And also a second question would be on the projects. Apart from Chucapaca, where you have -- where you're developed already, is there any other brownfield or greenfield which could be compromised with the new price scenarios?

Let me start with the new projects. The new projects are underway. And it's Tambomayo, that is a very high-grade deposit, and that we -- the prices at this level will have no impact. The Trapiche copper project is still in exploration. And it will require probably, I would say, 2 or 3 years to make a final decision to go ahead. So I think we would evaluate. But at this point in time with leachable material in Trapiche, that will also be a feasible project in my mind. Those are the 2 projects, and we are obviously continue exploring for higher-grades ores that will enable us to produce even at these lower prices.

Regarding the exploration expenses, you have 2 parts. One is the exploration in units in operation, operating units, where we have reported $46 million. And you have to bear in mind that this is part of our cash operating costs in our units. Within that, we have this connection to the area of Pucay, which is an effort that we have, and the exploration effort that we are carrying out in Poracota and Antapite without having any production. We -- after completing this task that we have already fixed, we are going to reduce this exploration effort. On the other hand, I have Cesar VIdal over here, claiming that we are allocating certain exploration expenses that come from our -- mainly our new projects, the project of Tambomayo that Roque mentioned, that we are not only exploring, but also developing in preparation for the new project. So it's not that fair to consider this as an exploration -- only exploration. And there were $6.3 million allocated to that. On the other hand, you have the Trapiche exploration effort, which is close to $5 million. And we are not only exploring, but also we are evaluating and working on a potential project that we have to develop. And beside that, we acquired a certain prospect where -- in the order of $3.5 million that Cesar, perhaps, will expand on that. And so those are not only exploration, a greenfield exploration, subject to very high risk, but we are focusing on the developing of new projects that will be the future of Buenaventura.

I would like to add only that for those of you that have read the annual report of Buenaventura in 2012, in the operation section of La Zanja, there is a small project called Alejandra that has been mentioned there where we have a few, 6 to 7 holes with high-grade intersects, and we already claim to have a resource. So La Zanja is giving us good results, although it's very early days. And please keep your fingers crossed, by year end, you may have a resource -- a bigger resource number of high grade coming from a new discovery in the La Zanja mine.

Okay, great. And lastly, could you give us -- I mean, you commented on your plans on reducing costs from the efforts you're working with other companies. But how fast do you expect results from those efforts? Do you expect this from -- for the end of this year or for next year? Where should we see a little bit of cost containment because costs have been impacting very importantly?

We are going to work on this matter -- by the way, management will discuss in detail this, during this month. And we have to incorporate this effort immediately in order to cut costs. I believe that perhaps in a quarter's time, we could have implemented the decisions in order to improve the results during the second half of this year. But this is a progressive task.

Our next question comes from Felipe Hirai with Merrill Lynch.

I have a few questions. The first one, just wanted to clarify on the exploration expenses that you just mentioned, Carlos. So could you just give us guidance on how much you think that you could be spending this year in exploration? The second question is that, we thought that the words are kind of a mismatch between the equity production and the sales of particularly silver. So I just wanted to understand if there is any issue there, if there is any stock [indiscernible] higher sales volumes in the next few quarters? And then just a follow-up on the cost question. Again, Carlos, if you could just quantify how much of the cost savings you could see in Orcopampa and Uchucchacua?

Well, in the case of the greenfield -- sorry.

Brownfield.

Okay, the brownfield effort we have for this year is in the order of $62 million. And other than the exploration, we think the operating area is strictly [ph] -- you know that we have to replenish our research to the extent that we exploit, and this is part of our permanent effort. On the other hand, our exploration -- greenfield exploration budget, actually exploration budget will be $22 million for the year. As I mentioned, we have allocated an exploration expense, something that is working on the evaluation and the design of the 2 projects, Trapiche and Tambomayo, that we expect to come up with, in the case of Tambomayo, a design and a feasibility study at the end of this year or beginning next year after spending in the order of $38 million. While in the case of Trapiche, well, we are working on the scope, in a study, because this a copper deposit that you know that we have to evaluate very well.

And the production versus sales?

Well, the comparison of production versus sales during this quarter, mainly, what we have is on a small difference between the -- in silver lead concentrate sales, mainly because we delayed for a week delivering 3,000 tons of concentration in Uchucchacua that were delivered in the first week of April. Mainly, this is the main difference.

And then cost savings? Do you think [indiscernible]?

Could you repeat your question about the cost savings? Because we explained something about that.

Okay, Carlos. On the costs side, I just wanted to know if you had some numbers that you could share with us in terms of the cost savings potential that you could see for Uchucchacua and Orcopampa?

In the case of Uchucchacua, if you review the trend, we have reduced and we kept the same cash cost than in the past. We are aligned with what we've had the same quarter last year. And we reduced, initially, the cash cost, you can see the trends, during the third and fourth quarter of last year, in the order of $16.50 per ounce of silver. We expect to reduce this at about $15.50, while we are able to exploit the higher rate of silver, but -- as I mentioned, once we begin operations in Rio Seco manganese sulfate plant. In the case of Orcopampa, unfortunately, I'm not prepared to give you a final answer. This is something that we have to discuss in 2 or 3 weeks with Francois Muths, that -- according to his plans.

[Operator Instructions] Our next question comes from John Bridges of JPMorgan.

Just wondered with respect to Cerro Verde, what happened? Why was the production down so much, the copper production down this quarter?

Well you know that there was a reduction of the grade in the primary -- sorry, in the secondary sulfide, that was only 0.33% copper. And then the impact on the prices, the net prices they got was in the order of $3.05 [ph] after deducting the treatment charges.

Did something happen to treatment charges this quarter? This is the second time we've heard about higher treatment charges.

Well, not that we know exactly. You know that the impact of that is because they are selling higher volumes of concentrates instead of cathodes, and they calculate the average of that.

Okay. I would imagine Freeport would be able to get a pretty good deal on treatment charges.

Yes, I suppose so. If they cannot, who can?

I'm not sure if you want to answer this one, maybe you deferred on that just now. But Orcopampa, you're punching out to the higher-grade material. Do you have an estimate as to when you're going to get back into that?

We're punching into the higher-grade material now. The thing is there is a mine plan, and we are following the mine plan. There is nothing like high-grading or anything like that. We continue exploring and we are investing. You see, last year, we did 1,500 meters per month, coming from 800 meters per month the previous year. So we have put a lot of effort and a lot of resources in exploring, and we expect to increase the production somewhat from 2012 to 2013 the full year.

Okay. The main tunnel across the new area, when is that going to be completed?

Probably in -- Francois Muths says that probably by year end it should be ready, and then we would develop all this area of Pucay. But we have enough reserves and resources to complete, by far, this year.

Okay. Okay. With the lower production out of Cerro Verde, do you think there'll be a change to your guidance for copper this year?

Well, Cerro Verde's guidance is in the order of 280,000 tons of copper for the year.

And that's not changed?

No, the 280,000 tons has no variation.

Our next question comes from Tanya Jakusconek with Scotiabank.

I just have a couple of questions, 2 for the income statement and then one just on Breapampa. Just maybe, Carlos, on the income statement, so that we would get correctly our earnings per share number. We saw that you spent $46 million in exploration in units and operation this quarter, and then an additional $22 million in non-operating assets. That adds up to $68 million. Is that the run rate? And I know you've had some extraordinary items in there that you explained, but maybe you can give us the combination of the run rate for this year?

Yes. Well, as I mentioned, we feel this $22 million that we reported as exploration in non-operating areas, what we have is $11 million or $10.5 million that mainly are, in one case, infill drilling and developing the project, and in the other case is drifting to develop the project of Tambomayo. It is not actually exploration, perhaps what we have is to reallocate and just explaining what the name -- the correct name of this activity is. And $3.5 million was an acquisition of a property, so it's not going to repeat. In the case of the exploration effort in our operating areas, what we are doing is pushing hard in order to accelerate the process, especially in the area of Orcopampa and Poracota and Uchucchacua, as well, in preparation for the new areas that have to be put in place for the new sort of operation that we will have with our manganese sulfate plant. It is important to mention that we added exploration in the case of Julcani. Julcani had an expansion from 400 tons per day to 500 tons per day, and we had to increase the exploration effort in order to prepare the deposit for this expanded operation.

Okay. So would it be fair to say then that $46 million per quarter is a correct number for you for 2013?

Well, no, no, no. We expect to reduce this to the level of $35 million to $40 million per quarter.

Okay. And then the other exploration that you mentioned in non-operating assets seems to be more normalized, let's say, at under $10 million a quarter?

Absolutely, absolutely.

Okay. And then my second accounting question is just on your tax rate. I think your tax rate was about 23% this quarter. Is -- should we be looking at a 15% tax rate or are we looking back at a 25% tax rate?

Well what you have to consider is the order of 23%, due to the fact that this is not only the income tax, but also the realty and extraordinary mining taxation that we have to put together and report according to the new IFRS reporting system. This is mainly the modification.

Okay. And so you have, pretty much, gone through all of your tax losses?

Well the question is that the only benefit that you have for your tax losses is for the income tax. When having 30% and when applied to that, you reduce to 15%. But the way to report is to put together the income tax, plus the extraordinary mining taxation, plus the royalty, because the 3 are as a consequence of the operating margin or the net -- or the pretax profit.

Okay. Okay. And what would be the last tax losses you have on your books now?

Well we are almost to complete, this year end, the tax losses.

Okay. So they're almost 0?

No, no, no. At this year end, we are going to complete.

Okay. So then that's gone. Okay. And then maybe just for Roque, Breapampa, it seems to have come up nicely, 20,000 ounces in the quarter at $500 per ounce. Is that sort of the rate that we're going to be looking at per quarter? And maybe just tell us a little bit about how it came up -- it came up quite nicely. Usually startup is a bit harder.

Well, it took a little bit longer for getting the permit to start operating, because we were ready well before the operation permit -- the startup permit. Bureaucracy is terrible and, many times, very frustrating. The fact of the matter is that we were targeting 60,000 ounces per year, and we have had some higher grades. And this is typical of this type of deposit. I would not be surprised that we will be very close to 80,000 ounces in the year, but the target is in the order of somewhat in excess of 60,000 ounces.

And then the costs came in nicely because of the grade?

Well, it was -- it is a low-cost operation, and the $500 is something that we were expecting.

Our next question comes from Joe Teichman [ph] with LT Capital [ph].

I just had a few questions about a few of the charges. My first question is your depreciation, why did that almost double?

Well the depreciation increased dramatically, $10 million, coming from the expansion of Brocal You know that we consolidate Brocal. Brocal is in the process of expanding its operation, moving from, initially, 6,000 tons to 11,000 tons per day, and growing to the level of 18,000 tons per day throughput. And according to that, we began to depreciate the new assets that add $10 million in the quarter.

So you have not seen yet the new sales from it though? So you've not been able to produce, but the depreciation is already on the books?

Well, no, no, no, we are selling -- the question is that we are treating and selling 2, sort of, ores. The polymetallic ores are coming from Tajo Norte, and the copper ore is coming from Marcapunta. We are using the capacity, the 11,000 throughput per day, for the combination. The question is that, well, once you begin to use these facilities you have to depreciate, and the prices of copper and lead and zinc didn't help that much.

Got it. Okay. And about your cost of sales, could you give a breakdown? I know that you've had -- in the past, you've had the strikes which have driven up the costs. I know that it hit the mineral costs. Can you give a breakdown of what, specifically, this quarter drove up the costs, again, to almost double versus previous quarters? And how you're going to take care of this? Like, for example, what did you do about the strikes?

Regarding the cost of sales, you are mentioning -- you are comparing the $132 million -- $133 million with -- sorry, sorry, sorry. Wait a second, please. Yes, the $133 million we reported in the first quarter last year, as compared with the $158 million?

Yes. I mean, yes. Sorry, yes.

Yes. Different than the exploration effort that were -- was explained.

No, no, no. Not exploration, just the cost of sales.

Well in this cost of sales, what you have is the labor costs and contractor's effort that we have incorporated in -- for this production, and -- well, but I don't have fully here in my hand the breakdown of supplies or whatever. I can share with you the full detail later on, if you wish.

Yes. That would be good. So you do not have -- were there any operational costs that had to do with strikes this quarter? Or was that only...

Absolutely. You have to bear in mind that, as we reported in due time, we completed the negotiation with the unions at the beginning of the year, in January, and there was no impact on the strike. What we had is the reimbursement that the -- sorry, the disbursement of the product of these negotiation that is applicable from January onwards. And when -- and, by the way, that was an increase in the order of 5% of the payroll that we had to pay together.

So was that the reason why there was an increase in labor? Because you had to -- in order...

Yes, there is a certain compensation when closing the negotiation with them.

So that will continue -- so the terms of that agreement will continue throughout the year? Or it's only...

Well you have 2 parts. One is the salaries increase that we will continue, and the other onetime bonus that we paid at the beginning. But we did not explain because this is a typical payment that we have to do during the first quarter, every single year. But this -- it's not recurring for the rest of the year.

So just to clarify. So the increase in the cost of sales this quarter will, more or less -- I mean, not -- maybe not as high as this quarter, but will continue throughout the year?

Yes, well, this is why I mentioned that in the case of Uchucchacua, we reported in excess of $17, should reduce to less than $16.50 or close to $16 per ounce despite of the appreciation of the currency and so on.

Got it. Okay, very good. And just one last question. I don't know if you would want to answer but -- about the Congo project. Are there any updates about that project?

We are always prepared to answer all the questions that you and whoever in the market requests. In the case of Congo, we have -- we are finalizing the construction of the Chiwa 1 [ph] dam, which is the first one that should be ready. And we're starting the Parol [ph] dam, that should be finished by the end of the year. And then we will have to de-water the Parol [ph] reservoir into this new dam. If -- we are monitoring the social aspects of this project. And obviously, depending on how it works, we'll take the next steps. At this point in time, we are working in the -- what we said we were going to work, and this is what we are doing.

So how much have already spent on the project, and how much do you plan on spending on the project -- continue spending on the project?

The accumulated figure expended in the project is in the order of $1 billion, this is accumulated figure. Yes.

And then the project, altogether, was targeted for in excess of $5 billion. The thing is it depends on the next steps how much are we going to invest. But these reservoirs are not the substantial part of the project.

Our next question comes from Santiago Perez Teuffer with Crédit Suisse.

I just wanted to settle that -- I mean, with all the changes we have been discussing throughout the call, is there any comment in guidance, either production or your expected results that you would like to share with us?

There is no change in the guidance for our production for the year. We continue aiming what we planned. And, mainly, those operations that we had to stop are not producing. And eventually, what we have to do is to add whatever can come in the future from Poracota. But we have already considered that Antapite was not going to produce. And we keep on holding the same guidance for Orcopampa, La Zanja, Tantahuatay, even improving what was in our initial expectation. Likewise, in the case of Breapampa, as Roque has shared a few minutes ago. And in addition to that, what we have is an important expectation from our Uchucchacua's usual production and the new expansion Julcani.

Our next question comes from Walter Chiarvesio with Santander Bank.

My question is going back to the volumes sold of silver, just to understand a little bit better the dynamics. You mentioned that the lower volume compared to production was delivered in the first week of April. Just to understand, let's say, it's compared to an average of volume, let's say, about 4.5 million ounces. And the difference with that average, this is an assumption, was sold in the first week of April, implying a price right before the big drop that suffered the metal. Just to understand what we have to consider for the second quarter in silver. And second question is what is your outlook for precious metal, if you could provide us your opinion about the outlook for the rest of the year?

Well in the case of the silver delivery, that was just a logistic issue, not to count on the chip to deliver, and well we have to delay this just for a week. Nothing special, so I don't think that deserves any additional explanation. Regarding the precious metals prices, we believe that conditions haven't changed at any time. And you can test it when you compare what happened in the financial segment of the market, compared with the physical market. And as soon as the price of gold dropped, immediately, the demand of gold skyrocket by the Chinese and Indian markets. So nothing special. The -- I am not going to teach you anything about the performance of the U.S. and European economy. But you know, U.S. continue injecting $35 billion monthly to keep on growing at very weak 1.5% to 2% per year. On the other hand, Japanese government decided to inject and to double the monetary base in 2 years, and Europe hasn't changed anything. So gold, still, the best place to be despite of the market, the financial market would be afraid of that. But the physical market continues being as strong as always. In the silver side, well, it's going to take longer, perhaps, to recover the initial position, because it has an important component of base metal characteristics. So we believe that we are going to end this year at prices, for sure, higher than $1,500 in the case of -- per ounce, in the case of gold. And I wouldn't be surprised if we obtain in excess of $1,600 per ounce. Silver, I'm not that sure, but it could be something in between the $25 to $30 per ounce.

At this time, I would like to turn the call over to Roque Benavides for closing comments.

Well thank you for attending this conference call. I know that this is not the happiest or happier times for our shareholders. We are doing our best in improving efficiencies and improving returns, and you can be sure of that. In addition to that, I wanted to share with you that we will be attending the Merrill Lynch conference in Barcelona, in 15 days time, and the Scotiabank in London, in a month's time. For those of you that will be in those conferences, we will be very happy to take meetings with you and to explain further what we are doing. Thank you very much and have a great day. Bye-bye.

Thank you. Ladies and gentlemen, that will conclude today's conference. Please disconnect at this time.