Good day, ladies and gentlemen. Welcome to the Compañia de Minas Buenaventura Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I would now like to introduce your host for today's call, Mr. Rodrigo Echecopar, investor relations. Mr. Echecopar, you may begin.

Good morning, everyone, and thank you for joining us today to discuss our third quarter 2020 results. Today's discussion will be led by Leandro Garcia, CEO. Also joining our call today and available for your questions are Daniel Dominguez, CFO; Mr. Juan Carlos Ortiz, Vice President of Operations; Raul Benavides, Vice President of Business Development; Alejandro Hermoza, Vice President of Sustainability. And also available for your questions will be Roque Benavides, our Chairman. This confidence will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statement should be considered in conjunction with cautionary statements within our earnings release and risk factor discussions. I encourage you to read the full disclosure concerning forward-looking statements within the press release we filed on October 29, 2020. In addition, it is important to note that these statements include expectations and assumptions which we will share related to the impact of the COVID-19 pandemic. As seen on Slide 2, our forward-looking statements also provides information on risk factors, including the effects related to COVID-19, that could affect our financial results. In particular, there is significant uncertainty about the duration and [ complemented ] impact of the COVID-19 pandemic. This means Buenaventura's results could change at any time, and the impact of COVID-19 on the company's business results and outlook is best estimates based on the information available as of today's date. Please note that, in the interest of safety, we are again utilizing a more virtual approach in exercising social distances while conducting this call this quarter. We would ask you to please bear that in mind in light of any potential -- in any potential technological difficulties which could occur. At this time, let me now turn the call over to Leandro Garcia. Leandro, please go ahead.

Thank you, Rodrigo. Good morning to all, and thank you for attending this conference call. Before we start this presentation, we would like to wish you, your family and friends health and well-being at this difficult time. We are pleased to present the results of the third quarter of 2020 from Compañia de Minas Buenaventura. We have prepared a PowerPoint presentation, which is available in our web page. Before we go further, please take a moment to review the cautionary statement shown on Slide 2. Please consider the disclosure related to the COVID-19 pandemic. Moving on to Slide 3. Highlights were as follows. Third quarter 2020 EBITDA from direct operations reflected a positive trend on both a sequential and year-on-year basis despite the effects of COVID-19 on Buenaventura's operation during the quarter. EBITDA from direct operations reached $68.5 million for the third quarter '20 compared to $26.5 million in 2 quarter '20 and $58.4 million reported in 3 quarter '19. The third quarter '20 adjusted EBITDA including associate companies reached $183.9 million compared to $168.2 million in third quarter '19. Third quarter '20 capital expenditures were $12.6 million compared to $28 million for the same period in 2019. Third quarter '20 net income was $24.4 million compared to $4.5 million for the same period in 2019. The company's De-Bottlenecking Program continued to progress at a reduced level during the third quarter '20. The program's 2020 focus is on Buenaventura's Tambomayo, Uchucchacua and El Brocal mines. Buenaventura's cash position reached $265 million for the third quarter 2020. The company has released its updated guidance for the full year 2020. In line with the company's ongoing focus on cash preservation, on October 29, 2020, yesterday, Buenaventura successfully refinanced the final $113 million leasing payment for its Huanza hydroelectric power plant, effective November…

[Operator Instructions] And our first question today will come from Thiago Ojea of Goldman Sachs.

My first question is regarding the [ full restoration of the ramp-up ], what you are looking for in terms of volumes for next quarter. And what should we expect in terms of costs? How do you see the improvements on costs going forward? And regarding capital allocation, what's your looking in terms of capital allocation for next year, if you can provide a little bit more granularity on cash generation expectations and CapEx and potential dividends from Cerro Verde?

Thank you, Thiago. In the case of costs, we expect to kind of reduce a little our CAS, our cost applicable to sales, in all our mines. We expect to have a reducing -- a reduced cost in Tambomayo, Tantahuatay and Julcani, Colquijirca and Marcapunta. In the case of Tambomayo, for example, we expect to finish our CAS for the whole year between $750 to $800; in Orcopampa, around $1,000; in Tantahuatay, around $850, $800 per ounce. In Uchucchacua, we expect to have around $19, $18 per ounce; in Julcani, also $19; and in the case of -- for zinc in Colquijirca, around $1,800 per tonne of zinc; and in copper for Marcapunta, around $5,200 per tonne. In the case of CapEx, we expect to finish this year with a total investment in our mines between $45 million to $65 million sustaining and greenfield CapEx. And what was your second question? Sorry, Thiago.

Sure. It's more about the capital allocation in general terms. So what you're expecting in terms of CapEx but also what you're looking to do with the cash generation and if there is any change of potential dividends from Cerro Verde.

Well, our CapEx for this year without considering the construction of San Gabriel will be around $120 million. Our cash generation will be mainly our efforts to increase our explorations in our own mines. And the cash generation in Cerro Verde, it's a discussion that we -- that is still pending with Freeport. They are concluding this 2020 year with a high level of cash, but up to now, they -- we have not discussed what to do with that cash.

Okay. And then just going back on the costs and specifically on Uchucchacua. Are you expecting to reach 100% now in the fourth quarter, 100% of production in the fourth quarter?

No. We are actually trying to get more -- to try to collect all our workforce is -- for Chacua has been a very difficult quarter. And we expect the last quarter to be almost very look like the -- our third quarter. Maybe Juan Carlos can -- Juan Carlos Ortiz can give us more color with Chacua.

Thank you, Leandro, yes. In Uchucchacua, we are putting a lot of effort now with limited workforce available at the site with the -- about 30% production. And focus, it's been mine development. There's -- there have been some delays in that particular activity in the mine due to the reducing workforce, and we are focused on catching up with a proper rate of mine development in the fourth quarter. So we will be at almost 30% production with a low workforce and catching up with mine development.

[Operator Instructions] Our next question today comes from Carlos De Alba of Morgan Stanley.

So just maybe following up to make sure that I understood correctly. So the CapEx. Can you mention again the CapEx that you see for 2020? And maybe if you already have a ballpark figure for 2021, that will be great; and particularly if you can also break down how much of that 2021 number and 2020, if you have it, are allocated to San Gabriel. And my second question is regarding costs. Thank you for the details on the different mines for the full year, but maybe more broadly, can you comment, Leandro, on the cost performance? The number in the third quarter came significantly above what we were expecting. And therefore, even though volumes also did better, the EBITDA generated by the company was still lower than what we expected and, I think, what the consensus was expecting. I would have thought that, with the increase in production and the high-grading strategy that the company have put in place, costs will perform better. And when I looked at the silver particularly and CAS for the full 9 months, it's up 50%. Gold is much more reasonable, only up 3%. Do you have a sense of how much this increase in costs are related specifically with the lower production that you experienced this year? And particularly in the third quarter, where shipments and production, I think, surprised positively but yet costs didn't see the benefit of the higher unit -- yes, the higher volume.

Carlos, well, in terms of CapEx, as I told you, taking -- not taking in consideration San Gabriel, we expect to invest between $100 million and $120 million. The investment in San Gabriel will depend on the permits that we are chasing and we are [ permitting ] with the government and -- but any case, the construction will begin in the second quarter. We are expecting that in second quarter of 2021. You know the CapEx is around $400 million. So that should be the amount of investment. In terms of cost...

Sorry, Leandro. That $100 million to $120 million was for 2020.

No, no, no. This is from...

2021, okay, okay.

2021, yes. For 2020, we expect to have between $45 million and $65 million.

Got you, all right.

In the terms -- regarding the cost of goods sold, please, you have to keep in mind that all the costs, operating costs, that were registered in the second quarter and in the third quarter while we were not producing in some of our units have been reassigned or re-accounted in the cost of goods sold. So there is a significant increase in the cost of goods sold and a decrease in then gross margin. That's why maybe take your calculations out of the -- of our actual figure. And in the first -- in the second quarter, we registered in the operating expenses, not in the operating costs, but in a discussion with our external auditors, they suggest us to move and make a reclassification from operating expenses to operating costs. That's maybe the difference. And the total amount of this extra cost and extra -- sorry, then -- all the costs that cannot be absorbed by the production, it's around $29 million.

And of those $29 million, about -- if I remember correctly, about $9.2 million happened in the third quarter, right?

[ 9, 20 ] -- yes, it can be -- in the third quarter was a lower amount than in the second quarter.

Right. And how do you see that in the fourth quarter given the full year guidance, production guidance, that you provided?

As respect of the whole cost...

No, just to the unabsorbed costs due to production stoppage.

No, there should not be any unabsorbed cost because we already have some production in all our mines. When this account or this amount is registered in unabsorbed costs, when we don't have any production, [ we're to assign that cost ].

All right, great. And then just if I may, one final question, on the De-Bottlenecking Program. Great progress in the third quarter, $7.1 million. It still fell short of the budget of $12.1 million. What explained the difference is about 1/4 of the budgeted number didn't materialize. Is this related to the ramp-up in production and the disruption in general that you had still in the third quarter? Or is there anything else that you can point out specifically that explains the gap?

Well, basically the reason with the gap is COVID-related reasons, but maybe Juan Carlos can give more explanation of this debottlenecking delay.

Sure, Leandro. The -- yes, as you mentioned, it's mostly related to COVID operational disruptions. In Tambomayo, some of our plans were based on mine development, reduction in overheads in the mines. We couldn't achieve fully these targets because we have a lot of time during the quarter as care and maintenance in the operations. So we couldn't develop the mine or change the mine design as expected during these weeks of the third quarter. The same was for Uchucchacua. And the big savings that we consolidated during the quarter was the high-grading of copper ore in the underground mine of Brocal. [ Now with ] the most significant activity for [indiscernible] this quarter. That was with the limited workforce that we have. We focused on this high-grading copper pillars recovery in the underground mine. So basically not achieving the expectation was COVID related. And with a limited workforce and a limited time for activities in the mines was in particularly focused on Brocal underground mine.

Our next question today is from Leopoldo Silva of LarrainVial.

So I wanted to ask. First of all, I apologize if maybe what I ask has already been asked. I just came in to the call a few minutes ago. My question is regarding your exploration. And I see that, so far, 9 months on the year, you have spent less than half than what you spent on 2019 in exploration. And I wanted to ask you of how successful, if you can comment, have been your results in -- particularly in Tambomayo and Orcopampa. Has the COVID restrained you from doing all the exploration that you wish you have done? And what should we expect? Perhaps is -- the higher prices that will be embedded in reserves, will those be enough to restore enough for a good 2021 for Orcopampa or Tambomayo? And if you can give color of your next reserve release in any sense that you can -- any extent that you can go.

Thank you, Leopoldo. Yes, first of all, to clarify the -- this gap of exploration expenses is mainly due to the difficult to -- world in COVID situation. We have difficulties in [indiscernible] workforce and also for the work for our explorations program. But once we could get all the people, all the workforce, we are doing most -- the most of our efforts to get back in the explorations activity, and we are very positive with the results that we are having in these last months. And we expect to maintain the same levels of reserves at the closing of this year, [ 2020, I mean, on December ]. Maybe Juan Carlos also for another time can give us more color to explorations situation in our mines. Please, Juan Carlos.

Of course, Leandro, yes. [ Well ], as you mentioned, there was obviously difficulty to bring people up to the mine site to resume all the drilling activities, but we already have all the teams on site right now. We have 5 drill-hole machines in Tambomayo, according to the plans, right now drilling, 4 of them underground and 1 of them in surface. It's early work, so we don't have still the result of the campaign. It's ongoing. In Orcopampa, we have 4 drill holes working right now. There is 1 more bringing onboard in the next week. So we will have 5 as planned for Orcopampa in November. We have good results in Orcopampa underground. Probably, by the end of the year, we will have some kind of [ results ] reflecting in increase on resources, not necessarily reserve because early work, maybe some inferred resource at this time but high-grade [ new ] veins nearby the operations. So we expect to have a smooth 2021 year for Orcopampa running at an average of 4,000 or -- around 4,000 ounces of gold per month next year. In the other mines that we are resuming activities of exploration, in Brocal we have 5 drill holes working right now, 2 in surface, 3 underground. In La Zanja, we have 2 drill holes working. They are getting good results in a different kind of [ structured ], sulfides, high-grade veins, sulfides underground. And in Chacua, Uchucchacua, we have 7 drill holes machines working right now, having good results. Some of them are infill-drilling work activities as usual, part of the ongoing activities. And the majority of them, 4 of them, are on exploration underground. We are having good results, but this is ongoing campaign. We don't have consolidated figures of [ increased reserves ]. Probably by the end of the year, as usual, we'll report our balance of resource and reserve. We can share some more specific numbers on the result of these exploration efforts.

Another point -- another thing to point out is that the government open the economy by phases, right? And exploration was after the beginning of our operations. So that is another point of delays in our exploration program.

And the prices, the current prices, of the precious metals at least would let you increase perhaps your operating rates and maybe sacrificing some higher costs but profiting from the moment.

Leopoldo, can you repeat, please? I didn't hear you very well.

Yes, yes. Sorry. So these higher precious metals prices would allow you -- or would you be keen to increase your production rates and maybe at higher costs in -- on those mines? But perhaps mining resources, not reserves, that -- at, yes, $1,300 an ounce of gold maybe are non-economical but at $2,000 an ounce would be. Would you be able to increase costs and maybe sacrificing some additional costs?

Okay, I understand your question. We are in the process of making our operations planning in November. And we should evaluate there which is the best mining plan for all our mines. And that mining plan considers, as always, the price and the ore, the level of ore and all the content in the ore that we have more available. So we should evaluate that in November. And we will evaluate, of course, the current prices and which is the -- our objective EBITDA that we will like to have in 2021.

Our next question today is from Tanya Jakusconek of Scotiabank.

Wanted to ask about your reserves and resources. So if I understand you correctly, will you be changing the price assumptions that you used at the end of 2019 and move them up in 2020? Is that what I'm understanding?

Tanya, no, no, no. This is for our mining plan, the reserves. We have the -- a procedure to fulfill with the SEC procedures. So is -- that answer was regarding all our mining plans for next year.

Yes. No, I appreciate the budgets will be done at the higher pricing. I'm just trying to understand. So will you use the 3-year rolling average for your pricing for your reserves and resources? Is that what you're going to use the SEC format for that?

Yes, Tanya. That is the how we'll calculate our reserves.

Okay. And then you mentioned on the drilling side that you're going to be replacing your reserves and resources. I know that your mine plans have changed this year and you are mining at higher-grade material. So you're going after that. How does that change your mine plan for what you were going to do in 2021?

Well, now our effort is to searching -- in our exploration effort is to searching to replace those high-grade areas. As you may hear Juan Carlos, we -- in all our mines, I mean, in very high activity in that manner. We should being having results for the very close -- 2021. We're still making our plan to -- given the prices and given the content that we find. Maybe for another time Juan Carlos can give more explanation in the strategy.

Sure, Leandro. The strategy for high-grading, we are planning to extend that. We have the visibility to extend that to the end of the year. And we know that the COVID probably will be around for way more time, a few quarters, 2 quarters more. So the strategy also that is being developed in -- for the budget of 2021 is to see if we can continue with, let's say, some sort of high grading probably not as higher as in the third and ongoing quarter but still higher than the average for the early part of 2021. That's the general strategy. We are developing in detail all the mining plans to see if there is a viable to develop this strategy, the -- and do an analysis mine to mine. It's a different in each case. In an open pit, sometimes it's very difficult, and some more fixed sequence of mining, but in the underground mines where we have several [ base ] to mine we can change a little bit the sequence. We have the compromise of any long-term volume. And we will try to do that in the first half at least of 2021 as well.

Yes. Sometimes, when one does high grading upfront, you compromise your reserves and you compromise some of your ore body longer term, so are you saying that, the undergrounds, you're just going to be moving to higher-grade areas so there's no compromise in your reserve bases?

That's correct. We need to be very cautious, as you mentioned. It's a strategy that is valid for kind of short period of time without compromising the overall mining sequence of the -- of a mine. So yes, we need to be very cautious. And the reason we are working on that right now, the target is to try to keep up with the high grades within the [ first half ] of the 2021, but we need to validate that sequence. And when we have further detail, we will get back and share with [ information ], but that's kind of the generic strategy at this point.

Okay. And then maybe I just can ask one other question on Uchucchacua. Like when do you expect that mine to be back at full capacity in 2021? And then will you be reporting your monthly data? Like will you be reporting like November -- October number for us in November, or were you just showing it to us in the quarterly data? I'm just trying to understand if it's going to just be shown in the quarterly data monthly. Or will you be announcing monthly data going forward for us?

In terms of our releases and for this year, we -- in order to have the same transparency, we decided to report monthly our production figures. So we -- you should expect our production release month by month. And in terms of Uchucchacua, well, Juan Carlos will continue.

Yes. As I mentioned before, we are right now pretty much at 30% capacity on the processing plan. The efforts underground or shared between production of wall, mine development and exploration. You -- we were having a delay, based on COVID, of mine development. And we will catch up with this delay along the next months. Probably, up to January, we will complete to reach the point where we can start making a ramp-up from 30% up to maybe 70%, 80% in the coming months. So it's a -- it's one of the mines that have been more heavily impacted by the COVID. We have some instability of how many people we can schedule from week to week. So the general plan is that from -- moving from 30% for the next 2, 3 months. And based on the development, how fast we achieve our target of mine development, we will start doing a ramp-up, a gradual ramp-up. So it's -- at this point, it's kind of uncertain how fast can we go, but again strategy is to move from 30% up to 70% in the early months of 2021.

Okay, great.

Tanya, only to clarify. Sorry. We are going to report our production figures in -- when in at the end of the quarter, but we are going to report it month by month...

Yes, but I was trying to clarify that not in, like, December you're going to be reporting just the October, November number, but you're going to report monthly when you report at the end of the quarter.

Yes, yes, yes. That's right.

So in January or February, you'll [indiscernible] all of the numbers.

[indiscernible]. In January, we should send the information by month. Thank you.

Yes, okay, okay. Then -- okay. Maybe if I could just ask one other question just on your dividend policy. Like what do you need to see to reinstate the dividend?

Yesterday, we have the Board of Directors, and that issue came to the discussion. And we will expect our word [ on February ] to see which is the global situation, which is the very next future in those months. So then we should take, make the decision.

But would it be that you would need to see that all the mines are back up and running at full capacity, including Uchucchacua, and there's no COVID and then you feel comfortable at that point. Is that what you're trying to assess?

Yes, yes.

[Operator Instructions] Our next question today is from [ Kita Kamiyama ] of BNP Paribas.

Just one question more focused about El Brocal and concerning the De-Bottlenecking Program. How can you explain actuals third quarter figures compared to the budgeted one? It's much more higher for the actual than the budgeted one for El Brocal for the first pillar's, recovery with high copper grades.

Thank you. Thank you for your question. Yes, this quarter has been a very good quarter for our -- El Brocal. And we have some operating -- like warning of -- we didn't have any disturbance of communities or -- only the COVID situation, but we have -- we achieved some stability, operating stability, and all, of course, the efforts of our operating people to maintain the production. Even given that we have 8 days period -- 8 days maintenance period for one of our plants, we reached this stability. And the production is -- was very stable. Maybe Juan Carlos can give us more color of this.

Sure, Leandro. In the third quarter, we speed up the stripping of one section of the open pit so we can reach ahead of time for an -- a high-grade area of the open pit. That area is already mining right now. And we continue to mine around that wall and finish the north phase of the open pit in this quarter. Later in the coming months, we will switch operation from the north to the south, and we will increase copper production because copper is on the south side of the open pit. And the northern part, where there was more polymetallic, will be depleted, [ possibly ] depleted. So we will start now a transition from polymetallic ore in the open pit to copper in the southern part of the open pit. So particular this quarter, the increase in production was by speeding up the stripping in the northern part, reaching the high-grade polymetallic ore ahead of time and include that in the production early on. From the underground mine, the production of the pillars, we have high-grade copper pillars between 2% to 3% copper in certain areas of underground mine. So with the limited workforce that we have, we put a lot of effort to recover those pillars and bring that production into the processing plant. That was the reason we have an increase in the production -- or we'll keep up with the production of copper even with a limited workforce. Regarding the De-Bottlenecking Program, yes, as I mentioned, the effort that we put was in this particular activity of recovering the high-grade copper pillars and to increase the copper production. The copper was in a very good price along the quarter, so it was a double effect, increasing grades and increasing and capture a good price. So a combining effect helped us a lot during this quarter in Brocal.

Okay, and one more question. Could you have more detailed forecast about, especially El Brocal, for instance, CapEx for the full year 2020 and the forecast for 2020; and some details about the expected production mix? Because I saw that the copper production decreased, while the zinc one increased.

Well, for -- in the terms of costs, we expect to finish in the open-pit mine with around of $1,800 of CAS. And in the underground mine, around $5,200 per tonne of copper. In terms of CapEx, we are estimating to finish this year with around $18 million of CapEx. And for the next year, we don't have up to now the final figure because we -- as I told you before, in November, we have our operating planning sessions. And in that moment, we are going to define the following-year CapEx for all our units.

And ladies and gentlemen, at this time, we will conclude the question-and-answer portion of today's conference. At this time, I would like to turn the conference back over to Mr. Garcia for closing remarks.

Thank you. Before we finish today's conference call, I would like to transmit to all of you that our first commitment is to maintain our workforce healthy, applying the strictest protocols to warranty their safety in this pandemic environment. Then we want to assure that we will continue making great efforts to recover our output in all our operating units as it was before the effects of COVID-19. We're still applying the strategy of working on high-grade ore, with a parallel effort in geology to replace those areas for the upcoming months. Finally, we want to confirm that we maintain our effort also to preserve our cash position as a very important objective in this pandemic scenario. Thank you very much for making the time to join us today, and have a wonderful day. Thank you.

Ladies and gentlemen, that concludes Buenaventura's Third Quarter 2020 Results Conference Call. We would like to thank you again for your participation, and you may now disconnect.