Prepared remarks
Good day, and welcome to the Compania de Minas Buenaventura Second Quarter 26 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star then 1 on a touch-tone phone. Please note this event is being recorded. I would now like to turn the conference over to Sebastian Valencia Carrasco. Please go ahead.
Good morning, everyone. Thank you for joining us today to discuss our second quarter 26 results. Today's discussion will be led by Mr. Leandro Garcia, Chief Executive Officer. Also joining our call today and available for your questions are Mr. Daniel Dominguez, Chief Financial Officer; Mr. Juan Carlos Ortiz, Vice President of Operations; Mr. Aldo Massa, Vice President of Development and Commercial; Mr. Renzo Macher, Vice President of Projects; Mr. Juan Carlos Salazar Caceres, Vice President of Geology and Exploration; Jose Malca La Fuente, Vice President of Sustainability; Mr. Roque Benavides, Chairman; and Mr. Raul Benavides, Director. Before I hand the call over, please let me touch on a few items. On Buenaventura's website, you will find our press release that was posted yesterday after market close. Please note that today's remarks include forward-looking statements that are based on management's current views and assumptions. While management believes that assumptions, expectations and projections are reasonable in view of current available information, you are cautioned not to place undue reliance on these forward-looking statements. I encourage you to read the full disclosure concerning forward-looking statements within the earnings results release issued on 07/30/2026. Let me now turn the call over to Mr. Leandro Garcia.
Thank you, Sebastian. Good morning to all, and thank you for joining us today to discuss the quarterly results of the company. On Slide 2 is our cautionary statement. Important information that I encourage you to read. Today, we will talk about our second quarter 26 performance, our main achievements and our priorities for the future. After the presentation, we will be available for a Q&A session, where our team will be happy to answer your questions. Next slide. I would like to begin with a brief overview of our operational performance during the second quarter of 26. Consolidated gold production increased 12% year over year to 30.1 thousand ounces, primarily driven by the continued ramp up of San Gabriel. Consolidated silver production increased 2% year over year to 3.6 million ounces, mainly supported by higher production at Yumpag, while copper production increased 2% year over year to 13.5 thousand tons, reflecting stable production at El Brocal. San Gabriel produced 2.8 thousand ounces of gold during the quarter and began commercial sales in the second quarter of 2026, marking its first contribution to Buenaventura sales volumes. More details on the project's ramp up and key developments are presented in the following slides. In addition, after quarter end, we received approval to increase Yumpag's mining throughput from 1,000 tons per day to 1,200 tons per day, an important milestone toward unlocking additional production capacity. Our capital allocation remains focused on projects and assets that enhance productivity, support growth and create long-term value for shareholders. CapEx totaled approximately $98 million, primarily allocated to San Gabriel, El Brocal and Uchucchacua-Yumpag, supporting productivity, operational reliability and future value creation. Moving on to the next slide, I would like to summarize our second quarter financial performance. Our operational performance, combined with favorable metal prices, translated into another quarter of robust financial results. Total revenues increased 43% year over year to $529 million. EBITDA from direct operations reached $277 million, increasing 113% compared to the same period last year. Importantly, EBITDA margins expanded from 35% to 52%. Net income reached $261 million, representing a 165% increase year over year and reflecting a stronger operational performance across our core assets. Our balance sheet remains a key strength of the company. We closed the quarter with $759 million in cash and $69.002 million in total debt, maintaining a net cash position of approximately $67 million. Net debt to EBITDA remained at negative 0.05x, underscoring the financial flexibility of the company. Energetica de Huancavelica S.A.A., our power generation subsidiary, we reduced the outstanding balance of the financial lease 2031 from $63 million to $50 million with the remaining balance to be amortized through the year. Year-to-date, dividends from Cerro Verde reached $274 million, including $118 million received in July. Moving on to costs applicable to sales. Starting with copper, cash performance remained stable year over year mainly at El Brocal. Silver cash increased compared to the same period last year, primarily reflecting higher commercial deductions associated with price-based escalators at Uchucchacua and Yumpag. And finally, gold cash was impacted by the commencement of commercial sales of San Gabriel. During the quarter, the operation recorded costs applicable to sales for the first time as it continued progressing through its ramp up phase. As production and sales volumes remain below expected steady-state levels, current unit costs are not yet representative of the operation's long-term cost profile. Next slide, please. As mentioned earlier, San Gabriel continued progressing through its ramp up phase during the second quarter. While throughput remained constrained by tailings management and filtration challenges, the operation continued advancing across all key areas of development, and we remain focused on achieving a stable and sustainable ramp up. At the mine, we have completed the primary ventilation infrastructure and continue advancing the development of the full mining fleet which will support future production growth. At the same time, we expect to begin undercut mining below cemented fill during the third quarter, representing another important operational milestone. Within the processing plant, our priority remains stabilizing throughput and improving operating performance. Current efforts are focused on moisture control, filtration performance and metallurgical optimization, where recoveries are expected to continue improving during the second half of the year. On the tailings side, we expect filtered tailings compaction to begin during the third quarter, while ongoing expansion works are designed to progressively support higher throughput levels as the operation advances towards steady-state conditions. On the next slide, we highlight our strong free cash flow generation in the second quarter of 2026. Solid operational performance supported by dividends received allowed us to close the quarter with a cash position of $759 million. The chart also reflects the dividend payment we made in May. Importantly, this balance does not yet reflect the $118 million dividend received from Cerro Verde in July following the quarter end. Before opening the line for questions, I would like to leave you with four key messages. First, San Gabriel continued advancing through its ramp up phase during the quarter. The operation began recording commercial sales in the second quarter of 2026 and is now starting to contribute to Buenaventura's results. While we continue working through the challenges inherent to any ramp up process, our focus remains on achieving stable and efficient operations that will become an increasingly important contributor to the company's growth. Second, we continue executing our growth strategy across the portfolio. A key milestone was achieved at Yumpag where we received approval to increase the mining rate from 1,000 tons per day to 1,200 tons per day. This represents the first step toward unlocking the operation's full potential, while we continue advancing the next phase of expansion. Third, exploration remains part of our DNA. As we continue unlocking growth opportunity across our portfolio, we remain committed to extending our life of mine and supporting the long-term sustainability of our production growth. We believe that growing production and replenishing resources must go hand in hand to ensure long-term value creation. Finally, the combination of strong operating performance, disciplined capital allocation, and the favorable commodity price environment continue to strengthen our cash generation and balance sheet. This financial strength gives us the flexibility to invest in our growth portfolio, execute our long-term strategy and continue delivering value to shareholders through our dividend policy. Thank you for your continued interest and support. We appreciate your time today and look forward to answering your questions. Operator, please go live.
Questions and answers
We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Tanya Jakusconek from Scotiabank. Please go ahead.
Great. Good morning, everybody. Thank you for taking my questions. I have four questions if I could. I am going to start with San Gabriel first. Maybe someone can just provide me some insights into how the mining and the processing are doing relative to your block model now that you have gone commercial? And also in the underground and in the processing facility, what do you still need to do to optimize any — I saw the recoveries need to be optimized — but anything else to get you to that steady state?
Thank you, Tanya, for your question.
As I told you before, we are very focused on San Gabriel. We have a plan to deliver what was our guideline for 2026, pending the ramp up in mid-2027. Maybe Juan Carlos can give you more color on this topic. Please, Juan Carlos.
Sure, Leandro. Tanya, regarding the mine, the underground mine, we are feeling comfortable with the product that we have in the new mining method, the undercut and fill. We are already in the first undercut. We need the original mining layer with cemented backfill. So we are doing okay according to the plan. We are ramping up production, we are opening new phases, and now we are according to the plan. So the underground mine is moving ahead; it is according to our plans. We will have the fourth fleet for underground mining for Buenaventura by the end of August and two additional fleets for future developed underground with a contractor by November, according to the plan. So the underground mine is moving along. Regarding the processing plant, we have two lines of work: one is related to the increase of throughput and the second one is increase in recovery. Regarding throughput, we are facing some problems with the press filters. Remember that we are using dry stacking for tailings disposition, so we need to filter all the tailings. We are having some problems with the structural basis of the foundation of the filters. Remember, there are high-pressure filters. So when they are loaded with full pressure, they start to generate a back movement in the structures and, according to the tolerance that we have to have in these structures, we are beyond that. So we need to do further works to reinforce the structure and put some additional steel and new structures on top of what we have in the building. We have three filters, so we need to reinforce them one by one. Once these tasks are completed, we are on track to reach full capacity from that processing plant. Regarding recoveries, gold recoveries, it is a very complex ore. We are following all the parameters that we have. We need to fine-tune our set points for all of them, and use additional reagents. We have some preg-robbing carbon in the ore generating a lot of trouble. So we need to add additional reagents — new reagents that we do not have in Peru. We are bringing these reagents in August to start testing at industrial scale. We already tested them at lab scale. They are giving good results and are part of the solution. They will probably require finding the right dosage of reagents to reduce the impact that we faced in the second quarter. With that, we expect to reach about 70% gold recovery by the end of 2026. The following actions to go beyond 70% recovery, core recovery probably are linked with an additional circuit for flotation. Probably we need to remove all the carbon, all the organic matter that we have in the ore, not only use the reagents that I mentioned at the beginning of my comments, but probably we need to remove that carbon in order to avoid further complications in the process. So the flotation circuit is being designed. We probably need to get all the permits and designs ready by the end of the year and implement this new flotation circuit for carbon and partially refractory sulfides by the end of 2027. So there are two milestones: the first one is 70% gold recovery by the end of 2026 and beyond that, getting closer to the 85% that we have in our budget, probably by the end of 2027.
Okay. And just so I understand, the issue that you are having with the recovery has to do with organic matter that is associated with the gold? It is organic matter and a small fraction of the gold is in the sulfides, making it harder to extract. So you believe the best option is to do a complete flotation, not only for the organic matter, carbon, but in addition to that the flotation of the sulfides as well. Okay. So it is two things: sulfides and organic matter. Okay. Thank you for that. And then the second question I have is just on the cost overall. Besides the inflationary pressures you are seeing from higher fuel prices and maybe increased workers' profit sharing, are you seeing any other inflation in terms of labor or any other consumables or any issues with the supply chain that would affect costs?
This is Daniel. We do not see or foresee at this point any major inflation effects. As we were discussing last quarter, the impact of higher diesel prices had an effect of around 5% in our OpEx. If diesel stays at the same levels as the last quarter, the impact could be around 5% to 7%. Also, as you mentioned, the workers' profit sharing is also increasing slightly our costs, but nothing else. We do not have energy issues, and other reagents or consumables are keeping approximately the same price for what I mean, at least.
That is good to see. And I guess when I have you on, what about expectations for dividends from Cerro Verde for 2026 and longer term? I mean, you are doing above the guidance range you provided, so what would you guide for us for Cerro Verde's dividend?
For the first half of this year, Cerro Verde has already distributed close to €160 million. We have already reported another €120 million. This is for Buenaventura's stake. We have already reported €120 million of dividends that were paid in July. So this adds up to around $274 million. We expect between $50 million to $100 million in addition to this by the third or fourth quarter. So in total, we should be receiving between $350 million to $380 million of total dividends for this year. For next year, probably at a similar level, depending on the price. It could be $50 million or $80 million less. Remember that the dividend that we received in January was a dividend that came from the previous year, which was higher than what we have been receiving historically.
Our next question comes from Carlos De Alba with Morgan Stanley. Please go ahead.
Yes. Thank you. Good morning, everyone. Just in terms of all the initiatives that you are pursuing in San Gabriel to address the challenges, what are the CapEx and OpEx implications? How much CapEx are you investing in those initiatives and is cost going up? And if you can maybe just remind us what the CapEx expectation is for this year, maybe next year? And then what is the cost looking like, the OpEx for San Gabriel once you stabilize the operation?
Carlos, the total CapEx we expect to spend this year is around $500 million. We already have expended in the first half around $200 million. From that, all the investment we have to do in San Gabriel and El Brocal and all our flagship assets are according to what we expected in the guidelines. We are also taking advantage of opportunities given the current prices, then we have opportunities to accelerate some CapEx. Another type of CapEx that we are identifying is how we are going to prepare for the El Niño phenomenon. So that will be part of the guideline for this year. In terms of CapEx specifically for San Gabriel for the rest of the year, it is around $60 million. Juan Carlos, do you want to give some more detail?
Leandro. In the case of San Gabriel, the comments I made regarding the increase in recovery for 2026 have not materially increased OpEx; CapEx is more about fine-tuning the existing infrastructure and using additional reagents that replace those used before. In the case of increasing throughput, as I mentioned, we need to reinforce the structures that hold the three press filters for tailings. We are working on the engineering for these reinforcements. Top of my head, I would say something between $5 million to $10 million, but probably it will be in the lower range. We need to finalize the engineering to have the exact figure. It is something that will really solve the problem, but it is also fast to be implemented given the existing constraints because the filters are already mounted on their bases.
So it is basically an impact that has more impact on CapEx but not really on OpEx. We will probably follow our budget for OpEx for the year.
Of course, the impact would be a lower throughput than expected that will impact the cost per ton, but not the overall dollar amount that we spend across the year.
And what will be the cost of adding the additional flotation circuit?
We have not finished the engineering so far. We expect it to be in the order of $15 million, probably for next year.
And that does not increase OpEx significantly?
No. Maybe $1 or $2 per ton out of $130, so it is not material — maybe a 1% increase in cost to capture roughly 10% more recovery.
Right. Okay. And then on Cerro Verde, great to see the CapEx coming through. Just on production, what is expected copper production this year and next at Cerro Verde?
It has not changed; it is the same guidance. It is a little lower than the prior year, but there has been no change in the guidance.
Production for the first six months of 2026 is about 187 thousand tons of fine copper. Probably, you can expect the same production for the remaining six months of 2026, so it is going to be around 370 thousand to 380 thousand tons of copper for 2026.
Okay. And will the percentage of Cerro Verde production that you receive change in the coming quarters?
No. We have a contract for 40 thousand tons of concentrate.
Then on Julcani, there was a big shift in the production mix between gold and silver. What is the outlook for the remainder of the year, and do you have a view on 2027?
We focused more production in another area, which is the reason why silver production was a little below our guidance, while gold increased due to new areas we are working. As you know, we are in a process and in this quarter we expect to have some news if we have reached a final decision to sell Julcani. We have the plan through 2026. However, once we conclude this process, we will provide guidance for 2027.
Okay.
All right. And then finally, on Uchucchacua and Yumpag, there was a significant increase, almost double, and it is mentioned that this was driven by price-based escalators. As silver has come down, how do you see cost applicable to sales (CAS) adjusting back down? Any color given the importance of that operation and the big increase in cash that we saw in the second quarter?
As I understand, the base escalator price that we used for contracts in the first half of the year was around $35 per ounce. For new contracts, I think we are fixing that base at $50 per ounce. Aldo, can you give more information?
Yes, Leandro. You are right. For the first half of the year there was a floor price of $35 per ounce for those contracts. These contracts will end in August of this year, and from September to December we will begin with a new base of $50 per ounce.
Okay. All right. Thank you.
Our next question comes from Cesar Perez-Novoa with BTG Pactual. Please go ahead.
Yes. Good morning. My first question relates to Yumpag: you received approval to increase your throughput rates by 20%. How is this expected to impact silver production going forward? Could you quantify the potential increase and discuss whether this scale-up might affect or improve the cost structure of this asset?
Yes. Taking into consideration that we have received approval, and starting at mid-year, we are now ready to begin production at 1,200 tons per day. We expect about a 10% increase compared to what we were thinking at the beginning of the year.
And is this going to have any impact or improvement on the cost structure for this mine?
Yes, you are going to have a positive impact. We dilute our fixed costs by 20%. In addition, by the fourth quarter of this year we are connecting the Yumpag operation to the National Electrical Grid, so we will replace diesel-generated electricity with cheaper grid electricity. The outcome by the end of the year will be a double effect: larger throughput and replacement of diesel-generated power with national grid power. The overall result by year end should be around 15%–17% lower operating cost than in the first half of the year.
All right. Thank you very much. Can you also assess the current progress on the Trapiche copper greenfield project? Given how high copper prices are, the cash flow that you are generating and the substantial dividends you are getting from Cerro Verde, is there any scope to accelerate the development timeline?
Thank you, Cesar. Here with us is Renzo Macher, and he can give you an update on Trapiche. Please, Renzo.
Yes, thanks for the question. Due to the increase in copper prices, the opportunity of exploring primary mineralization, which is currently under the secondary sulfates, is getting closer to being economic. We are going to spend the next year to year and a half understanding if it is a viable business, and meanwhile we will keep reducing the project's current risks, which are the access road, the power line and the licenses, and we are trying to get a bit deeper into acid consumption understanding.
Has El Niño had any operational impact to date, or do you have any concerns about future effects? If so, which mining areas, operations or logistics do you see as most at risk, if any?
Identified some risk in our risk management meetings. We have reviewed all our main operations and the likely effects. We have increased CapEx slightly to prepare and that increase is part of what we thought at the beginning of the year; we have added additional CapEx around $12 million. Juan Carlos can give more detail on the activities we are undertaking.
And what are we preventing?
Since the end of April, when we received early alerts of a strong El Niño, we started our safety committees to prevent any potential damage from heavy rains. We have set up a committee at each mine. Each mine has mapped all potential risks and we authorized an increase in CapEx of about $12 million to be spent in the remainder of 2026 to be prepared for larger rainfall. This includes increasing pumping capacity, providing power for the pumps, water treatment facilities, and reinforcement of certain critical structures like water dams or reservoirs. We are working with a very strong technical committee on this. So far, we have not had any damage like the heavy rainfall events in Chile, but we are preparing for a potentially strong rainy season starting in December 2026.
Alright, that is fairly detailed. Thank you very much.
Thank you.
This concludes the audio portion of the Q&A session. I would like to turn it over to Sebastian Valencia Carrasco for webcast questions.
Thank you, operator. The last question comes from a webcast participant: Given the recent price drop in gold, any risk that production in Orcopampa or Tambomayo could be reviewed?
Of course. No. My first answer is no. We permanently review the value that we add with every ounce we produce, but we are building a plan for Orcopampa and Tambomayo for the following years. We continue in that trend.
Thank you, Leandro. At this time, there are no further questions. I would like to turn the call over to Leandro for final remarks.
Okay. Thank you, Sebastian. Thank you for your time and participation. Before we conclude today's conference call, I would like to thank you for joining us today. Your participation and input are greatly appreciated. Thank you again, and have a wonderful day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.