Gold prices help quarter at Buenaventura (May 19, 2003)

Higher production and an improved gold price buoyed up the top line for Compania de Minas Buenaventura (BVN-N) in the first three months of 2003.

The Peruvian gold and silver miner posted net earnings of US$53.6 million for the quarter ended March 31 on revenue of US$51.2 million and income from affiliates (mainly earnings from the Yanacocha mine, and accounted for outside revenue) of US$18.7 million.

The quarterly earnings amount to US42 per share, or to US84 per two-share American depository receipt, which is the Buenaventura security traded on the New York exchange.

The quarter was a big improvement for Buenaventura, which earned US$12.7 million on revenue of US$44.1 million in the first quarter of 2002. In the last quarter of 2002, the company earned US$47.4 million on revenue of US$47.5 million and income from affiliates of US$47.5 million.

Income from affiliates includes Buenaventura’s share of production from the Yanacocha gold mine in central Peru, in which it owns a 43.65% interest; Newmont Mining (NEM-N) is the majority shareholder.

Profits exceeded revenue in the recent quarter, thanks to an extraordinary gain on derivatives amounting to US$26.4 million (though without that gain the quarter’s net would have been US$27.2 million, still substantially better than in the first quarter of 2002). Operating costs remained about the same as the previous year’s figure.

Buenaventura’s attributable gold production from its own mines and consolidated joint ventures rose to 67,654 oz., up from 58,830 oz. in the first quarter of 2002. Silver production was down slightly, to 2.9 million oz. from 3.1 million in the corresponding period of 2002; lead production increased slightly and zinc production fell.

Its wholly owned Orcopampa mine was the star performer, increasing production by 18.4% over last year’s first-quarter figure, to 43,621 oz., and cutting cash production costs to US$159 per oz. from US$171. The Antapite mine, which produced 17,927 oz. gold in the quarter at a cash cost of US$163, should see increased production in the second quarter as a mill expansion is nearly complete.

Yanacocha produced 639,359 oz. in the quarter, against 471,467 oz. in the first quarter of 2002. Cash costs there declined to US$134 from US$146 per oz. A US$36.4-million expense, of which US$15.9 million was attributable to Buenaventura, arose from a change in the way Yanacocha accounts for future reclamation costs, which cut into Yanacocha’s earnings for the quarter.