2004 inglesok - Buenaventura

Contents
2 Letter to shareholders
7 Operations
10 Health, Safety, Environment and Community (HSEC)
12 Subsidiaries and Affiliates
18 Explorations
21 Financial, Economic and Corporate Matters Report
23 Management Analysis and Discussion
34 Financial Statements
78 Corporate Matters
Solid operating and financial results
Revenue from Sales
(in thousands of US$)
Gold Production
(in thousands of ounces)
1643
1800
1535
1600
280
259.6
260
1200
1000
300
1253
1400
316.0
320
1040
240
914
220
800
200
600
180
160
400
181.3
161.9
136.9
140
200
120
100
0
2000
2001
2002
2003
2004
Net Profit
(in millions of US$)
2000
2001
2002
2003
2004
EBITDA
including Yanacocha's participation
(in millions of US$)
250
208.9
200
173.5
183.4
428.2
450
400
341.0
350
150
110.5
300
100
71.1
227.2
250
61.8
53.4
200
50
149.4
143.1
150
100
0
2000
2001
2002
2003
Includes Mark to Market variation
Does not include Mark to Market Variation
2004
2000
2001
2002
2003
2004
Annual Report
2004
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. is a leading mining company producing precious metals and holding
mining rights in Peru.
Since its inception in 1953, Buenaventura has focused on exploration and exploitation activities on its own and through
joint ventures. Buenaventura is also an important shareholder of Minera Yanacocha S.R.L., the leading gold producer in
Latin America, and ranks amongst the world’s top ten precious metals producers.
This document contains true and sufficient information regarding the business development of Compañia de Minas
Buenaventura S.A.A. during year 2004. Without detriment to the issuer’s liability, the undersigned assume full
responsibility for its content in conformity with the applicable legislation.
Roque Benavides
Carlos E. Gálvez
President and CEO
Vice President and CFO
1
CHAIRMAN‘S LETTER
Launching of Buenaventura‘s Vision,
Mission and Values
Dear Shareholder:
This increase in production levels, coupled with the
favorable higher metals prices maintained throughout
the year, explain the company’s financial strength.
Revenues from operations for year 2004 reported
US$316.0 million and net profit amounted to US$208.8
million. On eliminating the effect of variations in the
value of Derivative Financial Instruments, net profit was
US$183.4 million and cash generation (EBITDA)
amounted to US$428.2 million.
In accordance with our Company's corporate by-laws,
we are pleased to present our 2004 Annual Report for
the consideration of our shareholders.
Throughout the company’s 51 years of institutional
life, Management and the Board have paid special
attention to the company’s organizational aspects
but, with the aim of maintaining and improving its
effectiveness and in view of the ever-increasing
growth trend that the company has experienced
during the last few years, the Board and the
management decided to contract the services of firms
specialized in organizational development to advise
us on how to formulate the company’s vision, mission
and values up into year 2014. In this excercise we
counted with the active participation of all of
Buenaventura’s staff.
Year 2004 saw the completion of two major
undertakings at the Orcopampa mine. One was the
new cyanidation plant which started-up operations in
March 2004. This has yielded highly satisfactory results
as it has helped us to improve gold recovery levels
from 86% to 95%, while enabling us to produce doré
bars with grades of 60% gold and 30% silver with 10%
of impurities, allowing us thereby, to significantly
reduce our costs per fine ounce from US$179 to
US$128. The second was the completion of the
construction of the 104 km long electrical transmission
power line (138 KV ) running from the Callalli
Substation to the Ares Substation. This was executed
by Buenaventura’s subsidiary Consorcio Energético de
Huancavelica S.A. (CONENHUA). This new line will
ensure a reliable supply of electrical power not only
for Orcopampa but also for the entire district currently
undergoing exploration activities as well as the
surrounding communities. Total investment for these
two works, totaled US$16 MM, which is within the
estimated budget. They were on schedule and neither
on of them reported accidents.
We believe that it is worth sharing with you the
company’s VISION, MISSION and VALUES that resulted
from this significant exercise, and have therefore
included them in this Annual Report.
Production for the year exceeded our expectations.
Indeed, as the pertinent chapter and graphs found on
the back cover of this Annual Report show, operations
have been very successful.
It is worth point out, as an ilustration, that our gold
production from our direct operations rose by 12%
compared with that of 2003, while silver production
grew by 9% compare to the same period. Lead and
zinc production was also stepped-up compare to 2003.
These figures do not include gold and silver
production our affiliate Minera Yanacocha S.R.L.,
whose numbers are shown in the Chapter headed
Subsidiaries and Affiliates in this report.
With respect to the Uchucchacua mine, in our Annual
Report for 2003 we announced that Management
would undertake the construction of a cyanidation
plant for treating post-flotation tailings. At a later date,
it was deemed suitable to investigate a new alternative
which consisted of leaching the tailings from the lead-
2
BOARD OF
DIRECTORS
Alberto Benavides Q., Chairman of the Board
Norman Anderson L.
Jorge Benavides Q. (until July 2004)
Roque Benavides G. (as from July 2004)
Luis Coleridge A.
Felipe Ortiz de Zevallos M.
Aubrey L. Paverd
Carlos H. Plenge W.
silver flotation circuit first and then float the zinc from
the tailings produced by the cyanidation process.
Results from these investigations have shown to be
encouraging due to the fact that this process will allow
us to obtain higher grade lead–silver concentrates,
recover a greater percentage of silver in the form of
bullion, and obtain higher grade zinc concentrates
while not loosing out on the present recovery levels
using the existing circuit. We are also pleased to
announce that the purchase orders for the required
equipment have already been placed and the detailed
engineering work is well underway. The project has
been delayed but, in the opinion of the Board, the
delay is well justified. We expect to begin the
construction of this plant during the first quarter of
2005 with the aim of putting it into operation before
the end of year.
Unfortunately, this environmentally-friendly approach
demonstrated by the Company in its operations
nationwide, has not been duly appreciated in the region
of Cajamarca, where we have had to deal with intricate
situations involving the communities surrounding
Minera Yanacocha’s area of operations and also in
connection with our exploration activities in the
La Zanja project, 35 km northeast of Yanacocha. These
are all public knowledge.
Market Capitalization
(2001 - 2004)
4.00
US$ Billion
3.00
2.00
1.00
Explorations in our Julcani operation have been
relatively successful, finding approximately 100,000
tons of easily extractable ore with a grade of 20 ounces
of silver per ton in the Acchilla area. This latest
discovery enabled us to maintain operations here at a
rate of production of 6,000 tons of ore per month with
satisfactory results, as it meant that the operation is
generating enough cash to cover its operating costs
in addition to those that in any case needed to be
covered and which are related to mine-closure
activities in the areas of Mimosa, Herminia, Tentadora,
etc. These are all mines located within the mining
center and worked by the company during the course
of its first 50 years. This is yet another example of
Buenaventura’s commitment to responsible practices
in the environmental aspects of its business. In this
context, we are proud to inform you that Julcani was
awarded the prize for Social Responsibility granted
by Peru 2021 for year 2004. This prize is awarded to
the operation with the best performance in this field
in Peru.
0.00
2001
2002
2003
2004
We are aware that the Cerro Quilish (Minera
Yanacocha) problem arose because we insisted on
carrying out exploration activities during a strong
drought dry season, which to a certain extent, was
reason enough for the local inhabitants - rightly or
wrongly-to blame our mining activities for the scarcity
of water. It probably would have been wiser to wait
until the rainy season and begin by improving the
irrigation channels used to carry water to the Quilish
area before reassuming explorations. The outcome of
this impasse was that we finally decided to request the
authorities to annul the respective permit and ceased
all explorations in the area.
This is now all part of Cerro Quilish and Minera
Yanacocha’s history. We have now begun to improve
the irrigation channels and have put water controlling
3
Orcopampa,
Cyanidation Plant
dams into operation in the Rejo and Grande rivers. We
are hopeful that the local inhabitants will soon realize
that future exploration activities and an eventual
exploitation of the ore deposit located in Cerro Quilish
will not affect them in any way. Far from impacting the
environment, it is our belief that the exploration of this
area will contribute to the benefit of not only Minera
Yanacocha, but also the inhabitants of Cajamarca and
the entire country.
concessions covering the so-called “Río Narcea Belt”
during an initial stage, and with a second option to
increase our interest to 70% during a second stage.
Operations of our subsidiaries and affiliates –
Yanacocha, Brocal, Inminsur, Cerro Verde, Consorcio
Energético de Huancavelica (CONENHUA), Cedimin and
Buenaventura Ingenieros (BISA) – are showing
satisfactory results as described in the corresponding
section of this Annual Report. They all receive due
attention by Cia. de Minas Buenaventura S.A.A. ‘s
Management and Board.
It is with this same conviction which drove us to take
action in the face of the misunderstandings at Cerro
Quilish that we also condemn the deplorable events that
occurred in the La Zanja project. Nothing justifies this
vandalic behavior which can only be explained as the
acts of politically-motivated unscrupulous rioters who
incited a group of peasants to sack, steal and burn down
the exploration‘s camp. We have made our protest heard
before political, administrative and judicial authorities
and the penal processes are underway to sanction those
who are found to be ultimately responsible for these
condemnable acts. Faithful to our commitment to
benefiting the surrounding communities, we continue
to work enthusiastically in La Zanja to put this deposit
into production. Although it is true that to date the
tonnage measured is not impressive, we are convinced
that it is our obligation as mine concession holders to
put this ore deposit into production as soon as possible,
while continuing with explorations as the area appears
to be highly prospective.
Within the scope of our affiliate companies, it is
important to mention that there is the possibility that
we shall be increasing our interest participation in
Cerro Verde. Indeed, Phelps Dodge, Sociedad Minera
Cerro Verde S.A.A.’s majority shareholder and
operator for the Cerro Verde copper deposit in
Arequipa, Peru, is considering inviting minority
shareholders to make capital increase contributions
to co-finance their primary sulfide project. As our
shareholders already know, Buenaventura owns 9.2%
interest in Cerro Verde and we are pleased at this
point, to announce that we have recently reached an
agreement with Phelps Dodge to increase our share
participation even further. Depending on the results
of the public tender offer to subscribe shares, which,
according to Peruvian law is the preemptive right of
the existing shareholders, Buenaventura could
increase its participation in Cerro Verde to up to 20%.
This is a mega deposit with 1.4 billion tons of copper
ores. Construction of the project is scheduled for the
first semester of 2005 so as to enter into production
by year end 2006 or during the first semester of 2007,
at a rate of 200,000 tons of copper in concentrate,
which, added to the present production of cathodes
obtained from oxides, would total 300,000 tons of
copper per year.
The Chapter on Explorations included herein offers more
detail on the exact status of the exploration projects
referred to in the preceding paragraph, progress made
in other exploration projects, and future plans. In this
letter, we would only like to mention that we have
reached a farm-in agreement with the mining company
Río Narcea, to carry out an exploration program in
Asturias, Spain, with an option to purchase 51% of the
4
US$
US$
Annual Price of Silver
Annual Price of Gold
In the global context, the reporting period was affected
by a series of major events amongst which are: 1) the
war in Iraq; 2) the continuous and seemingly sustained
growth of the economies of China, India and Eastern
Europe; 3) the fall of the US dollar as compared to the
Euro and the Yen; 4) favorable metals prices for the
metals that we produce, and 5) the devastating tsunami
that hit the coasts of Indonesia, causing the loss of over
150,000 human lives.
reported 3.5% which marks a slight increase but is still
within reasonable limits. Exports totaled US$ 12,547
million, representing an increment of 40% over exports
for 2003. The Peruvian Nuevo Sol revalued in respect
of the US Dollar from S/.3.46 to S/. 3.28 affecting
operation costs, specifically labor costs.
The Camisea natural gas project was put into operation
as scheduled, in August 2004. It is expected that this
project will tilt the scales of hydrocarbon producers, to
the point that it is not illusory to think that Peru could
once again become a net hydrocarbons exporter during
the course of the forthcoming years – something that
has been unattained in the last 30 years.
The Board shall only address the one referring to the
metals prices, as corresponds for this Report. Gold
maintained its price over US$ 420 per ounce, reaching
a maximum peak of US$ 455; we are confident that
these prices will keep steady for a good time to come.
The price of silver quoted over US$ 6.50 per ounce
throughout the reporting period.
Barrick’s construction of the Alto Chicama gold
project in the north of the country, is well underway
and scheduled to commence production at year end
2005.
In conformity with the regulations set forth by the
Securities and Exchange Commission (SEC), reserve
estimates for our operations have been calculated on
the basis of US$ 350.00 per ounce of gold and US$ 5.25
per ounce of silver, .
The Las Bambas copper-gold deposit, located in the
department of Apurimac in the southern highlands of
Peru was tendered and adjudicated to the Australian
Xstrata corporation.
The sharp upturn in lead and zinc prices are also
noteworthy. Lead prices more than doubled compared
to previous years and zinc prices 50%. This overall increase
in the price of metals is attributed to the economic growth
of China, India and Eastern Europe. While it is true that
the volume of these metals is not relevant for
Buenaventura‘s direct operation, it is for our subsidiary
Sociedad Minera El Brocal S.A.A., in which Buenaventura
holds an economic interest of 32.8%. In the reporting
period, El Brocal produced 24,556 tons of lead (19.6% more
than in 2003) and 57,500 tons of zinc (2.6% more than in
2003), contained in concentrates.
Expansion and modernization works on our local Lima
Jorge Chavez Airport have been practically concluded
and were put into service in February 2005. This major
investment prompts us to think that Lima might well
be on its way to becoming South America’s HUB.
At the time of writing this report, the Cabinet has just
approved a program for granting concessions of the
ports along the Peruvian coastline, to private operators.
This is of outmost urgency requirement, particularly at
this point in time when it seems that the North
American Free Trade Agreement is finally going to occur,
apart from the fact that Peru is also working on similar
trade agreements with China, Brazil, Chile, etc.
The Peruvian economy experienced a 5% growth for
the reporting period. Average inflation for the year
5
31
29
US$
27
25
23
21
19
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Buenaventura’s ADS Performance
It is important to emphasize that although the Peruvian
economy has grown at an average rate of 4% per year
during the last three years, there is still room for much more.
Peru requires, both foreign and domestic, investments,
apart from better-defined political leadership on the part
of Central Government.
Mr. Carlos H. Plenge, member of the Board for the last
25 years, presented his irrevocable resignation in
December 2004 on grounds of ill health, effective as
from the next Shareholders Meeting. The Board wished
to express its appreciation for the invaluable
collaboration of Mr. Plenge since the formation of the
company, as consultant, Board member and member
of the Auditing and Compensation Committees, and
trusts that the company will continue to benefit from
his efficient and enthusiastic collaboration, not only in
the field of metallurgy which is his specialty, but also
with respect to the Company‘s normal development.
The present Government must remain in office until
completing its term on July 28, 2006 and, according
the Peruvian Constitution, cannot be reelected. Election
campaigns and related issues will no doubt occupy the
minds of many Peruvian citizens and the Government
itself for a good part of year 2005 and the first months
of 2006. We have reason to believe that the sound
macroeconomic indicators will be upheld and that the
company shall be able to operate as normally. Central
Government, on its part, will no doubt try and establish
some sense of leadership that it has so far been unable
to institute in the past three and a half years.
As always, we would also like to thank our Shareholders
for trusting in us. On behalf of the Board, I would like
to thank all of Cia. de Minas Buenaventura S.A.A. staff
and other people who have worked with us during
2004, including all of those working with our subsidiary
and affiliate companies.
In July 2004, Mr. Jorge Benavides de la Quintana
resigned from the Board after 45 years of service. His
ever-willingness to collaborate, his loyalty and spirit of
sacrifice are duly appreciated. Mr. Benavides served as
Director and General Manager during the period 1964
– 1985. Although an agricultural engineer by
profession, he rapidly became identified with the
mining world and ensured that mining activities were
carried out with utmost zeal and efficiency.
Sincerely,
Alberto Benavides Q
Chairman of the Board
In its session of July 22, the Board designated Mr. Roque
Benavides Ganoza, the company’s Chief Executive
Officer, as the new Board member, to replace Jorge
Benavides. In this way Mr. Roque Benavides Ganoza now
holds the position of Director and General Manager as
well as President and CEO for the company. We
welcome Mr. Roque Benavides Ganoza to the Board of
Buenaventura.
6
OPERATIONS
Uchucchacua,
Main Tunnel level 4450
UCHUCCHACUA
During year 2004, the Uchucchacua, Orcopampa and
Julcani mining units in the aggregate, produced
1’285,178 DST of ore, with a metal content recovery of
This unit processed 795,036 DST of ore, mainly from the
10´949,495 ounces of silver and 211,447 ounces of gold.
Carmen (Rita, Rosario and Monica ore bodies), Socorro
These indices, compared with 1’178,050 DST of ore,
(Magali and Rossana ore bodies) and Huantajalla
10’165,256 ounces of silver and 181,141 ounces of gold
(Marion ore body) areas, and produced silver recoveries
produced in 2003, represents a production increase in
of 9’832,393 ounces (2.7% more than the previous year),
the order of 9.1% of processed ore, 7.7% in silver content
8,042 DST of lead and 7,477 DST of zinc, in comparison
and 16.7% in gold content.
to 747,190 DST of ore, 9’575,605 ounces of silver, 7,218
DST of lead and 6,216 DST of zinc produced in 2003.
This year, ore reserves in all of our mines increased thanks
to the highly successful explorations program and
Ore reserves at December 31, 2004 reported 3’961,710
expansion works carried out on mine infrastructure,
DST with 17.02 oz/ST of silver, equal to 67’428,304
including: the development of ramps at Orcopampa;
ounces of silver, which is 4.40% greater than the
deepening of shafts in the Uchucchacua, Orcopampa and
64’584,870 ounces of silver contained in 3´799,110 DST
Julcani mines; completion of the Paton drainage tunnel
with 17.0 oz/ST of silver reported for 2003. The 957,636
work and improvement of services. These have all been
DST of new reserves, proceeded mainly from the
important contributors that have enabled us to maintain
Socorro mine, which at the time of writing this report,
processed mineral production at a constant pace of growth.
is considered to be the area with the highest potential.
It is for this reason that development of the northern
Thus, ore reserves in the Uchucchacua, Orcopampa,
area of this mine has been prioritized between levels
Julcani and Recuperada mines and the Pozo Rico
4300 and 4060.
prospect, totaled 5’388,680 DST at December 31, 2004,
compared with 4'881,315 DST in 2003.This increase was
A diamond drilling campaign confirmed the existence
largely due to a stepped up advancement program by
of in-depth mineralization, below the 4120 level of the
explorations and development, which resulted in an
Carmen and Socorro mines, reason by which level 4060
increase of 4’372,167 ounces of silver in the
of both mines is currently under development. Moreover,
Uchucchacua and Julcani operations and 124,226
our efforts are also geared towards continuing
ounces of gold in Orcopampa reserves.
exploration work in the southern section of the
Casualidad mine, where the Paton tunnel intersected
Notable too is the continuous improvement of Safety
mineralized structures at level 4120. In order to facilitate
indices in our operations as well as Uchucchacua and
the exploration and future exploitation works at these
Orcopampa’s attainment of ISO 14001 certification in
levels, it was decided to deepen the Master Shaft and
environment care.
refurbish the loading infrastructure at level 4060.
7
Orcopampa,
Ecological Park
Exploitation works started on the Marion orebody, at
contained in 1’043,405 DST with 0.517 oz/ST of gold and
the Huantajalla mine during the second semester of
0.2 oz/ST of silver. New reserves registered 468,727 DST
year 2004. This has been reporting high silver, lead and
and proceeded mainly from the exploration and
zinc grades. Likewise, development of this orebody
development activities carried out in levels 3590 and
and of the 4A vein at levels 4360 and 4400 levels
3490 of the Nazareno vein and from the development
continued yielding satisfactory results.
of the Ramal 1 and 2 of Prometida vein at levels 3610
and 3490. We expect to continue increasing reserves in
In the Pozo Rico prospect (Uchucchacua‘s brown field),
these veins, both to the east and to the west, at depths
exploration works are being continued by means of
below levels 3490 and 3440. Likewise, there is also the
diamond drills and mine workings. Mineral measured
possibility of finding ore through explorations carried
as reserves at December 31 total 132,900 DST, with
out on the Prometida Oeste, Escondida, Señal Chipmo
16.17 oz/ST of silver, 0.48% of lead and 0.86 % of zinc,
and Prometida Norte veins between levels 3810 and
and the resources indicated by drills in this prospect
3440.
report up to 86,435 DST, with 13.04 oz/ST of silver, 0.59%
of lead and 1.02 % of zinc.
Diamond drill results have provided valuable geological
information suggesting continuity of in-depth
ORCOPAMPA
mineralization in the Prometida and Nazareno veins
down to elevation 3360, prompting the construction
In this unit 431,242 DST of head ore was processed and
of ramps and the execution of the second stage of the
thanks to start up of operations of the cyanidation plant
Pique Nazareno. Levels 3490 and 3440 are currently
in February, which increased gold recovery to over 94%
under development, starting from these ramps. The
while also producing a better grade, we are able to reach
Pique Principal (Main Shaft) is located at level 3470. The
a production level of 211,388 ounces of gold, which is
ramps are being executed by Compañía Graña y
16.7% greater than the 180,725 ounces of gold in 2003,
Montero and work is being carried out according to the
from the 393,210 DST of ore processed during that
agreement.
period.
Mine deepening works have caused the flow of water
The Nazareno, Prometida Ramal 1 and 2 veins continued
proceeding from filtrations to gain force, recording up
to be the largest contributors to this mine’s production.
to 120 l/s. In order to drain this excess flow, it has been
necessary to build pump chambers in the Mario Ramp
Ore reserves reported 663,666 oz of gold, contained in
at the deepest levels of the mine. The construction of
1’080,890 DST with 0.614 oz/ST of gold and 0.25 oz/ST
the main pump chamber has been designed to be
of silver, which represents an increase of 23.0 %
located at the bottom of Pique Nazareno (Nazareno
compared with 539,440 ounces at year end 2003,
Shaft) (level 3340), in order to support a flow of 200 l/s.
8
Julcani,
Sustainable development projects
It must be noted that the mining works are located
with 21.78 oz/ST of silver and 1.25 % of lead. This
below the Chilcaymarca river.
was the direct result of the exploration of the Jesus,
Manto and Acchilla 2 veins of the Acchilla area. The
These pumping, hoisting and ventilation requirements
Jesús vein is a new high-grade silver mineralized
of the Chipmo mine have had repercussions on the use
structure. At the time of writing this report, it has
of electric energy, as consumption has risen by 25%
been recognized as a structure measuring 200 m long
respect to the previous year.The timely interconnection
at level 390, with a strong possibility of extending
to the National Power Grid through the Callali – Ares
laterally and at depth. There is also a very high
electrical transmission line at 138 kV, resulting in
probability of encountering new reserves in this
enhanced transmission and transformation capacities,
same Acchilla area, with the exploration of the Jesús,
ensures normal development of our present and future
Manto, Acchilla 7B and Acchilla 2 veins, above level
operations.
390 and below level 420.
JULCANI
Apart from the ongoing exploitation works being
carried out in the Acchilla area, we are also continuing
Continuing with the rescue operation set in place for
on with the execution of the environmental Closure
this unit, this period processed 58,900 DST of ore with
Plan of the entire mining unit. As part of this, a number
18.5 oz/ST of silver, which represents a recovered metal
of accesses have already been closed in the Herminia
content of 1’019,743 ounces of silver, originating from
and Mimosa mines, which are flooded up to levels 460
developments and the exploitation of measured blocks
and 420, respectively. We are currently replanting the
in the Acchilla 2, Acchilla 7B and Manto veins of the
areas of old open-pit mines of Herminia and part of the
Acchilla mine.
San Jose mine.
As of December 2004, measured mineral reserves
In the Recuperada area, explorations and developments
totaled 102,625 DST, with 22.42 oz/ST of silver, 1.17%
at the Esperanza 2001 mine produced reserves of
of lead and 0.17% of copper, which marks an upswing
110,555 DST, 8.31 oz/ST of silver, 3.03 % of lead and
compared to the 38,800 DST with 19.9 oz/DST of silver,
5.35 % of zinc. A further increase in reserves might even
1.10% of lead and 0.2% of copper reported in 2003.
be possible, depending on the results of explorations
in the Esperanza 2001 vein between levels 4680 and
4520 and in the Camucha vein at level 520.
New reserves at year end 2004, reported 122,725 DST,
9
HEALTH, SAFETY, ENVIRONMENT
AND COMMUNITY (HSEC)
SAFETY
which are comparatively lower indices than those
reported for 2003, which were 3,172 and 13.2,
respectively.
We continued to implement Buenaventura’s Health,
Safety and Environment system (HSEC), oriented
The Company will continue directing its activities while
towards risk prevention in our operations.
seeking to attain higher levels of efficiency rooted in
At Uchucchacua, operations control was improved,
excellent performance of its responsible practices in the
and no serious accidents were reported in this period.
Safety, Health and Environmental aspects of its business.
Regretfully, one fatal accident was reported in
For such effects, in the course of 2005, Buenaventura’s
Orcopampa. This unfortunate event called for the
HSEC activities will be strengthened in order to become
adoption of additional control measures and these
more efficient as an Integrated Risk Management System
have now been set in place. At December 31, 2004
and attain OHSAS 18001 certification.
the Julcani mine totaled 2’199,711 man hours with
In this context, we wish to highlight the fact that the
zero accidents.
Mining Rescue squads at Uchucchacua and
The frequency index for the mining units, including
Orcopampa, received well-deserved recognition for
contractors, dropped from 4.2 to 3.2 (see graph). The
their participation in the 1st National Rescue
severity index was 1,055 and accidentability was 3.3,
Competition realized in the city of Cajamarca, where
Buenaventura's Production (DST) vs Frequency (FI) Index
14.0
1,400,000
12.6
12.8
12.0
1,285,012
11.9
12.0
1,156,640
1,200,000
10.4
10.2
9.8
1,000,000
941,181
926,291
1,052,050
1,175,050
1,137,195
10.0
1,046,250
917,436
800,000
894,032
8.0
IF
DTS
845,135
770,150
5.9
600,000
5.3
6.0
4.9
4.2
400,000
3.2
4.0
2.0
200,000
0.0
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
AÑOS
Freq. Buenaventura
Production
DTS
Accidents x million of MHW
10
Julcani,
Forest Nursery
they obtained first place in Fire Fighting and Rope
In the Uchucchacua area, we reached an agreement
Rescue, respectively.
with the Chinche Tingo Peasant Community, through
which we supported the implementation of a miniplant
ENVIRONMENT
designed to industrialize the area’s milk production.
This concession enabled us to continue with
exploration works in the Pozo Rico Project.
ISO 14001 certification for Environmental Management
Systems in Orcopampa and Uchucchacua was renewed;
auditing was carried out by Germanischer Lloyd, an
Buenaventura also entered into an agreement as
internationally renowned certifying agency. Moreover,
coparticipant with the Ministry of Transport (Provías)
the ISO 14001 Environmental Management System was
to maintain the Sayán-Oyón road, over which the Moroc
implemented in Julcani and Recuperada.
Bridge was constructed this year (this support is a coeffort together with other mines near Oyón).
Environmental permits and authorizations for the
different exploration projects (greenfields y brownfields)
At Orcopampa, we continued to execute the
were processed and renewed in coordination with the
agreement entered into with the local Peasant
respective management areas. In June, the Company’s
Community, by supporting it with the formulation of
environmental officers in charge of the different mining
various project profiles they wish to carry out in the
units and of the Group itself, traveled to the United States
different annexes. Worth mentioning is the signing of
to attend a course on tailings closure and also visited a
a land use agreement, allowing us to make use of the
number of mines (both in operation and undergoing
areas held by the Chilcaymarca and Umachulco
closure). Training in this area will be prioritized
communities. This last one in particular, will enable us
throughout the course of 2005.
to access the Poracota project.
Closure activities were continued in all of the mining
In the Julcani – Recuperada area, the Huancavelica Land
units as scheduled. These works provide jobs for the
Transport Terminal as well as the Lircay Technological
local inhabitants and contribute to improve
Institute were handed over to local residents.
community relations.
In spite of the restrictions limiting the activities of a
COMMUNITIES
number of public institutions, we are continuing on
with the agreement to improve the Chincha –
In the course of 2004 relations with communities
Huancavelica road.
surrounding our areas of operation produced
encouraging results, and a number of mutually
Total annual investment in community projects and
beneficial agreements were successfully negotiated.
assistance amounted to US$1.48 million.
11
SUBSIDIARIES
AND AFFILIATES
Yanacocha,
Panoramic view of open pit operation
MINERA YANACOCHA S.R.L. (43.65%)
to feel that the company really wants to work as a team
with them, to achieve a better future in common as
partners for their integrated development.
Minera Yanacocha achieved a record production of
3’017,303 oz in the reporting period. However, it has
been the social related issues that have caught the most
It is within this context and attitude of conciliation, that
attention.
Minera Yanacocha S.R.L. decided to request the
government to annul the exploration permit granted
As the Chairman‘s Letter explains, despite the extreme
for Quilish. This resulted in the reduction of 3.9 million
care taken to protect the environment around Minera
ounces from our reserve inventory, which has passed
Yanacocha, the inhabitants of Cajamarca have
on to be classified as resources.
construed a different perception which, aggravated by
our insistence to explore Cerro Quilish in the drought
On the other hand, the completion of the feasibility
season, triggered an adverse social reaction to
study for Minas Conga has allowed us to incorporate
Yanacocha in Cajamarca.
8.7 million ounces of gold to our reserve estimates,
while resources still report 4.2 million ounces. Minas
We have embarked on a thorough examination of the
Conga is a copper-gold porphyry located east of
reasons which might have caused this reaction in
Yanacocha within the 1,386 Km2 area covered by the
Cajamarca and are taking action to solve each one of
mining rights controlled by Minera Yanacocha S.R.L. in
them. Clearly, one of the population’s major concerns,
the region.
both in Cajamarca’s rural areas and in the city itself,
relates to how our activities may potentially affect the
Total reserves for Minera Yanacocha S.R.L. at December
quantity and quality of water in the area. We are hopeful
31, 2004 including Minas Conga totaled 32.2 million
that our efforts to construct the dams in the Rejo and
ounces compared to 31.7 million at December 31, 2003.
Grande rivers, completed in 2004, in addition to a series
Oxide resources reported 5.9 million ounces which also
of other water works (canals and small dams) currently
represents a significant upturn with respect to the 3.6
under execution, will contribute to revert this
million ounces reported for the period ending
misconstrued perception that has led them to believe
December 31, 2003.
that our mining activities could potentially affect their
Provided the respective permits are granted without
supply of water, particularly during the dry season.
delay, we expect to have the first grinding -cyanidation
Yanacocha is also working towards achieving better
plant for the treatment of both sulfides and high grade
staff/community relations by encouraging its staff to
oxides, in operation by the first quarter of 2007. This
make efforts to better integrate with the local
plant will be doubly beneficial as it will allow us to add
community. In this way, Cajamarca’s people may grow
significant tonnage of sulfides to our Reserve Inventory,
12
El Brocal,
Colquijirca Mine Operation
SOCIEDAD MINERA EL BROCAL S.A.A.
(32.78%)
given that at present we have ample evidence of its
existence, but cannot include it in our current inventory
because we do not have a plant to process it in.
During 2004 two events became significant milestones
In the meantime anyhow, we shall continue carrying out
in El Brocal’s history: (a) the achievement of record
explorations in search of oxidized minerals as the district
production levels and concentrate sales, and (b) the
offers interesting opportunities for this.
beginning of construction works for the exploration
ramp in the Marcapunta Oeste copper with low gold
Gold sales reported a record high of 3’039,873 ounces
content project.
while silver sales totaled 3’672,896 ounces as of the
period’s close. These results were attained despite
a. In effect, regarding production, total metal contents
having maintained ore production levels constant, at
of concentrates produced during 2004 amounted
the same levels as the previous year (134 million MT)
to 57,500 MT of zinc; 24,556 MT of lead and 3.4
and despite the fact that ore grade contracted from 0.93
million ounces of silver, which represent increases
gr/MT to 0.86 gr/MT. This apparent contradiction –
in the order of 2.6%, 19.6% and 14.7% respectively,
higher metal sales despite producing lesser-grade ore
in comparison to 2003.
– is explained by the reduction of gold inventory, as gold
undergoing carbon column and other forms of
The total value of gross sales during the year
processing improvements was excluded.
reported S/.183.9 million, equivalent to US $ 53.7
million, and represents a 52% increment with
Cash cost per ounce of gold produced jumped up from
respect to sales in 2003.
US$129 to US$147 due mainly to the weaker gold ore
grade mentioned above, and the rising cost of fuel.
The historic level of production and sales obtained
in 2004, favored too by the improvement of
Sales recorded US$1,249.9 million, compared with
international prices of metals produced by the
US$1,036.4 million of the previous year. Net Income
company, resulted in profits for year 2004 of S/.31.4
totaled US$390.3 million with respect to US$320.4
million before Taxes and Workers’ Participation, and
million in 2003 while cash flow from operations was
a Net Income of S/.11.1 million, after restating the
maintained at US$542 million.
accounting for deferred charges.
Annual investment amounted to US$ 226.2 million. As
b. Construction works for the Marcapunta Ramp
in previous years, most investment was realized for the
officially began on September 6. As of year-end
construction of leach pads, mine development works
2004 this had been advanced by 353.2 meters.
and the acquisition of mining equipment.
Completion of this work is scheduled for 2005, when
13
Antapite,
Underground mine
the exploration drilling program shall be started-up
drills indicating the presence of a copper structure
in the underground workings.
hosted in the Caldera Formation. This copper
structure measures at least 300 meters long, 70-80
The crushing system has been totally modified in the
meters wide and 10-12 meters thick, with average
Huaraucaca plant. This will be totally operational by
grades of more than 2 % of copper.The geochemical
March 2005.
results indicate that the structure is essentially
arsenic-free.
As of December 31, 2004, the Ore Reserves Inventory of
the Tajo Norte vein, indicates the existence of 8’829,608
Two drill holes lateral to the non-arsenic copper
DMT of proven and probable mineral, with mean grades
structure evidence a seemingly important halo of Zn-
of 2.87 oz/MT of silver, 2.28 % of lead, 6.02 % of zinc and
Pb-Ag. Drilling works programmed for 2005 are
0.07 % of copper. At the present rate of production, these
directed towards exploring and defining this halo as
mineral reserves would allow us to maintain the
well as exploring the continuity to the south of the
operation active for almost 7 additional years.
Smelter Norte non-arsenic copper structure.
tons of ore.
INVERSIONES MINERAS DEL SUR S.A.
(78.04%)
EXPLORATIONS
Inversiones Mineras del Sur S.A. operates the Antapite
Inventory of Ore Reserves in Tajo Norte, reports 874,000
mine, located in the province of Huaytará, department
a. As in 2003, exploration activities in the course of the
of Huancavelica and the Ishihuinca mine, located in the
year focused on defining, expanding and searching
province of Caraveli, department of Arequipa, and is
for new copper resources, in particular those lacking
actively involved in the exploration of the Arenizo gold
or low in arsenic content. Within this framework,
prospect, in the province of Parinacochas, located in the
diamond drill works were completed by adding on
department of Ayacucho.
an extra 453.1 meters to the program. Total meters
drilled as from year 2002, amount to 13,836.5 meters.
To date, we have exploited 163,100 DMT of head ore,
b. During the second semester of 2004, and based on
recovering 97,137 ounces of gold, which represents a
information produced by previous diamond drills
15.1% increase over the production of 2003. Mineral
and minerographic studies, we decided to explore
Reserves at Antapite reported 434,031 DMT with a
for non-arsenic copper in the Smelter Norte sector
grade of 14.12 g/t of gold.
(located between the Marcapunta Norte Copper
Project and south of Tajo Norte). As of December
At Antapite, capacity of the Tailings Dam and the Carbon
31, the works consisted of 814.6 meters of diamond
Adsorption Section in the Processing Plant was expanded.
14
Moreover, we have also initiated the studies for
The Shila mine treated 41,151 dry short tons of mineral
obtaining government authorization for expanding the
at its concentration plant producing 14,086 ounces of
capacity of the Processing Plant to 1,000 MT/day. We
gold and 587,181 ounces of silver in the course of 2004.
have maintained satisfactory relationships with our
In its 16 years of mine-life, this operation has treated a
workers and surrounding communities.
total of 848,673 dry short tons of ore in its concentration
plant, obtaining 268,628 ounces of gold and 6,503,244
Mina Ishihuinca produced 24,504 ounces of recovered
ounces of silver. Shila as well as Paula, carry out their
gold and as of December 31, 2004, registered 59,750 DMT
activities at altitudes over of 5,000 m.a.s.l. in the
of Mineral Reserves with a mean grade of 15.05 g/t of
department of Arequipa.
gold. At Level 1890 we have begun a 750 meters long
crosscut towards the Cordova area which is where we
The Paula mine, which is located 10 kilometers in a
will be concentrating our future exploration activities.
straight line to the SE of the Shila mine, explores both
gold and silver veins and in 2004, produced 16,831 dry
Diamond drilling and underground works have been
short tons of mineral which were treated at Shila’s
executed in the Arenizo prospect. Although results
concentration plant, obtaining 10,387 ounces of gold
have not been totally satisfactory to date, we believe
and 73,594 ounces of silver.
that it is important to continue explorations in the
southern section of the prospect throughout the first
The total contribution of both mines was 24,473 ounces
few months of 2005.
of gold and 660,775 ounces of silver which equal 35,230
ounces of equivalent gold.
CEDIMIN S.A.C. (100%)
The interconnection of both mines to the National
Compañía de Exploraciones Desarrollo e Inversiones
Power Grid through the Callali – Ares line constructed
Mineras S.A.C. (CEDIMIN S.A.C.), operates the Shila and
by CONEHUA and completed at the end of 2003, has
Paula mines. The latter is 51% owned by Minera Paula
supplied us with lower-cost and reliable electric energy.
49 S.A.C. By year-end CEDIMIN S.A.C. had acquired
We are confident that continued exploration work will
100% of Minera Paula’s shares and will therefore now
eventually reward us by proving that these mines are
proceed to merge the two companies. CEDIMIN S.A.C.
in fact large-scale deposits, as has been the case with
is titleholder of a series of mining rights which cover a
other similar mines in the region, as Orcopampa, Arcata
total area of approximately 71,740 Ha.
and Caylloma.
We are pleased to note the emergence of synergies with
Engineer Miguel Huamán was Manager of Cedimin up
respect both to the exploration and operation of these
until March 31, 2003. Eng. Miguel Correa, the former
two mines.
Operations Manager replaced Mr. Huamán as from April
15
BISA,
ISO 9001 Certification
1, 2003. We would like to thank Engineer Huamán for his
relentless work at Cedimin and welcome Engineer Correa
whom we trust will see that Shila-Paula develops into the
same type of large-scale operations as others in the region.
BUENAVENTURA INGENIEROS S.A.
(100%)
After 26 years of providing services to the mining
This will be Arequipa’s fist mega-project after the
industry in the areas of geology, engineering,
construction of the Charcani V hydroelectric plant in the
construction management, environment and social
1980s. It is expected to generate great economic
development, BISA obtained ISO 9001 certification, in
activity in Arequipa during the next three years of
the reporting period. This international certification
construction time. Once completed, the mining
guarantees excellence and quality services.
operation will additionally create permanent and
significant mine-related commercial activity, both in the
In 2004, BISA not only increased its sales by 25% for the
city and at the Matarani port.
second consecutive year, but also added to its client
portfolio by providing services to new clients such as
As has been explained in our Letter to Shareholders, a
Barrick’s Alto Chicama project, Minera Goldfield’s (Peru)
capital increase in Sociedad Minera Cerro Verde S.A.A.
Cerro Corona; Rio Narcea in Spain and Inti Raymi in
is programmed for the first semester of the current year,
Bolivia.
with which, Compañía de Minas Buenaventura S.A.A.
should increase its interest participation in Sociedad
SOCIEDAD MINERA CERRO VERDE S.A.A.
(9.17%)
Minera Cerro Verde S.A.A. to 20%.
Cerro Verde will permit Buenaventura, on the one hand,
In October 2004, the Board of Sociedad Minera Cerro
to participate in the development of this major copper
Verde decided to go forward with the project to construct
porphyry, and on the other, acquire a better
a flotation plant for treating primary sulfides in Cerro
understanding of the copper market.
Verde.
Cerro Verde’s primary sulfides project, located 30 km to
At the time of writing this Annual Report, all permits
the SW of the city of Arequipa, will have a 100,000 MTD
and water rights have been obtained and project
capacity treatment plant expected to produce
financing is the only issue pending. This requires an
approximately 200,000 MT of copper in concentrate
investment of US$850 M.
form, in addition to producing copper cathodes which
16
CONENHUA,
Ares Sub - Station
in 2004 reported 88,352 MT as a result of acid leaching.
A total of 15.1 million kWh was transmitted in the
Cerro Verde’s expected annual production, once the
reporting period through the El Palmar Electrical
flotation plant is operative, is estimated to be in the
Substation operation executed by CONENHUA under
order of 300,000 MT of copper contained in
contract with INMINSUR, to supply electrical energy to
concentrates and cathodes.
the Antapite mine.
CONSORCIO
ENERGÉTICO
DE
HUANCAVELICA S.A. (CONENHUA) (100%)
CONENHUA’S electrical power generation installations
in the department of Huancavelica are conformed by
the Ingenio, Huapa and Tucsipampa Hydroelectrical
CONENHUA, an electrical energy supply company,
Power Plants, which in the aggregate generated a total
transmitted 11.6 million kWh, at 60 kV in Huancavelica
of 17.9 million kWh for the reporting period. This
during 2004. Operations were outaged for a total of 16
represents a drop of 8% compared with 2003. The fact
hours and 28 minutes, out of which 12 hours and 37
that year 2004 was a ‘dry year’ had significant bearing
minutes were due to pre-programmed cuts for
on this reduction of power generation.
maintenance works and 3 hours and 51 minutes were
due to power cuts caused by faults in the system,
A new 104 km long transmission line was constructed,
generated mainly by weather problems.
running between Callalli and Ares, at 138 kV as a means
of solving the problem caused by the deficient installed
The Trujillo - Cajamarca Norte - La Pajuela line transmitted
capacity of the existing at 66 kV electrical transmission
280.0 million kWh, with a total of 11 hours and 35 minutes
line running between the Callalli Electrical Substation
of down-time, out of which 9 hours and 50 minutes were
and the Ares Electrical Substation, which is part of the
due to programmed maintenance works, 1 hour and 30
National Power Grid. This supplies power to operations
minutes were due to failure of the National Power Grid
at Orcopampa, Shila and Paula as well as the future
and 6 minutes due to faults in our own system caused
prospect of Poracota. This project, which was the first
by lightning or extreme meteorological conditions. This
138 kV transmission line to be constructed by
all confirms the consolidation of this operation and
CONENHUA staff, was executed in a period of 9 months
consequent benefit for operations at Yanacocha.
at a cost of US$ 10.1 million, and reported zero
accidents.
The operation currently being carried out by CONENHUA
on the 138 kV line under contract, between Paragsha II
Engineering and supervision works were contracted
and Uchucchacua, transmitted 104.4 million kWh with a
to Promotora de Proyectos S.A.C. The experience
total of programmed down-time for maintenance of 6
obtained from this first project if its kind, now enables
hours and 54 minutes plus an additional 54 minutes of
us to offer services to carry out similar projects in the
outage time caused by lightning.
market.
17
EXPLORATIONS
Poracota,
Poracota mine, Level 4720
Our Explorations Campaign for
5. Mine development
2004 compiled survey data,
geological,
mineralogical,
geophysical and geochemical
data for three main projects:
Projects
cadastral information and
4. Feasibility and ore reserves
3. Resource delineation
Poracota in Arequipa, La Zanja in
Input
Cajamarca and Marcapunta in
fifteen prospects and other third
party
opportunities
were
2. Drilling and tunneling
Prospects
Cerro de Pasco. An additional
Output
1. Reconnaissance
assessed, not only in Peru but
also in Argentina, Bolivia, Mexico
and Spain.
Ranking for exploration projects and prospects as of December 31, 2004
In Poracota, in the sector of
PORACOTA / SORAS
Huamanihuayta, we outlined 1.7 million tons with 11.0 g/t
of gold in two mantos, both pyritic. Directly eastwards of
Poracota, in the Soras concessions, diamond drilling
Mine workings have been advanced 800 m in the
intersected veins of high grade gold and silver in enargite.
Huamanihuayta Este sector of the Poracota prospect in
two parallel levels at elevations 4720 and 4785 m. It is from
In La Zanja, measured and indicated resource estimates
here that we plan to start infill drilling work for the mantos
were completed for San Pedro Sur and Pampa Verde,
identified from the surface, followed by the necessary
revealing 17.4 million tons with 0.9 g/t of gold and 5.7
metallurgical tests required to confirm total feasibility of
g/t of silver in surficial oxides. Exploration activities were
the resources indicated and inferred by the diamond drilling.
also commenced in search of high grade ore in the
Turmalina and Campana prospects.
In Soras,diamond drilling has served to indicate persistence
in narrow veins with high grade gold and silver intersects
SOCIEDAD MINERA EL BROCAL S.A.A. has begun the
associated to enargite and tennantite. Drill hole SO-02
construction of a decline in Marcapunta, on the
intersected 1.20 meters with 16.8 g/t of gold,9.3 oz/t of silver,
Western Flank, on resources indicated and inferred by
10.1% of copper and 3.7% of arsenic. Moreover, the same
diamond drilling reporting 112 million tons with 1.8 %
drill hole intersected 1.05 meters with 28.6 g/t of gold, 24.9
of copper, 0.7 g/t of gold and variable quantities of silver,
g/t of silver, 3.5% of copper and 1.2% of arsenic. During year
bismuth, arsenic and antimony.
2005,we shall build trenches and continue diamond drilling
18
BUENAVENTURA’S EXPLORATION ACTIVITIES
IN AMERICA AND EUROPE
MINING DISTRICTS
IMMEDIATE PROJECTS
Advanced Projects
Generative Projects
Prospective Regions
LA ZANJA
stepping-out towards the east of this initial discovery. This
particular area exhibits an outcrop of silicified tuffs with an
obvious gold anomaly of more than 0.1 g/t of gold but less
Unfortunately, the 2004 campaign was cut short due
than 2.4 g/t of gold. The medium-term plan contemplates
to an unjustified act of violence which occurred on
continuing into a second stage with small cross cuts and
November 16, 2004 – particularly considering that this
drifts at the 4700 m level.
is still an exploration project causing no environmental
impact. Prior to this event, progress had been made on
Soras is a prospect totally owned by BUENAVENTURA,
exploration works in San Pedro Sur and Pampa Verde,
while Poracota is a double option deal. Exercise of the first
with the completion of 5700 m infill drilling of both
option for 50% held by SOUTHWESTERN GOLD prior to
orebodies and the respective final column-leachability
February 16, 2006, will activate the second option for an
study. The La Zanja / oxides project reveals measured
additional 25% controlled by TECK COMINCO LTD., under
and indicated resources of 17.4 million tons with 0.88
certain minimum investment conditions, and depending
g/t of gold and 5.67 g/t of silver, where 66% is
on the size and quality of the new resources found.
recoverable by direct gold cyanidation with the
possibility of reaching 75% in the medium term.
Poracota and Soras would appear to constitute an
important new gold district. We are currently generating
A number of high grade ore intercepts in the Turmalina
new diamond drill targets to the north and northeast
and Cerro Campana prospects are encouraging. In
of Cerro Huamanihuayta.
Turmalina, drill hole TUR-3 reported 6.0 m with 10.0 g/t
19
of gold and drill hole TUR-15 reported 33.0 meters with
to define the different types of mineralization according
13.1 g/t of gold, both in oxides only a few meters below
to its mineralogy and iron, copper, gold, silver, bismuth,
the surface. In Cerro Campana drill hole C-01 cut 42.5
sulfur and arsenic contents. This will determine which is
meters with 1.4% of copper and 0.7 g/t of gold with 14.4
the most suitable metallurgical treatment for each case.
g/t of silver and 0.2% of arsenic in sulfides.
OTHER PROSPECTS
Evaluation of copper and gold sulfides in Cerro La Zanja,
located in the area beyond the gold oxides of San Pedro
Out of the fifteen prospects mentioned in the first
Sur and Pampa Verde, will be resumed shortly. On the
paragraph of this Chapter on Explorations, the most
surface, we have defined a molybdenum ring with a gold
outstanding prospects, based on initial results, are the
nucleus characterized by quartz veinlets containing
epithermal ore deposits of Los Pircos in Cajamarca,
pyrite, chalcopyrite, bornite, covellite and/or enargite
Pampa Andino in Ica and Minasnioc in Huancavelica.
which will be the target of future exploration work .
The Aguas Verdes skarns located in Ayacucho and the
Trapiche copper-molybdenum porphyry in Apurimac
MARCAPUNTA
are also noteworthy. We have also embarked on a jointventure explorations project to asses the skarns and
SOCIEDAD MINERA EL BROCAL S.A.A. continues to
gold veins of the Santa Marina prospect, located in the
explore the copper-arsenic resources with gold content
Cantabric region of Asturias, Spain.
at Marcapunta. To date, approximately 320 m of a new
decline have been completed at Marcapunta Oeste. We
Year 2005 will be dedicated to focus on the most
still need to advance another 200 m before beginning
advanced or central projects, while also attending other
infill drilling and 500 m to reach the mineralized area.
prospects currently undergoing evaluation and new
During the next 18 months, this program will enable us
business opportunities.
Poracota Project, Mantos Aguila and Dorado
The La Zanja Project, from oxides to sulfides
744 E
736 E
728 E
720 E
Diablo Rojo
ALTERATION
Silicification
Quartz - alunite
Chinchimal Norte
Quartz - sericite
C∞ Buitre
9248 N
PAMPA VERDE
U D
D
izc
ac
C∞ La Zanja
Casharume
AREAS OF INTERES
San Pedro Norte
Pisit
UV
ha
s
High sulfidation Au (Ag)
Low sulfidation Au (Ag)
El Cedro
D U
C∞ Campana
SAN PEDRO SUR
CO
ES
AL
RR
IN
VE
D
U
Porphyry of Cu (Au,Mo)
Turmalina
Garay
er
Riv
Blanco
KEY
Limit of property
La Quinua
Faults
9240 N
Pincullo
D
U
Access
Caldera
llo
cu
Pin
Coshuro Norte
Coshuro
U
D
D
U
C∞ Chicche
5 Km
9232 N
20
FINANCIAL, ECONOMIC AND
CORPORATE MATTERS REPORT
Cia. de Minas Buenaventura S.A.A.’s total production
Silver: 3’200,000 ounces in total, at an average price of
value, in adjusted terms, reported S/.516’393,000 for
US$6.14/oz, effective January 2005 to December 2006.
fiscal year 2004, which compares favorably to
S/.381’057,000 registered for year 2003. The
It is likewise important to highlight the significant cash
consolidated production value, excluding Yanacocha,
contributions made by Orcopampa, Uchucchacua and
amounted to S/.931’143,000 in 2004 compared with
Antapite to the company’s overall results. These mining
S/.723’809,000 of the preceding year.
units increased their production levels while maintaining
cost-efficiency and competitivity world-wide.
Gold was the metal that in terms of value accounted
for the greatest percentage of our production,
As from 1991, the Company has been submitting
representing 48.30% thereof in 2004. In order of
Financial Statements adjusted for variations of the
importance, it was followed by silver (43.51%), lead
Wholesale Price Index (WPI). The purpose of such
(4.11%) and zinc (4.08%). However, after consolidation
restatement is to reflect the effect of variations in the
- including the 43.65% interest in Yanacocha - these
general price level. The methodology followed by the
percentages read as follows: gold 84.25%, silver 10.54%,
Company to make such adjustments is described in
zinc 3.34% and lead 1.87%.
Note 2 (a) of the Consolidated Financial Statements.
Consequently, the Consolidated Financial Statements
In the financial year 2004, losses in futures trading
as of December 31, 2004 included in the Appendix to
transactions registered US$16,942,463.38 (compared
this Annual Report, together with the Auditor’s report
with US$4’256,533.75 of the preceding year). Losses
submitted by Medina, Zaldívar, Paredes y Asociados, a
were distributed as follows:
member firm of Ernst & Young, contain the figures
adjusted for WPI variations for the periods 2003 and
Gold:
2004.
US$ 9’485,328.00
Silver: US$ 1’550,483.38
Zinc:
However, through Resolution No.031-2004-EF/93.01
US$ 5’906,652.00
published May 18, 2004, effective as from fiscal year 2005,
In summary, commitments for operations from
the Consejo Normativo de Contabilidad has suspended
derivative financial instruments and sales contracts
the practice of adjusting financial statements by inflation,
which the company held effective at year-end 2004,
which means that the balances adjusted by inflation at
with banks and first-order brokers and are as follows:
year-end 2004 shall be considered as the starting
balances at January 1, 2005. Likewise, Law 28394, enacted
Gold: 2’693,000 ounces in total, at an average price of
November 23, 2004 suspends the implementation of
US$364.47/oz, effective January 2005 to December
financial statements adjusted by inflation, for tax
2011.
purposes, effective as from 2005.
21
WPI variation was 4.9% in 2004, compared to 2.0% in
Consolidated Financial Statements corresponding to
2003. Moreover, our local currency experienced a
the above mentioned period.
devaluation of -5.23% in 2004 (-1.48% in 2003).
As of December 31, 2004, the Company had 1,626
Net income reported for the year was S/. 680‘140,000
common shareholders. Of these, 49.195% are held by
compared to S/. 177’487,000 in 2003. Consolidated net
shareholders residing in Peru and 50.805% by
income for the year reported S/. 685’650,000 compared
shareholders residing in foreign countries. Moreover,
to S/.175’153,000 in 2003. Both Company and
we had 1,176 shareholders holding investment shares.
Consolidated net income for fiscal year 2003
After restating the calculations for WPI variations as of
were affected by accounting costs amounting to
December 31, 2004, restated Capital Stock and
S/.643’694,000 and S/.647’218,000, respectively, as a
Investment Shares accounts amount to S/.596’755,000
result of changes in the reasonable value of its derivative
(Net sum of S/.49’659,000 of Treasury shares) and
financial instruments, in application of NIC 39, effective
S/. 1’683,000 (Net sum of S/.66,000 of Treasury shares)
as from January 01, 2003, as indicated in Notes 28(a) and
respectively and Legal Reserve S/. 129’276,000.
33(a) of the Company’s and Consolidated Financial
Company and Consolidated Accumulated net income
Statements, respectively, as of such date. However, it is
at year-end 2004, amounts to S/.734’059,000 and
important to state that the itemized expenditures did
S/.734’070,000, respectively.
not produce any effect whatsoever on Income Tax
calculations, nor on Workers’ Participation in the
Both Capital Stock and Investment Shares are
Company for year 2003, since these expenditures were
susceptible to a capitalization of S/. 96’634,000 and
not considered as deductible expenses for effects of
S/.260,000 respectively, considering that the amounts
determining Taxable Income for such period.
issued to date for both items total S/. 549’779,848 and
S/.1’489,280 respectively.
Likewise and in application of NIC 12, during year 2003
the Company proceeded to register Earnings against
Finally, the New York Stock Exchange's (NYSE) ADR
Income Tax and Workers’ Participation (deferred),
program closed the year by issuing a total of 64’213,046
generated by the temporal differences of assets and
ADS, equal to 1 Common Share per ADS. 109’369,800
liabilities subject to accounting practices that are
ADS were transacted in 2004, which represents 170%
different to tax treatment. This accounting practice,
of total ADS emitted and 86% of Buenaventura’s total
revealed Earnings of S/.62’896,000 and S/228’834,000
number of outstanding shares.
for Workers’ Participation and Income Tax respectively
in the results of the company for year 2003 and Earnings
ADR performance during 2003, as well as Common
of S/. 62’887,000 and S/.198’286,000 for Workers’
Share and Investment Share prices are shown in Table
Participation and Income Tax respectively, in the
Nº 6.
22
MANAGEMENT ANALYSIS
AND DISCUSSION
ON THE MAIN VARIATIONS IN THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
TWELVE-MONTH PERIODS ENDING DECEMBER 31, 2004 AND 2003
1. NET SALES
combined effect of these fluctuations resulted in an
creased revenue from sales which totaled
US$15’502,227 in 2004.
In the year 2004, Net Sales from concentrates totaled
S/. 908’441,000
compared to S/.735’306,000 Net
Sales realized in year 2003. This represents a 23.55%
e) Deductions– During year 2004 deductions
increase. This variation is explained by the following
for “maquila” (processing fees) and penalties
factors:
together, amounted to US$ 47’677,961 compared
to US$ 39’510,604 in 2003.
a) Gold Sales– This item increased in 29,516 ounces
of gold, compared with sales for 2003, and
f) Hedging Operations– During the year 2004, the
proceeded mainly from Orcopampa. Average gold
Company recorded losses from hedging operations
sale prices rose from US$ 364.88/oz in 2003 to US$
generated by Sociedad Minera El Brocal S.A.A. (El
373.78/oz in 2004. The combined effect resulted in
Brocal) of S/.20,158,000 (compared to revenues of
higher revenue from sales reporting US$13’914,252
S/.5,405,000 as of December 31, 2003) with respect
in 2004, compared to 2003.
to transactions due in the reporting period.
b) Silver Sales– 3’146,970 more ounces of silver were
g) Energy Sales– During 2004, energy sales to third
sold compared to 2003 and proceeded mainly from
parties amounted to S/.16’829,000 (S/.17’249,000 in
our Uchucchacua mine. Average silver sale prices
2003). These sales proceed mainly from the billing
rose from US$ 4.91/oz in 2003 to US$ 6.51/oz in
made by CONENHUA to Minera Yanacocha S.R.L.
2004. The combined effect resulted in higher
(Yanacocha) for the transmission of electrical power
revenue from sales of US$ 38’233,915 in 2004.
supplied by the Trujillo Norte-La Pajuela line.
c) Zinc Sales– Average zinc sale prices rose from
h) Sales of Mining Services– Sales of Mining Services
US$ 814.47/MT in 2003, to US$ 1,026.01/ MT in 2004.
to third parties realized by Buenaventura Ingenieros
Total volume sold also experienced an upturn to
S.A. (BISA) totaled S/.13’224,000 (S/.13’279,000 in
2,068 MT in 2004. The combined effect resulted in
year 2003).
higher revenue from sales of US$ 12’895,660 in
2. INCOME FROM ROYALTIES
2004.
d) Lead Sales– Average lead sale prices increased from
In 2004, royalties received from S.M.R.L Chaupiloma Dos
US$ 532.04/MT in 2003 to US$ 908.79/MT in 2004.
de Cajamarca (Chaupiloma) amounted to S/.128’889,000
The volume of lead sold also increased by 7,093 MT,
compared with S/.116’857,000 received in 2003, which
and proceeded mainly from Colquijirca mine. The
represents an increment of 10.3%. This rise is explained
23
Antapite,
Concentration plant
by higher gold sale prices on Yanacocha‘s sales during
S/.76’866,000 in 2004, due largely to a reduction in
2004.
the provision for long-term compensation payments
realized to company officers (See Note 28).
3. OPERATING COSTS
c) Selling Expenses– This item experienced a
a) Operating Costs– Operating Costs increased from
downturn, contracting from S/.25’776,000 in 2003 to
S/.302’572,000 in 2003 to S/.338’074,000 in 2004,
S/.17’839,000 in 2004. This is explained by a reduction
(representing an 11% increase) due to a greater
in the freights and other service payments no longer
volume of sales realized by Uchucchacua and
required after switching production at Orcopampa
Buenaventura’s subsidiary El Brocal. (See note 25).
from concentrates to doré. (See Note 29).
b) Exploration and Development Costs in
Operational Sites– This increased significantly
d) Royalties to the Peruvian State– This item
from S/.85’715,000 in 2003 to S/.127’169,000 in 2004
corresponds to the provision of Mining Royalties
due to stepped-up exploration activities in our
created by Law 28258 enacted June 24, 2004 (See
Uchucchacua and Ishihuinca mines (See Note 26)
Note 19(d).
c) Depreciation and Amortization– This reported a
5. OTHER INCOME (EXPENSES)
rise from S/.49’118,000 in year 2003, to S/.59’473,000
in 2004, due mainly to the depreciation of the assets
related to mine closure.
a) Share in results of affiliate companies, net–
This item registered S/.557’558,000 in 2003
4. OPERATING EXPENSES
compare to S/.575’858,000 in 2004, and is
primarily attributed to Yanacocha’s increased
incomes. (See Note 12 (b)).
a) Exploration Costs in Non– Operational Mining
Sites– Expenses for this item rose from S/.59’255,000
in 2003 to S/.88’241,000 in 2004, and is explained
b) Realized Income from Sale of Future Production–
mainly by stepped-up exploration activities in the
In 2004, this reported S/.68’837,000 after the
Poracota project (S/.10’609,000 primarily for
physical delivery of gold whose mark-to-market
construction of the road to Orcopampa), the La Zanja
value was provisioned against at the time of signing
project (exploration increment of S/.5’832,000) and the
the sales contract in December 2003 (See Note
Pampa Andino project (S/.3’996,000), amongst others.
35(a)).
(See note 27).
c) Gains (Losses) from Changes in the Fair Value of
b) General and Administrative Expenditures– This
Derivative Financial Instruments– In 2004 the
item decreased from S/.123’161,000 in 2003 to
Company recognized revenues of S/.14’629,000
24
(Losses of S/.647’218,000 in 2003) due to lower price
which resulted from the creation of a deferred asset
variations compared with 2003. (Note 35(a))
by the sale of futures contracts in accordance with NIC
12 as is explained in detail in Note 30(b) of the
d) Interest Income– This item grew by S/.4’347,000 as
Consolidated Financial Statements as of December 31,
a result of the increased market value of investment
2003.
funds.
7. PROVISION (EXPENDITURE ) FOR
INCOME TAX
e) Realized Gain (Loss) in Derivative Instruments–
The loss of S/.20’812,000 reported for 2003
escalated to a loss of S/.73’403,000 in 2004 due to
This went from reporting Earnings of S/.198’286,000 in
the difference between fixed prices and market
2003 to Expenditures of S/.101’997,000 in 2004, due
prices upon maturity and liquidation in the referred
primarily to the same reasons pointed out in the
exercises (See Note 35(a)).
preceding paragraph.
8. MINORITY INTEREST
f) Gain (loss) from Exposure to Inflation– This item
switched from revenues of S/.321,000 in 2003 to
recording losses of S/.22’483,000 in year 2004. This
This dropped from an Expenditure of S/.51’023,000 in
was caused mainly by the exchange differences of
2003 to an Expenditure of S/.28’171,000 in 2004,
S/. 12‘636,000 included in this caption. (See note
attributed mainly to the reduced Net Income from
2(a)).
Inversiones Colquijirca S.A. and Inversiones Mineras
del Sur S.A.
g) Interest Expenses– These reported a contraction
9. CUMMULATIVE
EFFECT
OF
ACCOUNTING CHANGE FOR MINE
CLOSING COSTS
of S/.1’172,000 compare to year 2003, due to a
reduction in interest rate charges applied to smaller
bank loans and long-term debt, respectively. (See
Notes 17, 20 and 30)
As described in Note 3 of the Consolidated Financial
6. PROVISION (EXPENSE) FOR WORKERS’
PROFIT SHARING
Statements as of December 31, 2003, effective January
1, 2003, the Company and Yanacocha realized
accounting changes with respect to the provision for
This item switched from revenues of S/.62’887,000 in
mine closing costs applicable to their respective mining
year 2003 to expenses of S/.18’356,000 in 2004 due to
units. This provision amounted to S/.72’295,000, and
the registration of an accounting income in 2003,
affected the results of fiscal year 2003.
25
SUMMARY OF OPERATIONS 2004
TABLE Nº 1
DESCRIPTION
HEAD ORE MILLED
HEAD GRADES
UNIT.
Ag.
Au
Cu
Pb.
Zn.
BULK CONCENTRATE (Ag-Pb-Cu-Au)
GOLD SILVER CONCENTRATE
LEAD-SILVER CONCENTRATE
COPPER-SILVER CONCENTRATE
COPPER CONCENTRATE
ZINC CONCENTRATE
OUNCES OF SILVER
OUNCES OF GOLD
COPPER METAL
LEAD METAL
ZINC METAL
Ag RECOVERY
Au RECOVERY
Cu RECOVERY
Zn RECOVERY
CASH COST PER Oz.Ag.
CASH COST PER Oz.Au.
CASH COST PER MT Zn
CASH COST PER MT Cu
PROGRESS IN EXPLORATIONS
PROGRESS IN MINING OPERATIONS
DIAMOND DRILLING
NEW RESERVES
ORE MILLED 2003
DESCRIPTION
HEAD ORE MILLED
HEAD GRADES
BULK CONCENTRATE (Ag-Pb-Cu-Au)
GOLD-SILVER CONCENTRATE
LEAD-SILVER CONCENTRATE
COPPER-SILVER CONCENTRATE
COPPER CONCENTRATE
ZINC CONCENTRATE
OUNCES OF SILVER
OUNCES OF GOLD
COPPER METAL
LEAD METAL
ZINC METAL
Ag RECOVERY
Au RECOVERY
Cu RECOVERY
Zn RECOVERY
CASH COST PER Oz.Ag.
CASH COST PER Oz.Au.
CASH COST PER MT Zn
CASH COST PER MT Cu
PROGRESS IN EXPLORATIONS
PROGRESS IN MINING OPERATIONS
DIAMOND DRILLING
NEW RESERVES
ORE MILLED 2003
Ag.
Au
Cu
Pb.
Zn.
ORCOPAMPA UCHUCCHACUA
431,242
0.34
0.513
795,036
16.79
JULCANI
SHILA
PAULA
58,900
18.50
0.002
0.17
1.68
1.48
41,151
17.50
0.380
16,831
4.83
0.645
2,355
549
1,030
1,777
1,019,743
59
587,181
14,086
73,594
10,387
81.3
90.0
89.0
94.8
165.92
314.08
DST
Oz./DST
Oz./DST
%
%
%
DST
DST
DST
DST
DST
DST
Oz.
Oz.
DST
DST
DST
%
%
%
%
US $
US $
US $
US $
m
m
m
DST
DST
6,451
7,452
11,522
468,727
393,210
10,125
8,649
14,239
957,636
747,190
5,674
3,127
2,058
122,725
37,650
5,054
429
9,474
28,440
50,085
2,673
491
8,163
0
14,880
UNIT.
ANTAPITE
ISHIHUINCA
EL BROCAL
CERRO VERDE
YANACOCHA
DST
Oz./DST
Oz./DST
%
%
%
DST
DST
DST
DST
DST
DST
Oz.
Oz.
DST
DST
DST
%
%
%
%
US $
US $
US $
US $
m
m
m
DST
DST
179,785
0.74
0.570
60,213
1,492,569
3.23
22,958,913
133,820,907
0.06
2.89
5.82
0.64
1.13
5,447
32,684
97,359
211,388
64.9
93.7
18,714
9,832,393
8,042
7,477
73.7
81.8
2.93
854
93.7
50.7
82.9
6.12
128.27
0.474
0.35
47,397
1,852
86,162
97,137
64.5
94.4
124,967
3,399,130
24,505
169
3,479,435
3,017,302
97,491
27,069
63,448
70.6
85.8
81.2
67.0
73.0
173.72
334.99
147.00
644.15
12,233
3,943
12,896
209,974
155,494
26
4,991
4,718
6,010
50,882
57,463
1,268
1,015,838
1,409,104
5,864
21,014,000
146,858,690
RESERVES AS OF DECEMBER 31, 2004
TABLE Nº 2
PROVEN AND PROBABLE RESERVES
GOLD
Orcopampa
Shila
Paula
Antapite
Ishihuinca
Yanacocha
Yanacocha (Minas Conga)
Jatun Orcco
BVN %
Participation
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
100.00
100.00
100.00
78.04
78.04
43.65
43.65
100.00
1,081
14
74
478
66
734,978
371,112
24
0.614
0.344
0.507
0.412
0.439
0.032
0.023
0.460
664
5
38
197
29
23,547
8,711
11
664
5
38
154
23
10,278
3,802
11
1,107,826
0.030
33,201
14,974
BVN %
Participation
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
32.78
100.00
1,081
3,962
103
111
14
74
133
9,733
24
0.25
17.02
22.42
8.31
15.10
3.50
16.17
2.60
5.38
270
67,428
2,301
919
207
259
2,149
25,306
128
270
67,428
2,301
919
207
259
2,149
8,295
128
15,233
6.50
98,967
81,956
BVN %
Participation
DST (000)
% Zn
DST (000)
BVN
DST (000)
100.00
100.00
100.00
32.78
3,962
111
133
9,733
1.99
5.35
0.86
6.02
79
6
1
586
79
6
1
192
13,938
4.82
672
278
BVN %
Participation
DST (000)
% Pb
DST (000)
BVN
DST (000)
100.00
100.00
100.00
100.00
32.78
3,962
103
111
133
9,733
1.51
1.17
3.03
0.48
2.28
60
1
3
1
222
60
1
3
1
73
14,041
2.04
287
138
BVN %
Participation
DST (000)
% Cu
DST (000)
BVN
DST (000)
9.17
9.17
43.65
1,428,060
387,144
371,112
0.49
0.45
0.30
6,997
1,742
1,113
642
160
486
2,186,316
0.45
9,853
1,287
Total gold reserves
SILVER
Orcopampa
Uchucchacua
Julcani
Recuperada
Shila
Paula
Pozo Rico
El Brocal
Jatun Orcco
Total silver reserves
ZINC
Uchucchacua
Recuperada
Pozo Rico
El Brocal
Total zinc reserves
LEAD
Uchucchacua
Julcani
Recuperada
Pozo Rico
El Brocal
Total lead reserves
COPPER
Cerro Verde (Sulfides)
Cerro Verde (Oxides)
Yanacocha (Minas Conga)
Total copper reserves
Prices used to estimate reserves as of December 2004: Gold US$350/oz, Silver US$5.25/oz, Zinc US$1,050/MT, Copper US$ 0.90/Lb and Lead US$550/MT
27
RESERVES AS OF DECEMBER 31, 2003
TABLE Nº 3
PROVEN AND PROBABLE RESERVES
GOLD
Orcopampa
Shila
Paula
Antapite
Ishihuinca
Yanacocha
La Zanja (**)
Jatun Orcco
BVN %
Participation
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
100.00
100.00
51.00
78.04
78.04
43.65
53.06
100.00
1,043
26
113
448
75
1,047,049
18,850
18
0.517
0.441
0.608
0.470
0.531
0.030
0.030
0.493
539
12
69
211
40
31,710
563
9
539
12
35
164
31
13,841
299
9
1,067,623
0.031
33,153
14,931
BVN %
Participation
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
100.00
100.00
100.00
100.00
51.00
32.78
100.00
1,043
3,799
39
26
113
10,207
18
0.20
17.00
19.90
16.30
4.30
2.58
6.04
209
64,585
772
431
486
26,335
110
209
64,585
772
431
248
8,633
110
15,247
6.10
92,928
74,987
BVN %
Participation
DST (000)
% Zn
DST (000)
BVN
DST (000)
100.00
32.78
3,799
10,207
2.18
6.09
83
622
83
204
14,007
5.03
704
287
BVN %
Participation
DST (000)
% Pb
DST (000)
BVN
DST (000)
100.00
100.00
32.78
3,799
39
10,207
1.65
1.10
2.32
63
0
237
63
0
78
14,045
2.14
300
141
BVN %
Participation
DST (000)
% Cu
DST (000)
BVN
DST (000)
9.17
724,774
0.59
4,276
392
724,774
0.59
4,276
392
Total gold reserves
SILVER
Orcopampa
Uchucchacua
Julcani
Shila
Paula
El Brocal
Jatun Orcco
Total silver reserves
ZINC
Uchucchacua
El Brocal
Total zinc reserves
LEAD
Uchucchacua
Julcani
El Brocal
Total lead reserves
COPPER
Cerro Verde
Total copper reserves
(**) Reserves showing technical and economic variability; EIA still pending.
Prices used to estimate reserves as of december 2003: gold US$ 325/oz, silver US$ 5.20/oz, zinc US$ 920/MT, copper US$ 0.91/Lb and lead US$ 600/MT.
28
ESTIMATES FOR NON-RESERVE MINERAL AS OF DECEMBER 31, 2004
TABLE Nº 4
GOLD
ESTIMATES FOR NON-RESERVE MINERAL
BVN %
Participation
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
100.00
100.00
100.00
78.06
78.06
43.65
43.65
40.00
40.00
53.06
32.78
32.78
100.00
100.00
0.00
848
17
59
183
114
242,616
246,277
26,345
385,809
19,196
123,136
13,216
225
17
1,892
0.702
0.311
0.646
0.434
0.292
0.024
0.017
0.025
0.009
0.026
0.017
0.060
0.534
0.440
0.320
595
5
38
79
33
5,920
4,228
649
3,601
493
2,032
793
120
7
605
595
5
38
62
26
2,584
1,846
260
1,440
262
666
260
120
7
0
1,059,950
0.018
19,201
8,172
DST (000)
Oz / DST
Ounces (000)
BVN
Ounces (000)
848
1,056
98
144
17
59
76,898
123,136
86
26,345
19,196
225
17
0.30
16.10
20.66
7.10
11.20
5.60
0.42
0.67
13.04
0.26
0.16
15.78
19.17
254
17,008
2,035
1,020
189
331
32,297
82,501
1,127
6,833
3,138
3,543
333
254
17,008
2,035
1,020
189
331
10,587
27,044
1,127
2,733
1,665
3,543
333
248,126
0.61
150,609
67,869
DST (000)
% Zn
DST (000)
BVN
DST (000)
1,056
144
76,898
86
2.21
5.20
8.02
1.02
23
7
6,167
1
23
7
2,022
1
78,185
7.93
6,199
2,053
DST (000)
% Pb
DST (000)
BVN
DST (000)
1,056
98
144
86
76,898
1.94
1.33
2.60
0.59
2.27
20
1
4
1
1,746
20
1
4
1
572
78,283
2.26
1,772
598
BVN %
Participation
DST (000)
% Cu
DST (000)
BVN
DST (000)
32.78
40.00
43.65
123,136
385,809
246,277
1.85
0.85
0.27
2,278
3,279
665
747
1,312
290
755,222
0.82
6,222
2,349
Orcopampa
Shila
Paula
Antapite
Ishihuinca
Yanacocha
Yanacocha (Minas Conga)
Tantahuatay - Oxides
Tantahuatay - Sulfides
La Zanja
El Brocal (Marcapunta)-Sulfides
El Brocal (Marcapunta)-Oxides
Los Pircos
Pampa Andino
Poracota (1)
Total gold resources
SILVER
BVN %
Participation
Orcopampa
Uchucchacua
Julcani
Recuperada
Shila
Paula
El Brocal (San Gregorio + Colquijirca)
El Brocal (Marcapunta)-Sulfides
Pozo Rico
Tantahuatay - Oxides
La Zanja
Los Pircos
Pampa Andino
100.00
100.00
100.00
100.00
100.00
100.00
32.78
32.78
100.00
40.00
53.06
100.00
100.00
Total silver resources
ZINC
BVN %
Participation
Uchucchacua
Recuperada
El Brocal (San Gregorio + Colquijirca)
Pozo Rico
100.00
100.00
32.78
100.00
Total zinc resources
LEAD
BVN %
Participation
Uchucchacua
Julcani
Recuperada
Pozo Rico
El Brocal (San Gregorio + Colquijirca)
100.00
100.00
100.00
100.00
32.78
Total lead resources
COPPER
El Brocal (Marcapunta)-Sulfides
Tantahuatay - Sulfides
Yanacocha (Minas Conga)
Total copper resources
(1) Option Agreement to acquire 75%
29
SUMMARY OF OPERATIONS AND STATISTICAL DATA
TABLE Nº 5
Content (000)
BVN %
Participation
Orcopampa
Uchucchacua
Julcani
Antapite
Ishihuinca
Shila
Paula
El Brocal
Yanacocha
Cerro Verde
Ag
Ounces
Au
Ounces
97
9,832
1,020
86
211
100.00
100.00
100.00
78.04
78.04
100.00
100.00
32.78
43.65
9.17
587
74
3,399
3,479
Zn
Tons
8
1
7.5
Cu
Tons
18,575
Cash cost
US $ / MT Zn
97
9,832
1,020
67
211
27
587
74
1,114
1,519
63.4
3,017
3,375
36
Cash cost
US $ / Oz. Ag
71
98
14,274
Zn
Tons
8
1
7
0.13
9
21
1,317
1,643
18
28
9
Company
workers
Hired
workers
Total
128.27
371
421
93
188
89
71
83
274
2,313
774
593
323
862
400
160
274
456
3,326
1145
1014
416
1050
489
231
357
730
5,639
644.15
147.00
353,317
14,252,144
31,131
53,001
121
Cu
Tons
Cash cost
US $ / Oz. Au
173.72
334.99
165.92
314.08
Average Net Prices of Sales
2003
2004
2003
323,801
11,105,174
24,038
50,933
243
373.78
6.51
908.79
1,026.01
2,869.90
364.88
4.91
532.04
814.37
1,763.41
Number of workers as of December 2004
Management
0
76
19
14
10
Pb
Tons
9
2.93
6.12
2004
- Oz.
- Oz.
- MT.
- MT.
- MT.
Au
Ounces
0.2
Volume Sold
Gold
Silver
Lead
Zinc
Copper
Ag
Ounces
97.5
Total contents
Orcopampa
Uchucchacua
Julcani
Antapite
Ishihuinca
Shila
Paula
El Brocal
Yanacocha
0
97
25
14
10
Content BVN(000)
Pb
Tons
Executives
Empl.
Mine Empl.
Mine workers
Total
Julcani
Recuperada
Orcopampa
Uchucchacua
Lima
1
0
1
1
16
14
1
49
60
48
6
3
17
32
119
14
6
69
69
0
58
7
235
259
0
93
17
371
421
183
Total
19
172
177
158
559
1085
30
TABLE N°6
ADS PRICES
MONTH
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
OPENING
US$
S/.
28.87 98.10
23.20 81.20
25.00 86.75
29.15 100.86
21.65 75.35
23.60 82.13
22.17 76.93
21.77 74.68
22.80 76.61
23.70 79.16
24.70 82.01
23.70 78.21
CLOSING
US$
S/.
MAXIMUM
US$
S/.
MINIMUM
US$
S/.
23.40 81.67
24.21 84.25
28.90 100.00
21.64 75.31
23.43 81.54
22.10 76.69
21.53 73.64
22.72 76.34
23.75 79.33
24.84 82.72
23.50 77.55
22.90 75.12
30.49 105.50
27.78 96.96
30.07 104.05
29.95 108.63
23.95 88.59
23.78 82.76
23.74 81.43
23.34 78.43
23.90 79.83
26.17 86.89
26.08 86.07
23.98 79.14
22.25
22.80
23.60
20.52
18.61
19.73
19.86
20.48
21.05
22.30
23.20
18.46
77.43
79.80
81.90
71.41
64.95
68.47
67.93
69.84
70.52
73.82
76.80
60.74
Buenaventura Common Shares (S/.)
Mont
January
February
March
April
May
June
July
August
September
October
November
December
Opening
Closing
Maximum
Minimum
Average
96.71
80.05
86.25
100.30
75.50
81.00
75.00
75.00
76.45
77.20
79.35
77.90
81.40
84.00
103.50
77.50
82.50
76.00
74.40
75.00
77.60
83.40
78.20
75.05
105.00
95.00
103.50
101.48
82.60
81.00
81.32
78.50
78.40
86.00
84.50
77.90
79.00
80.00
83.00
71.60
66.80
69.68
69.50
70.40
72.80
77.00
77.75
68.54
87.89
88.82
91.49
86.63
77.16
74.63
76.18
74.45
74.18
81.99
81.76
73.44
Buenaventura Investment Shares (S/.)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Opening
Closing
Maximum
Minimum
Average
60.00
51.77
56.00
66.00
55.00
64.00
60.00
60.00
62.00
61.10
70.00
69.50
51.77
56.25
66.00
60.00
62.00
60.00
60.00
62.00
60.00
70.00
70.20
62.01
60.00
56.25
66.00
66.00
62.00
64.00
62.00
62.00
62.00
70.00
70.20
69.50
48.00
51.77
53.00
60.00
52.00
55.00
60.00
58.00
60.00
61.10
65.00
62.00
52.88
54.72
58.61
64.15
57.99
61.69
61.09
60.00
61.24
63.91
70.13
62.97
31
AVERAGE
US$
S/.
25.77
25.31
26.02
24.96
21.41
21.40
21.81
21.92
22.39
24.50
24.53
22.09
89.68
88.34
90.29
86.37
74.51
74.26
75.03
74.31
75.23
81.34
81.20
72.46
Report of Independent Auditors
To the Shareholders of Compañía de Minas Buenaventura S.A.A.
1. We have audited the accompanying consolidated balance sheets of Compañía de Minas Buenaventura S.A.A. (a Peruvian
company) and subsidiaries (together, the Company) as of December 31, 2003 and 2004, and the related consolidated statements
of income, changes in shareholders' equity and cash flows for the years ended December 31, 2002, 2003 and 2004. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the financial statements of Minera Yanacocha S.R.L.
(an equity accounted affiliated entity in which the Company has an 43.65 percent interest) as of December 31, 2003 and 2004
and for the years ended December 31, 2002, 2003 and 2004. Those statements have been audited by others auditors, whose
reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Minera Yanacocha S.R.L., is
based solely on the reports of the others auditors. In the consolidated financial statements of the Company, as derived from the
financial statements of Minera Yanacocha S.R.L., the Company´s investment and share in the net income in this entity amount to
approximately S/1,101.0 million and S/1,152.2 million at December 31, 2003 and 2004, and S/361.5 million, S/515.7 million
and S/583.3 million for the years ended December 31, 2002, 2003 and 2004, respectively.
2. We conducted our audits in accordance with auditing standards generally accepted in Peru. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the independent
auditors of Minera Yanacocha S.R.L. provide a reasonable basis for our opinion.
3. In our opinion, based on our audits and the report of the auditors of Minera Yanacocha S.R.L., the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of Compañía de Minas
Buenaventura S.A.A. and subsidiaries as of December 31, 2003 and 2004, and the consolidated results of their operations and
their cash flows for the years ended December 31, 2002, 2003 and 2004, in conformity with accounting principles generally
accepted in Peru.
4. Effective January 1, 2003, the Company adopted the IAS 39, Financial Instruments - Recognition and Measurement, and
together with its affiliate Minera Yanacocha S.R.L., modified its accounting policy to record its long-lived assets retirement
obligations, see notes 2 and 3 to the consolidated financial statements.
Countersigned by:
Víctor Burga
C.P.C. Register No.14859
Lima, Peru
February 18, 2005
CONSOLIDATED BALANCE SHEETS
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2003 and 2004
Note
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
Assets
Current assets
Cash and cash equivalents
Investment funds
Trade accounts receivable
Other accounts receivable, net
Accounts receivable from affiliates
Inventories, net
Current portion of prepaid tax and expenses
Total current assets
Long - term accounts receivable
Prepaid tax and expenses
Investments in shares
Property, plant and equipment, net
Development costs, net
Deferred stripping costs
Mining concessions and goodwill, net
Deferred income tax and workers’ profit sharing asset, net
Total assets
Liabilities and shareholders’ equity, net
Current liabilities
Bank loans
Trade accounts payable
Other current liabilities
Derivative instruments
Current portion of long-term debt
Deferred income from sale of future production
Total current liabilities
Other long-term liabilities
Derivative instruments
Long-term debt
Deferred income from sale of future production
Total liabilities
Minority interest
Shareholders’ equity, net
Capital stock, net of treasury shares
by S/49,659,000 in 2003 and 2004
Investment shares, net of treasury shares
by S/66,000 in 2003 and 2004
Additional capital
Legal reserve
Retained earnings
Cumulative translation loss
Cumulative unrealized gain on investments in shares carried at fair value
Cumulative unrealized loss on derivative instruments
Deferred income from sale of future production of subsidiary
Total shareholders’ equity, net
Total liabilities and shareholders’ equity, net
The accompanying notes are an integral part of these consolidated balance sheets.
33
6
7
8
9
38
10
11
2003
2004
2004
(Note 4)
S/. 398,551
54,881
74,266
23,471
37,698
77,232
45,544
711,643
5,008
7,552
1,443,035
408,132
123,821
56,056
168,130
297,441
3,220,818
S/. 614,862
86,971
97,061
12,248
46,078
69,353
40,471
967,044
4,574
14,059
1,531,347
452,214
143,258
56,056
157,544
245,299
3,571,395
US$ 187,287
26,491
29,565
3,731
14,035
21,125
12,327
294,561
1,393
4,282
466,447
137,745
43,636
17,075
47,988
74,718
1,087,845
21
23,461
52,699
86,125
99,893
70,453
68,841
401,472
76,853
307,826
45,468
641,122
1,472,741
48,428
13,150
61,188
142,696
70,927
36,332
74,937
399,230
74,030
267,852
15,031
568,772
1,324,915
66,347
4,005
18,638
43,465
21,604
11,067
22,826
121,605
22,550
81,588
4,578
173,248
403,569
20,209
22
596,755
596,755
181,771
1,683
610,659
99,286
217,874
(29,395)
209,130
(6,343)
1,699,649
3,220,818
1,683
610,659
129,276
734,070
(148,513)
256,331
(128)
2,180,133
3,571,395
513
186,006
39,378
223,597
(45,237)
78,078
(39)
664,067
1,087,845
9
11
12
13
14
15
16
32
17
18
19
35
20
35
19
35
20
35
CONSOLIDATED STATEMENTS OF INCOME
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
For the years ended December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
Operating revenues
Net sales
Royalties income
Total revenues
Costs of operation
Operating costs
Exploration and development costs in operational mining sites
Depreciation and amortization
Total costs of operation
Gross margin
Operating expenses
Exploration costs in non-operational mining sites
General and administrative
Royalties to third parties
Selling
Royalties to the Peruvian Government
Asset impairment loss and write-off
Total operating expenses
Operating income
Other income (expenses)
Share in affiliated companies
Realized income from sale of future production
Gain (loss) from change in the fair value
of derivative instruments
Interest income
Realized gain (loss) in derivative instruments
Gain (loss) from exposure to inflation
Amortization of mining concessions and goodwill
Interest expense
Loss from sale of subsidiary’s shares
Other, net
Total other income (expenses), net
Income before workers’ profit sharing, income tax,
minority interest and cumulative effect of
accounting change
Provision for workers’ profit sharing
Provision for income tax
Income before minority interest and cumulative
effect of accounting change
Minority interest
Income before cumulative effect of accounting
change
Cumulative effect of accounting change for mine
closing costs
Net income
Basic and diluted earnings per share before
cumulative effect of accounting change,
stated in Peruvian nuevos soles and U.S. dollars
Cumulative effect of accounting change for mine
closing costs
Basic and diluted earnings per share, stated in
nuevos soles and U.S. dollars
Weighted average number of shares outstanding
Note
2002
2003
2004
2004
(Note 4)
24
38
S/. 575,707
82,350
658,057
S/. 735,306
116,857
852,163
S/. 908,441
128,889
1,037,330
US$ 276,711
39,260
315,971
25
26
13(c)
273,686
77,660
43,195
394,541
263,516
302,572
85,715
49,118
437,405
414,758
338,074
127,169
59,473
524,716
512,614
102,977
38,736
18,115
159,828
156,143
27
28
37(b)
29
19(d)
40,309
79,298
14,681
24,314
1,634
160,236
103,280
59,255
123,161
25,142
25,776
4,691
238,025
176,733
88,241
76,866
24,918
17,839
6,639
2,889
217,392
295,222
26,878
23,413
7,590
5,435
2,022
880
66,218
89,925
12(b)
35
353,963
-
557,558
-
575,858
68,837
175,406
20,968
35
30
35
2(a)
16
30
9,215
44,760
(3,312)
(17,441)
(16,702)
(7,069)
2,954
366,368
(647,218)
7,785
(20,812)
321
(15,578)
(8,687)
(12,804)
(139,435)
14,629
12,132
(73,403)
(22,483)
(15,598)
(7,515)
(13,505)
538,952
4,456
3,694
(22,359)
(6,849)
(4,749)
(2,289)
(4,114)
164,164
32(a)
32(a)
469,648
(1,613)
(26,859)
37,298
62,887
198,286
834,174
(18,356)
(101,997)
254,089
(5,591)
(31,068)
21
441,176
(25,461)
298,471
(51,023)
713,821
(28,171)
217,430
(8,581)
415,715
247,448
685,650
208,849
415,715
(72,295)
175,153
685,650
208,849
3.27
1.95
5.39
1.64
-
(0.57)
-
-
3.27
127,236,219
1.38
127,236,219
5.39
127,236,219
1.64
127,236,219
31
3
33
33
The accompanying notes are an integral part of these consolidated statements.
34
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
For the years ended December 31, 2002, 2003 and 2004
Capital stock, net of
treasury shares
Number
(Stated in thousands of Peruvian
of
Common Investment Additional Legal
Nuevos Soles and U.S. dollars)
shares
shares shares Capital reserve
Balance as of January 1st,
126,235,832 S/.181,777 S/.533 S/.552,019 S/.39,563
2002
Declared and paid dividends,
note 22(f)
Capitalization of retained
earnings, notes 22(a) and 22(b)
- 448,520 1,216
Transfer to legal reserve
- 41,974
Gain from sale of ADR’s, note 22(e)
644,000
925
24,267
Purchase of Investment shares
- (14)
(146)
Cumulative gain for translation of
investment in Minera Yanacocha S.R.L.,
maintained through Compañía
Minera Condesa S.A., note 22(g)
Increase of nominal value of
treasury shares maintained
by subsidiary
- (34,467) (52)
34,519
Net income
Balance as of December 31,
126,879,832 596,755 1,683
610,659 81,537
2002
Declared and paid dividends,
note 22(f)
Investments in shares maintained
at fair value, note 2(f)
Loss in the initial valuation of
investments in shares maintained
at fair value, note 2(s)
Gain in the initial valuation
of derivative instruments classified as
hedging instruments held
by subsidiary, note 2(s)
Loss from change in the fair
value of derivative instruments
classified as hedging instruments
held by subsidiary, note 35(a)
Transfer to legal reserve
- 17,749
Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
mantained through Compañía
Minera Condesa S.A., note 22(g)
Net income
Balance as of December 31,
126,879,832 596,755 1,683
610,659 99,286
2003
Declared and paid dividends,
note 22(f)
Investments in shares maintained
at fair value, note 2(f)
Change in the fair value of derivative
instruments classified as hedging
instruments held by subsidiary, note 35(a)
Transfer due to change in the
terms of certain derivative
contracts of a subsidiary
Realized revenue from sale of
future production of subsidiary
Transfer to legal reserve
- 29,990
Others
Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
maintained through Compañía
Minera Condesa S.A., note 22(g)
Net income
Balance as of December 31,
126,879,832 596,755 1,683
610,659 129,276
2004
The accompanying notes are an integral part of these consolidated statements.
35
Cumulative
unrealized
loss on
derivative
instruments
Retained
earnings
Cumulative
Cumulative unrealized gain
translation on investments
in shares carried
gain
at fair value
(loss)
S/.835,067
S/. 6,315
S/. -
S/. -
(75,292)
-
-
-
-
(75,292)
(449,736)
(41,974)
-
-
-
-
-
25,192
(160)
-
1,054
-
-
-
1,054
415,715
-
-
-
-
415,715
683,780
7,369
-
-
-
1,981,783
(159,164)
-
-
-
-
(159,164)
(5,957)
-
209,130
-
-
203,173
(458,189)
-
-
-
-
(458,189)
-
-
-
1,742
-
1,742
(17,749)
-
-
(8,085)
-
-
(8,085)
-
175,153
(36,764)
-
-
-
-
(36,764)
175,153
217,874
(29,395)
209,130
(6,343)
-
1,699,649
(139,464)
-
-
-
-
(139,464)
-
-
47,201
-
-
47,201
-
-
-
4,621
-
4,621
-
-
-
1,722
(1,722)
-
(29,990)
-
-
-
-
682
912
682
912
- (119,118)
685,650
-
-
-
-
(119,118)
685,650
734,070 (148,513)
256,331
-
(128)
2,180,133
Deferred
income from
sale of future
production
of subsidiary Total
S/. - S/. 1,615,274
CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
For the years ended December 31, 2002, 2003 and 2004
2002
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
2003
2004
2004
(Note 4)
Operating activities
Collection from customers
Collection of dividends
Collection of royalties
Collection of interest
Payments to suppliers and third parties
Payments of exploration expenditures
Payments to employees
Payments of income tax
Payments of royalties
Payments of interest
Net cash provided by operating activities
S/. 566,562
83,098
80,560
9,243
(289,828)
(98,612)
(102,048)
(30,872)
(13,337)
(14,457)
S/. 733,646
482,025
112,354
8,827
(347,109)
(128,684)
(101,629)
(38,509)
(25,976)
(8,686)
S/. 885,646
419,782
120,136
11,909
(388,709)
(172,215)
(119,594)
(44,478)
(27,248)
(5,170)
US$ 269,767
127,865
36,593
3,627
(118,401)
(52,457)
(36,428)
(13,547)
(8,299)
(1,574)
190,309
686,259
680,059
207,146
Investing activities
Purchase of property, plant and equipment
Collections (payments) from derivative instruments
settled, net
Development expenditures
Increase of investment fund
Decrease on time deposit in local currency
Payments by purchase of investments in shares
Proceeds from sale of plant and equipment
Proceeds from sale of investments in shares
(66,508)
(67,814)
(96,507)
(29,396)
44,760
(23,998)
(11,927)
1,008
4,323
(20,812)
(38,504)
(53,068)
(4,663)
2,464
3,059
(73,403)
(38,611)
(34,735)
(24,255)
(8,084)
1,595
330
(22,359)
(11,761)
(10,580)
(7,388)
(2,463)
486
101
Net cash used in investing activities
(52,342)
(179,338)
(273,670)
(83,360)
Financing activities
Payments of dividends, note 22(f)
Decrease of bank loans, net
Proceeds from long-term debt
Payments of long-term debt
Proceeds from sale of ADR
(72,265)
(74,218)
(12,125)
25,192
(159,164)
(22,921)
(22,213)
-
(139,464)
(10,311)
12,147
(76,705)
-
(42,481)
(3,141)
3,700
(23,364)
-
(133,416)
(204,298)
(214,333)
(65,286)
Net increase in cash and cash equivalents during the year
Cash and cash equivalents at beginning of year
4,551
91,377
302,623
95,928
192,056
398,551
58,500
121,398
Cash and cash equivalents at year-end
95,928
398,551
590,607
179,898
Net cash used in financing activities
36
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
For the years ended December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
2002
2003
2004
2004
(Note 4)
Reconciliation of net income to net cash
provided by operating activities
Net income
Add (deduct)
Current income tax and workers’ profit sharing expenses
Depreciation and amortization
Provision for deferred income tax and
workers’ profit sharing, see note 32 (a)
Amortization of development costs
Minority interest
Loss (gain) from exposure to inflation
Amortization of mining concessions and goodwill
Accretion expense
Asset impairment loss and write-off
Officers’ compensation, note 19
Allowance for doubtful accounts
Net cost of retired plant and equipment
Share in affiliated companies, net of dividends
Income from sale of future production
Loss (gain) from change in the fair value of derivative
instruments
Gain from change in the fair value of investment fund
Gain on sale of plant and equipment
Loss (gain) on sale of shares
Cumulative effect of accounting change
Write-off development costs
Loss from sale of subsidiary’s shares
Net changes in assets and liabilities accounts
Decrease (increase) of operating assets Trade and other accounts receivable
Deferred stripping costs
Prepaid taxes and expenses
Inventories
Increase (decrease) of operating liabilities Trade accounts payable and other current liabilities
S/. 415,715
S/. 175,153
S/. 685,650
US$ 208,849
45,424
52,240
82,513
60,877
25,133
18,543
3,552
14,985
25,461
3,312
17,441
1,634
6,744
329
8,502
(270,865)
-
(301,980)
16,445
51,023
(321)
15,578
4,724
4,691
49,594
5,952
6,490
(75,533)
-
37,840
33,265
28,171
22,483
15,598
7,056
2,889
2,135
1,146
754
(160,947)
(68,837)
11,526
10,132
8,581
6,848
4,749
2,149
880
650
349
230
(49,024)
(20,968)
(898)
1,412
7,069
647,218
(1,813)
(2,133)
(267)
72,295
7,742
-
(14,629)
(5,022)
(157)
(51)
-
(4,456)
(1,530)
(48)
(16)
-
(73,849)
(12,500)
1,645
641
(16,019)
(14,329)
(6,432)
558
(22,259)
(48,952)
5,097
(6,779)
(14,910)
1,553
(5,445)
(4,617)
15,439
4,705
190,309
686,259
680,059
207,146
Transactions that do not affect cash flows:
Payment of dividends through common shares of Sociedad Minera
El Brocal S.A.A., note 22(f)
3,028
Increase of the book value of long-lived assets
-
8,658
24,842
7,567
Net cash provided by operating activities
The accompanying notes are an integral part of these consolidated statements.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
1. Business activity
Compañía de Minas Buenaventura S.A.A. (hereafter «Buenaventura») is a public company incorporated in 1953. It is engaged
in the exploration (individually and in association with third parties), extraction, concentration and commercialization of
polymetallic ores.
Buenaventura operates two mining units in Peru (Uchucchacua and Orcopampa) and has a controlling interest in three Peruvian
mining companies that own the Colquijirca, Antapite, Ishihuinca, Shila and Paula mines. In addition, the Company holds direct and
indirect interests in a number of other mining companies; the most important of such interests is in Minera Yanacocha S.R.L. (hereafter
«Yanacocha»), an entity in which the Company owns 43.65 percent of outstanding stock through Compañía Minera Condesa S.A.
(hereafter «Condesa»), see note 12. Buenaventura also owns an electric power distribution company and a mining engineering
services consulting company.
In 1999 and 2001, Buenaventura decided to suspend exploitation activities in the Julcani and Huachocolpa mines,
respectively, and only continue to carry out exploration activities. Mineral found in Julcani during exploration activities
is treated and sold.
As of December 31, 2003 and 2004, the number of employees at Buenaventura and its subsidiaries (together «the Company»), is as
follows:
Officers
Employees
Workers
2003
2004
56
907
1,133
2,096
78
868
1,038
1,984
Buenaventura’s legal address is Avenida Carlos Villaran 790, Santa Catalina, Lima, Peru.
The 2004 consolidated financial statements have been approved by Management and will be presented for the approval of the
Directors and Shareholders at the times established by Law. In Management’s opinion, the accompanying consolidated financial
statements will be approved without modifications in the Board of Directors’ and Shareholders’ meetings to be held during the
first quarter of 2005.
Consolidated financial statements as of December 31, 2003 were approved in the Shareholders’ meeting held on March 26, 2004.
The consolidated financial statements include the financial statements of the following subsidiaries:
Ownership percentages as of December 31,
2003
Subsidiaries
Direct
%
Buenaventura Ingenieros S.A.
2004
Indirect Direct Indirect
%
%
Business Activities
%
100.00
-
100.00
- Provides advisory and engineering services related to the
mining industry.
Compañía de Exploraciones,
Desarrollo e Inversiones
Mineras S.A.C. - CEDIMIN
44.83
55.17
44.83
Compañía Minera Condesa S.A.
99.99
-
99.99
55.17 Holds investments in S.M.R.L. Chaupiloma Dos de Cajamarca,
Minas Conga S.R.L., and other affiliated companies
engaged in mining activities. Also, it is engaged in the
extraction, concentration and commercialization of gold
bars and concentrates.
- Holds investments in Buenaventura,Yanacocha and other
affiliated companies engaged in mining activities.
38
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
Compañía Minera Colquirrumi S.A. (i)
73.63
-
90.00
- Extraction, concentration and commercialization of
polymetallic ores, principally zinc and lead. Currently is
also engaged in electric power sales.
Consorcio Energético de
Huancavelica S.A.
Contacto Corredores de Seguros S.A.
99.99
-
0.01
99.99
99.99
-
Inversiones Colquijirca S.A.
59.90
-
59.90
Inversiones Mineras del Sur S.A.
78.04
-
78.04
100.00
-
51.00
100.00
-
20.00
60.00
40.00
20.00
-
-
53.06
0.01 Transmission of electric power to mining companies.
99.99 Placement of insurance contracts and provision of
administrative and technical services in insurance matters.
- Extraction, concentration and commercialization of
polymetallic ores, principally zinc and lead, through its
subsidiary Sociedad Minera El Brocal S.A.A.
- Extraction, concentration and commercialization of gold
bars and concentrates.
- Treatment of minerals and concentrates.
- Extraction, concentration and commercialization gold
bars.
60.00 Owner of mining rights.
40.00 Owner of the mining concessions explored and exploited
by Yanacocha.
- Prospection, exploration and exploitation of mineral rights.
Currently is engaged in exploration activities.
Metalúrgica Los Volcanes S.A.
Minera Paula 49 S.A.C. (ii)
Minas Conga S.R.L.
S.M.R.L. Chaupiloma Dos de Cajamarca
Minera La Zanja S.R.L.
(i) The Shareholders’ Meeting of Compañía Minera Colquirrumi held on April 20, 2004 approved to capitalize the debts with its
shareholders, with the purpose of reducing its capital stock, off setting its accumulated losses, and creating Serie A and Serie B
shares. As a result, the Company owns the 99.99% of Serie A shares of Compañía Minera Colquirrumi, which represents an equity
investment of 90% (73.63% as of December 31, 2003).
(ii) Effective October 22, 2004, Compañía de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. – CEDIMIN acquired 100% of the
capital stock of Inversiones Mineras Aureas S.A.C., which owned 49% of Minera Paula 49 S.A.C. The Shareholders’ Meetings of
CEDIMIN, Inversiones Mineras Aureas S.A.C. and Minera Paula 49 S.A.C. held in 2004, approved the merger of these companies.
Effective December 31, 2004, Inversiones Mineras Aureas S.A.C. and Minera Paula 49 S.A.C. were merged by CEDIMIN. The merger
was recorded under the purchase method. The fair values of the assets and liabilities of the merged companies were not
significantly different from their book values at the date of the merger.
2. Significant accounting principles and practices
The consolidated financial statements are prepared based on legal regulations and following Accounting Principles Generally
Accepted in Peru. Accounting Principles substantially comprise International Financial Reporting Standards (IFRS), which include
International Accounting Standards (IAS) duly approved by the Peruvian Accounting Standards Board. To the date of the consolidated
financial statements, this Board has approved the use of IAS 1 to 41, and the Interpretations 1 to 33.
The main accounting principles and practices used in accounting for the transactions and in preparing the consolidated financial
statements are:
(a) Restatement of Financial Statements by Inflation The consolidated financial statements are restated to reflect the effect of the changes in the acquisition power of the Peruvian
currency, in accordance with the methodology approved by the Peruvian Accounting Standards Board. This methodology requires
the adjustment of the non-monetary items in the consolidated financial statements considering their origin date and applying the
corresponding Wholesale Price Indexes. Monetary items and foreign currency-denominated items are not restated because they
are stated in currency of acquisition power at the balance sheet dates. The results from exposure to inflation are separately presented
in the statements of income and mainly include the exchange difference loss originated by the foreign currency-denominated
items. In years 2002, 2003 and 2004, the exchange difference losses were S/6,246,000, S/472,000 and S/12,636,000, respectively.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
The variations of the acquisition power of the Peruvian currency, according to the Wholesale Price Indexes, were 1.7%, 2% and 4.9%
for 2002, 2003 and 2004, respectively.
Through Resolution No. 031-2004-EF/93.01, the Peruvian Accounting Standards Board suspended, effective year 2005, the
restatement of the financial statements to recognize the inflation effect. The restated balances as of December 31, 2004 will be
considered as initial balances as of January 1, 2005. Effective 2005, the tax authorities have adopted this accounting treatment for
calculating the income tax.
(b) Use of estimates and assumptions The preparation of financial statements in conformity with generally accepted accounting principles in Peru requires Management
to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported
amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
(c) Principles of consolidation The consolidated financial statements include the accounts of Buenaventura and the accounts of those subsidiaries in which possesses more
than 50 percent equity participation and/or exercises control. All significant inter-company balances and transactions have been eliminated.
The minority interest is presented separately in the consolidated balance sheets and in the consolidated statements of income.
See companies included in the consolidated financial statements in Note 1.
(d) Cash and cash equivalents Cash and cash equivalents include all cash on hand and deposited in banks. For preparing the consolidated statements of cash flows,
cash balances and cash equivalents includes cash on hand, time deposits and highly liquid investments with original maturities of
three months or less.
(e) Inventories Inventories are stated at the lower of average cost or net realizable value. Net realizable value is defined as the estimated sales price
obtainable in the ordinary course of business, less estimated costs of completion and estimated selling and distribution expenses.
Cost is determined using the average method.
The accrual for obsolescence is based on an item-by-item analysis completed by the Company’s management and related amounts
are charged to expense in the period in which the obsolescence is deemed to have occurred.
(f) Investments in shares Until December 31, 2002, investments in which the Company’s interest is lower than 20 percent were stated at cost, less any permanent
value impairment. Effective January 1, 2003, the Company has adopted IAS 39, Financial Instruments - Recognition and Measurement.
Under the requirements of this standard, such investments must be recorded at fair value and changes in such value must be
separately presented in the consolidated statements of changes in shareholders’ equity. The Company has recorded a charge to
retained earnings by S/5,957,000, corresponding to the initial adoption of this standard. The corresponding dividends are credited
to income when declared.
Investments in entities in which the Company’s ownership is greater than 20 percent but less than 50 percent are accounted for by
the equity method, recognizing the Company’s proportionate share in the results of the affiliates in the consolidated statements
of income. The measurement and reporting currency of affiliates is the Peruvian Nuevo Sol, with the exception of Yanacocha whose
measurement and reporting currency is the U.S. dollar. The translation of the financial statements of Yanacocha results in exchange
differences arising from translating (a) income and expense items at the exchange rates prevailing on the individual transaction
dates, (b) assets and liabilities at the closing exchange rate, and (c) equity accounts at the historical exchange rates. The net exchange
difference is classified in equity until further disposal of the net investment.
The purchase method is used to record business acquisitions. Under this method, the assets and liabilities of acquired businesses
are recorded at fair value and any difference between the amount paid and the fair value of assets and liabilities acquired is recognized
in the balance sheet as a mining concession or goodwill.
For companies in which the Company’s ownership is between 20 and 50 percent, any amount paid in excess of book value of the
shares is reported in the Investment caption. The Company presents in this caption amounts paid over the book value of Yanacocha
shares, and amortizes this amount using the units-of-production method based on proven and probable reserves, see Note 12(g).
40
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(g) Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment loss. Maintenance and minor
repairs are charged to expense as incurred. Expenditures that result in future economic benefits, beyond those originally
contemplated in standards of performance for the existing assets, are capitalized.
Depreciation is calculated under the straight-line method of accounting considering the following estimated useful lives:
Years
Buildings, constructions and other
Machinery and equipment
Transportation units
Furniture and fixures
10 and 20
5 and 10
5
8 and 10
Mineral rights are amortized using the units-of-production method.
The useful life assigned and the depreciation method chosen by the Company are reviewed periodically to ensure that the method and
the depreciation period are consistent with the economic benefit and life expectations for use of property, plant and equipment items.
(h) Exploration and mine development costs Exploration costs are charged to expense as incurred. When it is determined that a mineral property can be economically developed,
the costs incurred to develop it, including the costs to further delineate the ore body and remove overburden to initially expose
the ore body, are capitalized. In addition, expenditures that increase significantly the economic reserves in the mining units under
exploitation are capitalized. Mine development costs are amortized using the units-of-production method, based on proven and
probable reserves. On-going development expenditures to maintain production are charged to operations as incurred.
(i) Joint venture agreements The Company has entered into joint venture agreements with other mining companies for the purpose of exploring potential
mining sites. The associated exploration costs are recognized using the pro-rata share method and are charged to expense when
incurred.
(j) Mining concessions and goodwill The mining concessions balance corresponds to the amounts paid in excess of fair value of net assets acquired in the purchase of
Compañía de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. - CEDIMIN (Cedimin), Inversiones Colquijirca S.A. (Colquijirca),
Sociedad Minera El Brocal S.A.A. (El Brocal), Consorcio Energético de Huancavelica S.A. (Conenhua) and Minera Paula 49 S.A.C. (Paula).
The mining concession balances corresponding to Colquijirca, El Brocal and Paula are amortized using the units-of-production
method, while the balances corresponding to Cedimin and Conenhua are amortized using the straight-line method over a period
of 15 and 10 years, respectively.
Annually, the Company reviews the carrying amounts of mining concessions and assesses whether any potential impairment issues
exist respective to recoverability. If it is evident that the mining concessions and the goodwill are impaired, the Company provides
for the impairment loss in the consolidated statements of income.
(k) Impairment of assets The Company reviews for and evaluates the potential impact of impairment on its assets when events or changes in circumstance
occur that indicate the book value may not be recoverable. An impairment loss is recognized for the amount by which the book
value of an asset exceeds the higher of its net selling price or value in use. The value in use of an asset is generally calculated as the
present value of the estimated future cash flows expected to be earned from continual use of the asset and from its disposal at the
end of its useful life. An impairment loss recognized in a previous year is reversed if events or changes occur that indicate the
estimates used when the impairment loss was recognized should be adjusted to reflect a more favorable cash flow scenario. The
future cash flow assumptions used include, among other items, estimates of recoverable ounces and metric tonnes, estimates of
realizable prices and costs, and estimates of production quantities. Assumptions in which estimated future cash flows are based are
subject to risk and uncertainty. Differences between assumptions and market conditions and/or the Company’s development profile
could have a material effect on the financial situation and results of operations of the Company.
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(l) Accruals An accrual is recognized only when the Company has a present obligation (legal or implicit) as a result of a past event, it is probable
that resources of the Company will be required to settle the obligation, and the related amount can be reasonably estimated.
Accruals are revised periodically and are adjusted to reflect the best available information at the date of the consolidated balance
sheets.
(m) Accrual for mine closing costs See note 3(a) for further information about the accounting change.
(n) Deferred stripping costs The subsidiary El Brocal has deferred certain costs incurred in the expansion of Tajo Norte mining site (the expected life of Tajo Norte
is 8 years) with the intent to reasonably match revenues and production costs. Those costs are commonly referred as «deferred
stripping costs» and are incurred in mining activities that are associated with the removal of waste rock.
The deferred accounting stripping method used by El Brocal is generally accepted in the mining industry where mining
operations have diverse grades and waste-to-ore ratios; however, some mining companies expense waste removal costs as
incurred. If El Brocal were to expense stripping costs as incurred, there could be greater volatility in the period-to-period
results of operations.
In order to calculate the amount of deferred stripping cost to record as normal period expense, Management obtains a coefficient
by dividing the estimated tons of waste material to move by the estimated tons of mineral to be extracted during the useful life of
the related area. This coefficient is estimated to be 8.69 MT of waste material requiring to be moved to obtain 1 MT of extracted
mineral (8.18 MT of waste material requiring to be moved to obtain 1 MT of extracted mineral as of December 31, 2003). As of
December 31, 2004, the actual coefficient was 8.94 (11.13 as of December 31, 2003).
Costs related to additional quantities of waste that must be moved to obtain 1 MT of mineral are deferred when the actual waste
material extracted is higher than the estimate; likewise, these costs are amortized when actual waste mineral extraction is lower
than the estimate. The amortization of the deferred stripping costs will be reflected in the consolidated statements of income over
the life of the Tajo Norte area, based on proven and probable reserves, so that no unamortized balance remains at mine closure
(there were no amortization expenses in prior years and in the current year). Management expects to begin the amortization of the
deferred stripping costs in 2006.
(o) Recognition of revenues, costs and expenses Sales of concentrates are recorded at the time of shipment in the case of export sales or, when the concentrates physically pass to
the customer’s warehouse for domestic sales. Sales are recorded at estimated value according to preliminary billings. The sales
amount is then adjusted in the period in which final billings are released. When it is evident that the quotations to be used in the
final billings are lower than those used in preliminary billings, the excess is reversed in the period in which final prices are known.
Sales of ounces of gold are recorded at the time of the delivery and passage of the title rights of such ounces to the client.
Costs and expenses are recorded on an accrual basis.
(p) Foreign currency transactions Transactions occurring in a foreign currency are recorded in local Peruvian currency by applying to the foreign currency amount
the exchange rate at the transaction date. Exchange gains and losses resulting from differences between the closing exchange rate
and the exchange rate used to initially record transactions, are recognized in the consolidated statements of income in the period
in which they arise, see Note 5, and are presented in the caption «gain (loss) from exposure to inflation».
(q) Income tax and workers’ profit sharing The current income tax and workers’ profit sharing balances are calculated and recorded pursuant to current legal regulations
effective in Peru. Following the balance sheet liability method, the Company recognizes the effect of temporary differences between
book and tax basis of assets and liabilities to the extent that such differences result in a deferred tax liability. Should a deferred asset
arise, it is not recognized unless it is more likely than not that it will be recoverable.
42
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(r) Contingencies Loss contingencies are recorded in the financial statements when it is probable their occurrence and they can be fairly
determined. In other case, they are only disclosed in notes to the financial statements. The loss contingencies with probability
of resulting in a real loss can be classified as follow:
-
Probable: a contingency that generates an actual obligation and therefore, must be accrued.
-
Possible: a contingency whose result is uncertain due to its current status and therefore, must not be accrued but disclosed.
-
Remote: a contingency with a reduced probability of occurrence and therefore, must not be accrued or disclosed.
Contingent assets are not recognized in the financial statements; however, they are disclosed in notes to the financial statements
if it is probable that such contingent assets will be realized.
(s) Derivative instruments Until December 31, 2002, the Company used to disclose in notes to the consolidated financial statements the fair value of the
derivative instruments. Effective January 1, 2003, IAS 39, Financial Instruments – Recognition and Measurement, is in force. Following
we describe the changes resulting from the adoption of this standard:
-
The fair value of derivative contracts qualifying as cash flow hedges are reflected as assets or liabilities in the consolidated
balance sheets. To the extent these hedges are effective in offsetting forecasted cash flows from the sale of production, changes
in fair value are deferred in an equity account. Amounts deferred in such account are reclassified to Sales when the underlying
production is sold. The effect of the initial adoption of this standard by the subsidiary El Brocal resulted in a credit to the equity
account «unrealized loss on derivative instruments» of S/1,742,000.
-
The fair value of derivative contracts not qualifying as cash flow hedges are reflected as assets or liabilities in the consolidated
balance sheets. Changes in fair values are recorded in the caption «gain (loss) from Change in the Fair Value of Derivative
Instruments» in the consolidated statements of income. The effect of the initial adoption of this standard resulted in a charge
to retained earnings of 2003 by S/458,189,000.
-
Gain and losses on derivative contracts qualifying as normal sales are initially deferred in the consolidated balance sheets and
then recognized in income in the years in which the Company makes a physical delivery of the committed ounces of gold and
tonnes of minerals, see note 35.
(t) Treasury shares The Company has common and investment shares under treasury. The nominal values of these shares, restated by inflation, are
presented net of the capital stock and investment shares amounts. The difference between the nominal values restated by inflation
and the cost of such shares is presented as a reduction in the additional capital caption of the consolidated statements of changes
in shareholders’ equity.
The effect of the dividends income arising from the treasury shares held by a subsidiary are eliminated in the consolidated financial
statements.
(u) Basic and diluted earnings per share Basic and diluted earnings per share have been calculated based on the weighted average number of common and investment
shares outstanding at the date of the consolidated balance sheets; treasury shares have been excluded from the calculation.
(v) Comparative financial statements Figures presented in the consolidated financial statements as of December 31, 2002 and 2003 have been inflation adjusted to
reflect the change in the National Wholesale Price index (IPM) at December 31, 2004, using an inflation factor of 1.049.
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(w) New accounting pronouncements As of today, the International Accounting Standards Board (IASB) has completed its review process of International Financial Reporting
Standards (IFRS), and has issued new accounting standards. These standards are internationally in force effective January 1, 2005;
however, they are pending of approval by the Peruvian Accounting Standards Board. The Company is in process of evaluating the
impact of the adoption of the revised IAS and the new IFRS issued.
Following we present a summary of the main changes:
(i) Improvement project of the IASB As part of this Project, 15 IAS were reviewed with the objective of reducing or eliminating alternative treatments, redundancies
and conflicts within the standards, as well as to get the US GAAP convergence and to carry out other improvements. This project
modified the following IAS:
-
IAS 1 (revised in 2003): it modifies the presentation of the minority interest and other disclosures.
IAS 8, 10, 16, 17, 27, 28, 31, 32, 33 and 40 (revised in 2003) and IAS 39 (revised in 2004): these IAS do not contain changes that
could significantly affect the consolidated financial statements or the accounting policies of the Company.
-
IAS 21 (revised in 2003): it incorporates guides and requisites to determine the functional currency of the entities.
-
IAS 24 (revised in 2003): it will affect the identification of the related parties and some other disclosures with related
parties.
(ii) As part of the revision of the standard of business combinations, the IASB issued IFRS 3, Business Combinations. Additionally, it
reviewed IAS 36, Impairment of Long-Lived Assets and IAS 38, Intangible Assets.
(iii) New International Financial Reporting Standards:
IFRS 2 – Share-based payments
IFRS 3 – Business Combinations
This IFRS replaces IAS 22, Business Combinations, and the related interpretations (SIC 9, 22 and 28). According the provisions of
IFRS 3:
-
Goodwill is not subject to amortization beginning January 1, 2005;
-
Accumulated amortization as of December 31, 2004 will be eliminated by reducing the corresponding cost;
-
Effective January 1, 2006, goodwill is subject to an annual impairment test.
IFRS 4 - Insurance contracts
IFRS 5 - Non-current assets held for sale and discontinued operations
IFRS 6 - Exploration and Evaluation of Mineral Resources
3. Change in an accounting principle
Effective January 1, 2003, the Company and its affiliated Yanacocha made an accounting change related to the provision for mine
closure. Following, we describe the accounting changes, and the cumulative effect as of January 1, 2003:
44
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(a) Until December 31, 2002, the Company used to record the obligation for mine closure when the related amount could be fairly
estimated, which normally occurred at end of the life mine. Effective January 1, 2003, the Company records such liability when
a legally enforceable obligation arises for mine closing, independently of the full depletion of the reserves. Once such obligation
has been appropriately measured, it is recorded by creating a liability equal to the amount of the obligation and recording a
corresponding increase to the carrying amount of the related long-lived assets (development costs and property, plant and
equipment). As time passes, the amount of the obligation changes, recording an accretion expense; additionally, the capitalized
cost is depreciated and/or amortized based on the useful lives of the related asset. Any difference in the settlement of the
liability will be recorded in the results of the period in which such settlement occurs. The changes in the fair value of the
obligation or useful life of the related assets that occur from the revision of the initial estimates, should be recorded as an
increase or decrease in the book value of the obligation and the related long-lived asset.
The cumulative effect of this change in accounting principle, net of the workers’ profit sharing, income tax and minority interest,
was a loss of S/20,711,000; this amount is presented in the caption «cumulative effect of accounting change for mine closing
costs» in the consolidated statements of income.
(b) Until December 31, 2002, the affiliated Yanacocha used to accrue the mine closure costs and charge to income over the expected
operating lives of the mines using the unit-of-production method. Effective January 1, 2003,Yanacocha records such obligation
using an accounting treatment similar to the one used by Buenaventura and its subsidiaries. The cumulative effect of the
change in the accounting principle was a loss of S/51,584,000, which is presented as «cumulative effect of accounting change
for mine closing costs».
(c) The condensed consolidated statements of income for the year 2002 that would had result if the Company would had given
retroactive effect to the accounting change follows:
2002
(Stated in thousands of Peruvian Nuevos Soles )
Operating revenues
Net sales
Royalties income
Total revenues
Costs of operation
Operating costs
Exploration and development costs in operational mining sites
Depreciation
Total cost of operation
Gross margin
Total operating expenses
Operating income
Other income (expenses)
Share in affiliated companies
Accretion expense
Other
Total other income, net
Income before workers’ profit sharing,
income tax and minority interest
Provision for workers’ profit sharing
Provision for income tax
Income before minority interest
Minority interest
Net income
Basic and diluted earnings per share
45
S/. 575,707
82,350
658,057
273,786
78,661
43,510
395,957
262,100
160,236
101,864
334,654
(4,017)
12,405
343,042
444,906
(1,476)
(26,383)
417,047
(24,976)
392,071
3.08
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
4. Convenience Translation of Peruvian Nuevos Soles amounts into U.S. dollar amounts
The consolidated financial statements are stated in Peruvian Nuevos Soles. U.S. dollar amounts are included solely for the convenience
of the reader, and were obtained by dividing Peruvian Nuevos Soles amounts by the exchange rate for selling U.S. dollars at December
31, 2004 (S/3.283 to US$1), as published by the Superintendencia de Banca y Seguros (Superintendent of Bank and Insurance, or
«SBS»). The convenience translation should not be construed as a representation that the Peruvian Nuevos Soles amounts have
been, could have been or could be converted into U.S. dollars at the foregoing or any other rate of exchange.
5. Foreign currency transactions
Translations to foreign currency are completed using exchange rates prevailing in the market. As of December 31, 2004, the average
exchange rate in the market for U.S. dollar transactions was S/3.280 for buying and S/3.283 for selling (S/3.461 for buying and S/3.464
for selling as of December 31, 2003).
As of December 31, 2003 and 2004, the Company had the following assets and liabilities denominated in foreign currency:
2003
(Stated in thousands of U.S. dollars)
Assets
Cash and cash equivalents
Investment funds
Trade and other accounts receivable (including current portion)
Account receivable from affiliates
Liabilities
Bank loans
Trade accounts payable
Derivative instruments
Other current liabilities
Long-term debt (including current portion)
Net asset (liability) position
2004
US$ 88,723
15,116
23,485
10,117
137,441
US$ 161,786
26,515
30,699
13,923
232,923
6,443
7,038
112,203
1,271
35,322
162,277
(24,836)
3,900
12,703
103,192
5,516
15,807
141,118
91,805
The translation of foreign currency assets and liabilities in 2004 resulted in a net loss of S/12,636,000 (S/472,000 in 2003). These
amounts are included in the consolidated statements of income as «gain (loss) from exposure to inflation.»
6. Cash and cash equivalents
(a) This item is made up as follows:
(Stated in thousands of Nuevos Soles)
2003
Cash
Demand deposit accounts
Saving accounts
Time deposits
In local currency
In foreign currency (b)
Cash balances included in the Consolidated Statements of Cash Flows
Time deposits in local currency with an original maturity of more
than 90 days (c)
2004
S/. 2,105
16,731
559
S/. 2,893
108,102
-
73,052
306,104
398,551
479,612
590,607
398,551
24,255
614,862
(b) As of December 31, 2004, the Company maintained principally the following time deposits in foreign currency:
-
US$60,000,000 with annual interest rates ranging from 1.98% to 2.67%, and maturities from 18 to 30 days.
US$86,000,000 with annual interest rates ranging from 1.96% to 2.15% and current maturities.
(c) As of December 31, 2004, it corresponds to a time deposit in Peruvian currency for S/24,255,000, at an interest rate of 5.7
percent, with maturities from 448 to 630 days. With the purpose of hedging the foreign currency exchange risk associated to such,
the Company entered into a foreign currency forward contract for US$7,414,000 at an exchange rate of S/3.574 for each U.S. dollar,
and stated maturities similar to the time deposits, see note 35.
46
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
7. Investment funds
(a) This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
2003
Variable-investsment fund
Investment fund in process of liquidation (b)
S/. 54,881
54,881
2004
S/. 52,155
34,816
86,971
As of December 31, 2003 and 2004, this caption includes variable investment funds under the administration of Compass Group
S.A., which are carried at fair value. The change in the fair value of the investment funds held during 2004 was S/5,022,000 (S/
1,813,000 during 2003) and has been accounted for as a financial income in the consolidated statements of income, see note 30.
(b) As of December 31, 2004, the Company settled this fund. The cash was available for the Company on January 18, 2005.
8. Trade accounts receivable
This item is made up as follows:
2003
(Stated in thousands of Peruvian Nuevos Soles)
BHL Perú SAC.
Consorcio Minero S.A.
Mitsui & Co. Precious Metals
Johnson Matthey
Doe Run Perú S.R.L.
A y S S.A.
Refinería de Cajamarquilla S.A.
Other
S/. 3,379
44,249
13,059
3,998
1,774
7,807
74,266
2004
S/. 18,209
17,411
16,334
16,292
13,092
8,479
2,479
4,765
97,061
Trade accounts receivable are denominated in U.S. dollars, have current maturity, do not earn interest and do not have specific
guarantees.
In order to facilitate the collection of the long-term debt maintained with Banco de Crédito del Perú and BBVA Banco Continental,
El Brocal has gave up to these entities the cash inflows from two clients.
In Management’s opinion, the allowance for doubtful accounts is sufficient to cover bad debt risks at the date of the consolidated
balance sheets.
9. Other accounts receivable, net
(a) This item is made up as follows:
2003
(Stated in thousands of Peruvian Nuevos Soles)
Other accounts receivable
Claims to Tax Authorities (b)
Advances to suppliers and third parties
Loans to employees
Interest receivable
Account receivable from BHL - Perú S.A.C., related to sale
of Minera Huallanca S.A.C.’s shares
Advances given to a contractor (GyM S.A.)
Accounts receivable from Compañía Minera El Palomo S.A.
Allowance for doubtful accounts (c)
Non current portion
Current portion
2004
S/. 8,573
4,048
14,844
1,712
1,246
S/. 12,287
4,048
3,305
1,896
1,769
2,265
1,800
8,366
42,854
(14,375)
28,479
(5,008)
23,471
23,305
(6,483)
16,822
(4,574)
12,248
(b) It corresponds to income tax payments of 2001, made in excess to Tax Administration. The Company is asking for a refund of these
payments. In Management’s and its legal advisors’ opinion, this amount will be recovered once the claim process is over.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(c) Movement of the allowance for doubtful accounts is shown bellow:
2002
2003
2004
S/. 10,916
329
(179)
11,066
S/. 11,066
5,952
298
(2,941)
14,375
S/. 14,375
1,146
(672)
(8,366)
6,483
(Stated in thousands of Peruvian Nuevos Soles)
Beginning balance
Accrual for the year, note 28
Result from exposure to inflation
Write-off
Ending balance
In Management’s opinion, the allowance for doubtful accounts is sufficient to cover bad debt risk at the date of the consolidated
balance sheets.
10. Inventories, net
(a) This item is made up as follows:
2003
(Stated in thousands of Peruvian Nuevos Soles)
Spare parts and supplies
Products in process
Finished products
2004
S/. 50,303
6,968
26,579
83,850
(6,618)
77,232
Slow moving and obsolescence supplies reserves (b)
S/. 54,311
17,574
6,975
78,860
(9,507)
69,353
The Company expects to use its supplies inventory in the normal course of operations. An immaterial amount related to supplies
with slow turnover is classified as a current asset within this caption.
The inventories to be shipped by El Brocal guarantee certain loans maintained by this subsidiary, see note 17.
(b) The reserve for supplies had the following movements during 2002, 2003 and 2004:
(Stated in thousands of Peruvian Nuevos Soles)
Beginning balance
Accrual for the year
Write - off
Ending balance
2002
2003
S/. 6,081
204
6,285
S/. 6,285
624
(291)
6,618
2004
S/. 6,618
2,889
9,507
In Management’s opinion, the reserve above created is sufficient to cover the risks of slow moving and obsolete supplies at the
date of the consolidated balance sheets.
11. Prepaid taxes and expenses
(a) This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
2003
Value added tax credit
Income tax credit
Additional income tax prepayment
Pre-paid insurance
Others
S/.
Current portion
Non current portion (b)
17,276
28,988
3,790
3,042
53,096
(45,544)
7,552
2004
S/. 21,772
14,497
11,451
2,812
3,998
54,530
(40,471)
14,059
(b) As of December 31, 2004, it mainly includes the value added tax originated by the exploration activities of Minera La Zanja S.R.L.
In Management’s opinion, this credit will be offset with the future value added tax liability.
48
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
12. Investments in shares
(a) This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Equity ownership
2003
2004
Investments carried at fair value
Sociedad Minera Cerro Verde S.A. (d)
Ferrovías Central Andino S.A.
Others
9.17 %
10.00
9.17 %
10.00
43.65
43.65
Equity method investments (c)
Minera Yanacocha S.R.L. (f)
Equity share
Mining concession, net (g)
Amount
2003
2004
S/. 223,399
2,207
2,233
227,839
S/. 270,600
2,207
925
273,732
1,101,045
113,850
1,214,895
301
1,215,196
1,443,035
1,152,188
103,866
1,256,054
1,561
1,257,615
1,531,347
Others
(b) The detail of share in affiliated companies is:
(Stated in thousands of Peruvian Nuevos Soles)
Minera Yanacocha S.R.L.
Others
2002
S/. 353,873
90
353,963
2003
S/. 558,103
(545)
557,558
2004
S/. 575,188
670
575,858
(c) The amount of equity participation in affiliates are determined from audited financial statements of each affiliate as of December
31, 2003 and 2004.
Sociedad Minera Cerro Verde S.A.
(d) In 2004, the Company recorded a credit of S/47,201,000 in a separate equity account to carry the investment in Sociedad Minera
Cerro Verde S.A. to its fair value as of December 31, 2004 (credit of S/209,130,000 as of December 31, 2003). In addition, in 2003,
the Company charged S/5,957,000 to retained earnings, corresponding to the initial adoption of the accounting policy, as
further explained in note 2(f).
(e) In 2004, the Company received cash dividends from Sociedad Minera Cerro Verde S.A. for S/4,871,000, see note 31.
Minera Yanacocha S.R.L.
(f) The movement of the equity investment in Yanacocha is as follows:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Yanacocha’s equity at beginning of year
S/. 1,914,543
Participation percentage
43.65%
Company’s participation in Yanacocha’s equity as of January 1st ,
835,698
Elimination of intercompany gains (*)
(13,170)
Balance of investment at beginning of year
822,528
Participation in Yanacocha’s income
361,546
Participation in the cumulative effect of change in accounting principle
Dividends received , note 12(h)
(83,070)
Realization of intercompany gains (*)
1,040
Cumulative translation gain (loss)
1,054
Balance at year-end
1,103,098
2003
S/. 2,554,932
43.65%
1,115,228
(12,130)
1,103,098
567,282
(51,584)
(482,025)
1,038
(36,764)
1,101,045
2004
S/. 2,547,851
43.65%
1,112,137
(11,092)
1,101,045
583,268
(414,911)
1,904
(119,118)
1,152,188
(*) The elimination of related inter-company gains corresponds to profits generated in past years, and is presented net of the
investment in Yanacocha for reporting purposes. The Company increases the investment and recognizes a gain in the share
in affiliated companies as Yanacocha depreciates and amortizes the acquired assets.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
The participation in Yanacocha’s income in the years 2002, 2003 and 2004 is mainly originated by higher sales (quantity and
quotation), offset by increases of cash cost per ounce sold, as shown below:
(Stated in thousands of U.S. dollars)
Years
Sales
Average
Quantity of
Cash costs per
quotation
ounces saled
ounce sold
2002
US$ 714,813
US$ 311
2.29
US$ 134
2003
1,036,370
363
2.86
129
2004
1,249,882
411
3.04
147
(g) The movement of the amount paid over book value of Yanacocha’s shares (mining concession), is as follows:
2003
(Stated in thousands of Peruvian Nuevos Soles)
Balance at beginning of year
2004
S/. 124,067
S/. 113,850
Amortization
(10,217)
(9,984)
Balance at year-end
113,850
103,866
(h) Yanacocha represents the most significant investment. The Company’s share of Yanacocha earnings was significant as compared
to Buenaventura’s net income in 2002, 2003 and 2004. Presented below is selected information about Yanacocha:
Economic activity Yanacocha is engaged in the exploration for and exploitation of gold in the open pit mines of Carachugo, San José, Maqui Maqui,
Cerro Yanacocha and La Quinua; all mines are located in the department of Cajamarca, Peru. Chaupiloma is the legal owner of the
mineral rights on the mining concessions exploited by Yanacocha.
Summary financial information based on the Yanacocha financial statements Presented below is certain summary financial information extracted from the Yanacocha financial statements and adjusted to
conform to accounting practices and principles of the Company:
Summary Yanacocha balance sheet data as of December 31, 2003 and 2004 (includes 100 percent of Yanacocha’s operations):
2003
(Stated in thousands of U.S. dollars)
Total assets
2004
US$ 1,146,041
US$ 1,207,748
Total liabilities
445,171
396,574
Shareholders’equity
700,870
811,174
Summary data from the Yanacocha statements of income for the years ended 2002, 2003 and 2004 (includes 100 percent of Yanacocha’s
operations):
2002
(Stated in thousands of U.S. dollars)
Total revenues
Operating income
2003
2004
US$ 713,398
US$ 1,036,370
US$ 1,249,882
270,006
475,508
571,867
197,922
352,765
390,304
-
(32,353)
-
197,922
320,412
390,304
Income before cumulative effect of change
in accounting principle
Cumulative effect of change in accounting principle
Net income
Dividends paid by Yanacocha Cash dividends paid by Yanacocha to Condesa were S/83,070,000 in 2002, S/482,025,000 in 2003 and S/414,911,000 in 2004.
Legal proceedings See note 37(c).
50
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
13. Property, plant and equipment, net
(a) The 2004 movement within the cost and accumulated depreciation accounts is shown below:
(Stated in thousands of Peruvian Nuevos Soles)
Cost
Land
Mineral rights
Buildings, constructions and other
Machinery and equipment
Transportation units
Furniture and fixtures
Work in progress (d)
Mine closure costs, notes 3 and 19 (c)
Beginning
balance
Additions Retirements
Sales
Transfers
Ending
balance
S/. 6,237
22,741
387,970
546,155
29,812
16,655
26,033
6,954
1,042,557
S/. 413
722
2,960
24,626
356
210
67,220
10,688
107,195
S/. (14)
(886)
(82)
(4)
(986)
S/. (888)
(13,622)
(2,115)
(287)
(16,912)
S/. 259
5,886
28,836
1,802
376
(37,159)
-
S/. 6,909
23,463
395,914
585,109
29,773
16,950
56,094
17,642
1,131,854
Accumulated depreciation and amortization
Mineral rights
8,776
Buildings, constructions and other
192,127
Machinery and equipment
399,913
Transportation units
20,469
Furniture and fixtures
9,406
Mine closure costs, notes 3 and 19 (c)
3,734
634,425
2,045
15,764
34,244
2,392
883
5,593
60,921
(164)
(68)
(232)
(382)
(12,974)
(1,831)
(287)
(15,474)
-
10,821
207,509
421,019
20,962
10,002
9,327
679,640
Net cost
408,132
452,214
(b) Fully depreciated assets as of December 31, 2003 and 2004 amount to S/336,849,000 and S/405,937,000, respectively.
(c) The distribution of annual depreciation and amortization was as follow:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Inventories
Operating costs
Exploration costs in non-operative mining areas
Other, net, (note 31)
S/. 1,884
43,195
2,229
47,308
2003
2004
S/. 817
49,118
479
2,643
53,057
S/. 44
59,473
1,404
60,921
(d) Work in progress mainly corresponds to the construction of Tailing Dam No 4 in the Orcopampa mining unit.
(e) El Brocal has pledged property, plant and equipment for approximately US$5,822,000, as a guarantee of the long-term debt with
Banco de Crédito del Perú and BBVA Banco Continental, see note 20.
14. Development costs, net
(a) Movements of the cost and accumulated amortization follow:
(Stated in thousands of Peruvian Nuevos Soles)
Cost
Uchucchacua
Orcopampa
Antapite
Ishihuinca
Mine closing costs, notes 3 and 19 (c)
Balance as of
January 1st,
2004
S/. 91,528
28,831
56,812
16,624
7,784
201,579
51
Additions
S/. 3,293
31,850
3,468
14,154
52,765
Balance as of
December 31,
2004
S/. 94,821
60,681
60,280
16,624
21,938
254,344
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles)
Accumulated amortization of:
Uchucchacua
Orcopampa
Antapite
Ishihuinca
Mine closure costs, notes 3 and 19 (c)
Net cost
Balance as of
January 1st,
2004
Balance as of
December 31,
2004
Additions
S/. 37,095
10,297
12,390
14,956
3,020
77,758
123,821
S/. 8,599
8,261
5,108
513
10,847
33,328
S/. 45,694
18,558
17,498
15,469
13,867
111,086
143,258
(b) The annual amortization was distributed as follows:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Exploration and development costs in
operational mining sites, note 26
Exploration costs in non-operational mining areas
Operating costs
Inventories
2003
S/. 14,985
994
15,979
2004
S/. 15,806
639
238
16,683
S/. 30,854
2,145
266
63
33,328
15. Deferred stripping costs
The movements of deferred stripping costs during the years ended December 31, 2003 and 2004 were as follows:
(Stated in thousands of Peruvian Nuevos Soles)
2003
Beginning balance
Additions
Ending balance
S/. 41,727
14,329
56,056
2004
S/. 56,056
56,056
16. Mining concessions and goodwill, net
(a) Movements of cost and accumulated amortization accounts were as follows:
Balance as of
January 1,
(Stated in thousands of peruvian nuevos soles)
2004
Additions
Cost
Compañía de Exploraciones,
Desarrollo e Inversiones Mineras S.A.C.- CEDIMIN S/. 175,837
S/. Inversiones Colquijirca S.A.
42,476
Consorcio Energético de Huancavelica S.A.
9,113
Sociedad Minera El Brocal S.A.A.
5,549
Minera Paula 49 S.A.C.
5,393
232,975
5,393
Accumulated amortization
Compañía de Exploraciones,
Desarrollo e Inversiones Mineras S.A.C. – CEDIMIN
43,261
10,859
Inversiones Colquijirca S.A.
18,149
3,212
Consorcio Energético de Huancavelica S.A.
1,920
994
Sociedad Minera El Brocal S.A.A.
1,515
533
64,845
15,598
Net cost
168,130
Balance as of
December 31,
Retirements
de 2004
S/. (381)
(381)
S/. 175,456
42,476
9,113
5,549
5,393
237,987
-
54,120
21,361
2,914
2,048
80,443
157,544
(b) Management estimates that the amortization expense for each of the next five years will be approximately S/15 million.
52
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
17. Bank loans
Bank loans, contracted in U.S. dollars, consist of:
(Stated in thousands of Peruvian Nuevos Soles)
Sociedad Minera El Brocal S.A.A.
Banco Interamericano de Finanzas – BIF
Banco de Crédito del Perú
Banco Internacional del Perú - Interbank
Inversiones Mineras del Sur S.A.
Banco de Crédito del Perú
Other subsidiaries
Annual interest rate
4.45% (3.72% as of
December 31, 2003)
Between 3.69% and 3.81%
Between 3.71% and 4.48%
2.66%
2003
2004
S/. 1,635
5,959
4,905
S/. 3,283
-
10,539
423
23,461
9,521
346
13,150
As of December 31, 2003 and 2004, this caption is mainly conformed by pre and post-export loans obtained from various domestic
banks. The loans obtained by El Brocal are guaranteed by the related shipments of concentrate inventories, and have current maturities.
The loan obtained by Inminsur does not have specific guarantees.
The weighted average annual interest rates on bank loans were 4.24 percent and 3.37 percent during 2003 and 2004, respectively.
The weighted average annual interest rate was 9.33 percent at December 31, 2003 and 3.12 percent at December 31, 2004.
18. Trade accounts payable
This item is made up as follows:
2003
(Stated in thousands of Peruvian Nuevos Soles)
Local suppliers
Foreign suppliers
S/. 49,957
2,742
52,699
2004
S/. 49,767
11,421
61,188
Trade accounts payable are mainly originated by the acquisition of materials and supplies. These obligations are stated in local and
foreign currency, have current maturities and do not accrue interest. No guarantees have been granted.
19. Other current liabilities
(a) This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
2003
Accrual for mine closing costs (c)
Stock appreciation rights (b)
Income tax payable
Other taxes payable
Remuneration and similar benefits payable
Accounts payable to a joint venture partner
Workers’ profit sharing payable
Royalties payable to the Peruvian Government
Accrual for labor contingencies
Royalties payable to third parties, note 37(b)
Accrual for exchange difference loss related
to a forward contract, note 35 (b)
Dividends payable
Other liabilities, each individually less than S/1,500,000
Long - term portion
Stock appreciation rights
Accrual for mine closing
Others
Current portion
53
2004
S/. 51,202
57,463
28,500
3,865
5,507
4,620
S/. 67,521
47,047
25,143
20,072
7,202
9,435
11,738
6,639
3,140
2,513
773
1,838
9,210
162,978
2,182
1,467
12,627
216,726
(48,151)
(28,702)
(76,853)
(32,444)
(39,881)
(1,705)
(74,030)
86,125
142,696
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(b) Stock Appreciation Rights The Company has a program under which certain executives earn a cash bonus equal to that executive’s allotted number of shares
multiplied by the difference between the market value at a future date of the Company’s shares and the base price on the executive’s
share. This program remains in effect as long as the executive works for the Company at each program’s settlement date.
The measurement is made at the end of each reporting period based on the current market price of the shares. Compensation
expense is recognized ratably over the vesting period established in each program.
The number of shares units which will be granted to executives subject to the stock appreciation rights bonus in future years, are
as follows:
Years
Number of shares
2004
2005
2006
2007
2008
2009
There after
94,900
150,300
192,700
217,100
190,900
193,000
388,600
1,427,500
In 2004, the Company recorded an expense amounting to S/2,135,000 in connection with this program (S/6,744,000 and S/49,594,000 in
2002 and 2003, respectively), which is recorded in the «general and administrative» caption in the consolidated statements of income.
(c) Accrual for mine closing costs Movements within the accrual for mine closing costs follow:
Balance as of January 1, 2003 (Stated in thousands of Peruvian Nuevos Soles)
Disbursements
Cumulative effect of accounting change
Accretion expense, note 31
Loss from exposure to inflation
Balance as of December 31, 2003
Disbursements
Provision
Accretion expense, note 31
Gain from exposure to inflation
Balance as of December 31, 2004
S/. 7,453
(3,637)
40,679
4,724
1,983
51,202
(5,691)
21,019
7,056
(6,065)
67,521
The accrual for mine closing costs is based on studies completed by independent parties, in accordance with current environmental
protection regulations, see note 37 (a).
(d) Royalties payable to Peruvian Government In June 24, 2004, the Peruvian Congress approved Law 28258 - Mining Royalties Law. This law established a mining royalty that
owners of mining concessions should pay for the exploitation of metallic and non-metallic resources. The mining royalties
will be calculated with rates ranging from 1% to 3% over the mineral concentrates value or equivalent, according to the
quoted market price published by the Ministry of Energy and Mines. The corresponding ruling was approved on November 15,
2004.
Royalties amounted to S/6,639,000 in 2004 and would be paid in a five-months period, beginning on February 28, 2005.
To the date of this report, the National Society for Mining, Oil&Gas and Energy filed before the Peruvian Constitutional Court an
unconstitutionality appeal against the Law of Mining Royalties. The Company has accounted for an accrual for this royalty; however,
in January 2005, it has filed a Recourse Action against this law. The corresponding precautionary actions, which permit to suspend
the application of this law until the Peruvian Constitutional Court resolve this matter, are in process.
54
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
20. Long-term debt
(a) Long-term debt, denominated in U.S. dollars, were as follows:
(Stated in thousands of
Peruvian Nuevos Soles)
Inversiones Mineras del Sur S.A.
Banco de Crédito del Perú
Consorcio Energético de
Huancavelica S.A.
BBVA Banco Continental
Sociedad Minera El Brocal S.A.A. (c)
BBVA Banco Continental
Banco de Crédito del Perú
Teck Cominco Metals Ltd.
Banco de Crédito Leasing
Other
Guarantee
Annual interest rate
Final maturity
Guaranteed by Buenaventura
4.5%
September 2005
Guaranteed by Buenaventura
Three - month Libor plus 1.2%
(3.76% as of December 31, 2004)
Pledge over machinery and
equipment for US$1,000,000; and cash
flows from collections of a client.
Pledge over machinery and
equipment for US$5,822,000; and cash
flows from collections of two clients
No specific guarantees
Leased property
2003
2004
S/. 72,675
S/. 22,981
April 2005
19,319
4,323
Three - month Libor plus 2.35%
(4.91% as of December 31, 2004)
November
2009
-
12,147
Three - month Libor plus 3.75%
(6.31% as of December 31, 2004)
September
2006
18,320
10,533
Three - month Libor plus 6%
(7.16% as of December 31, 2003)
5.00%
December
2006
June 2007
5,494
-
113
115,921
(70,453)
45,468
1,037
342
51,363
(36,332)
15,031
Current Portion
Long-term portion
(b) The long-term debt maturity schedule as of December 31, 2004 is as follows:
Year ended December 31,
(Stated in thousands of Peruvian Nuevos Soles)
Amount
2006
2007
2008
2009
S/. 7,524
2,651
2,428
2,428
15,031
(c) The financing agreements of El Brocal include certain provisions that require compliance with certain financial indicators.
Except for the maximum leverage ratio required by BBVA Banco Continental, El Brocal has complied with those indicators as of
December 31, 2003 and 2004. This non-fulfillment will be informed to BBVA and, in management’s opinion, it will have no effect
on the current conditions of the borrowing, considering that the leverage ratio must not exceed 1.0 and the actual leverage
ratio is 1.04 as of December 31, 2004. In addition, this ratio considers S/13 million of a deferred income tax and workers’ profit
sharing liability, which does not require an immediate cash outflow.
(d) The debt that Brocal maintained with Teck Cominco Limited was paid with funds arising from the long term debt obtained from
BBVA Banco Continental.
(e) The weighted average annual interest rates of the long - term debt were 4.81 percent and 4.92 percent during 2003 and 2004,
respectively.
21. Minority interest
The minority interest liability shown in the consolidated balance sheets consists of:
2003
Inversiones Colquijirca S.A.
S.M.R.L. Chaupiloma Dos de Cajamarca
Inversiones Mineras del Sur S.A.
Minera La Zanja S.R.L.
Other
S/. 27,762
14,227
8,722
(2,283)
48,428
55
2004
S/. 50,337
15,655
14,165
(13,111)
(699)
66,347
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
Minority interest income (expense) is presented in the consolidated statements of income and consists of:
(Stated in thousands of Peruvian Nuevos Soles)
Inversiones Colquijirca S.A.
S.M.R.L. Chaupiloma Dos de Cajamarca
Inversiones Mineras del Sur S.A.
Other
2002
S/. (1,884)
(23,121)
(1,719)
1,263
(25,461)
2003
S/. (10,439)
(33,175)
(7,905)
496
(51,023)
2004
S/. 13,974
(34,951)
(5,444)
(1,750)
(28,171)
22. Shareholders’ equity
(a) Capital stock The Company has common shares entitled to exercise voting rights that represent the 100 percent of its outstanding share
capital.
The Mandatory Annual Shareholders’ meeting held on March 26, 2002, decided to increase the Company’s capital stock from
S/137,444,962 to S/549,779,848 (from S/197,894,000 to S/646,414,000, in constant values as of December 31, 2004) through
the capitalization of a portion of retained earnings as of December 31, 2001, and by increasing the nominal value of the
common shares - Series A and B from S/1 to S/4. From the capitalized amount of S/412,334,886 (approximately S/448,520,000
in constant values as of December 31, 2004), S/129,266,262 corresponds to common shares - Series A and S/283,068,624 to
common shares - Series B.
The Shareholders’ Meeting held on April 30, 2002 approved the re-designation of common shares - Series B as common shares Series A, and then immediately approved the re-designation of common shares – Series A as common shares. As a consequence,
since May 3, 2002, the Company’s capital stock is comprised of 137,444,962 common shares with a nominal value of S/4 each.
In October 28, 2003, the Board of Directors decided to modify the ADR’s program with the Bank of New York. Effective November 12,
2003, each ADR corresponds to one common share; formerly, each ADR corresponded to two common shares.
As explained in note 2(t), the nominal value of treasury shares adjusted by inflation is presented net of the capital stock. The detail
of the capital stock as of December 31, 2004 follows:
(Stated in thousands of Peruvian Nuevos Soles)
Common shares
Treasury shares
Number of
shares
137,444,962
(10,565,130)
126,879,832
Nominal
value
S/. 549,780
(42,261)
507,519
Result from
exposure to
inflation
S/. 96,634
(7,398)
89,236
Capital
stock
S/. 646,414
(49,659)
596,755
As a result of the restatement of the 2004 financial statements for inflation at December 31, 2004, the Company is permitted to issue
additional common shares for a total value of S/96,634,000.
(b) Investment shares The investment shares are not entitled to exercise voting rights and do not represent the Company’s stock obligation. However,
investment shares confer upon the holders thereof the right to participate in the dividends distributed.
The Annual Shareholders’ meeting mentioned in paragraph (a) above, also decided to increase the investment shares account from
S/372,320 to S/1,489,280 (from S/533,000 to S/1,749,000, in constant values of December 31, 2004), by increasing the nominal value
of investment shares from S/1 to S/4, concurrent with the capitalization of a portion of retained earnings equal to S/1,116,960
(S/1,216,000 in constant value as of December 31, 2004). As a consequence, effective May 3, 2002, there are 372,320 investment
shares with a nominal value of S/4 each.
As explained in note 2(t), the nominal value of investment shares held in treasury adjusted by inflation is presented net of the
investment shares. The detail of the investment shares as of December 31, 2004 follows:
56
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles)
Number of
shares
Nominal
value
372,320
(15,933)
356,387
S/. 1,489
(63)
1,426
Investment shares
Investment shares held in treasury
Result from
exposure to
inflation
S/. 260
(3)
257
Investment
shares
S/. 1,749
(66)
1,683
As a result of the restatement of the 2004 financial statements for inflation at December 31, 2004, the Company is permitted to issue
additional investment shares for a total value of S/260,000.
(c) Additional capital The additional capital of the Company includes the following as of December 31, 2004:
-
The premium received on the issuance of Series B common shares for S/546,835,000.
-
The income from the sale of ADR for S/30,286,000, and
-
The difference between constant nominal values of treasury shares (common and investment), held by the subsidiary Condesa,
and the cost of such shares for S/33,538,000.
(d) Legal reserve According to the Ley General de Sociedades (General Corporations Law), applicable to individual and unconsolidated financial
statements, a minimum of 10 percent of distributable income in each year, after deducting income tax, shall be transferred to a legal
reserve, until such reserve is equal to 20 percent of capital stock. This legal reserve may be used to offset losses or may be capitalized;
however, if used to offset losses or if capitalized, the reserve must be replenished with future profits.
(e) Treasury shares maintained by subsidiary As explained in note 2(t), the values of treasury shares are presented net of the capital stock, investment shares and additional capital
accounts.
In the first quarter of 2002, Condesa sold to third parties an additional 322,000 ADR (equivalent to 644,000 common shares) for
approximately S/25,192,000, which is presented in the consolidated statements of changes in shareholders’ equity.
(f) Declared and paid dividends The information about declared and paid dividends in the years 2002, 2003 y 2004 is as follows:
Meeting/Board
Date
Declared
dividends
Dividends
per share
Dividendos 2002
Mandatory Annual Shareholders’ meeting
Board of Directors
Board of Directors
March 26, 2002
October 22, 2002
October 22, 2002
S/. 31,637,000
46,891,000
3,028,000
81,556,000
S/. 0.23
0.34
(*)
Dividends 2003
Mandatory Annual Shareholders’ meeting
Board of Directors
Board of Directors
March 31, 2003
July 31, 2003
October 28, 2003
44,198,000
80,280,000
47,771,000
172,249,000
0.32
0.58
0.35
Dividends 2004
Mandatory Annual Shareholders’ meeting
Board of Directors
March 26, 2004
October 28, 2004
77,823,000
73,208,000
0.56
0.53
151,031,000
(*) Equivalent to S/2.19 per common share of El Brocal.
During 2002, 2003 and 2004, the dividends paid to the subsidiary Condesa for Buenaventura’s shares amount to S/6,264,000,
S/13,085,000 y S/11,567,000, respectively. These amounts are presented net of declared and paid dividends in the consolidated
statements of shareholders’ equity.
(g) Cumulative translation gain (loss) This amount corresponds to the exchange differences that arise as a result of applying the methodology described in Note 2(f )
when translating the financial statements of Yanacocha from U.S. dollars to Peruvian Nuevos Soles. These exchange differences
will be presented in equity until the related investment is disposed of.
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
23. Taxation
(a) Buenaventura and their subsidiaries are subject to Peruvian tax law. As of December 31, 2004, the statutory income tax rate
in Peru is 30 percent (27 percent until December 31, 2003), including the gain (loss) from exposure to inflation.
Non - domiciled companies in Peru and individuals must pay an additional tax of 4.1 percent over received dividends.
Effective January 1, 2005, the following tax modifications are in force:
-
It has been established a Temporary Tax on Net Assets, which will be in force until December 31, 2006. This tax can be used as
credit against the income tax prepayments.
-
For income tax purposes, especially for calculating the income tax, the financial statements shall not be adjusted for
inflation.
(b) The tax authorities are legally entitled to review and, if necessary, adjust the income tax calculated by the Company during the
four years subsequent to the year of the related tax return filing. The income tax and value added tax returns of the following
years are pending review by the tax authorities:
Entity
Years open to review by
tax authorities
Buenaventura
2001, 2002, 2003 and 2004
Buenaventura Ingenieros S.A.
Compañía de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. - CEDIMIN
2000, 2001, 2003 and 2004
2000, 2001, 2003 and 2004
Compañía Minera Condesa S.A.
2002, 2003 and 2004
Compañía Minera Colquirrumi S.A.
Consorcio Energético de Huancavelica S.A.
2000, 2001, 2002, 2003 and 2004
2000, 2001, 2002, 2003 and 2004
Contacto Corredores de Seguros S.A.
Sociedad Minera El Brocal S.A.A.
2000, 2001, 2002, 2003 and 2004
2000, 2001, 2002, 2003 and 2004
Inversiones Mineras del Sur S.A.
2000, 2002, 2003 and 2004
Metalúrgica Los Volcanes S.A.
Minera Paula 49 S.A.C.
2000, 2001, 2002, 2003 and 2004
2000, 2001, 2002, 2003 and 2004
Minas Conga S.R.L.
2000, 2001, 2002, 2003 and 2004
S.M.R.L. Chaupiloma Dos de Cajamarca
2002, 2003 and 2004
The income tax of Buenaventura for 2000 was reviewed by the Tax Administration. As a consequence, Buenaventura received
an assessment that modifies the tax loss carryforward. The main issue is that the Company considered certain revenues (dividends
and equity participation) as taxable for determining the tax loss carryforward. In opinion of the Company’s legal advisors, the
assessment does not have solid grounds. It is expected that the Company obtains a favorable opinion in the administrative
process initiated against the assessment.
Due to various possible interpretations of current legislation, it is not possible to determine whether or not future reviews will
result in tax liabilities for the Company. In the event that additional taxes payable, interest and surcharges result from tax
authority reviews, they will be charged to expense in the period assessed and paid. However, in the opinion of Management,
there are no issues that may result in significant tax contingencies for the Company and any additional tax assessment would
not be significant to the consolidated financial statements as of December 31, 2004.
(c) With the purpose of determining the income tax and the value added tax, the transfer price among related parties and for
transactions with companies domiciled in countries considered tax havens, prices should be supported by documentation
containing information about the valuation methods applied and criteria used in its determination. Based on an analysis of the
Company’s operations, Management and its legal advisors believe that the new regulations will not result in significant
contingencies for the Company as of December 31, 2004 and 2003. Effective January, 2004 the Company is obliged to file an
annual informative declaration of these transactions.
58
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(d) During the year 2000, Yanacocha was notified with tax assessments of US$24.4 million in connection with the income tax
and value added tax - VAT for years 1998 and 1999, as well as for VAT of January and February 2000. With the purpose of
eliminating some of these contingencies, Yanacocha filed for the «Sistema Especial de Actualización y Pago de Deudas
Tributarias – SEAP» which allows the payment of incorrectly declared taxes, eliminating fines and accrued interest at
preferential rates. Although Yanacocha filed for the SEAP, it still has a lawsuit outstanding before the Supreme Court of
Justice for US$3.1 million.
In the opinion of Yanacocha’s Management and its legal advisors, there are no issues that may result in significant tax
contingencies.
24. Net sales
The Company’s revenues primarily result from the sale of precious metal concentrates, including silver-lead, silver-gold, zinc
and lead-gold-copper concentrates and ounces of gold. The following table shows net sales by geographic region:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Perú
North America
Europe
Asia
Oceania
2003
2004
S/. 327,768
38,202
175,916
20,976
5,260
568,122
S/. 383,180
28,793
289,597
26,065
2,266
729,901
S/. 437,411
50,736
424,614
15,838
928,599
7,585
575,707
5,405
735,306
(20,158)
908,441
Income (expense) from hedging transactions, note 35(a)
In 2004, the Company’s three largest customers accounted for 20%, 16% and 13%, respectively, of total sales (35%, 28% and 11% of total
sales in 2003). As of December 31, 2004, 48% of the trade accounts receivable are related to these customers (77% as of December 31,
2003). Some of these customers have sale contracts with the Company that guarantee them the production output from specified
Company mines at prices based on market quotations or previously agreed. Currently, the production of the mining units of the Company
is subject to such sale agreements; these agreements have various maturity dates but do not extend beyond December 31, 2011.
25. Operating costs
This item is made up as follows:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Contractors
Supplies
Personnel expenses
Other
S/. 89,354
69,769
60,297
54,266
273,686
2003
S/. 115,313
74,359
67,134
45,766
302,572
2004
S/. 122,803
84,327
82,893
48,051
338,074
26. Exploration and development costs in operational mining sites
A continuación se presenta la composición del rubro:
(Stated in thousands of Peruvian Nuevos Soles)
Exploration expenses
Uchucchacua
Orcopampa
Antapite
Ishihuinca
Shila
Julcani
Paula
Other
Amortization of development costs, note 14(b)
2002
S/. 21,402
17,493
9,589
2,420
4,970
2,690
2,241
1,870
62,675
14,985
77,660
59
2003
S/. 22,926
21,883
12,967
4,129
5,034
1,627
1,301
42
69,909
15,806
85,715
2004
S/. 38,111
22,628
13,817
6,843
4,708
4,191
3,446
2,571
96,315
30,854
127,169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
27. Exploration costs in non-operational mining sites
This item is made up as follows:
2002
(Stated in thousands of Peruvian Nuevos Soles)
In areas external to the mining sites
Join ventures
In mining sites
Huachocolpa
Julcani
Paula
Antapite
2003
2004
S/. 29,893
S/. 45,797
S/. 81,812
5,153
1,732
1,889
8,774
1,642
40,309
1,948
4,295
2,876
9,119
4,339
59,255
4,507
4,507
1,922
88,241
2002
2003
2004
Studies and project expenses
28. General and administrative expenses
This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Personnel expenses
Professional fees
Board members’ remuneration
Insurance
Officers’ compensation, note 19(b)
Supplies
Accrual for doubtful receivables, note 9(c)
Rentals
Maintenance
Other expenses
S/. 35,023
14,907
3,056
1,576
6,744
1,554
329
883
793
14,433
79,298
S/. 29,493
16,673
3,859
1,730
49,594
943
5,952
989
750
13,178
123,161
S/. 31,802
18,569
4,655
2,164
2,135
1,649
1,146
890
668
13,188
76,866
29. Selling expenses
This item is made up as follows:
2002
(Stated in thousands of Peruvian Nuevos Soles)
Freight
Sundry services
Others
S/. 16,714
5,516
2,084
24,314
2003
S/. 18,425
6,231
1,120
25,776
2004
S/. 12,913
3,412
1,514
17,839
30. Interest income and expense
This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Interest income
Interest on deposits
Change in the fair value of the investment fund
Interest on loans
Interest expense
Interest on loans
Others
2002
2003
2004
S/. 9,070
145
9,215
S/. 5,639
1,813
333
7,785
S/. 5,726
5,022
1,384
12,132
(15,473)
(1,229)
(16,702)
(7,361)
(1,326)
(8,687)
(4,609)
(2,906)
(7,515)
60
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
31. Other, net
This item is made up as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Other revenues
Dividends received from Cerro Verde
Gain from sale of supplies
Gain from insurance recoverability
Gain on sale of property, plant and equipment
Other
Other expenses
Accretion expense, notes 3 and 19 (c)
Labor contingencies
Additional taxes
Depreciation, note 13 (c)
Project for social development in
the department of Huancavelica
Loss from sale of supplies to third parties, net
Administrative penalties
Employee termination bonuses
Accrual for impairment loss on investments
Other
Net
2002
2003
2004
S/. 3,079
1,732
6,276
11,087
S/. 2,871
1,175
2,989
7,035
S/. 4,871
273
259
287
5,690
1,540
-
4,724
1,246
2,643
7,056
3,199
2,232
1,404
808
1,537
1,513
2,735
8,133
2,954
1,313
1,657
1,046
874
6,336
19,839
(12,804)
925
805
817
2,757
19,195
(13,505)
32. Income tax and workers’ profit sharing
(a) The income tax and workers’ sharing expense (benefit) amounts shown in the consolidated statements of income are made up
as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Expense (benefit) for income tax
Current
S.M.R.L. Chaupiloma Dos de Cajamarca
Inversiones Mineras del Sur S.A.
Buenaventura
Inversiones Colquijirca S.A.
Consorcio Energético de Huancavelica S.A.
Compañía de Exploraciones, Desarrollo e
Inversiones Mineras S.A.C. - CEDIMIN
Minera Shila S.A.C.
Other
2002
2003
2004
S/. 21,528
-
S/. 30,683
6,543
-
S/. 37,509
12,642
10,345
8,368
2,126
2,321
323
24,172
1,283
38,509
1,051
620
72,661
2,669
18
2,687
26,859
(228,834)
(4,916)
(2,798)
(247)
(236,795)
(198,286)
21,582
7,370
384
29,336
101,997
Deferred
Buenaventura
Inversiones Colquijirca S.A.
Inversiones Mineras del Sur S.A.
Minera Shila S.A.C.
Other
Total
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles)
Expense (benefit) for workers’s profit sharing (i)
Current
Inversiones Mineras del Sur S.A.
Buenaventura
Inversiones Colquijirca S.A.
Consorcio Energético de Huancavelica S.A.
Compañía de Exploraciones, Desarrollo e
Inversiones Mineras S.A.C. - CEDIMIN
Minera Shila S.A.C.
Otros
2002
Deferred
Buenaventura
Inversiones Colquijirca S.A.
Inversiones Mineras del Sur S.A.
Minera Shila S.A.C.
Other
Total
2003
2004
S/. -
S/. 2,111
-
S/. 3,664
2,998
2,426
373
748
748
187
2,298
305
86
9,852
859
6
865
1,613
(62,896)
(1,425)
(811)
(53)
(65,185)
(62,887)
6,256
2,136
112
8,504
18,356
(i) In accordance with Peruvian legislation, mining companies that have more than 20 employees should accrue an amount
equal to 8 percent of annual taxable income to be distributed under an employee profit-sharing plan. As of December 31,
2002, 2003 and 2004, S.M.R.L. Chaupiloma Dos de Cajamarca and Compañía Minera Condesa S.A. have less than 20 employees.
(b) As explained in note 2(q), Buenaventura and their subsidiaries recognize temporary differences between tax and book basis of
assets and liabilities through the recording of deferred tax assets and liabilities. The income tax and workers’ profit sharing asset
is composed of the following:
Credit (debit) to the consolidated
statements of income
(Stated in thousands of Peruvian Nuevos Soles)
Balance as of
January 1st, 2004
Deferred asset
Deferred income from sale
of future production
S/. 252,746
Accrual for mining closing
14,808
Officers’ compensation
17,142
Exploration expenses
11,046
Impairment of property, plant and
equipment
6,281
Unrealized gain with affiliates Tax loss
carryforward
30,056
Slow moving and obsolescence supplies
reserve
4,089
Royalties payable to the Peruvian
government
Allowance for doubtful accounts receivable
1,845
Accrual for labor contingencies
Other
3,214
346,064
Less – Allowance for deferred asset
recoverability
(20,358)
Deferred asset
325,706
Deferred liability
Deferred stripping costs
(19,956)
Other
(8,309)
Deferred liability
(28,265)
Deferred asset, net
297,441
Income
tax
Deferred income
tax and workers’
profit sharing
Result from
exposure
to inflation
Balance as
of December
31, 2004
S/. (18,149)
2,873
(3,428)
582
S/. (5,253)
830
(994)
169
S/. (11,766)
(842)
(798)
(285)
S/. 217,578
17,669
11,922
11,512
(116)
(34)
(291)
5,840
(18,927)
(5,925)
(1,237)
3,967
(692)
(201)
(105)
3,091
1,927
21
1,199
325
(34,737)
559
6
348
93
(10,504)
(86)
(90)
(15,724)
2,486
1,786
1,547
3,542
285,099
4,641
(30,096)
1,783
(8,721)
1,195
(14,529)
(12,739)
272,360
760
760
(29,336)
217
217
(8,504)
227
227
(14,302)
(19,956)
(7,105)
(27,061)
245,299
62
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
The Company has not recorded a deferred income tax and workers’ profit sharing liability originated by the excess of the book basis
over the tax basis of the investments in shares due to the following:
-
In the case of the affiliate Cerro Verde (recorded at fair value): under any circumstance - dividend distribution or sale of
the investment - the reversal of the basis difference will not be taxable. As mentioned before, dividends distributions are
income tax exempt. On the other hand, Cerro Verde S.A. is a company that quotes its shares in the Lima Stock Exchange and,
in accordance with the Peruvian tax regulations, any gain or losses arising from the disposition of these shares are not
taxable.
-
In the case of the affiliate Yanacocha, Buenaventura’s management has the intention and ability of maintaining the
investment until the date of the depletion of its gold and silver reserves; in this sense, it considers that the temporary
difference will be reverted through future dividends, which are not taxable. On the other hand, Buenaventura’s
management has the ability of reversing the temporary difference, by other form different than dividends distributions,
with any tax effect.
(c) During 2002, 2003 and 2004 the Company recorded expenses (income) tax and workers’ profit sharing due to:
2002
2003
S/. 469,648
S/. 37,298
S/. 834,174
32.84%
32.84%
35.60%
154,232
12,249
296,966
(Stated in thousands of Peruvian Nuevos Soles)
Income before income tax and workers’ profit sharing
Effective combined rate
2004
Expected income tax and workers’ profit sharing
according effective combined rate
Permanent differences:
Share in affiliated companies (i)
(116,242)
(183,102)
(205,005)
Effect of fair value of derivative instruments (ii)
-
66,250
(5,208)
Realized loss in derivative instruments (ii)
-
6,835
26,131
turned into normal sales contracts (iii)
-
(94,794)
-
Change in valuation allowance
-
(53,944)
-
Effect on fair value derivative instruments (iv)
(6,145)
(21,978)
-
Other permanent items
(3,373)
7,311
7,469
(125,760)
(273,422)
(176,613)
28,472
(261,173)
120,353
Effect of fair value of derivative contracts
Total
(i) According to current Peruvian tax regulations, the equity participation in affiliates, including dividends received, are not taxable.
(ii) According to current Peruvian tax regulations, the loss on derivative instruments is not deductible to the extent it is generated
abroad.
(iii) Effective January 1, 2003, the Company adopted IAS 39, recording the initial effect of the fair value of all derivative contracts
in the equity account: retained earnings (loss). In December 2003, the Company modified certain conditions of its derivative
contracts to qualify them as sales contracts; pursuant to this revision, the related loss (negative fair value) became a
temporary difference under current Peruvian tax regulations. The income tax effect on the loss recorded in retained
earnings has been recorded as a benefit of the year because the change of status of a permanent, to a temporary item
occurred in December 2003.
(iv) Effective April 1, 2004, the statutory income tax rate in Peru is 30 percent. Until December 31, 2003, the income tax rate was 27
percent.
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
33. Basic and diluted earnings per share
The computation of the basic and diluted earnings per share for the years ended December 31, 2002, 2003 and 2004 is presented below:
(Stated in Peruvian
Nuevos Soles)
For the year ended
December 31, 2002
Net income
Shares
Earnings
(numerator) (denominator) per share
Basic and diluted income
per share before the
cumulative effect of
accounting change
S/. 415,715,000 127,236,219
Cumulative effect of
accounting change for
mining closing costs
127,236,219
Basic and diluted
net income per share
415,715,000 127,236,219
For the year ended
December 31, 2003
Net income
Shares
Earningsper
(numerator) (denominator)
share
S/. 3.27 S/. 247,448,000 127,236,219
-
(72,295,000)
For the year ended
December 31,2004
Net income
Shares
Earnings
(numerator) (denominator) per share
S/. 1.95 S/. 685,650,000 127,236,219 S/. 5.39
127,236,219
(0.57)
- 127,236,219
-
3.27 175,153,000 127,236,219
1.38
685,650,000 127,236,219
5.39
The number of shares to be used as the denominator in the calculation of basic and diluted earnings per share for the years ended
December 31, 2002, 2003 and 2004 was determined as follows:
Common shares
Investment shares
Less – Treasury shares
2002
2003
2004
137,444,962
372,320
137,817,282
(10,581,063)
127,236,219
137,444,962
372,320
137,817,282
(10,581,063)
127,236,219
137,444,962
372,320
137,817,282
(10,581,063)
127,236,219
34. Disclosure about information by segments
International Accounting Standard (IAS) 14, revised, requires enterprises to disclose financial information by business and/or
geographical segment. Companies should consider their organizational and management structure and their internal financial
reporting system when identifying segments. Segments are generally defined by the manner in which the Company presents data
to high-level management for their use in evaluating each units past performance. Management bases their decisions on and
evaluates business development in terms of the mining segments’ performance. The electric, mining consulting and insurance
segments are not significant and, therefore, are not considered in the making of decisions or in the evaluation of business
development. Management therefore considers that the Company’s only reportable segment is mining.
35. Derivative financial instruments
(a) Risk of metal price fluctuations Derivative contracts
Buenaventura holds contracts of derivative instruments with the intention to hedge the fluctuations in metal prices; however, the
Company does not meet all the criteria stated in IAS 39 to account for the derivative instruments as cash flow hedges. In addition,
the subsidiary El Brocal maintains contracts of derivative instruments that qualify as cash flows hedges.
The table below presents a summary of the commodity derivative contracts outstanding as of December 31, 2004:
Metal
Quantity (ounces)
Minimal
Gold
Silver
52,500 (i)
500,000 (ii)
Price range
Maximum
(US$/Oz)
849,000
3,200,000
343 to 366.7
5.84 to 6.16
Period
January 2005 - July 2011
January 2005 - August 2006
(i) Guaranteed with an average price of US$345 per ounce only and when gold price is above US$285.00 per ounce.
(ii) Guaranteed with a minimum price of US$6.00 per ounce (only and when silver price is above US$4.00 per ounce).
Related to the derivative instruments contracts maintained during 2003 and 2004, Buenaventura and El Brocal recorded the
following:
-
In January 2003, Buenaventura charged S/458,189,000 to retained earnings and El Brocal credited S/1,742,000, net of minority interest,
to the equity account of «cumulative unrealized loss on derivative instruments» in connection with initial adoption of IAS 39.
64
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
-
In 2004, Buenaventura recognized a gain of S/14,629,000 (a loss of S/647,218,000 in 2003) due to the changes in the fair value
occurred during this period, which is separately presented in the Consolidated Statements of Income.
-
In 2004, El Brocal credited S/4,621,000 (a charge of S/8,085,000 in 2003), net of minority interest, to the equity account
«Cumulative unrealized loss on derivative instruments», due to the changes in fair value occurred during those periods. As of
December 31, 2004, El Brocal does not have derivative contracts to offset the risk of metal price fluctuations.
-
In 2004, Buenaventura recognized expenses of S/36,566,000 (income of S/44,760,000 and expenses of S/20,812,000, in 2002 and
2003, respectively), in connection with derivative operations settled during this period. In addition, Buenaventura recognized expenses
of S/36,837,000 for the reduction of the Company’s hedge book exposure in 120,000 ounces of gold during the first quarter of 2004.
These amounts are presented in the caption «realized loss on derivative instruments» of the Consolidated Statements of Income.
In addition, the liability presented in the consolidated balance sheets for S/70,927,000 and S/267,852,000 as current and noncurrent portions, respectively, corresponds to the fair value of derivative instruments of Buenaventura as of December 31, 2004 (S/
99,893,000 and S/307,826,000 as current and non-current portions, respectively, as of December 31, 2003).
Normal sale contracts of gold, zinc and silver
Effective December 30 and 31, 2003, Buenaventura modified the terms of certain derivative instruments contracts in order to
qualify them as normal sale contracts. The fair value of these contracts at the date prior to the modification of terms amounted to
S/709,963,000 and was presented as «deferred revenue from sale of future production» in the Consolidated Balance Sheet as of
December 31, 2003. Since this date, such amount will be credited to income as delivery of the committed ounces of gold occurs.
In 2004, Buenaventura delivered 198,000 ounces of gold as part of the sale contracts above mentioned. As a consequence,
Buenaventura recognized revenues of S/68,837,000 in the caption «realized revenue from sale of future production» in the
Consolidated Statements of Income.
As of December 31, 2004 Buenaventura is committed to sell 1,844,000 ounces of gold at prices ranging from US$332 to US$451 per
ounce until December 2011.
(b) Foreign currency exchange risk Buenaventura has entered into a forward currency exchange contract for US$7,414,000, at rates ranging from S/3.554 to S/3.589
per U.S. dollar, and stated maturities similar to time deposits, see note 6. In 2004, this operation has generated a loss for approximately
S/1,818,000 (S/2,436,000 in 2003), basically explained for a lower market exchange currency rate compared to the agreed exchange
rate. The fair value of this contract as of December 31, 2004 amounts to S/2,182,000 (S/773,000 as of December 31, 2003) and is
presented in the caption «other current liabilities» of the Consolidated Balance Sheets, see note 19.
36. Fair value of financial instruments
The information about fair value of the financial instruments, including derivatives, is presented below:
-
Current assets and liabilities approximate their fair value due to the short-term maturities of these financial instruments.
-
The fair value of the investment held in Sociedad Minera Cerro Verde S.A. is S/270,600,000 as of December 31, 2004 (S/223,399,000
as of December 31, 2003).
-
The estimated fair value of the long-term debt kept by El Brocal and Inminsur is similar to its book value, as the terms and interest
rates are from the market.
-
The estimated fair value of the derivative contracts is S/338,779,000 and is based on quotations received from the Company’s
counter- parties, see note 35.
37. Commitments and contingencies
(a) Environmental matters The Company’s mining and exploration activities are subject to environmental protection standards. In order to comply with these
standards, the Company has presented preliminary studies covering of environmental and Environmental Adjustment and
Management Programs (PAMA) for each of the mining units. The Ministry of Energy and Mines has approved the PAMAs related to
Uchucchacua, Julcani, Orcopampa, Colquijirca, Ishihuinca, Huachocolpa, Shila and Paula, as well as the Environmental Impact Study
(EIA) of Antapite. As of December 31, 2004, the activities as defined in the PAMAs respective to the Uchucchacua, Julcani, Orcopampa,
Colquijirca and Ishihuinca mining units had been completed.
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002, 2003 and 2004
On October 14, 2003, the Congress issued the Law 28090 which regulates the procedures and commitments that the mining activities
must follow in order to elaborate, file and implement a mining site closing plan, as well as establishes the constitution of a guarantee
to assure the compliance of the committed plan. At the date of the report, the corresponding regulation is pending to be issued.
(b) Land and mineral rights leases The Company has obtained the right to operate in certain areas through the execution of land lease contracts, as shown below:
Leaseholder
Compañía de Minas
Buenaventura S.A.A.
Inversiones Mineras
del Sur S.A.
Leasing
company
Year in which
the contracts end
Royalties
2043
10% of the valorized production,
subject to certain conditions.
2015
7% of concentrate revenues.
Sindicato Minero
Orcopampa S.A.
(Arequipa)
El Futuro de Ica S.R.L.
(Arequipa)
Royalty expenses, which are included in the operating expenses section of the Consolidated Statements of Income, are allocated
among the mineral rights lease contracts, as follows:
(Stated in thousands of Peruvian Nuevos Soles)
Sindicato Minero Orcopampa S.A.
El Futuro de Ica S.R.L.
2002
S/. 13,561
1,120
14,681
2003
S/. 22,869
2,273
25,142
2004
S/. 22,706
2,212
24,918
Royalties payable amount to S/2,513,000 as of December 31, 2004 (S/4,620,000 as of December 31, 2003), see Note 19(a).
(c) Pending litigation of Buenaventura Damages claimed by a French citizen In February of 2002, the Company and its subsidiariy Compañía Minera Condesa S.A.C. (Condesa), together with Newmont Mining,
Newmont Second and certain individual persons, were defendants in an action initiated by a French citizen, with jurisdiction before
the District Court of the state of Colorado in the United States. The plaintiff alleges that he was engaged as an advisor to Normandy
respective to a lawsuit that concluded in October of 1998, and that such lawsuit separately motivated the execution of a Global
Transaction Agreement in 2000 between the Company, BRGM, Mine Or, Normandy and their related entities (SEREM). The Global
Transaction Agreement provided for full and permanent revocation and annulment of any preferential rights on the shares of
Compañía de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. - CEDIMIN. in exchange for a one-time payment of US$80 million
by the Company, of which the Company paid US$40 million.
The plaintiff asserts that he was injured because Normandy had promised to pay him a commission based fee if he was able to
increase the amount of the Company’s payment as ordered by the Court, which did not occur, and seeks damages of not less than
US$25 million plus interest, in addition to unspecified punitive damages that could increase the amount by threefold. Additionally,
the plaintiff alleges violations of the federal RICO statute and similar provisions of Colorado law, interference with contract rights,
defamation and other damages.
The defendants have filed various motions to dismiss the action; however, rather than responding to these motions for dismissal, the
plaintiff has filed another demand. The Company and Condesa have presented motions to reject the new demand. On January 15, 2004,
the judge Richard P. Matsch of the District Colorado Court issued an opinion and ordered granting defendants motions to dismiss the
amended complaint. On February 15, 2004 the defendants appealed the opinion of the judge to the Federal Court of the United States
of America - Tenth Circuit (Colorado). At the date of this report, it is not possible to predict when the court will rule on the motions.
In Management’s and legal advisors’ opinion, the final outcome of this process will not have a significant adverse effect on the
Company’s financial statements as of December 31, 2004.
Other From time to time in the normal course of its activities, the Company is involved in various legal proceedings of a diverse nature.
Management believes that any possible loss, which may result from these lawsuits, will not have a materially adverse effect on the
Company’s financial position.
66
COMPAÑIA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2002, 2003 and 2004
(d) Legal processes of Yanacocha
Mercury spill in Choropampa In June,2000 aYanacocha’s contractor spilled approximately 11 liters of mercury nearby Choropampa,located at 84.8 kilometers fromYanacocha.
As a result of the accident, September 10, 2001, 900 Peruvian citizens sue Yanacocha and other persons involved at the District Court of the
state of Colorado, United States of America (hereinafter «the Court»). The plaintiffs demand compensations by the damages originated by this
spill. In May 22, 2002 the Court misestimated the demand, which was ratified later in June 30, 2002. The plaintiffs appealed this resolution.
In July 2002, a new demand was presented against Yanacocha and other subsidiaries of Newmont Mining Corporation at the same Court,
by other 140 Peruvian citizens who added themselves to the original demand, demanding similar compensations to those of the first
demand. This new demand is in suspense until the appeal of the first one is defined. To this date,Yanacocha considers that it is not possible
to predict the final result of these demands and believes that any effect related to them would not be significant to its financial statements.
(e) Arbitration with a contractor In June of 2004, as part of the process of conciliation with a Yanacocha contractor, the Management of this Company decided to pay
an indemnification of US$2.5 million. With this payment, Yanacocha concluded the process of arbitration initiated in November,
2003, related to the contractual dispute in the civil construction made in Carachugo. The original amount of the reclamation was
of approximately US$12 million.
38. Transactions with affiliated companies
(a) The Company had the following transactions with its affiliated companies during the years ended December 31, 2002, 2003 and 2004:
S.M.R.L. Chaupiloma Dos de Cajamarca («Chaupiloma») Chaupiloma is the legal owner of the mineral rights on the mining concessions exploited by Yanacocha, and receives a 3 percent
royalty on the net sales of Yanacocha. In 2004, royalties earned amounted to S/128,889,000 (S/82,350,000 and S/116,957,000 in
2002 and 2003, respectively) and are presented as «royalty income» in the consolidated statements of income.
Compañía Minera Condesa S.A. («Condesa») During 2004, Compañía Minera Condesa S.A. received cash dividends from Yanacocha for approximately S/414,911,000 (S/83,070,000
and S/482,025,000 in 2002 and 2003, respectively).
Buenaventura Ingenieros S.A. («Bisa») In March of 2002, Buenaventura Ingenieros S.A. signed a technical service agreement with Yanacocha to perform a number of specialized
activities and services. Pursuant to the agreement, the services performed will be related to the construction of mining projects and will
include completion of analysis and studies, work plan design, and functions related to planning, monitoring and administrating the infrastructure
projects required by Yanacocha in its operations. This contract will expire on December 31,2004 and was renewed in January, 2005 under the
same terms. In 2004, the revenues related to this service contract amounted to approximately S/10,176,000 (S/11,408,000 in 2003).
The profit between Bisa and Yanacocha is not significant and, therefore, has not been eliminated in the consolidated financial statements.
Consorcio Energético de Huancavelica S.A. («Conenhua») In November of 2000, Conenhua signed an agreement with Yanacocha for the construction and operation of a 220 kW transmission
line between Trujillo and Cajamarca, a 60 kW transmission line between Cajamarca and La Pajuela, and the Cajamarca Norte substation;
this agreement also encompassed activities necessary to enlarge the Trujillo substation. Pursuant to this contract, the construction
work finished in October 2001. Concurrently, Yanacocha and the Company signed a 10-year agreement covering electric energy
transmission and infrastructure operation beginning November 2001. In exchange for Buenaventura operating and managing the
transmission project, Yanacocha will pay an annual fee of US$3.7 million. During 2004, the revenues for these services amounted to
approximately S/13,265,000 in 2004 (S/14,282,000 in 2003).
The profit between Conenhua and Yanacocha is not significant and,therefore,has not been eliminated in the consolidated financial statements.
(b) As a result of the above and other minor transactions, the Company has the following accounts receivable from affiliated companies:
2003
(Stated in thousands of Peruvian Nuevos Soles)
Minera Yanacocha S.R.L.
Other
S/. 36,761
937
37,698
2004
S/. 45,708
370
46,078
39. Explanation added for English language translation
The accompanying consolidated financial statements are presented on the basis of accounting principles generally accepted in
Peru. Certain accounting practices applied by the Company that conform with generally accepted accounting principles in Peru
may differ in certain respects to generally accepted accounting principles in other countries.
67
REPORT OF INDEPENDENT AUDITORS
As of December 31, 2003 and 2004
Report of Independent Auditors
To the Shareholders of Compañía de Minas Buenaventura S.A.A.
1. We have audited the accompanying balance sheets of Compañía de Minas Buenaventura S.A.A. (a Peruvian company) as of
December 31, 2003 and 2004, and the related statements of income, changes in shareholders' equity and cash flows for the years
ended December 31, 2002, 2003 and 2004. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements
of Minera Yanacocha S.R.L. (an equity accounted affiliated entity in which the Company has an 43.65 percent interest through
its subsidiary Compañía Minera Condesa S.A.) as of December 31, 2003 and 2004 and for the years ended December 31, 2002,
2003 and 2004. Those statements have been audited by others auditors, whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for Minera Yanacocha S.R.L., is based solely on the reports of the other
auditors. In the consolidated financial statements of the Company, as derived from the financial statements of Minera Yanacocha
S.R.L., the Company´s investment and share in the net income in this entity amount to approximately S/1,101.0 million and
S/1,152.2 million at December 31, 2003 and 2004, and S/361.5 million, S/515.7 million and S/583.3 million for the years ended
December 31, 2002, 2003 and 2004, respectively.
2. We conducted our audits in accordance with auditing standards generally accepted in Peru. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the independent
auditors of Minera Yanacocha S.R.L. provide a reasonable basis for our opinion.
3. The financial statements of Compañía de Minas Buenaventura S.A.A. were prepared to comply with legal requirements
effective in Peru, regarding the presentation of financial information to shareholders and to the Comisión Nacional Supervisora
de Empresas y Valores-CONASEV (National Supervisory Commission for Companies and Securities), and reflect the
investments in its subsidiaries and affiliates at equity value as of December 31, 2003 and 2004, and not on a consolidated basis.
Therefore, the financial statements herein should be read together with the consolidated financial statements of the Company and
its subsidiaries, presented separately, on which we have issued an unqualified opinion on February 18, 2005.
4. In our opinion, based on our audits and the report of the independent auditors of Minera Yanacocha S.R.L., the financial
statements referred to above, prepared for the purposes indicated in the previous paragraph, present fairly, in all material
respects, the financial position of Compañía de Minas Buenaventura S.A.A. as of December 31, 2003 and 2004, and the results
of its operations and its cash flows for the years ended December 31, 2002, 2003 and 2004, in conformity with accounting
principles generally accepted in Peru.
5. Effective January 1, 2003, the Company adopted the IAS 39, Financial Instruments - Recognition and Measurement, and
together with its affiliate Minera Yanacocha S.R.L., modified its accounting policy to record its long-lived assets retirement
obligations, see notes 2 and 3 to the financial statements.
Countersigned by:
Víctor Burga
C.P.C. Register No.14859
Lima, Peru,
February 18, 2005
68
BALANCE SHEETS
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
As of December 31, 2003 and 2004
Note
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
Assets
Current assets
Cash and cash equivalents
6
Investment funds
7
Trade accounts receivable
8
Other accounts receivable, net
9
Accounts receivable from subsidiaries and affiliates
34
Inventories, net
10
Current portion of prepaid tax and expenses
11
Derivative instruments
Total current assets
Long-term accounts receivable from subsidiaries
34
Investments in shares
12
Property, plant and equipment, net
13
Development costs, net
14
Mining concessions and goodwill, net
15
Deferred income tax and workers’ profit sharing asset, net
28
Total assets
Liabilities and shareholders’ equity, net
Current liabilities
Trade accounts payable
16
Other current liabilities
17
Accounts payable to subsidiaries and affiliates
34
Derivative instruments
31
Deferred income from sale of future production
31
Total current liabilities
Other long-term liabilities
17
Derivative instruments
31
Deferred income from sale of future production
31
Total liabilities
Shareholders’ equity, net
18
Capital stock, net of treasury shares by S/49,659,000
in 2003 and 2004
Investment shares, net of treasury shares by S/66,000
in 2003 and 2004
Additional capital
Legal reserve
Retained earnings
Cumulative translation loss
Cumulative unrealized gain on investments in shares carried at fair value
Cumulative unrealized loss on derivative instruments
Deferred income from sale of future production of subsidiary
Total shareholders’ equity, net
Total liabilities and shareholders’ equity, net
2003
2004
2004
(Note 4)
S/. 389,643
54,881
55,684
14,831
13,095
55,529
30,073
3,525
617,261
7,905
1,748,900
191,557
76,801
35,554
297,065
2,975,043
S/. 303,887
52,155
64,252
5,478
14,704
47,909
30,460
518,845
46,107
2,193,150
200,758
98,385
30,812
255,407
3,343,464
US$ 92,564
15,886
19,571
1,669
4,479
14,593
9,278
158,040
14,044
668,032
61,151
29,968
9,385
77,797
1,018,417
19,890
48,122
43,981
77,903
68,841
258,737
62,210
307,826
641,122
1,269,895
30,855
80,368
18,453
70,927
72,313
272,916
53,791
267,852
568,772
1,163,331
9,398
24,480
5,621
21,604
22,027
83,130
16,385
81,588
173,248
354,351
596,755
596,755
181,771
1,683
610,659
99,286
223,373
(29,395)
209,130
(6,343)
1,705,148
2,975,043
1,683
610,659
129,276
734,059
(148,513)
256,331
(117)
2,180,133
3,343,464
513
186,006
39,377
223,594
(45,237)
78,078
(36)
664,066
1,018,417
These balance sheets have been extracted and translated into English from the 2004 annual report of Compañía de Minas Buenaventura S.A.A., originally
issued in Spanish language.
69
STATEMENTS OF INCOME
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
For the years ended December 31, 2002, 2003 and 2004
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
Operating revenues
Net sales
Royalties income
Total revenues
Costs of operation
Operating costs
Exploration and development costs in operational mining sites
Depreciation
Total costs of operation
Gross margin
Operating expenses
General and administrative
Exploration costs in non-operational mining sites
Royalties to third parties
Selling
Royalties to the Peruvian Government
Asset impairment loss and write-off
Total operating expenses
Operating income (expense)
Other income (expenses), net
Share in subsidiaries and affiliates
Gain (loss) from change in the fair value
of derivative instruments
Realized gain (loss) in derivative instruments
Realized income from sale of future production
Interest income
Interest expense
Gain (loss) from exposure to inflation
Amortization of mining concessions and goodwill
Other, net
Total other income (expenses), net
Income (expense) before workers’
profit sharing, income tax, and cumulative
effect of accounting change
Provision for workers’ profit sharing
Provision for income tax
Income before cumulative effect
of accounting change
Cumulative effect of accounting change
for mine closing costs
Net income
Basic and diluted earnings per share before
cumulative effect of accounting change,
stated in Peruvian nuevos soles and U.S. dollars
Cumulative effect of accounting change
for mine closing costs
Basic and diluted earnings per share,
stated in nuevos soles and U.S. dollars
Weighted average number of shares outstanding
Note
2002
2003
2004
2004
(Note 4)
20
34(a)
S/. 412,107
6,755
418,862
S/. 521,862
8,614
530,476
S/. 683,599
9,377
692,976
US$ 208,224
2,856
211,080
21
22
13(c)
239,959
50,098
19,606
309,663
109,199
275,402
56,989
20,955
353,346
177,130
332,290
90,332
28,068
450,690
242,286
101,215
27,515
8,550
137,280
73,800
23
24
33(b)
25
17(d)
56,096
31,833
13,560
14,020
150
115,659
(6,460)
96,043
45,225
22,869
15,028
361
179,526
(2,396)
56,753
46,821
22,706
6,200
4,346
136,826
105,460
17,287
14,261
6,916
1,889
1,324
41,677
32,123
12(f)
382,373
627,888
624,624
190,260
31
31
31
26
26
44,760
14,179
(1,442)
(3,187)
(6,374)
(4,119)
426,190
(643,694)
(19,020)
9,421
(202)
825
(4,550)
(10,220)
(39,552)
11,233
(70,430)
68,837
9,385
(1,022)
(18,464)
(4,742)
(3,560)
615,861
3,421
(21,453)
20,968
2,859
(311)
(5,624)
(1,444)
(1,085)
187,591
419,730
-
(41,948)
62,896
228,834
721,321
(9,254)
(31,927)
219,714
(2,819)
(9,725)
419,730
249,782
680,140
207,170
3
419,730
(72,295)
177,487
680,140
207,170
29
3.30
1.96
5.35
1.63
-
(0.57)
-
-
3.30
127,236,219
1.39
127,236,219
5.35
127,236,219
1.63
127,236,219
15
27
28(b)
28(b)
29
These statements have been extracted and translated into English from the 2004 annual report of Compañía de Minas Buenaventura S.A.A., originally issued
in Spanish language.
70
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
For the years ended December 31, 2002, 2003 and 2004
(Stated in thousands of
Peruvian Nuevos Soles)
Number
of
Common Investment Additional Legal Retained
shares
shares
shares Capital reserve earnings
Balance as of
January 1st, 2002
126,235,832
Declared and paid dividends,
note 18(f)
Capitalization of retained
earnings, note 18(a) and 18(b)
Transfer to legal reserve
Gain from sale of ADR’s, note 18(e)
644,000
Purchase of investment
shares by subsidiary
Cumulative gain for translation
of investment in Minera Yanacocha S.R.L.,
maintained through Compañía
Minera Condesa S.A., note 18(g)
Increase of nominal value
of treasury shares maintained
by subsidiary
Net income
Balance as of
December 31, 2002
126,879,832
Declared and paid dividends,
note 18(f)
Investments in shares maintained
at fair value, note 2(e)
Loss in the initial valuation of investments
in shares maintained at fair value, note 2(q)
Gain in the initial valuation of
derivative instruments classified as
hedging instruments held by
subsidiary, note 2(q)
Loss from change in the fair value
of derivative instruments classified
as hedging instruments held by
subsidiary, note 31(a)
Transfer to legal reserve
Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
mantained through Compañía
Minera Condesa S.A., note 18(g)
Net income
Balance as of December
31, 2003
126,879,832
Declared and paid dividends,
note 18(f)
Investments in shares maintained
at fair value, note 2(e)
Change in the fair value of derivative
instruments classified as hedging
instruments held by subsidiary,note 31(a)
Transfer due to change in the terms of
certain derivative contracts of a subsidiary
Realized revenue from sale of
future production of subsidiary
Transfer to legal reserve
Others
Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
maintained through Compañía
Minera Condesa S.A., note 18(g)
Net income
Balance as of December
31, 2004
126,879,832
S/.181,777 S/.533 S/.552,019 S/.39,563 S/.840,481
Cumulative
Cumulative unrealized gain
translation on investments
in shares carried
gain
at fair value
(loss)
Cumulative
unrealized
loss on
derivative
instruments
Deferred
income from
sale of future
production
of subsidiary Total
S/.6,315
S/. -
S/. -
(81,556)
-
-
-
-
(81,556)
- (449,736)
- 41,974 (41,974)
24,267
-
-
-
-
-
25,192
-
-
S/. - S/.1,620,688
-
-
448,520
925
1,216
-
-
(14)
(146)
-
-
-
-
-
-
(160)
-
-
-
-
-
1,054
-
-
-
1,054
(34,467)
-
(52)
-
34,519
-
-
419,730
-
-
-
-
419,730
596,755
1,683
610,659 81,537
686,945
7,369
-
-
-
1,984,948
-
-
-
- (159,164)
-
-
-
-
(159,164)
-
-
-
-
(5,957)
-
209,130
-
-
203,173
-
-
-
- (458,189)
-
-
-
-
(458,189)
-
-
-
-
-
-
-
1,742
-
1,742
-
-
- 17,749
(17,749)
-
-
(8,085)
-
-
(8,085)
-
-
-
-
-
177,487
(36,764)
-
-
-
-
(36,764)
177,487
596,755
1,683
610,659 99,286
223,373
(29,395)
209,130
(6,343)
-
1,705,148
-
-
-
- (139,464)
-
-
-
-
(139,464)
-
-
-
-
-
-
47,201
-
-
47,201
-
-
-
-
-
-
-
4,621
-
4,621
-
-
-
-
-
-
-
1,722
(1,722)
-
-
-
- 29,990
-
(29,990)
-
-
-
-
682
923
682
923
-
-
-
-
- (119,118)
680,140
-
-
-
-
(119,118)
680,140
596,755
1,683
610,659 129,276
734,059 (148,513)
256,331
-
(117)
2,180,133
These statements have been extracted and translated into English from the 2004 annual report of Compañía de Minas Buenaventura S.A.A., originally issued in Spanish language.
71
STATEMENTS OF CASH FLOWS
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
For the years ended December 31, 2002, 2003 and 2004
2002
(Stated in thousands of Peruvian Nuevos Soles and U.S. dollars)
Operating activities
Collection from customers
S/. 416,467
Collection of dividends
10,154
Collection of royalties
6,755
Collection of interest
14,502
Payments to suppliers and third parties
(245,635)
Payments of exploration expenditures
(73,417)
Payments to employees
(73,724)
Payments of royalties
(13,203)
Payments of income tax
(9,284)
Payments of interest
(1,811)
Net cash provided by operating activities
30,804
Investing activities
Collections (payments) from derivative instruments settled, net
44,760
Decrease (increase) of accounts receivable from subsidiaries and affiliates
150,694
Development expenditures
(23,687)
Purchase of plant and equipment
(36,671)
Increase on time deposit in local currency
Payments by purchase of investments in shares
(11,546)
Proceeds from sale of plant and equipment
2,288
Proceeds from sale of investments in shares
Increase of investment fund
Net cash provided by (used in) investing activities
125,838
Financing activities
Payments of dividends
(78,528)
Decrease of bank loans, net
(70,876)
Net cash used in financing activities
(149,404)
Net increase (decrease) in cash and cash equivalents during the year
7,238
Cash and cash equivalents at beginning of year
81,549
Cash and cash equivalents at year-end
88,787
Reconciliation of net income to net cash provided by operating activities
Net income
419,730
Add (deduct)
Depreciation
21,244
Provision for deferred income tax and workers’ profit sharing, note 28(a)
Amortization of development costs
8,514
Loss (gain) from exposure to inflation
3,187
Current income tax and workers’ profit sharing expenses
Amortization of mining concessions and goodwill
6,374
Accretion expense
Slow moving and obsolescence supplies reserve
150
Officers’ compensation, note 17
6,744
Ingreso por participación en los resultados de las empresas
Share in subsidiaries and affiliated companies, net of dividends
(372,219)
Income from sale of future production
Loss (gain) from change in the fair value of derivative instruments
Gain from change in the fair value of investment fund
Gain on sale of plant and equipment
(1,496)
Allowance for doubtful accounts
329
Cumulative effect of accounting change
Net changes in assets and liabilities accounts
Decrease (increase) of operating assets Trade and other accounts receivable
(41,080)
Inventories
(3,042)
Prepaid taxes and expenses
(16,260)
Increase (decrease) of operating liabilities Trade accounts payable and other current liabilities
(1,371)
Net cash provided by operating activities
30,804
Transactions that do not affect cash flows:
Payment of dividends through common shares of Sociedad Minera El Brocal S.A.A., note 18(f) 3,028
Increase of the book value of long-lived assets
Capitalization of accounts receivable from Compañía Minera Colquirrumi S.A.
-
2003
S/. 508,007
547,356
8,614
11,668
(293,516)
(91,291)
(74,693)
(22,346)
(11,046)
(203)
582,550
2004
2004
(Note 4)
S/. 675,031 US$ 205,614
146,605
44,656
9,282
2,827
9,089
2,769
(357,324)
(108,841)
(105,847)
(32,241)
(77,635)
(23,648)
(23,291)
(7,094)
(14,564)
(4,436)
(1,022)
(311)
260,324
79,295
(19,020)
45,640
(32,685)
(46,923)
(4,663)
1,274
(53,068)
(109,445)
(70,430)
(51,311)
(35,143)
(30,665)
(24,255)
(8,299)
469
330
(219,304)
(21,453)
(15,629)
(10,705)
(9,341)
(7,388)
(2,528)
143
101
(66,800)
(172,249)
(172,249)
300,856
88,787
389,643
(151,031)
(151,031)
(110,011)
389,643
279,632
(46,004)
(46,004)
(33,509)
118,685
85,176
177,487
680,140
207,170
22,324
(291,730)
10,553
(825)
4,550
2,795
361
49,594
28,357
27,838
27,547
18,464
13,343
4,742
2,555
2,426
2,135
8,638
8,479
8,391
5,624
4,065
1,444
778
739
650
(80,533)
643,694
(1,813)
(1,030)
307
72,295
(482,890)
(68,837)
(11,233)
(2,529)
(203)
-
(147,088)
(20,968)
(3,421)
(770)
(62)
-
(19,759)
(3,391)
(13,911)
221
4,528
(10,732)
67
1,379
(3,269)
11,582
582,550
24,452
260,324
7,449
79,295
4,566
-
20,818
11,595
6,341
3,532
These statements have been extracted and translated into English from the 2004 annual report of Compañía de Minas Buenaventura S.A.A., originally issued
in Spanish language.
72
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
Management
Alberto Benavides
Chairman of the Board
Roque Benavides
President & CEO
Since 22/02/01
Raúl Benavides
Carlos Gálvez
Mario Santillán
César Vidal
Vice President Bussiness Development
Vice President & CFO
Vice President Operations
Vice President Explorations
Since
Since
Since
Since
Humberto Rodríguez
Comptroller
Since 01/01/84
Jaime Ayllón
Fernando Espá
Isaac Galarza
Alejandro Hermoza
Mario Palla
Bernardo Rubio
Federico Zúñiga
Assistant Manager for IT Systems
Assistant Manager for Commercialization
Assistant Manager for Logistics
Assistant Manager for Administration and Human Resources
Assistant Manager for Environmental and Social Affairs
Assistant Manager for Concentration Plant
Assistant Manager for Accounting
Since 01/01/02
Since 01/01/93
Since 01/01/94
Since 16/06/03
Since 01/07/03
Since 01/06/95
Since 01/01/84
Julio Meza
Chief Geologist
Since 01/07/04
Carlos Rodríguez
Safety Director
Luis de la Cruz
Head of Metallurgical Projects and
Officer in Charge of Environmental Auditing
Julcani
Felix Lewandowsky
Orlando Quintanilla
Mario Calderón
Mario Loayza
Juan Carlos Vargas
General Superintendent
Assistant Superintendent
Head of Unit Geologists
Head of Concentration Plant
Head of Human Resources
Uchucchacua
Daniel Briones
Jose Luis Ilizarbe
Marco Oyanguren
Raúl Goicochea
Angel Sabastizagal
Jorge Páez
Alejandro Merino
General Superintendent
Assistant Superintendent
Mine Superintendent
Concentration Plant Superintendent
Head of Unit Geologists
Unit Accountant
Head of Human Resources
Orcopampa
Julio Rojas
Máximo Castro
Luis Sanchez
Eduardo Castro
Luis Gamarra
Percy Cárdenas
Luis Góngora
General Superintendent
Assistant Superintendent
Mine Superintendent
Concentration Plant Superintendent
Head of Unit Geologists
Unit Accountant
Head of Human Resources
73
01/07/97
22/02/01
01/05/97
02/01/96
BOARD AND MANAGEMENT RESUME
Alberto Benavides, Chairman of the Board* and member of the Compensations Committee. He is a graduate of the UNI (Mining
Engineering), and Harvard University (MSc in Geology) where he also followed the Advanced Management Program offered by the
Harvard Business School. He worked for the Cerro de Pasco Corporation and has served as Director for a number of companies and
institutions, amongst which is the Banco Central de Reserva del Perú.
Norman Anderson, Director*. Graduated from the University of Manitoba as a Geological Engineer. He has worked for AMAX and
Cyprus Amax Inc. and served as Executive Chairman for Cominco.
Luis Coleridge, Director*. Member of the Auditing Committee. A graduate of the UNMSM, he holds a degree in Economic and
Marketing Sciences and Accounting in addition to a PhD. He was partner of Arthur Andersen & Co. and professor at the UNMSM.
Carlos H. Plenge, Director*. Member of the Compensations Committee and the Auditing Committee. He graduated from the
University of Missouri-Rolla with a Mining Engineering degree, and holds an MSc degree in Minerals from the School of Mines of
Montana. He has also worked in the Cerro de Pasco Corporation. He has served as consultant for a series of mining companies and
is Director of 2 subsidiary companies.
Felipe Ortiz-de-Zevallos, Director*, Compensations Committee and the Auditing Committee. He graduated from the UNI with
an Industrial Engineering Degree, holds an MBA for Information Systems from the University of Rochester and completed the
Harvard’s Business School’s OPM program. Apart from his numerous academic and executive activities, he is Founder and President
of Grupo APOYO since 1977.
Aubrey Paverd, Director*. He is a graduate of Rhodes University (BSc and MSc), and of James Cook University of North Queensland
(PhD). He worked with the Newmont Mining Corp. for 21 years, where he was appointed Vice President for Explorations, and was also
involved with North Ltd. He presently works as a Private Consultant.
Roque Benavides, Director* - President and CEO. He graduated as a Civil Engineer from the PUCP. He holds a MBA from Henley,
completed the Management Development Program at Harvard Business School and the Advanced Management Program at
Templeton College. He has worked at Buenaventura since 1977; is Director of 7 subsidiary companies and was President of SNMPE
and CONFIEP.
Carlos E. Gálvez, Vice President and CFO. He is a graduate of UNFV (BA in Economics) and of the UP (MBA), as well as completing
the Management Development Program at Harvard Business School. He has worked at Banco Minero del Perú and has worked in
Buenaventura since 1978. He is Director of 4 subsidiaries.
Raúl Benavides, Vice President Business Development. He holds a BA in Mining Engineering from the University of MissouriRolla, a Masters Degree in Mining Management from Pennsylvania State University and he completed the Advanced Management
Program at Harvard Business School. He has worked in Buenaventura since 1980 and is Director of 12 related companies.
Mario Santillán, Vice President Operations. He is a Mining Engineer from the UNI, with courses in Mines and Business Management
at PUCP, UNI, UP and Colorado School of Mines. He worked in the Yuritala Mine and has worked in Buenaventura since 1970.
César E. Vidal, Vice President Explorations. He is a graduate of the UNI (BA in Geology), of the University of Liverpool (Ph.D.), and
Heidelberg University (post-doctorate degree). Former employment includes working at Buenaventura Ingenieros and being an
independent consultant for a number of mining companies. He has worked in Buenaventura since 1996, and is currently also
Director of 2 subsidiary companies and Vice President of the Society of Economic Geologists Foundation.
José Miguel Morales, Chief Lawyer since 1973 and graduate of the PUCP Law School. He completed the Training Program at
Stanford University’s Business School. He has been a Partner of the Estudio Aurelio García Sayán Law Firm since 1973 and is Director
of 5 subsidiaries and other companies. He is a former President of SNMPE.
Carlos Humberto Rodríguez. Comptroller. BA in Economic, Marketing and Accounting Sciences from PUCP, with Business Studies
at the U. de Piura. He has worked in Petrolera Amotape S. A , Cyanamid Peruana S. A and has been working in Buenaventura since 1975.
He is currently Secretary of the Auditing Committee and Ethics Officer for Buenaventura.
* All Directors are members of the Committees of Corporate Governance and Nomination.
74
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
Securities Market Information
Buenaventura’s Common and Investment Shares have been listed and traded in the Lima Stock Exchange since 1871 and 1979
respectively.
The Company’s American Depositary Receipts have been listed and traded in the New York Stock Exchange since March 16, 1996,
under the symbol of BVN.
Since the beginning of the ADR program and up to November 12, 2003 each ADS equaled 2 Common Shares and as from
November 13, 2003 their value was changed to 1 ADS equals 1 Common Share.
Shareholders and their respective nationalities (only includes shareholders controlling more than 5% interest as of December 31, 2004).
Name
Interest Participation %
Alberto Benavides
Fidelity Management & Research Co.
Compañía Minera Condesa S. A.
Merrill Lynch Investment Managers Ltd. (UK)
Total
14.022
8.614
7.687
6.089
36.412
Nationality
Peruvian
North American
Peruvian
British
Shareholding Structure, Common Shares with Voting Rights as of December 31, 2004
% of Shares
Number of Shareholders
Less than 1%
Between 1% - 5%
Between 5% - 10%
More than 10%
Total
1,601
21
3
1
1,626
Interest participation in %
21.32
42.27
22.39
14.02
100.00
Shareholding Structure, Investment Shares as of December 31, 2004
% of Shares
Number of Shareholders
Less than 1%
Between 1% - 5%
Between 5% - 10%
More than 10%
Total
1,168
5
1
2
1,176
75
Interest participation in %
49.06
13.21
7.20
30.53
100.00
COMPAÑIA DE MINAS BUENAVENTURA S.A.A.
Corporate information
Compañía de Minas Buenaventura S.A.A.
Daniel Dominguez
Telephone:
(511) 419 2536
E-mail:
[email protected]
I-Advize Corporate Communications, Inc
Melanie Carpenter / Pete Majeski
Telephone:
(212) 406 3690
E-mail:
[email protected]
[email protected]
Desing, Pre Prensa and Printer: Impresso Gráfica S.A.
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Vision 2014
Buenaventura is a globally competitive mining - metallurgical corporation. We are a leading company in
terms of safety, creating opportunities which contribute to the integrated development of our team of
professionals, maximizing profitability and enhancing shareholder value. Buenaventura is fully committed
to responsible practices in the environment and to contributing to the sustainable development of the
communities in which it operates.
Mission
-
To form and maintain a multidisciplinary team of quality people for corporate excellence.
-
To execute mining–metallurgical operations safely and efficiently, applying the highest standards in the
industry.
-
To promote growth and organizational development, primarily through explorations and metallurgical
research.
-
To seek joint businesses with similar world-class companies overseas.
-
To acquire and develop mining assets in Latin America.
-
To diversify into the production of other metals or industrial minerals.
-
To maintain contact with and transmit an attitude of transparency with our shareholders, authorities and
other stakeholders.
-
To apply the best practices of Corporate Governance.
-
To achieve environmental excellence with respect to operations and explorations.
-
To develop and promote strategical alliances with the communities in which we operate, participating
actively towards their sustainable development.
-
To attain a work environment that promotes human and professional development in all of the company’s
areas of work.
Values
-
Integrity
-
Diligence
-
Loyalty
-
Respect
-
Honesty
-
Transparency
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