Good morning. My name is Brandon and I'll be your conference operator today. At this time, I would like to welcome everyone to the Buenaventura conference call. All lines have been placed on mute to prevent any background noise. After the presentation we will conduct a question-and-answer session. Instruction on how to ask the question will be given at that time. Thank you for your attention. I would now like to turn the call over to Rafael Borja of i-advize Corporate Communications. Please go ahead, sir.

Thank you and good morning everyone. Welcome to Compania de Minas Buenaventura's second-quarter 2016 earnings conference call. Please be advised that today's call is for investors and analysts only, therefore questions from the media will not be taken. I would like to introduce our speakers. And joining us from Lima, Peru are Mr. Roque Benavides, Chairman and Chief Executive Officer; Mr. Carlos Galvez, Chief Financial Officer; and members of the Company's management team. They will be discussing the results per the press release distributed yesterday. If you have not yet received a copy of earnings report, please visit www.buenaventura.com where there is also a webcast presentation to accompany discussion during this call. If you need any assistance please contact i-advize in New York at (212)406-3693. Before we begin, I would like to remind you that during this call comments made by management may include forward-looking statements which are subject to various conditions and uncertainties based on a variety of factors. These forward-looking statements may differ materially from actual results. Thus we ask that you refer to the disclaimer located in the earnings release prior to making any investment decision. And now it is my pleasure to turn the call over to Mr. Roque Benavides, Chairman and Chief Executive Officer of Buenaventura, for his presentation. Mr. Benavides, please go ahead.

Thank you, Rafael, and welcome to all of you to this quarterly conference call of Compania de Minas Buenaventura. May I start by giving a short brief on what is going to happen tomorrow, I meant the change in government after the presidential elections. Mr. Pedro Pablo Kuczynski will take office as President of Peru starting July 28th, tomorrow. And we are very optimistic about the future, the political future of Peru, the economic future of Peru. Mr. Kuczynski is a well-known financier. He used to work for first Boston Bank and he also has been a fund manager for many years. He has selected excellent people for the different ministries, and we look forward to a much better environment from an economic, political and social environment for Peru. We as Peruvians, we are very pleased that the elections were held democratically. There is a group of Congress people that has control of Congress and those are the followers of Ms. Keiko Fujimori that is also a very sensible person and that after the speech of the newly elected President of congress Ms. Luz Salgado, where she mentioned that they will not be obstructive to the work of the executive. We look forward with optimism to what is going to happen in the next five years in Peru. The environment is therefore more economic development and that will certainly contribute to the development of mining in our country. I will follow the presentation which has been sent and it's in our webpage on the second quarter 2016 results. And I will mention the page in which I will be presenting. We are in page number 3. And we have stated a number of objectives. And we are essentially on track to achieve the guidance of what we have mentioned. We…

At this time, we will open the floor for questions. [Operator Instructions]. And the first question will come from Felipe Hirai, with Bank of America. Please go ahead.

So I have two questions from my side. First, Roque, you mentioned a little bit about the new government and how they are not likely going to obstruct the investments in the mining sector. But I would like to know if you have any expectations, what kind of new project the Company could start to develop and what kind of help the government would give to you if that is kind of the first of this new wave of projects coming in the country? The second question is related to your cost, we noted that most of the declining cost that we saw on a quarter-on-quarter basis was essentially because of the higher [indiscernible] credit, so we were just wondering if you could tell us a little bit on how you are expecting to see cost going forward, excluding this [deposit] credit? Thanks a lot.

Thank you, Felipe. I will ask Igor Gonzales to answer the declining cost in leasing, but I will answer the new government and new projects. I think Mr. Kuczynski has been very emphatic is showing that he is all for reducing all the bureaucratic restrains that we have had in the past. And I think that his government is going to work on that. And in that respect, I think projects not of Buenaventura but projects as Quellaveco, La Gransa and maybe Tia Maria could fly. On our front I think we are evaluating San Gabriel and Trapiche. And the vision of going ahead will certainly be influenced by the positive environment that we may have for investment, but also mostly by the returns on investment that any of those projects may have. We will continue working and essentially we are very positive towards what will be happening. Igor, would you answer the question?

Yes, sure. Yes, the cost reduction is mostly a combination of things and we have increased throughput in most of our plants, operations other than Orcopampa. We also have efficiency improvement such as recovery, maintenance, shorter downtimes and also have the direct reductions such as contract negotiations. So it's a combination of all three elements that add to the cost reductions and then also there is the element of metal price.

Thank you for the question. Our next question comes from John Bridges with JP Morgan. Please go ahead.

Many thanks for the presentation, it's very helpful, we really appreciate that. Roque, in your introduction you mentioned something about shipping delays at Verde, I seem to hear. Could you give us a little bit more detail on that and what's going on with the ramp up and cost structure and that sort of thing?

Sure. May I ask Raul Benavides to answer that question please.

Yes, John, well, the plant is operating, and the -- for instance, this month we have an average production improvement of 250,000 tons per day. And we are getting adjusted to the -- the availability, the mechanical availability. They think that should improve from the lower 80s to lower 90s. So we can foresee some increase in throughput in the next few months. And the missions for the production figures are that we have the lower [indiscernible] and there has been some major achievements that don't show the numbers that we would like to see in sales but it's a small revision from what's predicted.

May I just add that the first results of cash cost in the case of Cerro Verde are giving us $1.20 per pound of copper and that certainly is treated as a lot.

Well, and just to mention, I mean these cash costs that has been done of $1.2 are remarkable.

Yes, I was going to say you can't have many big problems with $20 cash cost, but I suppose that's what you get when you build the world's biggest concentrated plant, right?

Yes.

Just for modelling purposes, Carlos, maybe do you have the tonnage throughput at Brocal and the split between the copper and the zinc streams?

Carlos Galvez. In the case of Brocal, you know that Brocal has already achieved their full year throughput at 18,000 tons per day. And is -- sorry, do you -- I don't know which -- the information. We have throughput rate of 0.69 ounces per metric ton of silver, 2.78% zinc, and 0.82% lead. And on the other hand 2.16% copper. The recovery is performing good metal and we expect to maintain the June and July average of level of operations, it's more than in terms of throughput but grades and recoveries with this and following the current prices that we try to take advantage of, the higher operations from time to time show us in the market we expect to get for full year with positive cash flow. By the way the EBITDA during this quarter in Brocal was $5 million but we expect to improve this in an important way.

The next question will comes from Carlos de Alba with Morgan Stanley. Please go ahead.

The question I have, the first one is, you have had very good results in the first half of the year, the guidance on EBITDA right now stands at 180 million to 220 million for the year but you're already there basically, so I wonder if you are considering revising that guidance or what can you tell us in terms of expectations for performance in the second half of the year. And clearly you don't control prices but in terms of volumes and cost particularly if you can make any comments that will be great. The second question has to do with an update on the sales of the discontinued operations. The market clearly has improved in terms of gold prices and silver prices. So perhaps there is more opportunities now, more willing buyers. And then finally, could you give us a guidance of your expectations for silver production at Brocal?

Well, regarding the guidance of EBITDA you will have to remember that in March when we released our information to the market we mentioned that the EBITDA was going to improve at the level of $200 million, $210 million. If you take the average prices of year 2015, show that -- they show that market has helped and if we continue attaining the prices that we have, the EBITDA to our direct operations should be in the order of $400 million this year. And it will include the affiliates. This EBITDA should be in the order of $700 million. Regarding also our.

Silver.

Silver production, well, the grades in silver have, has a decline in Brocal. And, one minute, let me see what we have. 2.7 million ounces. Yeah, well, the guidance should be in the order of 2.7 million ounces, 2.8 million ounces during this years. And I don't know, Raul, do you have?

Yes, this is Raul Benavides. Currently we're in the process of selling Antapite and Recuperada. The rest of the operations are practically long term. In the case of Chile, we are selling the installations in the facility that it's essentially a closure. So, yes, we have some people interested in Antapite. We are under [indiscernible] with potential buyers. And in the case of Recuperada we have three people interested but that's less [indiscernible] operation that has less interest than Antapite.

Thank the next question will come from Botir Sharipov, of HSBC. Please go ahead.

Congratulation on set of good results Roque and the team. Few questions from me, and if you don't mind I'll ask them one by one. You mentioned synergies in La Zanja and Tantahuatay, could you maybe specifically specify what you guys have done so far in terms of those synergies and if there's a room for improvement further down the line in costs at those mines?

Well, one very specific synergy is that today Ricardo Huancaya is in charge of both operations. If I may say, the administrative costs will be diluted. And what we are doing is managing the two mines from one single head. And I think that's where we can find a lot of synergies which have given us substantial results.

To complement Roque's comments, we have created a small office in Cajamarca where we have combined all the support services for both mines and [indiscernible] those services from the mines themselves. We are also sharing staff in a number of areas, safety and environmental, even metallurgy where we're sharing staff knowledge and also in all the [indiscernible] and support services. So that's having a good impact in not only in cost but also in performance.

Yes, [indiscernible] will be implemented in the area of [indiscernible] and Mallay together acquired in the [indiscernible] accounting, [indiscernible] human resources, logistics and so on.

If I may add about Cajamarca, a very good thing that has been done is that we have only one social area [indiscernible] their management of a very difficult social environment in Cajamarca. So it's not only the synergies in cost but the improvement in the information that we have about social movements.

Okay, thank you. And I guess second question is on CapEx at Cerro Verde, it is a bit loaded. CapEx was about $140 million in the second quarter, how much of it is expansion, how much of it is sustaining? And I think a couple of quarters ago the message was that sustaining CapEx for Cerro Verde was about US$250 million annually, and looks like we are tracking above that. Can you shed some light on that as well?

Yes, the final numbers for the topics for the expansion, it is $4.514 billion. And in capital for the second quarter you have $70,397,000. And the project or everything from now on will be charged in the operations.

The thing is the budget was US$4.6 billion and we have at the end -- then this is -- the final figure is $4.5 billion, so it has been under the budget and on time, so we are very pleased to report that.

So would you say going forward $70 million per quarter is roughly the sustaining CapEx for Cerro Verde?

I would say that will be in that order or magnitude, but yeah, it's -- that order of magnitude.

Okay. Good. And my last question is on your future in Yanacocha. Obviously great news there with [indiscernible], specifically on the sulphites on project [indiscernible], my understanding is there are two main sort of sub-projects one is a copper [indiscernible] sulphite and the other one is Chaquicocha underground. Can you confirm those? I guess, any other additional deposits that are being evaluated right now by you and your partner?

Well, I think part of the evaluation that is being done is essentially the copper sulphite and that a huge potential. But I will say that those two that you have mentioned, the Chaquicocha underground and the bio-leeching are [indiscernible] are the main projects. But still we are finding a number of areas that are very mineralized and the copper sulphite have the limitation in some places of arsenic content that we think that could have also a solution in the near future.

Right, and the Chaquicocha has native sulphur in it, right? I think.

Yes, well, in Chaquicocha we have built the ramp and now we are starting to drill and we are getting some interesting results, higher grades, and I think that will show us the way how to develop Chaquicocha.

[Operator Instructions] The next question will come from [Rinan Crusio] with Credit Suisse. Please go ahead.

My first question is regarding the expansion of the Yanacocha. The presentation from Newmont mentioned that there is a pending IRR of 15%, can you elaborate where -- what are the assumptions to get the IRR or if you can comment on expected costs, is it the same of the Yanacocha currently? That will be highly appreciated. And the second question is only if you can provide us the expectations for CapEx this year and onwards. That's it on my side.

Capital for which project, please?

The expansion of Yanacocha.

So I think it's early day to, for us at least to say an IRR for different project, but if Newmont has given guidance of 15% I would imagine that that is the case. I don't have more to comment on that. And in terms of the CapEx for all these projects, I would reckon that it will be in the order of $500 million, but in that order of magnitude.

Thank you. The next question will come from Tanya Jakusconek of Scotiabank. Please go ahead.

Yes, good morning everybody and congratulations on a good quarter. Just wanted to come back, if I could, maybe with Igor on the costs and then Carlos maybe for some guidance on the costing side. Igor, I understand you mentioned that increased throughput, efficiency, you touched on maintenance and you touched on negotiation, recovery, all helping that. Can we get down to when, on the labour side is it negotiation of contracts or is it combination of also reduction of labour at your operations?

No, it's mostly a review of a contract for suppliers, that's what I meant, not contract with labour. However, we have enclosed some of our negotiations with labour, but the savings are not coming from contracts with labour, mostly from re-negotiating contracts with suppliers.

Yes, but if I may add, one important change has been modifying the exploration method from current fields to tension fields and this improved the productivity, reducing the cost in our underground operations. So this is an important modification.

You can see that this is a team. The financier is talking about operations and the operations guy is talking about finance. Good.

Okay, so that I can understand correctly, so Carlos was mentioning that we've had increased productivity, which I appreciate, obviously surprising. And Igor mentioned that the -- there's the consumables, I guess, where you re-negotiated pricings, that have helped that portion of the cost structure in addition to maintenance, is that correct?

Yes, I will give you an example. For example, we have standardized all the support materials for our underground mine. Then by standardizing that now we have a larger package to negotiate with the suppliers, and we did that. And as a result of that we have fewer elements to bid and a bigger package and of course we have better pricing on that. So that's one example. The other example that I was also mentioning is that we focused on the maintenance part of things. And what we did is we applied some maintenance scheduling techniques to reduce the maintenance time and therefore downtime, and so that also helped us in the process. And something that is impacting well is the fact that we renegotiated with the suppliers prices in reagents and so on. And this is a true quarter that [indiscernible] reduction of prices impacted in our consumers and suppliers pricing costs.

We have also negotiated with contractors. We have contract mining in a number of operations where we have been reviewing contracts with the contractors and we have been able to reduce somewhat, some other costs they were all charging to us.

Okay. So that's appreciative. So is it safe to assume that your cost of sales this quarter was about $116 million. Carlos, is that a good run rate? Of course eliminating impacts of currency and/or other metal pricing. But are we going to see further reduction from this $116 million level cost of sales for the quarter or we are at normalized level? Just so that I am understanding whether there is more to come.

Well, we expect to have some lower cost of sales due to the fact that in the second quarter normally we have the impact of the renegotiation of our, with our unions. That has [indiscernible] immediately, that has impact actually in May and June. So after that we are not going to have any other package for bonuses to our blue collars. So the cost of sales could be lower.

And we're talking like what sort of magnitude lower so that I can understand what impact the tier II costs had on the union packages and bonuses?

Well, this could be about 3% to 5% in the labour cost.

Okay. And are you comfortable going forward that this is something that is sustainable, you renegotiated, you've got your productivity, you've got your efficiencies and throughput recoveries, et cetera, so its sort of a normalized rate that you're comfortable at?

Yes. What we're trying to do is we're not only talking the cost reduction per se and just renegotiating, we are also going doing, making an analysis of element of cost and going to the root cause and analysis of what's generating the higher cost and then we're making a plan to address those elements and reduce the cost permanently. And so that's an ongoing effort because we want to make this cost reduction sustainable in time and we don't want them to be just one short. And so we continue to do that. We just concluded what we call our operational review in all of our operations just about a month ago where we identify a number of opportunities to further improve our cost and each one of the opportunities has a plan to follow and big and responsible people to make it happen, so -- and with the detailed analysis of the improvement, so that's going to continue throughout the year.

Okay. And just can you remind me what role that currency play in your cost of sales this quarter versus what you had budgeted?

It is a minor impact. The exchange rates have not moved in this quarter so it is very limited.

Okay. So I think the exchange rate moved about 4% and, okay, so it was a minimal impact for you?

Yes.

Okay. And fuel is minimal anyways. Okay, thank you.

Thank you for the question. [Operator Instructions] We're showing no further questions. Mr. Benavides, I'll turn the conference back over to you.

Well, thank you for attending this quarterly conference call of Buenaventura. You can be sure we continue working very hard. And heading for Peruvian National Day tomorrow and for a new government with new impulse and very positive news. So keep an eye on Peru. I think this is a country that is going to continue to be a star in Latin America. Thank you for attending the conference. Bye-bye.

Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect your lines.