August 16, 2013 (www.investorideas.com newswire) Net Income decreased to USD18.9m (-87.6% YoY), which fell below our expectations (USD 62.4m) and was due to weaker revenues and higher costs. Buenaventura ’s EBITDA reached USD 187.5m (-47% YoY).
The decrease in revenues, (USD285.8m, -18% YoY), is due to both lower metal prices and a decrease in production volumes. Orcopampa, Buenaventura ’s largest direct gold operation, produced 10% less (YoY) due to lower grades, a decrease in recoveries and a decline in exploitation relative to narrow vein mining. Yanacocha’s output came in above Newmont’s implied quarterly guidance but is expected to fall in 2H13. Newmont’s guidance at Investor’s Day led us to decrease our predicted output for Yanacocha. We expect that oxide operations will produce 1.0m oz Au in 2013-2015. In 2016-2018, production is expected to fall to 0.6m oz Au. By 2018, Conga is expected to play a very relevant role. In the current scenario, Conga accounts for USD2.34/share of BVN’s target price. Cerro Verde’s production grew to 136m lb of copper given that higher grades were mined from the sulfides area; this growth was nevertheless affected by cost increases, higher price adjustments and an increase in sales provisions due to lower copper prices.
Buenaventura has made it clear that it is focusing on cost control. Management expects to see monthly savings of close to USD15m, which will be composed of (i) USD7m from refocused drilling in high grade brownfield areas, which is directed by César Vidal, Head of Explorations (this drilling was formerly conducted by the Operations team of Buenaventura), (ii) USD4m from halting production at unprofitable mines (Poracota, Antapite and Shila-Paula) and (iii) USD4m from operational improvements such as those seen in Uchucchacua and those stemming from the recent downsizing of approximately 2000 workers. We partially include this improvements by now expecting costs to finish +5% above the 1Q13 level.
We reiterate our HOLD recommendation for Buenaventura but have decreased our 2013YE target price to USD13.20, which implies an upside (inc. div) of +1.1%. Cerro Verde accounts for 51% of our Sum of the Parts valuation because of the weakening of our outlook for Yanacocha and the partial inclusion of other Buenaventura projects. The current market cap relationship between Cerro Verde and Buenaventura seems to confirm our view. We do not include expected production stemming from the reorganized Orcopampa, Tambomayo or Chucapaca because they are medium term catalyzers whose feasibility has not been confirmed yet. Precious metals NAV multiple is 1.0x.
Published at the Investorideas.com Newswire - Big ideas for Global Investors
Disclaimer/ Disclosure:The Investorideas.com newswire is a third party publisher of news and research as well as creates original content as a news source. Original content created by investorideas is protected by copyright laws other than syndication rights. Investorideas is a news source on Google news and Linkedintoday plus hundreds of syndication partners. Our site does not make recommendations for purchases or sale of stocks or products. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. All investment involves risk and possible loss of investment. This site is currently compensated by featured companies, news submissions, content marketing and online advertising. Contact each company directly for press release questions. Disclosure is posted on each release if required but otherwise the news was not compensated for and is published for the sole interest of our readers. More disclaimer info: http://www.investorideas.com/About/Disclaimer.asp
BC Residents and Investor Disclaimer : Effective September 15 2008 - all BC investors should review all OTC and Pink sheet listed companies for adherence in new disclosure filings and filing appropriate documents with Sedar. Read for more info: http://www.bcsc.bc.ca/release.aspx?id=6894. Global investors must adhere to regulations of each country.