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LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 1
Roque Benavides - President and CEO Compañía de Minas Buenaventura S.A.A.
Lima, November 11th of 2014
Challenges in financing the growth of a precious metals mining company
Overview of the Peruvian mining sector
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LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 2
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Peru is in the top 5 worldwide mining producers ranking
2013 World production ranking
Metal Latin-American World
Zinc 1 3
Tin 1 3
Silver 2 3
Copper 2 3
Lead 1 4
Gold 1 5
Mercury 2 5
Source: USGS (U.S. Geological Survey) 2014
4
Mining in Peru represents
14.4% National GDP*
20.8% Private investments
61.8% National exports
29.2% 3rd category income tax
40.2% Corporative income tax
Source: Varias. INEI, BCRP, MINEM, SNMPE y E&Y *Base year 2007
The mining sector role in Peru
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 3
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Share of the mining activity in the territory
Source: MINEM. Boletín estadístico de minería. Reporte anual 2013.
Description Millions Has. Percentage Land extension of Peru: 128 Has. 100% Restricted areas for mining: 89.8 Has. 69.3% Operation: 1.15 Has. 0.90% Exploration: 0.42 Has. 0.33% Other areas for mining activities: 0.18 Has. 0.14%
Only the 1.37% of the Peruvian land extension have
activity related to mining.
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2013 Word reserves ranking
Metal Peru (‘000 tones) World (‘000 tones) Ranking
Silver 120 540 1
Copper 76,000 680,000 3
Zinc 18,000 250,000 3
Lead 7,900 89,000 4
Molybdenu 450 11,000 4
Tin 310,000 4’900,000 6
Gold 2,200 52,000 7
Peru is also in the top worldwide reserves ranking
Source: MINEM. Anuario Minero Agosto 2013.
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 4
7 Source: MINEM. Elaborated: PwC 2013 Industria Minera. Guía de negocios en el Perú.
Peruvian gold production since 1998
Peru: Gold production 1998-2002 (Thousands of ounces)
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Peru: Silver production 1998-2002 (Thousands of ounces)
Source: MINEM. Elaborated: PwC 2013 Industria Minera. Guía de negocios en el Perú.
Peruvian silver production since 1998
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 5
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Exploration
Discovery
Construction
Production
The mining sustainable cycle
Source: Buenaventura 10 Source: MINEM. Presentación “La minería en el Perú” PDAC 2014. Guillermo Shinno Huamaní
US$ MM.
Fuente: MINEM. Boletín estadístico de minería. Reporte anual 2013.
What are the main activities in which the mining companies require to invest in order to preserve the cycle?
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 6
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Source: SNL, Metals Economic Group 2013 Ministerio de Energía y Minas. Boletín 2013
Perú :
US$ 774 MM.
In 2013, Peruvian exploration investments represented 5% of the worldwide exploration expenditure
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Financial alternatives in mining
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Session 4 – Roque Benavides 7
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Mining financial options
What are today´s Financing option?
The key financing options for mining companies remain equity, debt or royalty & streaming financing
Source: PwC 3 things you need to know about alternative financing 14
Mining financial options according to its stage
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 8
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The breakdown of the mining money raisings
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Equity: Most used financing mechanism by the exploration mining companies
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 9
0
5
10
15
20
25
30
0
50
100
150
200
5.08 3.04 5.07 3.04 1.58 5.14 1.43 5.07 4.06 4.67
Top 10 convertible bond issues
Proceeds Coupon
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Convertible bonds: One of the most used financing mechanism by the mining developer companies
US$ MM. %
Maturity (Years)
Molycorp
China Daye
Honbridge Noble
Atlantic San Gold Guildford
Duluth Firestone YTC
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Syndicated loans: One of the most used financing mechanism by the mining constructor companies
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 10
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Bonds: One of the most used financing mechanism by the mining producer companies
Buenaventura financial mechanisms
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LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 11
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Financial instruments used by Buenaventura in the past years
1996: Buenaventura was listed in the NYSE
2008: BVN entered into a syndicated loan for US$ 450 MM.
2009: Conehua entered into a lease agreement for US$ 119 MM. with BCP
2012: El Brocal entered into a medium-term loan contract for US$ 120 MM. with BCP
2013: El Brocal entered into a series of leaseback agreements for US$ 180 MM. with BCP
¿Why listing in the NYSE?
May 15th of 1996, Buenaventura was listed in the NYSE
• Attract new investors, mainly from USA, Canada, Europe and Asia
• Bring out more liquidity to the shares
• Look up for financing in order to develop new mining projects
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• Find a mechanism to commit with the highest governance corporative standards
BVN LISTED
NYSE
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 12
BVN: Before and after the listing in the NYSE
Market Capitalization:
Before: US$ 660MM (BVL since 1971). After: US$ 2.8B (31.12.2013 – NYSE since 1996).
Transaction Volume: Before: Less than US$ 1MM daily. After: US$ 25MM daily.
Shareholders:
Before: 10% foreign institutional investors
After: 55% foreign institutional investors (USA, UK, Europe, Brasil, Chile). Funds like: Blackrock, Fidelity and Templeton.
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Our operations: Before: • Ran six underground mines (Julcani, Chacua, Orcopampa, Recuperada, Íshihuinca and Shila). • Yanacocha (43.65%), one of the biggest gold mines in the world. • Cerro Verde (9.2%), one of the biggest copper producer in the world.
After: • Runs five underground mines (Orcopampa, Chacua, Julcani, Mallay and Marca Punta). • Operates four open pit mines (Breapampa, Colquijirca, La Zanja and Tantahuatay). • Yanacocha (43.65%). • Cerro Verde (19.58%). • El Molle Verde (100%) – Trapiche project. • Canteras del Hallazgo (100%) – Chucapaca project.
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BVN: Before and after the listing in the NYSE
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 13
25
0
50
100
150
200
250
300
350
400
450
500
1990 1993 1996 1999 2002 2005 2008 2011
Au Production 000 Oz*
1996: BVN was listed in the NYSE
*Direct Operations
BVN: Before and after the listing in the NYSE
Source: Buenaventura
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1990 1993 1996 1999 2002 2005 2008 2011
Ag production 000 Oz*
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1996: BVN was listed in the NYSE
*Direct Operations
BVN: Before and after the listing in the NYSE
Source: Buenaventura
LBMA Precious Metals Conference 2014 10 November 2014
Session 4 – Roque Benavides 14
BVN: Adittional information
• First Latin-American company in being listed in the NYSE.
• The transactional volume of BVN in NYSE is higher that the all transactional volume of BVL.
• Good practices of corporative governance :
• Only 1 type of shares. • 5 independent directors. • Corporative governance committee, Audit committee and
Compensation committee. • Accountability.
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0
10
20
30
40
50
60
15/05/1996 15/05/2000 15/05/2004 15/05/2008 15/05/2012
BVN from 1996 to Up-to-date
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1996: BVN was listed in the NYSE
2005: BVN increased its state in Cerro Verde to 18.5%
2008: BVN unwinded its hedge book
2014: BVN acquiered Chucapaca
Source: Buenaventura
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