BUENAVENTURA INGLESok 2005

Transcription

Contents
2 Letter to shareholders
5 Operations
9 Health, safety, environment and community
12 Subsidiaries and affiliates
18 Explorations
21 Financial, economic and corporate matters report
23 Management analysis and discussion
32 Financial statements
68 Corporate information
Solid operating and financial results
Annual Report
2005
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 Sociedad Minera Cerro Verde S.A.A, an important
copper company in Perú, 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 2005. Without detriment to the issuer’s liability, the undersigned assume full
responsibility for its content in conformity with the applicable legislation.
Roque Benavides Ganoza
Carlos E. Gálvez Pinillos
President and CEO
Vice - President and CFO
1
CHAIRMAN’S
LETTER
governance practices, which have maintained constant
contact with our shareholders, while carrying out
activities in the most open and transparent manners
possible. We also believe that the strategy of
standardizing the rights and obligations of the two
classes of shares that we had in 1996 by replacing them
with one, “common” class of shares has significantly
contributed to an increase in Buenaventura’s share
value and liquidity.
Dear Fellow Shareholders,
Nearly a decade ago, on May 15, 1996, to be precise,
Buenaventura listed its shares on the New York Stock
Exchange. As mentioned in our 1996 Annual Report,
May 15th was indeed a memorable day for all of us who
work at Buenaventura. After 43 years in the mining
industry, we became the first Latin American mining
company to trade on the New York Stock Exchange. Just
as significant as being listed on the prestigious NYSE,
or perhaps more important, was the favorable response
by investors who enthusiastically purchased the
Buenaventura’s American Depository Receipts (ADRs).
Results from operations have been good, not only as a
result of higher international precious metals prices for
the specific metals we produce, but also due to our
increased levels of production and the promising results
of our successful explorations campaigns. These have
resulted in the discovery of additional ore tonnages,
which are considerably greater than those extracted
during the year translating into higher reserves in three
of our mines: Julcani, Orcopampa and Uchucchacua.
Today, at the time of drafting this letter for the 2005
Annual Report, we can say with great satisfaction that
our shares have been widely accepted by the market
and the price of our shares has gained considerably.
On the occasion of our 10th anniversary on the NYSE,
we were invited for a second time– the first was in 2003
when Buenaventura S.A.A. celebrated its golden jubilee
– to ring the NYSE’s Closing Bell to mark the closing of
trading on March 6, 2006. We accepted the invitation
with great pride, and wish to express our gratitude to
the New York Stock Exchange’s Management for this
gesture of recognition.
Special mention should be made to the construction
of the hydro-metallurgical circuit for the
complementary treatment of ore from Uchucchacua,
the completion of which is scheduled for the first
quarter in 2006. In fact, we expect to have it fullyoperational by the time this Annual Report reaches our
shareholders.
At the beginning of 1996 the price of gold, our main
product, was already approaching the US$ 400 / oz
mark, which means that the increase we see today in
our share price cannot be attributed only to a rise in
the price of our products. In our opinion, the increase
in our stock price is mainly the result of two factors: First,
the prudent management of operations, discussed in
greater detail later on in this Annual Report, has resulted
in a progressive production increase, and secondly, it is
a reflection of the result of meticulous corporate
In connection with our search for technological
innovations for the complementary treatment of these
minerals, we have already had the opportunity to
experiment with the hydro-metallurgical process using
oxidized ores with promising results. We subsequently
proceeded to review the old mine workings where we
stopped exploitation work upon encountering oxides
that were not amenable for flotation. It would appear
that we have large reserves of these oxide types, which
can now be treated using this new circuit.
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BOARD OF
DIRECTORS
Alberto Benavides Q., Chairman of the Board
Norman Anderson L.
Roque Benavides G.
Luis Coleridge A.
Felipe Ortiz de Zevallos M.
Aubrey L. Paverd
Carlos Plenge W. (until March 2005)
Germán Suárez Ch. (as from March 2005)
Buenaventura’s ADS Performance
We think that it is of interest to our shareholders to
know that throughout the course of the last five
years, our Chipmo mine in Orcopampa has reached
a cumulated production of over one million ounces
of gold – undoubtedly a milestone for any gold mine.
The additional discovery of new reserves in the
Chipmo mine, our main producer, apart from other
interesting projects in its surrounding areas, have
transformed this operation into an entire mining
district with enormous potential for the future. Of
immediate interest is the development of the
Poracota area, 20 kilometers west of Orcopampa. The
Explorations chapter offers a more detailed
description of our findings in Poracota. We shall only
venture to say in this letter that we expect to
commence exploitation activities in this deposit by
mid-2006, and this should contribute to further
increases in our production. Initially it will be a smallscale operation, designed to grow gradually in the
future.
us to test different alternatives to process the minerals
found in this area. As our shareholders are well-aware,
these minerals are complex and typically contain high
levels of arsenic, which need to be eliminated in an
environmentally-friendly manner.
The subsidiary companies through which
Buenaventura manages its production activities have
functioned according to the pre-established programs.
In this context, Sociedad Minera El Brocal’s
performance has been particularly successful:
production not only increased dramatically, but was
also boosted in value terms due to high silver, lead and
zinc prices. Thanks to profitable financial results, the
Company was able to complete the construction of a
800m ramp as part of the Marcapunta Oeste ore
deposit development program.
Minera Yanacocha, is of the belief that this
extraordinarily high output cannot and should not be
maintained – and we agree. We believe that production
levels should be reduced in Minera Yanacocha to target
an average of approximately 2.5 million oz of gold, while
focusing on the installation of a plant to treat sulfide
gold ores as soon as possible. Minera Yanacocha has
already approved the construction of this plant, and it
represents an important project insofar as it will extend
the life of the mine for many more years to come.
Minera Yanacocha S.R.L., (43.65% Buenaventura)
operated by Newmont Mining Co. (51.35%) produced
3,333,088 oz gold in 2005.
We are very pleased to inform our shareholders that our
auditors at Ernst & Young consider our condition as a
“parent company”, by virtue of our 18.3% interest in
Minera Cerro Verde, to be of “significant influence”. As a
consequence, as of fourth quarter 2005, Cerro Verde’s
financial results have been included in our Financial
Furthermore, the reporting period saw the completion
of a processing plant to treat copper ore with a 1000
tpd capacity at El Brocal. This should be in operation by
mid–2006, and allow us not only to capitalize on high
copper prices, but perhaps more important, will permit
3
US$
Annual Price of Silver
Annual Price of Gold
Statements under “equity participation”. The Cerro Verde
ore deposit has mineral reserves in the order of 1,500
million tons of copper ore and promises to be a highly
profitable investment for Buenaventura.
is another heartening step forward. We hope that these
negotiations not only come to a happy end, but also
are concluded in the very short-term, hopefully before
the upcoming Presidential elections.
Apart from Buenaventura, Cerro Verde’s other
shareholders are: Phelps Dodge (53.6%), Sumitomo
(21%), and a number of local shareholders who hold
approximately a 7.2% interest.
As can be appreciated so far, the country’s economic
situation is highly satisfactory, and we expect that it will
continue to be so in the future. Notwithstanding all the
good news, the upcoming general elections scheduled
to take place in April of this year have brought a
temporary sense of uncertainty with respect to the
political future of the country. However, this is a
relatively normal occurrence in most pre-election
seasons. Nevertheless, we are confident that whatever
the outcome of these elections, the country’s economy
will continue its upward trend, and that it will at least
match, if not improve, the pace of growth experienced
over the course of the last five years.
The Peruvian economy grew at a rate of 6.7 % in 2005.
Perhaps, more important than the annual growth is the
fact that since 2001, the Peruvian economy has grown
at a constant rate of over 4% per year during the last
five years. 2005 inflation averaged 1.5% and foreign
currency reserves at the Banco Central de Reserva
reached a record high of 14,097 million U.S. Dollars. The
fiscal deficit is estimated to be in the order of 0.4% of
GDP, which signifies that in its totality, the economic
scenario is gratifying, and we hope that this trend will
continue into the future.
In closing, we would like to express our heartfelt thanks
to each and every one of our workers, engineers and all
of our collaborators for their dedication and enthusiasm
in their day-to-day work.
The construction of the Camisea gas pipeline,
transporting gas from the Peruvian jungle to the coast
has been completed. It is expected that final
completion and operation of this ambitious project will
have the effect of tilting the hydrocarbon balance which to date has been grossly deficient – by reversing
it until it shows a surplus.
We would also like to take this opportunity to express
our sincere gratitude to our shareholders for their
unfailing support and interest in our business
activities.
Xstrata’s involvement in the Las Bambas copper ore
deposit in southern Peru and CVRD’s participation in the
Bayovar phosphate deposit in the north of the country
is very encouraging. The participation of Río Tinto in the
copper ore deposit of La Granja is likewise very welcome.
On another note, the agreement reached with respect
to the Free Trade Agreement between Peru and U.S.A
Alberto Benavides de la Quintana
Chairman of the Board
4
OPERATIONS
Uchucchacua, Tunel
Principal level 4450
In 2005, the Uchucchacua, Orcopampa and Julcani
mineral containing 73,067,085 oz silver and 663,666
mining units together produced 1,348,011 DST of ore,
oz gold, increases of 34.62 %, 36.05 % and 17.57 %
recovering 11,602,470 oz of silver and 233,222 oz of
respectively.
gold. These figures, when compared with 1,285,178 DST
UCHUCCHACUA
of ore, 10,949,495 oz of silver and 211,447 oz of gold
produced in 2004, represented an increase of 4.89 % of
ore milled, 5.96 % silver content and 10.30 % gold
Total tons milled at our Uchucchacua mine amounted
content.
to 813,220 DST, mainly from the Socorro (Socorro vein
and Giovanna and Eliana ore bodies), Carmen (Rosario,
During 2005, we continued to carry out the intense
Mónica, Eva María and Rubi ore bodies) and
explorations and development campaign, originally set
Huantajalla (vein 4 A, Marión ore body and Edith)
by management, which mainly focused on the deeper
areas, producing 30,647 DST of concentrate with
levels of these three mines. Results were very
10,213,794 oz of silver content (3.88% more than the
encouraging and reserves were increased. High grade
previous year), 8,067 DST lead and 6,553 DST zinc,
gold ores continue at depth in Orcopampa’s Nazareno
compared with 795,036 DST of mineral, 9,832,393 oz
and Prometida veins, while new ore bodies were
of silver, 8,042 DST of lead and 7,477 DST of zinc
discovered (Edith and Eva María) with high silver grades
reported in 2004.
in the Uchucchacua mine.
Reserves at year-end 2005 totaled 5,423,760 DST
Work on the construction of a cyanidation plant at
with 16.38 oz/ST of silver, which translates into
Uchucchacua commenced in 2005 to increase the
88,850,722 oz of silver and reflects a 31.77% increase
mine’s production of silver.
over 2004, where we reported 67,428,304 oz silver
contained in 3,961,710 DST with 17.02 oz/ST of
Exploration work was also carried out at the brownfield
silver. These reserves include oxides (174,681 DST
projects Pozo Rico and Mallay in Uchucchacua, Layo in
with 21.70 oz/ST of silver), and zinc ore (105,419 DST
Orcopampa and at Recuperada, where we are currently
with 1.80 oz/ST of silver, 2.10 % of lead and 9.20 %
finding economic ore.
of zinc) from the Casualidad areas (Bonnie veins and
ore bodies).
Total reserves as of December 31, 2005 for the
Orcopampa, Uchucchacua, Recuperada and Julcani
New reserves (2,100,589 DST), were primarily found in
mines as well as the Pozo Rico and Layo prospects
the Giovanna and Eliana ore bodies located in the
reported 7,254,385 DST of ore with 99,407,406 oz of
Socorro area, from the Edith and Charo ore bodies
silver and 780,278 oz of gold, a significant increase
located in the Huantajalla area and from the Bonnie ore
over 2004, where we reported 5,388,680 DST of
body located in the area of Casualidad.
5
Uchucchacua,
Cyanidation plant
Oxide resources have also been estimated in addition
leach tests using high grade silver oxides mined from
to the above-mentioned reserves. These resources will
the upper stopes of the Carmen and Socorro mines.
become reserves as we advance with the development
These tests have shown that, although this mineral is
of the higher levels of the mine.
by nature refractory to the flotation process, it does
respond to cyanidation with relative ease, producing
At the Carmen mine, work has commenced to deepen
silver recoveries in the order of 60% to 80%. In the light
the main shaft down to the level 3985. A second stage
of this new possibility we decided to install a crushing
will continue deeper down until reaching the level 3940.
and milling circuit for processing this mineral and to
The plan to construct the ramps at the Carmen and
expand the capacity of the cyanidation circuit. Upon
Socorro mines and establish a level at 4000 via a 900m
completion, this facility will simultaneously treat the
long crosscut running from the main shaft to the Luz
bulk concentrates obtained from flotation and the
shaft will also continue.
oxidized mineral.
Our record-high production of 10,213,794 oz of silver
Exploration work was carried out via drilling and/or
was made possible in great measure due to the
underground workings in Uchucchacua’s brownfield
implementation of new flotation cells in the zinc, silver/
projects (Pozo Rico, Anamaray and Mallay). These
lead concentrate cleaning processes, in addition to
have produced promising results. Measured ore
putting into operation of a continuous flow analyzer.
reserves in Pozo Rico totaled 265,855 DST, containing
From the moment the flow analyzer was installed, it has
16.64 oz/ST of silver, 0.52% lead of and 0.90% of zinc.
enabled us to maintain silver/lead concentrate grades
of over 330 oz/ST of silver, recovering more than 70%
Drill holes at Anamaray have intercepted four lead, silver
of silver in the concentrates themselves, while reducing
and zinc structures. Drill hole DDH AN-05-05 intercepted
the consumption of reagents by 20%.
two major structures, one measuring 4.75m wide, with
3.09 oz/ST of silver, 0.70% of lead and 9.36% of zinc, and
In February 2005, work on the construction of the new
the other measuring 1.35m wide with 41.33 oz/ST of
silver cyanidation circuit was begun. This new process,
silver, 0.33% of lead and 1.00% of zinc. Drill hole DDH
scheduled to enter into operation in March 2006, will
AN-06-05 intercepted two stretches, one measuring
allow us to recover an additional 6% to 8% of silver in
0.85m wide, with 9.16 oz/ST of silver, 1.2 % of lead and
the form of bars. At first thought, the idea was to
2.40% of zinc, and the other measuring 0.55m wide with
produce bulk concentrate using the tailings produced
1.52 oz/ST of silver, 0.03 % of lead and 9.00 % of zinc.
by the silver/lead flotation process and then cyanideleach to extract the silver for its subsequent
The drilling campaign in Mallay was successfully
precipitation and casting into bars. Throughout the
completed and produced encouraging results.
course of the year we carried out a number of cyanide-
Exploration work included a 300m crosscut towards
6
Underground mine
drilling
Manto Izguiz at level 4420. Estimated resources in this
There is also the chance of finding new reserves in the
structure amount to 475,760 DST with 6.30 oz/ST of
East and West extensions of the Nazareno and Prometida
silver, 4.80% of lead and 9.80% of zinc.
vein alignment between levels 3540 and 3300.
ORCOPAMPA
Explorations at Layo were also very encouraging. This
deposit offers interesting prospects for finding new
Total tons milled at Orcopampa were 461,091 DST with
reserves in sulfides (gold, copper and silver), since
0.53 oz/ST of gold and 0.30 oz/ST of silver, signifying
diamond drill tests carried out in the northern sector
that production for the reporting year closed at 233,182
have intercepted three good structures (0.75m with
oz of gold in bars, which is a10.31% increase over the
12.52 oz/ST of gold, 0.70 oz/ST of silver and 0.02% of
211,388 oz of gold contained in the 431,242 DST of
copper; 0.45m with 0.03 oz/ST of gold, 18.3 oz/ST of
mineral reported for 2004.
silver and 4.46% of copper; 0.80m with 0.64 oz/ST of
gold, 21.65 oz/ST of silver and 3.41% of copper. New
Total reserves were 773,306 oz of gold, contained in
reserves found during initial workings in 2005 were
1,137,215 DST of mineral with 0.68 oz/ST of gold and 0.27
20,875 DST with 0.33 oz./ST of gold, 2.47 oz/ST of silver
oz/ST of silver, representing an overall increase of 16.52%
and 0.30% of copper.
compared with the 663,666 oz gold reported for 2004,
contained in 1,080,890 DST with 0.61 oz./ST of gold and
Metallurgical tests on diamond drill cores suggest that
0.25 oz/ST of silver. New reserves accounted for 517,416
this ore is apt for flotation. In the second quarter of 2005,
DST and mainly came from the Nazareno (Level 3490),
bulk samples were sent for metallurgical assaying
Prosperidad (Level 3440), Lucy Piso (Level 3590) and
obtaining concentrates with high grade of silver, gold
Prometida R 1 (Level 3490) veins. The construction of
and copper with recovery rates ranging between 80%
ramps by G&M permitted easier access to the areas, to
and 90%. Metallurgical research work will continue as
develope the lower levels, thereby increasing reserves.
to establish optimum operational parameters for the
flotation circuit in Orcopampa’s concentration plant
The positive results produced by the underground mine
which is currently available for use and rated to treat
workings and diamond drills, suggest that
up to 1,200 DST/day.The crushing and milling processes
mineralization in the Prometida and Nazareno veins
require adaptation to this end. This plant could also
continue at depth towards the East, at least until level
treat ore from Poracota.
3300.This information in turn leads us to determine that
JULCANI
the vertical length of mineralization lies in the order of
550m. In this context it is important that we continue
to develop ramps and shafts until reaching that level in
This mining unit milled a total of 73,700 DST of mineral
order to define and further increase our reserves.
ore with 18.80 oz/ST of silver and 2.02% of lead,
7
recovering 1,302,596 oz of silver proceeding mainly
Regarding the Recuperada area, exploration activities
from the Acchilla 2, Acchilla 7B, Manto and Jesus veins
focused on the Esperanza area to search for new
of the Acchilla mine. This represents an increase of
reserves that might justify resuming mining operations.
27.74% with respect to the 1,019,743 oz of silver
As of December 31, 2005 we measured 143,190 DST of
produced as a result of the 58,900 DST milled in 2004.
accessible mineral with 10.37 oz/ST of silver, 2.78% of
lead, 4.98% of zinc, (including the Esperanza, Camucha
Reserves at year-end 2005 totaled 168,585 DST with
and Pilar veins), compared with 110,555 DST of mineral
21.95 oz/ST of silver and 1.60% of lead, compared with
with 8.31 oz/ST of silver, 3.03% of lead and 5.35% of zinc,
102,625 DST, with 22.42 oz/ST of silver and 1.17 % of
in 2004. Additionally, we estimated 94,905 DST with 6.19
lead reported for 2004.
oz/ST of silver, 6.77% of lead and 4.86% of zinc in other
areas ( Teresita Alta, Rublo Chico, Angelica and
New reserves amounted to 139,660 DST, largely in the
Escopeta), totaling 238,095 DST with 8.71 oz/ST of silver,
Jesus, Manto, Acchilla 2, Maju and Chapi veins hosted
4.37% of lead and 4.93% of zinc. There are also resources
in the Acchilla dome.
that merit development totaling 109,770 DST with 8.50
oz/ST silver, 6.73% lead and 3.48% zinc.
Exploration activities were continued in the Jesus vein
at levels 390 and 420, where mineralization has
On the other hand, non-reserve mineral reserves
continued horizontally for a distance of roughly 500m.
located in areas currently inaccessible in the lower
We expect that it dips vertically for approximately 240m,
sections of Teresita, were estimated to be in the order
between levels 320 and level 560.
of 605,185 DST, with 2.75 oz/ST of silver, 5.87% of lead
and 8.20% of zinc. From these, 190,835 DST is proven-
The Acchilla 2 and Manto veins are also expected to
probable ore and 414,350 DST is prospective mineral
plunge deeper to level 560, and will require the
indicated by drill holes.
construction of a new shaft on crosscut 986 S, of level
460, down to at least level 560. In order to ensure the
In the Hallazgo area, there is a group of veins with silver,
feasibility of this, it will be necessary to cut vertical drill
lead and zinc mineralization emplaced by a dioritic
holes in the section where the new shaft (possible
intrusive. Exploration in search of new reserves will be
volcanic neck) would be built.
prioritized here.
In view of the encouraging results obtained from the
Remnants of old mine workings in the areas of
exploration work conducted on the Acchilla dome veins,
Carhuancho and Trapiche, together with information on
we have begun to explore other structures in the
mining activity of this particular area in colonial times,
Condoray – Taype domes, as well as in the area between
would appear to make Recuperada’s brownfields a
these two domes and Acchilla.
priority target worth studying and exploring.
8
HEALTH, SAFETY, ENVIRONMENT
AND COMMUNITY RELATIONS (HSEC)
SAFETY
Some of these activities included: safety audits
conducted by a renowned international company;
Unfortunately, 2005 was characterized by a rise in
contracting experts in geomechanics; workshops
disabling and fatal accidents in workplace. We are taking
organized by professionals in this particular field
a series of measures to prevent this from occurring
directed at workers on family and job-related issues;
again in the future.
participation of our mining squads in the 2nd
National Rescue Competition; educational trips of
The three main causes of accidents affecting our mines
mining engineers to the USA’s Mining Safety
and projects were rock blasting, road accidents and
Academy and trips to visit operations in Mexico.
rockslides. We are now implementing intensive safety
Buenaventura also acquired equipment to carry out
campaigns designed to prevent these incidents.
electromagnetic inspections of shaft cables and
others.
Throughout the course of 2005 we continued to
implement an intensive program of activities aimed at
The company considers that every accident is
achieving a culture of safety at all levels. It is thanks to
preventable and will make its best effort to reach and
this that we have managed to meet our company’s
maintain a goal of zero accidents in all mining
Safety and Environment objectives.
operations and projects.
9
Paton, environmental
activities
ENVIRONMENT
Our contributions are channeled through agreements
with local and regional governments. With respect to
energy, we are supporting the execution of studies and
initiatives related to rural electrification to benefit towns
and settlements located in the areas surrounding our
mining operations and projects. This is done through
agreements with the communities themselves and the
respective local and regional governments.
During 2005, we continued to carry out our mining
activities in accordance with the Environmental
Management System (EMS) and ISO 14001 standards
in all of our operations. The EMS was revalidated in the
Uchucchacua mine and re-certified in Orcopampa,
through the active participation of Germanischer
Lloyd. At Julcani, with the support of Qualitas
Consultores, we are beginning to implement the EMS
as part of the site’s Closure Plan.
2 Water and Forestation
Company policy on the use of water enforces maximum
optimization in the productive process. Permanent
recirculation of water has made it possible for us to
reduce our water consumption in the productive process.
The company has also supported the surrounding
villages by helping them with infrastructure and by
installing potable water systems. With regard to
forestation, Buenaventura has established a number of
nurseries in conjunction with the communities,
authorities and local governments. The idea is to reach
mutually beneficial agreements designed to contribute
to the improvement of the people’s living conditions.
We have amended and drafted the Mine Closure Plans at
feasibility level for both the mining units and exploration
projects, respectively. To this end, the company has entered
into agreements with experienced specialist companies
that are duly authorized to undertake such work by
Peruvian mining authorities. Once completed, these Plans
will be submitted to the Ministry of Energy and Mines
during the second and third quarter 2006.
Environmental permits have been obtained or renewed
for a number of different exploration projects, some of
which are due to commence activities and others whose
permits had expired.
3 Agro-Industry and Tourism
COMMUNITY RELATIONS
We are fully aware that mining activity, typically located
in sites at over 3,500 m.a.s.l., will not meet the population’s
demand of job opportunities single-handedly. It is for
this reason that our efforts are focused on promoting and
improving activities related to farming, camelide-raising,
stockraising (for meat and dairy) and activities designed
to teach people to work with camelide fibers for the
textile industry. The important thing is to improve the
quality and design of the products they offer. Another
highly promising line of business is the ecological fur
industry. Ecotourism and experienced tourism are both
In 2005, Buenaventura has worked with communities in
accordance with the company’s sustainable development
policy and following four main lines of work:
1 Infrastructure
communications)
(roads,
energy
and
Regarding road infrastructure, we have supported a
series of projects to rehabilitate rural and main roads.
10
gaining more and more popularity, as many places of
interest also offer hot-springs, as well as other natural
attractions. In these projects, the company plays the part
of a strategical partner, supporting the effort by
providing services and materials.
Peasant Community of Chinche Tingo, we were able to
complete the implementation of a milk miniplant to
industrialize the area’s milk production. Another
contribution made by Buenaventura, included Brown
Swiss cattle to improve the genetics of the local stock,
thereby producing better yields.
4 Health, Nutrition and Education
In a concerted effort with the Ministry of Transport
(Provias), and other companies with operations in the
basin (Raura, Los Quenuales), we are supporting the
work to refurbish the Sayán–Oyón road. These projects
also include providing maintenance to the road that
connects Uchucchacua with Cerro de Pasco and other
rural roads.
Buenaventura also participates with the community via
supporting initiatives geared towards constructing and
improving rural schools. Another line of action is directed
towards improving the level of education, particularly in
mathematics, in various schools in Huancavelica. This also
entails organizing teacher–training courses to place more
emphasis on subjects related to environmental
protection and natural resources (especially in
connection with the mining industry). A number of
school grants have also been awarded.
Work is continuing at Orcopampa too, under the
framework of the agreement entered into with the
Peasant Community of Orcopampa. The company
provides support in the design of profiles for a series of
projects created to benefit the community annexes.
Agreements have been signed with the communities
of Chilcaymarca and Umachulco, linked to the
Orcopampa mine and the Poracota Project, respectively.
Nutrition is a particularly worrisome concern in high
altitude areas. Our intervention here is in concert with local
authorities, with courses on ways to optimize the use of
local foods, while encouraging the intake of dairy products.
As far as health is concerned, Buenaventura offers support
in the construction of medical posts together with the help
of community members themselves. The company also
works jointly with the medical posts and local authorities
to organize health campaigns in the surrounding
communities and villages. It is the State’s responsibility to
provide basic medical coverage for the Peruvian people.
Our role in this particular field is to aid the health sector in
reaching those who most need it, within our area of
influence and to the extent that it is reasonably possible.
In Huancavelica, specifically in the area of Julcani–
Recuperada, Buenaventura transferred the
Huancavelica Land Transport Terminal and the Lircay
Technological Institute to the local authorities.
In spite of restrictions that limit the activities of a number
of public institutions, we are continuing with the
agreement to improve the Chincha – Huancavelica road.
Total annual investment in community outreach
projects amounted to US$1.47 million in addition to the
payment of mining royalties, which amounted to US$
In the Uchucchacua area, and under the framework of
the agreement signed by the Pozo Rico Project with the
2.78 million in the reporting period.
11
SUBSIDIARIES AND
AFFILIATES
Yanacocha, open pit
operation
MINERA YANACOCHA S.R.L. (43.65%)
In-fill drilling in Marleny suggest the presence of
oxides, the mining of which will eventually allow us
In 2005, production at Minera Yanacocha achieved an
to connect the open pit mines of Carachugo and
all-time record of 3´333,088 oz Au.
Yanacocha Sur.
The actual cost per ounce produced increased slightly
As mentioned in the Chairman’s Letter in the first
from US$ 147 in 2004 to US$ 150 per once due to the
pages of this Annual Report, Minera Yanacocha S.R.L.
combination of rising costs of commodities and higher
has approved the construction of its first plant to
social and environmental expenditures.
process sulfides and high grade gold ores. The project
consists of grinding the ore through a single-stage
Sales posted US$ 1,490 million compared with US$
semiautogenous mill that includes a cyanidation
1,250 million in 2004. Net profits accounted for US$ 525
circuit equipped with a counter-current thickening
million, compared with US$ 390 million reported for
system. The estimated investment for this project is
year 2004 and cash flow from operations recorded US$
US$ 247.7 million and it is expected to begin
665 million, compared with US$ 543 million in 2004.
operations in early 2008. We continue to explore in
Chaquicocha and Antonio where gold in sulfides is
being found.
Total reserves for Minera Yanacocha S.R.L. as of
December 31, 2005 increased when compared with
those reported for the previous year, reserves were 32.6
Although still preliminary, drilling work in the Conga
million oz in 2005 compared with 32.2 million oz as of
project, carried out in the Gentiles porphyry, would
year-end 2004, including oxides and sulfides (see
appear to suggest that it is a major discovery. This still
Exhibits 2 and 3). Oxide resources accounted for 8.6
has to be confirmed during the course of this year.
million oz, compared with 5.9 million oz as of December
The development of the Conga project, which comprises
31, 2004.
a copper-gold porphyry located to the East of the
Plans for 2006 include reducing the company’s gold
property, has been continued and reserves have been
production to 2.6 million oz of gold. This strategical
increased by 3.1 million oz totaling 11.8 million oz in
decision was taken as a consequence of the current
reserves and 3.1 million oz in resources. Copper reserves
level of production cannot be sustainable in the long-
amount to 560,450 MT and resources 242,020 MT. Start-
run. The company arrived at this conclusion after
up of production at Conga is scheduled for 2011.
considering the growing environmental and social
restrictions affecting activities this past year, especially
Annual investment in exploration in 2005 amounted to
with respect to exploring in new areas and expanding
US$ 19.3 million. Part of this investment has yielded
the existing leach pads and mines.
interesting results, especially with regards to the
12
existence of ore deposits that are totally different from
Total metal content in the concentrates produced this
those that were found in the past.
year reported 57,147 MT of zinc, 24,080 MT of lead and
4.39 million ounces of silver, which represents a
While we do realize that the social and political situation
reduction of roughly 0.6% and 1.93% respectively for
in Cajamarca is not the most advantageous, we do think
the first two, and an increase in silver in the order of
that the local people and the authorities are beginning
32.1%, compared with the previous year.
to open up a little more and understand how our
Gross sales for the year reported S/. 234.0 million,
operations work.
(US$70.5 million), which represents an increment of
31.3%, compared with those realized in 2004.
This is the result of the company’s policy to prioritize
social and environmental aspects in and around Minera
Yanacocha’s operations. The organization continues to
Higher prices for the metals we produce, enabled us to
make efforts to come closer to the rural and urban
generate S/.79.1 million profit before taxes and worker’s
population and become involved in their concerns and
profit participation while net profit after restating the
aspirations.
accounting for deferred charges amounted to S/. 44.4
million.
As part of this effort, we have joined forces with other
mining companies operating in the region, to launch
As of December 31, 2005, estimated reserves at Tajo
proposals for economic development and getting
Norte totaled 8,386,992 DMT of proven and probable
involved the people and other private companies in
mineral, with average grades of 2.75 oz/MT of silver,
Cajamarca to work together towards the sustainable
2.01% of lead, 5.68% of zinc and 0. 07% of copper. This
development of the region.
allows us to assure another six years of operation at the
present rate of production.
SOCIEDAD MINERA EL BROCAL S.A.A.
(34.3%)
Estimated mineral resources at Tajo Norte, registered
1,420,643 tons.
Production levels in 2005 were maintained at levels
similar to those of 2004, but the installation of two high-
With respect to explorations, efforts to expand new
frequency vibrating screens and the implementation
copper resources with low arsenic content were
of five flotation cells for lead and zinc, engineered to
continued. Roughly 8,712m of diamond drills were
increase the duration of the ore flotation periods,
completed during the year.
enabled us to produce significant improvements in the
metallurgical recovery of both lead and zinc, in the last
We continued evaluating our concessions both in the
quarter of the year.
vicinity of Colquijirca as well as in Huancavelica.
13
Antapite,
underground mine
INVERSIONES MINERAS DEL SUR S.A.
(78.04%)
A geological model has been generated and
metallurgical tests have been carried out on the nonarsenical copper of the Smelter Norte sector, but we still
do not have any conclusive results. Studies will be
Inversiones Mineras del Sur S.A. operates the Antapite
continued to determine the best way to treat these
mine, located in the Huaytara province, department of
metals.
Huancavelica. In Antapite we processed 163,180 DMT
of ore during 2005, recovering 103,931 oz of gold, which
The Marcapunta Ramp has now a total length of
translates into a 7.0% improvement over the former
1,780.6m. The exploratory drainage ramp has also
year’s production. Mineral reserves reached 490,766
been driven and is now 732.3m long while the
DMT with a grade of 12.31 g/MT of gold.
Principal ramp is 976.4m long. The work was
interrupted due to adverse soil conditions, and it has
Studies and other activities are being continued so as
now been determined that this is going to require
to obtain government permission to upscale the
ongoing ground support.
capacity of the processing plant up to 1,000 MT/day.
Worker and community relations have been satisfactory
throughout the year.
Exploration work at Marcapunta Oeste will include
drilling 146 holes from the surface downwards, through
the combination of reverse circulation and diamond
Approximately 59,362 DMT of ore were mined from the
drill holes. We already have obtained the consent of the
Ishihuinca mine in 2005; gold recovered accounted to
Huaraucaca community.
23,911 oz of gold, which is 2.4% less compared to 2004’s
figures. As of December 31, 2005, ore reserves were
In the Marcapunta Norte area, the feasibility of
estimated indicate 46,675 DMT with an average grade
starting production at a rated capacity of 1,000 MT/
of 13.62 g/MT of gold. At Ishihuinca we are currently
day has already been performed. For such effects, we
exploring the area of Cordova, where we have
began rehabilitation and cleanup of the roads to
discovered up to 3 mineralized structures which are
access the mine and install the required services.
increasing the mine minable reserves.
Moreover, we have also completed the engineering
work for the construction of the grinding and
In 2005, exploration work was also started on the Hatun
flotation circuits in addition to the Environmental
Orcco Prospect located in the Huaytara province,
Impact Study and permittings required. Start-up of
department of Huancavelica. We have not yet reached
operations has been programmed for the third
prospective areas of the mine.
quarter of year 2006.
Exploration work carried out in the Arenizo prospect,
located in the Parinacochas province, department of
14
Ayacucho, did not generated encouraging results, so it
The mine has processed 64,050 DST of ore in its
was decided to go ahead and implement its Closure
concentration plant, producing 26,978 oz of gold and
Plan.
330,184 oz of silver in 2005.
COMPAÑÍA
DE
EXPLORACIONES
DESARROLLO E INVERSIONES MINERAS
S.A.C. (CEDIMIN) (100%)
BUENAVENTURA INGENIEROS S.A. (BISA)
(100%)
BISA, our engineering firm, is engaged in undertaking
CEDIMIN operates the Shila and Paula mines and
a series of different studies related to the fields of
explores the Trapiche Project in the department of
geology, mining, metallurgy, infrastructure and
Apurimac. CEDIMIN is the titleholder of mining rights
construction as well as environmental, social and
covering a total extension of 77,917 Ha.
financial studies, in connection with the mining
industry and other sectors. BISA’s core business is
After the merger between CEDIMIN and Minera Paula
targeted on the development of Integrated Projects
49 S.A.C. on December 31, 2004, a sole administrator
from Engineering and Construction Management to
was established. We are implementing now camps,
commissioning and start up of contractual “EPCM”
services, electric energy and equipping Paula to
programs. In the reporting period, Bureau Veritas del
maximize synergies with Shila. The effort focused on
Peru S.A. updated the auditing of the company’s ISO
explorations with the objective of increasing the
9001 Quality System and renewed its certification
reserves and assuring sustained production. One of
(originally obtained in 2004).
the highlights of the year was the commencement of
the construction of a crosscut adit at level 4880, 100m
BISA managed to maintain the sales levels reported
below the mine’s lowest level. To date, the adit
in 2004 despite the highly competitive market, the
measures over 1000 m long and should intercept
difference being that in 2005 the company was able
Paula’s veins at 1,750 m. This tunnel will help us to
to add on new clients outside the Buenaventura group
explore these veins and at the same time will drain
to its client portfolio. Some of BISA’s new clients
the mine.
include: Aurífera Huaylillas, Minera Miski Mayo, El
Quinde Shopping Plaza, Fluor Daniel (Ilo), JOGMEC-
Exploration is being carried out in the areas surrounding
Japan Oil , Gas and Metals National Corporation,
the Shila mine in order to use existing infrastructure.
Minera Peru Copper, Southern Perú Copper
Of particular interest is the Angela vein, which lies within
Corporation, Minera Gold Fields, Doe Run Peru,
the Ampato prospect.
Atacocha and Simsa.
15
Cerro Verde,
processing plant
SOCIEDAD MINERA CERRO VERDE S.A.A.
(18.30 %)
The technical and professional success of having this
project up and running throughout the course of this
year will moreover mean that we will be able to benefit
As mentioned in the Chairman’s Letter at the
from the high copper prices, since this is one of the first
beginning of this Annual Report, Buenaventura
large-scale projects entering into production in this
increased its participation in Sociedad Minera Cerro
particular price cycle.
Verde S.A.A. from 9.17% to 18.30% increasing the
company’s capital jointly with Sumitomo and other
The Cerro Verde mine is located 30 kilometers
minor shareholders.
southwest from the city of Arequipa, department of
Arequipa, in southern Peru.
In 2004, Sociedad Minera Cerro Verde S.A.A. decided to
CONSORCIO
ENERGÉTICO
DE
HUANCAVELICA S.A. (CONENHUA) (100 %)
install a copper sulfide flotation plant with a capacity
to treat 108,000 MTD. This new plant should enter into
production towards the end of 2006, at an estimated
annual production rate in the order of 200,000 MT of
CONENHUA, an electrical energy supply company,
copper fines contained in concentrates, which added
reported the following operation achievements for the
to the production of electrolytic copper, which in 2005
reporting period:
reported 90,914 MT, would consolidate the Cerro Verde
mine as one of the most important copper-producing
In Huancavelica CONENHUA transmitted a total of 17.5
operations in the world.
million kWh at 60 kV (51% more than in 2004).
Transmission was temporarily stopped for a total of 177
We are pleased to report that in spite of all of the
hours and 58 minutes, out of which 10 hours and 22
problems related to higher costs of materials and
minutes were due to programmed maintenance works;
the lack of some of the basic materials required for
165 hours and 27 minutes were due to failures in the
the project, our par tner Phelps Dodge, mine
SEIN (National Interconnected Electric System)
operator and majority shareholder, has successfully
attributed mainly to failure of SE Huancavelica’s power
managed to keep the project on schedule and
transformer, and 2 hours and 09 minutes as a result of
within budget. As also stated in the Chairman’s
system failures, caused largely by weather problems.
Letter, as from the capital increase realized by
Buenaventura in Cerro Verde, upgrading us to the
The Trujillo – Cajamarca Norte – La Pajuela line
position of “parent company ” of “significant
transmitted 330.6 million kWh (18% more than in 2004),
influence”, our international auditors decided to
with a total of 09 hours and 52 minutes of down-time,
report our participation in such company as “equity
out of which 8 hours and 18 minutes were due to
participation.”
programmed maintenance works, 1 hour and 14
16
Surge chamber in El Ingenio
CONENHUA
minutes were due to failure of the National
between Paragsha II and Uchucchacua, transmitted
Interconnected Electric System (SEIN) and 20 minutes
118.8 million kWh (14% more than in 2004).The
were due to own failures, caused by lightning and
service was interrupted 8 hours and 19 minutes for
extreme weather conditions. Yanacocha’s operations
programmed maintenance works and 14 hours and
were not significantly affected by these minimal
54 minutes as a result of failures produced by
interruptions.
electrical storms.
The Callalli – Ares transmission line on the other hand,
A total of 15.3 million kWh was transmitted during the
transmitted 46.8 million kWh in 2005, its first year of
reporting year through SE El Palmar, run by CONENHUA
operation, and reported a total down-time of 26 hours
(under contract with INMINSUR) to supply electrical
and 59 minutes out of which 24 hours and 47 minutes
energy to Antapite. This represents a 1% increase over
were due to programmed maintenance works and only
2004.
2 hours and 20 minutes were due to own failures
caused by electric storms, accumulation of snow in the
CONENHUA is the entity responsible for supplying
conductors or extreme weather conditions. The
electrical power to operations in the Department of
company considers that despite these failures, which
Huancavelica through its Ingenio, Huapa and
are common occurrences in all new transmission lines,
Tucsipampa hydroelectric power plants. CONENHUA’s
the supply of electrical energy has finally been
annual production suffered a slight contraction due to
consolidated and is highly beneficial for the
the lack of rainfall in 2005, and generated a total of 16.9
Orcopampa, Shila and Paula operations.
million kWh (5.5% less than in 2004). We are currently
in the process of installing a third turbine in the Ingenio
The operation currently being carried out by
Hydroelectric power plant, with a rated capacity of 660
CONENHUA under contract, for the 138 kV line
kW. The work should be concluded in April.
17
EXPLORATIONS
Exploration activities were carried out in 12
By the end of April, 2006 we expect to have the
projects. The work was focused on carrying out
information on measured minable reserves, in order to
greenfield exploration activities and on the
proceed with the scoping studies required to justify
development
mining of this deposit.
of
brownfield
projects,
in
collaboration with Operations Management. The
latter included: Pozo Rico, Anamaray and Mallay in
To date, BUENAVENTURA, has acquired 75% of the
the vicinity of Uchucchacua and Layo in the vicinity
shares of MINAS PORACOTA S.A., after exercising its
of Orcopampa.
50% option before MINERA DEL SUROESTE and 25%
before TECK-COMINCO PERU. The remaining 25%
PORACOTA PROJECT (75%)
belongs to TECK-COMINCO PERU.
We are about to complete the diamond drilling and
MARCAPUNTA PROJECT (34.3%)
underground workings program in the Huamanihuayta
sector of the Poracota project, aimed at generating
In Marcapunta we have discovered interesting
high-grade ore reserves in two stratabound lenses and
extensions in the Smelter Norte sector, where 3,200 m
one vein.
of diamond drilling in 19 drill holes have been completed,
18
Marcapunta ramp
indicating the presence of 2’020,000 DMT with 1.90 % of
in the hills of La Zanja and La Cueva, and 3) on the basis
copper of supergene copper chalcocite enrichment.
of these, restart diamond drilling to evaluate the area’s
Marcapunta Norte was also drilled by 16 drill holes
potential for disseminated copper and gold sulfides.
totaling 3,636 m. In this last campaign the objectives have
The results of the initial 1,600 m of diamond drilling in
been to systematically assay and remodel the distribution
Section 13 of the Cerro La Zanja prospect, show the
of copper, gold, silver and for the first time, arsenic.
existence of a large, relatively deep ore body, located
At Marcapunta Oeste ramp construction has been
about 100 to 300 m from the surface, with disseminated
advanced by 1,428 m in the red sandstones of the Mitu
arsenical copper and gold sulfides. The most
Group intruded by argillized dacitic dikes and sills.
representative intercepts of this mineralization assay
Furthermore, three diamond drill holes evidenced
between 0.3 and 0.8% copper with 0.3 to 0.4 g/t of gold
extensions of known mineralization, such as drill hole
for stretches from 40m to 200m long.
RB-01-05: 23.90 m with 0.19% of copper, 3.98 g/t of gold
We are currently drilling the first two drill holes in Cerro
and 0.38% of arsenic.
La Cueva, where the disseminated mineralization on
Marcapunta Project Section 360,610 E
surface is stronger and more extensive than in Cerro La
Zanja.
PROSPECTS
In the Soras prospect (22,323 Ha), located between
Orcopampa and Poracota, we drilled eight diamond drill
holes to explore the Soraya veins at the 4700 m level.
Four of these holes intersected sulfide mineralization
with copper, gold and silver with prevailing enargite in
three of them and one with chalcopyrite and
LA ZANJA PROJECT (53.06%)
tetrahedrite. Average width and grade obtained for the
Soraya vein from the four positive drill holes indicates
At La Zanja, the three principal objectives were: 1) To
on average 1.35m with 3.84% of copper, 7.45 g/t of gold
reconstruct the camp and reestablish a feeling of
and 5.89 oz/t of silver, 1.66% of arsenic, with a copper
mutual trust and respect with our neighboring
to arsenic ratio of 2:1. Soras is a highly prospective
communities. 2) To draft detailed geological maps and
target area that still needs to be explored. We
model the geochemistry and the geophysics of two
recommend continuing exploration work there to
copper (gold/molybdenum) porphyry-type prospects
identify new drill objectives.
19
A three-year agreement was signed in April 2005 with
more productive at depth below a major dip inflection
the Asociación Agrícola La Unión to carry out advanced
and we hope to increase significantly mineral resources
exploration work on the Los Pircos project, in the
in this structural zone at lower levels.
province of Santa Cruz, Cajamarca region. In September
we initiated underground workings in the Diana, Isabel
In the Trapiche porphyry, located in the region of
and Angelica veins, to convert resources indicated by
Apurímac, drill hole TR-09 intercepted 107.6 m with
trenches and drill holes into 70,000 DMT of reserves
1.05% of copper and 0.03% of molybdenum. This is the
with 21.7 g/t of gold and 10.0 oz/t of silver in an average
best result to date and demonstrates that the brecciated
width of 1.58m. Metallurgical test work showed that
porphyry hosts the best mineralization. The diamond
these resources are amenable to gravimetric separation
drilling campaign continues and we hope to increase
and cyanide leaching, with recoveries in the order of
resources in terms of tonnage as well as grade within
92% for gold and 84% for silver.
these brecciated porphyry zones.
In the Tantahuatay prospect, located in the Hualgayoc
province, of the Cajamarca region, CIA. MINERA
COIMOLACHE S.A. has resumed talks with the Chugur
Community, with a view to signing an agreement
allowing the company to close the trenches opened in
2002 and complete diamond drilling of gold oxide
resources in Cienaga Norte. Finally, geological mapping,
sampling and geophysical modeling work has been
completed in the copper (molybdenum, gold) porphyry
prospect at Peña de las Aguilas, which will be drill-tested
during 2006.
From the seven remaining prospects, three would
Worth noting too are the Rosita and Elsa veins in the
appear of greater prospectivity for the 2006 campaign.
Pampa Andino prospect, located in the Province of
El Milagro – Yuraccasa is a polymetallic metasomatic
Chincha, Ica region. These host high-grade gold and
replacement deposit in limestones within an interesting
silver shoots. Although the resource to reserve
geological setting, which includes regional faulting and
conversion is still very low, as of year-end 2005 measured
dioritic intrusives. El Papayo is a volcanogenic copper-
and indicated resources total 15,770 MT with 13.1g/t of
rich massive sulfide deposit with high grade zones at
gold and 20.4oz/t of silver. Metallurgical recoveries by a
depth. In Hualgayoc we are evaluating various
combination of gravimetry and flotation are in excess of
porphyry-type copper(gold) prospects and polymetallic
90% for gold and 80% for silver. The Rosita vein appears
ore deposits in veins or replacements in limestones.
20
FINANCIAL, ECONOMIC AND
CORPORATE MATTERS REPORT
Cía. de Minas Buenaventura S.A.A.’s total production
Silver: 400,000 oz, at the average price of US$6.00/oz
value, in adjusted terms, totaled S/.652,310,000 for 2005,
between January and August 2006.
which represents an increase from the S/.516,393,000
registered in 2004. The consolidated production value,
It is likewise important to highlight the significant cash
excluding Yanacocha and Cerro Verde, amounted to
contributions made by Orcopampa, Uchucchacua and
S/.914,677,000 for 2005, compared to S/.845,330,000 in
Antapite to the company’s overall results. These mining
the preceding year.
units increased their production levels while maintaining
cost-efficiency and competitive on a global basis.
Gold was the metal that accounted for the greatest
percentage of our production, representing 46.91%
Beginning in 1991, the company has been submitting
of total production in 2005. In order of importance,
Financial Statements adjusted for variations for the
this was followed by silver with 44.62%, lead with
Wholesale Price Index (WPI). The purpose of such an
4.19% and zinc with 4.28%.
However, after
adjustment is to reflect the effect of variations in general
consolidating the results, including our 43.65%
price levels. The methodology followed by the
interest participation in Yanacocha and our 18.21%
Company to make such adjustments is described in
interest participation in Cerro Verde as of June 2005,
Note 2 (a) of the Consolidated Financial Statements.
production percentages were as follows: gold
Consequently, the Consolidated Financial Statements
79.59%, silver 10.15%, copper 5.24% zinc 3.39% and
as of December 31, 2004, included in the Exhibit to this
lead 1.63%.
Annual Report, together with the Auditor’s report
submitted by Medina, Zaldívar, Paredes y Asociados, a
In 2005, losses in future sales registered US$9,175,165
member firm of Ernst & Young, contain the figures
compared to losses of US$16,942,463 reported in 2004.
adjusted for WPI variations for the periods 2003 and
Losses were distributed as follows:
2004.
Gold: US$ 6,840,364
However, through Resolution No.031-2004-EF/93.01
Silver: US$ 2,334,801
published May 18, 2004, effective as of 2005, the Consejo
Normativo de Contabilidad has suspended the practice
In summary, commitments for operations from
of adjusting financial statements by inflation, which
derivative financial instruments and sales contracts,
means that the balances adjusted by inflation at year-
which the company held effective at year-end 2005,
end 2004 shall be considered as the starting balances
with banks and first-class brokers are as follows:
as of January 1, 2005. Likewise, Law 28394, enacted
November 23, 2004 provides that as of 2005, financial
Gold: 2,321,000 oz, at the average price of US$369.58/
statements must no longer be adjusted by inflation for
oz between January 2006 and October 2012.
tax purposes.
21
Uchucchacua,
processing plant
Devaluation of the Nuevo Sol (local currency) in 2005
company’s consolidated accrued earnings both
was 4.57%, compared to -5.23% in 2004.
consolidated and individual begs, to date amount to
S/.1,598,716,000.
Company profit 2005, both consolidated and
individually, totaled S/.940,983,000, which compares
Both Capital Equity and Investment Shares are
with S/.680,140,000 reported in 2004, on a individual
susceptible to a capitalization of S/. 96,634,000 and
basis, and S/.685,650,000 on an consolidated basis,.
S/.260,000, respectively, (as a result of adjustment for
inflation as of December 31 2004) considering that the
As of December 2005, the Company had 1,441
amounts issued for both items total S/. 549,779,848 and
common shareholders.
S/.1,489,280, respectively.
Of these, 48.83% are
shareholders who reside in Peru and 51.17% are
shareholders who reside in foreign countries.
Finally, the New York Stock Exchange’s (NYSE) ADR
Moreover, the Company had 1,107 shareholders
program closed 2005 with 65,266,405 outstanding ADS
holding investment shares.
(1 Common Share is equivalent to 1 ADS). A total of
106,538,200 ADS were traded during 2005, which
After restating Capital Equity and Investment Share
represents 163% of total ADS issued and 84% of
accounts as of December 31, 2004, these total
Buenaventura’s total number of outstanding shares.
S/.596,755,000 (Net sum of S/.49,659,000 of Treasury
shares) and S/. 1,622,000 (Net sum of S/127,000 of Treasury
ADR performance during 2005, as well as Common Share
shares), respectively, and Legal Reserve S/.129,276,000. The
and Investment Share prices, are shown in Table 6.
22
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF THE MAIN VARIATIONS IN THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
TWELVE MONTH PERIODS ENDED DECEMBER 31, 2005 AND 2004.
1. NET SALES
d) Lead Sales: The average lead sales price increased
from US$908/MT in 2004, to US$973/MT
As of December 31, 2005 net sales totaled
in 2005. However, the total volume sold
S/. 936,595,000
of
decreased by 811 MT in 2005. The combined
S/.908,441,000 reported in 2004, representing an
effect resulted in greater revenue from sales,
increase of 3.10%. This variation is explained by the
which amounted to US$1,216,407 in the
following factors:
reporting period.
compared
with
sales
e) Deductions: During 2005, deductions for maquila
a) Gold Sales: The average sales price of
gold decreased from US$ 373/oz in 2004 to
(processing
US$ 359/oz in 2005. The volume of gold sold also
US$ 53,371,532 compared with US$ 47,676,804 in
fees)
and
penalties
totaled
experienced a slight downturn of 4,683 oz of gold,
2004, affecting sales in both years.
when compared to 2004, due primarily to
deferred gold shipments. The combined effect
f ) Hedging Operations: As of December 31, 2005,
resulted in lower income from sales, which
Sociedad Minera El Brocal S.A.A. (El Brocal) had no
reported a variance of US$ 6,641,756 compared
hedging agreements or devices in force. In 2004, it
to the previous year.
reported losses of S/. 20,158,000 in hedging
activities.
b) Silver Sales: The average sales price of silver
increased from US$6.51/oz in 2004, to US$7.38/oz
g) Energy Sales: In 2005, energy sales to third parties
in 2005. The volume of sales also grew by 264,880
amounted to S/. 17,006,000 (S/.16,829,000 in 2004).
oz./Ag from last year’s total. The combined effect
This income is mainly the result from the power
resulted in higher revenue from sales reporting a
consumption of Minera Yanacocha S.R.L.
variance of US$ 14,425,440 in 2005.
(Yanacocha) obtained from the Trujillo Norte-La
Pajuela transmission line, a service it has been
receiving since November 2001.
c) Zinc Sales: The average zinc sales price increased
from US$1,026/MT in 2004, to US$1,299/MT in
2005. However, the total volume sold decreased by
h) Mining Service Sales: In 2005, mining service sales
915 MT in 2005. The combined affect resulted in
to third parties rendered by Buenaventura
greater revenue from sales and totaled US$
Ingenieros S.A.(BISA) amounted to S/. 18,637,000
13,297,757 in 2005.
(S/. 13,224,000 in 2004).
23
Antapite,
tailing dam
2. REALIZED INCOME FROM SALE OF
FUTURE PRODUCTION
5. OPERATING EXPENSES
a) General and Administrative Expenses: This item
This income is represented by the sale of physical
experienced an increase, rising from S/76,866,000
deliveries of gold under contracts executed in 2003
in 2004 to S/112,630,000 in 2005. This was primarily
and 2005.
In 2005, this item amounted to
due to an increase in the provision for long-term
S/.92,753,000 compared with S/.68,837,000 in 2004
compensation for company employees and other
(see Note 34b).
minor outlays (see Note 26).
3. INCOME FROM ROYALTIES
b) Royalties: This item increased from S/.31,557,000
in 2004 to S/.40,350,000 in 2005, largely as a result
In 2005, royalties received by S.M.R.L Chaupiloma Dos
of increased royalty payments to the Peruvian
de Cajamarca (Chaupiloma), totaled S/.152,342,000
Government (see Note 27).
compared with S/.128,889,000 received in 2004,
representing an increase of 18.2%. This increase is
c) Sales Expenses: These were reduced from
best explained by higher sales from Yanacocha in
S/17,839,000 in 2004 to S/.15,864,000 in 2005,
2005.
due mainly to lower payments for freight
transportation of concentrates and other related
4. COSTS OF OPERATIONS
services (see Note 28).
6. OTHER INCOME EXPENSES
a) Exploration and Development in Operating
Units: This grew from S/. 127,435,000 in 2004 to
S/.136,053,000 in 2005, due to stepped-up
a) Share in affiliated companies, net: This item
exploration activity in our Orcopampa, Antapite and
totaled S/. 575,858,000 in 2004, as opposed to
Shila-Paula mines (see Note 24).
S/. 870,748,000 in 2005, and is primarily attributed
to Yanacocha’s higher profits, combined with
b) Depreciation and Amortization: This reported an
Buenaventura’s increased participation in Cerro
increase from S/.74,077,000 in 2004, to
Verde (see Note 12b).
S/.111,177,000 in 2005, due to escalating
amortizations associated with development costs
b) Loss from change in the fair value of derivative
after having reviewed the useful mine life of our
instruments: In 2005 the company posted net
presently active operations (see Note 13c).
losses amounting to S/.87,872,000 (losses of
24
7. WORKERS PROFIT SHARING
S/.58,774,000 in 2004) for changes in the fair value
from derivative operations (see Note 34a).
This item decreased from an expenditure of S/.18,356,000
c) Gain (Losses) from exposure to inflation: This
in 2004 to S/.8,569,000 in 2005. It was mainly offset by the
item reported losses of S/.9,847,000 in 2004. As for
income received in 2005, from the deferred calculation of
2005, adjustment of financial statements for
workers profit sharing for both Buenaventura employees
inflation was suspended pursuant to Resolution
and those of other subsidiaries (see Note 31a).
No.031-2004-EF/93.01 (see Note 2a).
8. INCOME TAX
d) Exchange difference gains (losses): In 2005, this
item totaled a gain of S/.1,483,000. In 2004, it
This item decreased from S/101,997,000 in 2004, to
represented losses of S/.12,636,000 and was
S/75,406,000 in 2005, due mainly to the reasons
included as part of the results of exposure to
previously mentioned (see Note 31a).
inflation in that year.
9. MINORITY INTEREST
e) Interest expenses: This item decreased by
S/1,718,000 compared to 2004, as a result of reduced
This item increased from S/.28,171,000 in 2004 to
interest payments due to fewer bank loans and
S/.66,003,000 in 2005, and was mainly attributed to
long-term debt (see Note 29).
higher profits from Inversiones Colquijirca S.A. and
Chaupiloma.
f ) Others, net.: This item increased from S/.13,505,000
10. CUMMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE DUE TO
STRIPPING COSTS
in expenses in 2004 to S/.18,305,000 in expenses in
2005, primarily a result of expenditures related to
community outreach programs, the accidental
shifting of the waste dam at Colquijirca, nonrecovered taxes and reimbursement of other items,
In 2005, El Brocal charged extraction costs of
etc. (see Note 30).
S/.10,416,000 to expenses. This item, up to this time,
had been deferred. In 2004, the treatment was similar
to that of 2005 (see Note 3b).
25
SUMMARY OF OPERATIONS 2005
TABLE Nº 1
26
RESERVES AS OF DECEMBER 31, 2005
TABLE Nº 2
Prices used to estimate reserves as of December 2005: gold US$ 400/oz, silver US$ 6.00/oz, zinc US$ 1,085 / MT, copper US$ 1.0 /Lb
and lead US$ 793/MT
27
RESERVES AS OF DECEMBER 31, 2004
TABLE Nº 3
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
28
ESTIMATES FOR NON-RESERVE MINERAL AS OF DECEMBER 31, 2005
TABLE Nº 4
29
SUMMARY OF OPERATIONS AND STATISTICAL DATA
TABLE Nº 5
30
TABLE Nº 6
ADS PRICES
MONTH
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
OPENING
US$
S/.
22.67
21.35
23.09
22.97
21.35
21.42
23.02
23.50
24.98
31.06
25.35
28.99
74.36
69.61
75.05
74.89
69.61
69.62
74.82
76.38
81.94
104.06
93.55
98.86
CLOSING
US$
S/.
21.27
23.16
22.78
21.35
21.38
22.99
23.53
24.81
31.05
25.77
28.02
28.30
MAXIMUM
US$
S/.
69.13
75.27
74.27
69.39
69.70
74.72
76.48
81.38
104.02
87.11
95.55
97.07
22.67
23.35
25.01
24.00
22.28
23.95
23.80
25.62
32.00
32.54
29.65
32.07
74.36
75.89
81.29
78.24
72.64
77.84
77.35
83.27
105.28
110.31
99.63
110.00
MINIMUM
US$
S/.
20.75
20.01
21.10
20.82
19.93
21.01
21.88
23.30
24.98
24.01
25.13
26.63
67.65
65.24
68.79
67.67
64.78
68.29
71.11
75.73
81.94
81.16
84.44
91.34
Buenaventura Common Shares (S/.)
Month
Opening
Closing
Maximum
Mínimum
Average
January
February
March
April
May
June
July
August
September
October
November
December
73.00
70.08
73.42
74.35
69.75
69.05
73.50
75.90
82.00
102.00
87.90
99.00
70.08
73.85
73.75
69.75
69.01
75.27
75.00
80.90
102.50
86.51
95.00
98.00
73.18
75.55
80.75
74.50
72.10
76.70
76.00
82.65
102.50
108.00
98.50
109.00
69.60
66.00
70.10
68.90
65.06
68.35
71.66
75.00
82.00
82.85
84.70
93.40
71.88
70.38
75.68
72.28
67.95
72.17
73.95
79.65
94.72
99.02
93.25
102.94
Buenaventura Investment Shares (S/.)
Month
January
February
March
April
May
June
July
August
September
October
November
December
Opening
Closing
Maximum
Mínimum
Average
65.00
63.00
63.00
63.00
51.00
51.00
54.00
51.30
64.00
74.00
78.00
78.00
63.50
63.62
63.62
61.00
53.00
54.00
53.58
64.00
65.00
76.45
78.63
75.00
65.65
63.62
63.62
63.00
53.00
54.06
55.00
64.00
65.00
78.00
80.70
78.00
60.00
63.00
63.00
61.00
51.00
51.00
53.00
51.30
63.00
74.00
77.00
75.00
62.47
63.43
63.31
63.00
52.83
53.64
53.35
58.03
63.98
76.00
79.66
77.80
31
AVERAGE
US$
S/.
20.38
21.05
22.83
21.41
21.47
22.91
23.60
24.81
30.63
25.91
28.02
28.30
66.65
68.63
74.43
69.59
69.78
74.46
76.70
80.64
99.55
87.58
94.43
97.07
32
CONSOLIDATED BALANCE SHEETS
COMPAÑÍA DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIES
As of December 31, 2004 and 2005
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 cur
currren
entt assets
Long - term other accounts receivable
Prepaid tax and expenses
Investment in shares
Property, plant and equipment, net
Development costs, net
Deferred stripping costs
Goodwill, net
Deferred income tax and workers’ profit sharing asset, net
Total assets
y, net
Liabilities and shar
eholders
shareholders
eholders’’ equit
equity
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 cur
currren
entt liabilities
Other long-term liabilities
Long-term debt
Total liabilities
Minority interest
eholders
hareholders
equity
Shar
y, net
Capital stock, net of treasury shares of S/49,659,000 in 2004 and 2005
Investment shares, net of treasury shares of S/66,000
in 2004 and S/127,000 in 2005
Additional capital
Legal reserve
Other reserves
Retained earnings
Cumulative translation loss
6
7
8
9
37(b)
10
11
2004
2005
2005
(Note 4)
S/. 614,862
86,971
97,061
12,248
46,078
69,353
40,471
967,044
4,574
14,059
1,531,347
603,559
143,258
56,056
6,199
245,299
3,571,395
S/. 332,102
52,884
93,354
19,089
66,038
94,377
43,182
701,026
5,044
12,405
2,502,267
583,281
163,924
5,303
308,091
4,281,341
US$ 96,795
15,414
27,209
5,563
19,247
27,507
12,586
204,321
1,470
3,616
729,311
170,003
47,778
1,546
89,796
1,247,841
19
13,150
61,188
133,261
70,927
36,332
74,937
389,795
83,465
267,852
15,031
568,772
1,324,915
66,347
26,229
53,089
204,597
59,138
1,631
107,079
451,763
96,852
168,017
1,367
613,791
1,331,790
80,247
7,645
15,473
59,633
17,236
475
31,209
131,671
28,229
48,970
398
178,896
388,164
23,389
20
596,755
596,755
173,930
1,683
610,659
129,276
923
734,059
1,622
609,734
129,276
923
1,598,716
473
177,713
37,679
269
465,962
(148,513)
(67,962)
(19,808)
9
11
12
13
14
3(b)
31(b)
15
16
17
34(a)
18
34(b)
17
34(a)
18
34(b)
Cumulative unrealized gain on investments in shares carried
at fair value, note 12(a)
256,331
240
70
Cumulative unrealized loss on derivative instruments
y, net
shareholders
equity
Total shar
eholders
(1,040)
2,180,133
2,869,304
836,288
Total liabilities and shar
eholders
y, net
shareholders
equity
3,571,395
4,281,341
1,247,841
The accompanying notes are an integral part of these consolidated balance sheets.
33
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2003, 2004 and 2005
Note
(Stated in thousands of peruvian
nuevos soles and U.S. dollars)
Operating revenues
Net sales
22
Realized income from sale of future production
34(b)
Royalties income
37(a)
Total rre
evenues
Costs of operations
Operating costs
23
Exploration and development costs in
operational mining sites
24
Depreciation and amortization
13(c)
Total ccosts
osts of op
er
ations
oper
era
Gross margin
Operating expenses
Exploration costs in non-operational mining sites
25
General and administrative
26
Royalties
27
Selling
28
Amortization of goodwill
Total op
er
ating eexp
xp
enses
oper
era
xpenses
Operating income
Other income (expenses), net
Share in affiliated companies, net
12(b)
Loss from change in the fair value of derivative
instruments
34(a)
Interest income
29
Gain (loss) from exposure to inflation
2(a)
Exchange difference gain (loss)
Interest expense
29
Other, net
30
Total other inc
ome (e
xp
enses), net
income
(exp
xpenses),
Income before workers’ profit sharing, income tax,
minority interest and cumulative effects of changes
in accounting principles
Workers’ profit sharing
31(a)
Income tax
31(a)
Income before minority interest and cumulative
effects of changes in accounting principles
Minority interest
19
Income before cumulative effects of changes
in accounting principles
Cumulative effect of change in accounting principle
due to mine closing
3(a)
due to stripping costs
3(b)
Net income
Basic and diluted earnings per share, before cumulative
effects of changes in accounting principles, stated
in Peruvian Nuevos Soles and U.S. dollars
32
due to mine closing
Basic and diluted earnings per share, stated in Peruvian
Nuevos Soles and U.S. dollars
32
eightted aav
erage
number
shares
Weigh
ver
age numb
er of shar
es outstanding
2003
2004
2005
2005
(Note 4)
S/. 735,306
116,857
852,163
S/. 908,441
68,837
128,889
1,106,167
S/. 936,595
92,753
152,342
1,181,690
US$ 272,980
27,034
44,402
344,416
306,624
340,697
343,327
100,066
86,354
63,786
456,764
395,399
127,435
74,077
542,209
563,958
136,053
111,177
590,557
591,133
39,654
32,404
172,124
172,292
59,255
123,161
25,142
25,776
910
234,244
161,155
88,241
76,866
31,557
17,839
994
215,497
348,461
91,919
112,630
40,350
15,864
896
261,659
329,474
26,792
32,827
11,760
4,624
261
76,264
96,028
557,558
575,858
870,748
253,788
(668,030)
7,785
793
(472)
(8,687)
(12,804)
(123,857)
(58,774)
12,132
(9,847)
(12,636)
(7,515)
(13,505)
485,713
(87,872)
11,646
1,483
(5,797)
(18,305)
771,903
(25,611)
3,394
432
(1,689)
(5,334)
224,980
37,298
62,887
198,286
834,174
(18,356)
(101,997)
1,101,377
(8,569)
(75,406)
321,008
(2,498)
(21,978)
298,471
(51,023)
713,821
(28,171)
1,017,402
(66,003)
296,532
(19,237)
247,448
685,650
951,399
277,295
(72,295)
-
-
-
175,153
685,650
(10,416)
940,983
(3,036)
274,259
1.95
5.39
7.48
2.18
(0.57)
-
-
-
-
-
(0.08)
(0.02)
1.38
127,236,219
5.39
127,236,219
7.40
127,229,844
2.16
127,229,844
The accompanying notes are an integral part of these consolidated statements.
34
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Capital stock, net of
treasury
shares
Number
of shares
Common
shares
Investment
shares
Additional
capital
Legal
Other
reserves reserves
Balance as of January 1st, 2003
126,879,832 S/. 596,755 S/. 1,683 S/. 610,659 S/. 81,537
Loss in the initial valuation of investments
in shares maintained at fair value, note 2(f)
Declared and paid dividends, note 20(f)
Shares carried at fair value
Loss in the initial valuation of derivative
instruments, note 2(r)
Gain in the initial valuation of derivative
instruments classified as hedging instruments
held by El Brocal, note 2(r)
Loss from change in the fair value of derivative
held by El Brocal
Transfer to legal reserve
- 17,749
Cumulative loss for translation of investment
in Minera Yanacocha S.R.L., maintained through
Compañía Minera Condesa S.A., note 20(g)
Net income
Balance as of December 31, 2003
126,879,832 596,755 1,683 610,659 99,286
Investments in shares maintained at fair value
Gain from change in the fair value of derivative
held by El Brocal, note 34(a)
Transfer due to change in terms of hedging
contracts held by the subsidiary El Brocal
Realized income from sale of future
production of El Brocal
Others
Compañía Minera Condesa S.A., note 20(g)
Net income
126,879,832
- S/. 683,769 S/. 7,369
-
Cumulative
unrealized
loss
on derivate
instruments
Total
- S/.1,981,772
- (5,957)
- (159,164)
-
-
209,130
-
(5,957)
(159,164)
209,130
- (458,189)
-
-
-
(458,189)
-
-
-
-
1,742
1,742
-
(17,749)
-
-
(8,085)
-
(8,085)
-
-
- (36,764)
175,153
217,863 (29,395)
209,130
(6,343)
(36,764)
175,153
1,699,638
-
-
-
-
- (139,464)
-
-
47,201
-
(139,464)
47,201
-
-
-
-
-
-
-
-
4,621
4,621
-
-
-
-
-
-
-
-
-
-
-
-
-
29,990
-
923
(29,990)
-
-
-
682
-
682
923
596,755
1,683
610,659 129,276
923
- (119,118)
685,650
734,059 (148,513)
256,331
(1,040)
(119,118)
685,650
2,180,133
-
-
-
-
-
75,680 (10,348)
- (152,006)
-
(256,043)
(48)
-
(190,711)
(152,006)
(48)
-
-
(61)
(925)
-
-
-
-
-
1,040
-
1,040
(986)
-
-
-
-
-
-
940,983
90,899
-
-
-
90,899
940,983
126,879,832
596,755
1,622
923 1,598,716 (67,962)
240
-
2,869,304
Effect of adoption of the equity method on
Sociedad Minera Cerro Verde S.A.A. investment,
note 12(j)
Investments in shares maintained at fair value
Realized revenue from sale of future production
of El Brocal
Investment shares acquired by Subsidiary
Cumulative loss for translation of investment in
Minera Yanacocha S.R.L., (maintained through
Compañía Minera Condesa S.A.) and in Sociedad
Minera Cerro Verde S.A.A., note 20(g)
Net income
Cumulative
transaction
loss
Retained
earnings
Cumulative
unrealized
gainon
investments in
shares carried
at fair value
609,734 129,276
35
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003, 2004, and 2005
2003
Operating activities
Collection from customers
S/. 733,646
Collection of dividends
482,025
Collection of royalties
112,354
Collection of interest
8,827
Payments to suppliers and third parties
(313,826)
Payments of exploration expenditures
(128,684)
Payments to employees
(101,629)
Payments of income tax
(38,509)
Payments of royalties
(25,976)
Payments of interest
(8,686)
Net cash provided by operating activities
719,542
Investing activities
Payments by purchase of investments in shares
(4,663)
Purchase of property, plant and equipment
(67,814)
Development expenditures
(38,504)
Payments from derivative instruments settled, net
(20,812)
Proceeds from sale of plant and equipment
2,464
Decrease (increase) on time deposits
Decrease (increase) of investment fund
(53,068)
Proceeds from sale of shares
3,059
Net cash used in investing activities
(179,338)
Financing activities
Payments of dividends
(159,164)
Payments of long-term debt
(22,213)
Payments of dividends for minority interest shareholders
(33,283)
Proceeds from long-term debt
Increase (decrease) of bank loans, net
(22,921)
Net cash used in financing activities
(237,581)
Net increase (decrease) in cash and cash equivalents during the year
302,623
Cash and cash equivalents at beginning of year
95,928
Cash and cash equivalents at year-end, note 6
398,551
Reconciliation of net income to net cash
provided by operating activities
Net income
S/. 175,153
Add (deduct)
66,908
Loss from change in the fair value of derivative instruments
668,030
Minority interest
51,023
Amortization of development costs
16,445
Officers’ compensation
49,594
Cumulative effect of accounting change
72,295
Asset impairment loss and write-off
12,433
Accretion expense
4,724
et cost of retired plant and equipment
6,490
910
Loss (gain) on sale of plant and equipment
(2,133)
Allowance for doubtful accounts
5,952
Exchange difference loss (gain)
472
Gain from change in the fair value of investment fund
(1,813)
Provisions for deferred income tax and workers’ profit sharing (301,980)
Income from sale of future production
Share in affiliated companies, net of dividends
(75,533)
Loss (gain) from exposure to inflation
(793)
Gain on sale of shares
(267)
Net changes in assets and liabilities accounts
Decrease (increase) of operating assets Trade and other accounts receivable
(16,019)
Inventories
558
Prepaid taxes and expenses
(6,432)
(14,329)
Increase (decrease) of operating liabilities Trade accounts payable and other current liabilities
7,854
719,542
Transactions that did not affect cash flows:
Transfer from derivative instruments to
deferred income from sale of future production
709,963
Increase of the book value of long-term assets
8,658
36
2004
2005
2005
(Note 4)
S/. 885,646
419,782
120,136
11,909
(355,188)
(172,215)
(119,594)
(44,478)
(27,248)
(5,170)
713,580
S/. 940,302
307,926
131,816
10,627
(365,353)
(181,921)
(147,048)
(84,750)
(42,803)
(5,797)
562,999
US$ 274,061
89,748
38,419
3,097
(106,485)
(53,023)
(42,859)
(24,701)
(12,475)
(1,690)
164,092
(8,084)
(96,507)
(38,611)
(73,403)
1,595
(24,255)
(34,735)
330
(273,670)
(509,163)
(70,253)
(57,586)
(24,157)
663
24,255
38,869
(597,372)
(148,401)
(20,476)
(16,783)
(7,041)
193
7,069
11,329
(174,110)
(139,464)
(76,705)
(33,521)
12,147
(10,311)
(247,854)
192,056
398,551
590,607
(152,006)
(50,354)
(36,840)
1,989
13,079
(224,132)
(258,505)
590,607
332,102
(44,304)
(14,675)
(10,737)
580
3,811
(65,325)
(75,343)
172,138
96,795
S/. 685,650
S/. 940,983
US$ 274,259
75,481
21,937
28,171
33,265
2,135
2,889
7,056
754
994
(157)
1,146
12,636
(5,022)
37,840
(68,837)
(160,947)
9,847
(51)
112,465
87,872
66,003
34,090
26,883
10,416
9,382
7,621
3,598
896
137
76
(1,483)
(2,503)
(42,836)
(92,753)
(562,822)
-
32,779
25,611
19,237
9,936
7,835
3,036
2,735
2,221
1,049
261
40
22
(432)
(730)
(12,485)
(27,034)
(164,040)
-
(22,259)
5,097
(48,952)
-
(23,665)
(29,278)
(97,515)
-
(6,897)
(8,533)
(28,422)
-
94,907
713,580
115,432
562,999
33,644
164,092
24,842
172,540
27,967
50,289
8,226
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2003, 2004 and 2005
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”) and Sociedad Minera Cerro Verde S.A.A. (hereafter, “Cerro Verde”), 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 Recuperada mines, respectively, and
only continue to carry out exploration activities. Mineral found in Julcani during exploration activities is treated and sold. Due to
the increase in the market quotations of metals, Buenaventura’s management has decided to reinitiate its exploration activities in
Recuperada during the first quarter of 2006.
As of December 31, 2004 and 2005, the number of employees at Buenaventura and its subsidiaries (together “the Company”), is as
follows:
2004
2005
Officers
Employees
Workers
78
868
1,038
1,984
Buenaventura’s legal address is Carlos Villaran Avenue 790, Santa Catalina, Lima, Peru.
87
974
1,066
2,127
The 2005 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 2006. Consolidated financial statements as of December 31, 2004 were approved in the Shareholders’ meeting held on
March 31, 2005.
The consolidated financial statements include the financial statements of the following subsidiaries:
Ownership percentages as of December 31,
2005
2004
Direct Indirect Direct Indirect
Business Activities
%
%
%
%
Buenaventura Ingenieros S.A.
100.00
- 100.00
- Provides advisory and engineering services related to the
mining industry.
Compañía de Exploraciones,
44.83
55.17
44.83
55.17 Holds investments in S.M.R.L. Chaupiloma Dos de
Desarrollo e Inversiones Mineras
Cajamarca, Minas Conga S.R.L., and other affiliated companies
S.A.C. - CEDIMIN
engaged in mining activities. Additionally, it is engaged
in the extraction, concentration and commercialization
of gold bars and concentrates
Compañía Minera Condesa S.A.
99.99
- 99.99
- Holds investments in Yanacocha Buenaventura and other
affiliated companies engaged in mining activities.
Compañía Minera Colquirrumi S.A. 90.00
- 90.00
- Exploration of polymetallic metals.
Consorcio Energético de
99.99
0.01
99.99
0.01 Transmission of electric power.
Huancavelica S.A.
Contacto Corredores de
99.99
99.99 Placement of insurance contracts and provision of
Seguros S.A.
administrative and technical services in insurance matters.
Inversiones Colquijirca S.A.
59.90
- 61.42
- Extraction, concentration and commercialization of
polymetallic ores, principally zinc and lead, through its
subsidiary Sociedad Minera El Brocal S.A.A.
Inversiones Mineras del Sur S.A.
78.04
- 78.04
- Extraction, concentration and commercialization of gold
bars and concentrates
Minas Conga S.R.L.
60.00
60.00 Owner of mining rights.
S.M.R.L. Chaupiloma Dos de
20.00
40.00
20.00
40.00 Owner of the mining concessions explored and exploited
Cajamarca
by Yanacocha.
Minera La Zanja S.R.L.
53.06
- 53.06
- Prospection, exploration and exploitation of mineral
rights. Currently is engaged in exploration activities.
Minas Poracota S.A. (i)
- 50.00
Minera Minasnioc S.A.C.
30.00
- 60.00
Subsidiaries
37
(i) Effective December 30, 2005 and January 2, 2006, Buenaventura acquired 50% and 25% of the capital stock of Minas Poracota
S.A. (Poracota), respectively, in exchange for a payment of US$4,501,000. According to the Shareholders´ agreement signed with
Teck Cominco Perú S.A. (hereafter “Teck Cominco”), if a preliminary study to be prepared by Teck Cominco and Buenaventura,
indicates that there is a probability of obtaining a production greater than 300,000 ounces of gold per year, Teck Cominco will
have the right to recover its position as the owner of the 50% of the capital stock of Poracota and to be the operator of the
project. To this effect, Teck Cominco will prepare a feasibility study with a production of 300,000 ounces of gold, assuming the
cost of this study. If the project were a smaller one, Buenaventura can opt for buying the remaining 25% of the capital stock of
Poracota for US$2,250,000.
2. Significant accounting principles and practices
The consolidated financial statements are prepared based on 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) Presentation Basis The accompanying consolidated financial statements have been prepared from the accounting records of the company, which are
stated in nominal monetary terms of the date of the transactions.
Until December 31, 2004, these consolidated financial statements were maintained in nominal Peruvian currency and adjusted to
reflect changes In the National Wholesale Price Level Index (IPM), according to the methodology approved by the Peruvian
Accounting Standards Board. This methodology required 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 were not restated because they are stated in currency of acquisition power at the consolidated
balance sheet dates.
Effective year 2005, through Resolution No.031-2004-EF/93.01 enacted on May 18, 2004, the Peruvian Accounting Standards Board
suspended the restatement of the financial statements to recognize the inflation effect. The restated balances as of December 31,
2004 have been considered as initial balances as of January 1, 2005. This accounting treatment has been also adopted by tax authorities
for calculating the income tax for the year 2005. Therefore, the Company has not recognized a result from exposure to inflation in
the income of 2005, while in 2003 and 2004, a gain of S/793,000 and a loss of S/9,847,000, respectively, were recorded.
(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 for the years ended December 31, 2003, 2004 and 2005. Actual results could differ from those
estimates.
The most significant estimates in the accompanying consolidated financial statements are the obsolescence supplies reserves, the
useful lives and impairment of long-term assets, the determination of mineral reserves, the recoverability of deferred income tax
and workers’ profit sharing, the accrual for mine closing costs and the fair value of derivates instruments.
(c) Principles of consolidation The consolidated financial statements include the accounts of Buenaventura and the accounts of those subsidiaries in which possess 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 a balances and cash equivalent 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 (f
Until December 31, 2002, investments in which the Company’s interest is lower than 20 percent or not exercise significant influence
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
38
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 or exercise significant
influence 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 and Cerro Verde whose measurement and reporting currency is the U.S. dollar. The translation of the financial statements
of Yanacocha and Cerro Verde 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 recorded as
a mining concession in the caption “property, plant and equipment”(when the difference corresponds to mineral reserves) 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
and Cerro Verde shares, and amortizes this amount using the units-of-production method, see Note 12.
oper
ertty, plan
plantt and equipmen
equipmentt (g) Prop
er
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 lower of estimated useful lives of the asset
or estimated reserves of the mining unit. The useful lives are the following:
Years
Buildings, constructions and other
Machinery and equipment
Transportation units
Furniture and fixtures
Computer equipment
10 and 20
5 and10
5
8 and 10
4
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) Mining concessions 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), Minera Paula 49 S.A.C. (Paula) and Minas Poracota S.A.( Poracota). The mining concessions
are shown as a part of the property, plant and equipment caption and represent the ownership of the mining sites which contains
the mineral reserves acquired. The mining concessions are amortized using the units-of-production method, based on the proved
and probable reserves.
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 are impaired, the Company provides for the impairment
loss in the consolidated statements of income.
(j) 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 tones, 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.
39
(k) 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.
(l) Accrual for mine closing costs See note 3(a) for further information about the accounting change.
(m) Deferred stripping costs See note 3(b) for further information about the accounting change.
(n) 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.
(o) 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.
(p) 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. If a deferred asset arises,
it is not recognized unless it is more likely than not that it will be recoverable.
(q) 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.
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.
(r) 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
the description of 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
tones of minerals, see note 34(b).
(s) Treasury shares The Company has common and investment shares under treasury. The nominal values of these shares are presented net of the
capital stock and investment shares amounts.
The effect of the dividends income arising from the treasury shares held by a subsidiary are eliminated in the consolidated
financial statements.
(t) 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.
(u) Comparative financial statements For improving the presentation of Consolidated Financial Statements, the company has made some reclassifications for the years 2003 and
2004.
40
-
The amortization of goodwill of S/910,000 in 2003 and S/994,000 in 2004, which used to be presented as other income (expenses)
net, is currently presented as operating expense.
-
The realized deferred income from sale of future production of S/68,837,000 in 2004, which used to be presented as other
income (expenses), is currently presented as an operating revenue.
-
The mining concessions of S/151,345,000 have been reclassified from the mining concessions and goodwill caption to the
property, plant and equipment caption of the consolidated balance sheet as of December 31, 2004.
-
The amortization of mining concessions of S/14,668,000 in 2003 and S/14,604,000 in 2004, have been reclassified from the
amortization of mining concessions and goodwill caption to the depreciation and amortization caption of the consolidated
statements of income.
(v) New accounting pronouncements Through Resolutions N° 034-2005-EF/93.01 and N° 036-2005-EF/93.01 dated March 2, 2005 and December 15, 2005, respectively,
the Peruvian Accounting Standards Board (CNC in Spanish), approved the International Accounting Standards (IAS) revised and the
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Committee. These standards
are in force in Peru effective January 1, 2006.
Through Resolution N° 038-2005-EF/93.01 of February 3, 2006, CNC approved to suspend until December 31, 2006, the mandatory
application of the IAS 21 “Effect of the Variations in the Exchange Rates of Foreign Currencies” (revised in 2003), related to the
identification and use of a functional currency. As well, CNC resolved to maintain the equity method in the preparation of the
individual financial statements.
The Company is evaluating the effects in its consolidated financial statements from the adoption of the revised IAS and the new IFRS issued.
3. Change in an accounting principle
(a) 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:
(i) 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 longlived 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 change accounting principle
due to mine closing” in the consolidated statements of income.
(ii) Until December 31, 2002, the affiliated Yanacocha used to accrue the mine closing 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 change in accounting principle due to mine closing costs” in the consolidated statements of income.
(b) Until December 31, 2004, with the intent to reasonably match revenues and current production costs, El Brocal was deferring
certain costs incurred in the expansion of the Tajo Norte mining site. These costs are commonly referred as “deferred stripping
costs” and are incurred in mining activities that are associated with the removal of waste rock to access the ore body. Costs
related to additional quantities of waste that must be moved to obtain 1 MT of mineral were deferred when the actual waste
material extracted was higher than the estimate; likewise, these costs were amortized when actual waste mineral extraction
was lower than the estimate.
Effective January 1, 2005, El Brocal considers the deferred stripping costs incurred during the production stage as variable
production costs that should be included in the cost of the inventories produced. This accounting change allows El Brocal to
adopt international industry practices.
The cumulative effect of this accounting change, net of workers’ profit sharing, income tax and minority interest, was a loss
of S/10,416,000, which is separately presented in the caption “Cumulative effect of change in accounting principle due to
stripping costs” in the consolidated statements of income. This accounting change had no effect in the consolidated
financial statements of 2004 due to the fact that the stripping costs incurred in such period were treated as in the current
period.
In 2003, this change would have represented in the consolidated statements of income an increase in the operating costs from
S/456,764,000 to S/471,093,000 and a decrease in the net income from S/175,153,000 to S/172,490,000. In addition, the basic
and diluted earnings per share would have decreased from S/1.38 per share to S/1.36 per share.
41
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, 2005 (S/3.431 to US$1), as published by the Superintendencia de Banca y Seguros (Superintendent of Bank and Insurance, or
“SBS”). The convenience translation should not be construed as a representation that the Peruvian Nuevos Soles amounts have
been, could have been or could be converted into U.S. dollars at the foregoing or any other rate of exchange.
5. Foreign currency transactions
Translations to foreign currency are completed using exchange rates published by the Superintendencia de Banca y Seguros y AFP.
As of December 31, 2005, the exchange rates published by this Institution were S/3.429 for buying and S/3.431 for selling (S/3.280
for buying and S/3.283 for selling as of December 31, 2004) and have been applied for the assets and liabilities accounts.
As of December 31, 2004 and 2005, the Company had the following assets and liabilities denominated in foreign currency:
2004
2005
Equivalent to
Equivalent to
US$(000)
S/(000)
US$(000)
S/(000)
Assets
161,786
530,658
88,611
303,847
Investment funds
26,515
86,969
15,423
52,885
Trade and other accounts receivable (including current portion) 30,699
100,693
17,038
58,424
Account receivable from affiliates
13,935
45,708
19,202
65,844
232,935
764,028
140,274
481,000
Liabilities
Bank loans
3,900
12,804
7,500
25,733
12,703
41,704
8,328
28,573
103,192
338,779
66,206
227,155
- Accrual for mine closing costs
20,567
67,521
26,922
92,371
- Stock appreciation rights
14,330
47,047
17,291
59,324
- Others
5,516
18,109
6,911
23,712
Long-term debt (including current portion)
15,645
51,363
874
2,998
175,853
577,327
134,032
459,866
Net asset position
57,082
186,701
6,242
21,134
6. Cash and cash equivalents
(a) This item is made up as follows:
2004
(Stated in thousands of peruvian nuevos soles)
Cash
S/. 2,893
Demand deposits accounts
108,102
Time deposits (b)
479,612
Cash balances included in the consolidated statements of cash flow 590,607
Time deposits with an original maturity of more than 90 days
24,255
614,862
2005
S/. 1,080
79,049
251,973
332,102
332,102
(b) As of December 31, 2005, it corresponds principally to time deposits for US$71,851,000, with annual interest rates ranging from
4.030 % to 5.425%, and maturities from 30 to 90 days (time deposits for US$146,000,000 with annual interest rates ranging from
1.96% to 2.67% as of December 31, 2004).
7. Investment funds
2004
2005
S/. 52,155
S/. 52,884
34,816
86,971
52,884
As of December 31, 2004 and 2005, this caption includes variable investment funds under the administration of Compass Group S.A.,
which are carried at fair value.
Variable Investment fund
Investment fund in process of liquidation (b)
(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:
2004
2005
Doe Run Perú S.R.L.
Consorcio Minero S.A.
S/. 13,092
17,411
42
S/. 33,196
23,416
BHL Perú S.A.C.
Refinería de Cajamarquilla S.A.
AyS S.A.
Mitsui & Co. Precious Metals
Johnson Matthey
Others
18,209
17,711
2,479
7,438
8,479
4,195
16,334
16,292
4,765
7,398
97,061
93,354
Trade accounts receivable are denominated in U.S. dollars, have current maturity, earn no interest and do not have specific guarantees.
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
2004
Value added tax receivable, note 21(d)
Doubtful account from sale of shares
Claims to tax authorities (b)
Advances to suppliers and third parties
Loans to employees
Interest receivable
Other accounts receivable
S/.
Allowance for doubtful accounts (c)
Non - current portion
Current portion
4,942
4,048
3,305
1,896
1,769
7,345
2005
S/. 8,310
4,942
4,048
3,159
2,543
265
7,315
23,305
30,582
(6,483)
16,822
(4,574)
(6,449)
24,133
(5,044)
12,248
19,089
(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.
(c) Movement of the allowance for doubtful accounts is shown bellow:
2003
Beginning balance
Accrual for the year, note 26
Result from the exposure to inflation
Write-off
Ending balance
S/. 11,066
5,952
298
(2,941)
2004
S/. 14,375
1,146
(672)
(8,366)
2005
S/. 6,483
76
(110)
14,375
6,483
6,449
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
2004
2005
Spare parts and supplies
Products in process
Finished products
S/. 54,311
17,574
6,975
78,860
S/. 55,852
24,624
32,067
112,543
(9,507)
69,353
(18,166)
94,377
Slow moving and obsolescence supplies reserves (b)
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.
(b) The reserve for supplies had the following movements during 2003, 2004 and 2005:
2003
2004
2005
Beginning balance
S/. 6,285
S/. 6,618
S/. 9,507
Accrual for the year, note 23
624
2,889
9,382
Write-off
(291)
(723)
Ending balance
6,618
9,507
18,166
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.
43
11. Prepaid taxes and expenses
Value added tax credit
Additional income tax prepayment (b)
Deferred costs
Pre-paid insurance
Tax on net assets
Income tax credit
Other
2004
S/. 21,772
11,451
1,218
2,812
14,497
2,780
54,530
2005
S/. 24,464
11,451
4,680
4,473
2,708
2,322
5,489
55,587
Less - Current portion
(40,471)
(43,182)
Non - current portion (c)
14,059
12,405
(b) On November 13, 2004, the Peruvian Constitutional Court enacted a sentence by means of which the Additional Income Tax
Advance was considered unconstitutional; consequently, this advance is no longer in force effective such date. Buenaventura
has applied for its devolution in accordance with the regulations of the Peruvian Tax Code. In management’s opinion, this excess
payment with be recovered in the short-term.
(c) As of December 31, 2004 and 2005, 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 to be generated when
the exploitation activities begin.
12. Investments in shares
Equity ownership
2005
2004
Equity method investments (c)
Minera Yanacocha S.R.L. (d)
Equity share (e)
Mining concession, net (f )
43.65 %
Sociedad Minera Cerro Verde S.A.A.
Equity share (k)
Mining concession, net (l)
Investment carried at fair value
Sociedad Minera Cerro Verde S.A.A. (i)
Ferrovías Central Andino S.A.
Others
Amount
2004
2005
43.65 %
S/. 1,152,188
103,866
1,256,054
S/. 1,714,424
94,245
1,808,669
-
18.299
-
491,933
197,754
689,687
9.17
10.00
10.00
270,600
2,207
925
273,732
1,561
1,531,347
2,207
1,531
3,738
173
2,502,267
Others
(b) The detail of share in affiliated companies is:
2003
2004
2005
Minera Yanacocha S.R.L.
S/. 558,103
S/. 575,188
S/. 744,710
Sociedad Minera Cerro Verde S.A.A.
125,567
Others
(545)
670
471
870,748
557,558
575,858
(c) The amount of equity participation in affiliates has been determined from audited financial statements of each affiliate as of
December 31, 2004 and 2005.
M iner
a Yanac
ocha S.R.L.
inera
anaco
(d) Economic activity Yanacocha represents the most significant investment of Buenaventura. 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.
(e) Investment in Yanacocha The movement of the equity investment in Yanacocha is as follows:
44
Yanacocha’s equity at beginning of year
Participation percentage
Company’s participation in Yanacocha’s
equity at beginning of year
Elimination of intercompany gains (*)
Balance of investment at beginning of year
Participation in Yanacocha’s income
Participation in the cumulative effect of
change in accounting principle
Dividends received, note 37(a)
Realization of intercompany gains (*)
Cumulative translation gain (loss)
Balance at year-end
2003
S/. 2,554,932
43.65%
2004
S/. 2,547,851
43.65%
2005
S/. 2,662,511
43.65%
1,115,228
(12,130)
1,112,137
(11,092)
1,162,186
(9,998)
1,103,098
567,282
1,101,045
583,268
1,152,188
752,908
(51,584)
(482,025)
1,038
(36,764)
1,101,045
(414,911)
1,904
(119,118)
1,152,188
(264,034)
1,423
71,939
1,714,424
(*) 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.
The net increase in the participation in Yanacocha’s net income during 2005 compared to 2004 is mainly due to increased sales
of Yanacocha (price and volume), offset by a slight increase in the cash cost per ounce of gold sold. In addition, this participation
is reduced as a consequence of the exchange rate used to convert into Nuevos Soles the participation in Yanacocha’s results,
reported in U.S. Dollars (the exchange rates used for that translation were S/3.302 and S/3.407 per US$1 for as of December 31,
2004 and 2005, respectively). The information related to Yanacocha’s result is shown below:
Average
Quantity of
Cash cost
Year
Sales
quotation
ounces sold
per ounce sold
US$(000)
US$
(In millions)
US$
2003
1,036,370
363
2.86
129
2004
1,249,882
411
3.04
147
2005
1,490,402
448
3.33
151
(f) Mining concession The movement of the amount paid over fair value of assets and liabilities of Yanacocha’s shares at its acquisition time, is as follows:
2004
2005
Balance at beginning of year
Amortization
Balance at year end
S/. 113,850
(9,984)
103,866
S/. 103,866
(9,621)
94,245
(g) Summary of financial information based on the Yanacocha’s financial statements Presented below is certain summary financial information extracted from the Yanacocha’s financial statements and adjusted to
conform to accounting practices and principles of the Company:
Summary of Yanacocha’s balance sheets data as of December 31, 2004 and 2005 (includes 100 percent of Yanacocha’s operations):
2005
2004
Total assets
Total liabilities
Shareholders’ equity
S/. 3,961,413
1,298,902
2,662,511
S/. 5,277,485
1,332,043
3,945,442
Summary data from the Yanacocha statements of income for the years ended December 31, 2003, 2004 and 2005 (includes 100
percent of Yanacocha’s operations):
2003
2004
2005
Total revenues
S/. 3,818,072
S/. 4,279,074
S/. 4,949,129
Operating income
1,751,810
1,957,834
2,526,633
Income before cumulative effect of change in
accounting principle
1,299,615
1,336,238
1,724,874
(118,176)
Net income
1,181,439
1,336,238
1,724,874
(h) Legal processes of Yanacocha
Mercury spill in Choropampa In June 2000, a Yanacocha’s contractor spilled approximately 11 liters of mercury nearby Choropampa, located at 84.8 kilometers
from Yanacocha. As a result of the accident, 1,000 Peruvian citizens and the Municipality of Cajamarca 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 February 2005, Yanacocha responded to this demand.
45
Likewise, approximately 900 Peruvian citizens sued Yanacocha and others evolved at the presence Cajamarca’s judicial authorities.
Those demands claim a financial compensation of US$229,420,000 and S/1,245,000. As of December 31, 2005, Yanacocha has
reached agreements with approximately 40% of the sewers for lower amounts from the initially demanded, reducing significantly
the contingencies originated by this legal process. Additionally, more than half of the remaining plaintiffs that still maintain
legal processes had reached compensations agreements with Yanacocha, before the demands begin. Yanacocha applied to the
Civil Court from the Cajamarca Superior Court the end of this process due to its previews agreements, having obtained favorable
sentences .The sewers have appealed those sentences before the Peru’s Supreme Court, where they remain pending.
Up to this date, Yanacocha considers that it is not possible to predict the final outcome of these demands; however, any effect
related to them will not be significant for that financial statements.
Tax processes Tax authorities have reviewed the income tax and value added tax returns for years 1998 to 2001. As a result of these reviews,
Yanacocha was notified with tax assessments of US$35.0 million, from which Yanacocha recorded an accrual of US$17.5 million
in 2004. With the purpose of eliminating some of these contingencies,Yanacocha filed for the “Sistema Especial de Actualización
y Pago de Deudas Tributarias - SEAP” which allows the payment of incorrectly declared taxes, eliminating fines and accrued
interest at preferential rates, resulting in a payment of US$ 11.5 million.
In the opinion of Yanacocha’s Management and its legal advisors, the accrual recorded is enough to cover the tax contingency.
S ociedad M
iner
aC
er
de S.A.A.
Miner
inera
Cer
errro Ver
erde
(i) Economic activity Cerro Verde is engaged in the extraction, production and commercialization of copper in its mining concessions located in the
department of Arequipa, Peru. Currently, Cerro Verde is carrying out the construction of the primary sulfide plant. The investment
in this project is estimated in US$850 million and will allow its copper production increase from 90,000 MT to 300,000 MT.
(j) Acquisition of additional share The Shareholders´s meeting of Cerro Verde held on April 18, 2005 agreed to increase the capital stock by US$440 millions with the
purpose of financing the construction of the primary sulfide plant, which total investment is estimated at US$850 million. This capital
increase permitted Buenaventura to raise its share in Cerro Verde from 9.17% to 18.214%, by a payment of US$154.8 million.
Subsequently, through of additional acquisitions of Cerro Verde´s shares, Buenaventura has increased its total share to 18.299%.
The share increase in Cerro Verde allows Buenaventura to exercise significant influence (faculty to participate in the decisions
related to financial and operational policies), which is evidenced by its representation in the Board of Directors; the participation
in policy-making processes, including participation in decisions about dividends; participation as guarantor of Cerro Verde in
the loan agreements entered by this entity with several foreign banks in connection with the financing of the construction of
the primary sulfide plant; and unrestrictive access to the interim and annual financial information. As a consequence,
Buenaventura has decided to account for its investment in Cerro Verde using the equity method, since this investment no
longer meets the criteria to be recorded at its fair value. Following, we describe the main accounting effects:
-
-
-
The fair value of the investment in Cerro Verde as of January 1, 2005 of S/256,043,000 was reversed with a charge to the
account “Cumulative gain on investments at fair value” and a credit to the captions of investment by S/250,087,000 and
retained earnings by S/5,956,000.
The prior years effects, resulting from the application of the equity method since the date of the initial acquisition occurred
in 1996, are S/69,724,000. This amount is recorded by a charge to the investment caption and by a credit to the retained
earnings caption of 2005. For the years 2003 and 2004, the change would have represented an increase in the share in
affiliated companies in the consolidated statements of income from S/557,558,000 and S/575,858,000 to S/571,734,000
and S/603,453,000, respectively, and an increase in the net income from S/175,153,000 and S/685,650,000 to S/189,329,000
and S/713,245,000, respectively. In addition, the basic and diluted earnings per share would have increased from S/1.38 and
S/5.39 to S/1.49 and S/5.61, respectively.
Buenaventura has recognized an amount of S/197,754,000, as a result of comparing the acquisition cost with the share in
the fair values of the assets and liabilities of Cerro Verde. This amount is included in the investment caption and amortized
based on the proven and probable reserves of Cerro Verde
(k) Investment in Cerro Verde The movement of the equity investment in Cerro Verde during 2005 is as follows:
Cerro Verde’s equity at beginning of year
Participation percentage
Balance of investment at beginning of year
Acquisition of additional share
Amount paid over fair value of assets and liabilities
Participation in Cerro Verde’s income
Dividends received
Cumulative translation gain
Balance at year - end
(l) Mining concession The movement of this amount is as follows:
S/. 871,204
9.17%
79,889
509,163
(197,754)
125,567
(43,892)
18,960
491,933
46
Balance at beginning of year
Amount paid over fair value of assets and liabilities
Balance at year end
(m) Summary of financial information based on the Cerro Verde’s financial statements -
2005
S/.
197,754
197,754
Presented below is certain summary of financial information extracted from the Cerro Verde’s financial statements and adjusted
to conform to accounting practices and principles of the Company:
Summary of Cerro Verde’s balance sheets data as of December 31, 2005 (includes 100 percent of Cerro Verde’s operations):
Total assets
Total liabilities
Shareholders’ equity
S/. 2,911,715
223,412
2,688,303
Summary data from the Cerro Verde statement of income for the year ended December 31, 2005 (includes 100 percent of Cerro
Verde’s operations).
(n)
(o)
13.
(a)
(b)
Total revenues
S/. 1,183,027
Operating income
682,450
Net income
737,655
Dividends receivedCash dividends paid by Cerro Verde amounted to S/4,871,000 and S/43,892,000, during 2004 and 2005, respectively.
Guarantees granted On September 30, 2005, Cerro Verde signed some agreements with several export credit agencies and commercial banks in
connection with the financing of US$450 million for the expansion of its operations. The financing requires the granting of
mortgages and pledges over the Cerro Verde´s assets, and that Phelps Dodge, Sumitomo and Buenaventura comply with
maintaining a minimum shareholders’ equity (US$600 million for Buenaventura). The company that does not comply with this
requirements must grant a stand-by letter for the representative of the banks that participate in the financing. Additionally,
shares in Cerro Verde owned by Buenaventura are pledged in favor of such banks.
Prop
er
oper
ertt y, plan
plantt and equipmen
equipmentt, net
The 2005 movement with the cost and accumulated depreciation accounts is show below:
Beginning
Ending
(Stated in thousands of
Balance Additions Retirements
Sales
Transf
ers Balance
peruvian nuevos soles)
ansfers
Cost
Land
S/. 6,909
S/. 79
S/.
S/.
- S/. 749 S/. 7,737
Mining lands
23,463
1,675
25,138
Mining concessions (d)
228,874
14,897
243,771
Building, constructions and other
395,914
121
(9,749)
48,203
434,489
585,109
34,663
(79,725)
(4,631)
7,118
542,534
29,773
263
(9,091)
(993)
1,534
21,486
14,501
Furniture and mixtures
16,950
22
(5,088)
2,617
Work in progress
56,094
18,533
(60,221)
14,406
Mine closure costs, notes 3 and 17(c)
17,642
27,967
45,609
1,360,728
98,220
(103,653)
(5,624)
- 1,349,671
Accumulated depreciation and amortization
Mining lands
10,821
2,112
12,933
Mining concessions (d)
77,529
16,330
93,859
Building, constructions and other
207,509
23,848
(8,616)
222,741
421,019
41,131
(78,460)
(4,629)
379,061
20,962
1,646
(8,037)
(858)
13,713
Furniture and mixtures
10,002
894
(4,942)
5,954
Mine closure costs, note 3
9,327
28,802
38,129
757,169
114,763
(100,055)
(5,487)
766,390
Net cost
603,559
583,281
Fully depreciated assets as of December 31, 2004 and 2005 amount to S/405,937,000 and S/360,187,000, respectively. Currently,
these assets are being used by the Company.
(c) The distribution of annual depreciation and amortization was as follow:
2003
Inventories
S/. 817
Operating costs
63,786
Exploration cost in non-operative mining areas
479
Others
2,643
67,725
47
2004
S/.
44
74,077
1,404
75,525
2005
S/. 2,298
111,177
571
717
114,763
(d) The 2005 movement of cost and accumulated amortization of mining concessions are shown below:
Balance as of
Balance as of
January 1, 2005 Additions December 31, 2005
Cost
Compañía de Exploraciones, Desarrollo e
Inversiones Mineras S.A.C.- CEDIMIN
S/. 175,456
S/.
S/. 175,456
42,476
42,476
Minas Poracota S.A.
8,763
8,763
Sociedad Minera El Brocal S.A.A.
5,549
6,134
11,683
Minera Paula 49 S.A.C.
5,393
5,393
228,874
14,897
243,771
Accumulated amortization
Compañía de Exploraciones, Desarrollo e
Inversiones Mineras S.A.C. - CEDIMIN
54,117
10,897
65,014
21,364
2,967
24,331
2,048
493
2,541
Minera Paula 49 S.A.C.
1,973
1,973
77,529
16,330
93,859
Net Cost
151,345
149,912
14. Development costs, net
(a) Movement of the cost and accumulated amortization as follow:
Balance as of
January 1, 2005
Cost
Uchucchacua
S/. 94,821
Orcopampa
60,681
Antapite
60,280
Ishihuinca
16,624
Poracota
Veta Nazareno
Mine closing costs, note 3
21,938
254,344
Accumulated amortization
Uchucchacua
45,694
Orcopampa
18,558
Antapite
17,498
Ishihuinca
15,469
Mine closing costs, note 3
13,867
111,086
Net cost
143,258
b) The annual amortization was distributed as follows:
2003
Exploration and development costs in
operational mining sites, note 24
Exploration cost in-non operational mining areas
Inventories
S/. 16,445
238
16,683
Balance as of
Additions December 31, 2005
S/. 2,667
38,940
1,910
751
12,263
1,055
57,586
S/. 97,488
99,621
62,190
17,375
12,263
1,055
21,938
311,930
8,741
13,056
12,656
900
1,567
36,920
54,435
31,614
30,154
16,369
15,434
148,006
163,924
2004
2005
S/. 31,120
2,145
63
33,328
S/. 34,090
2,830
36,920
15. Bank loans
Bank loans, mainly contracted in U.S. dollars consist of:
(Stated in thousand of peruvian nuevos soles)
Banco de Crédito del Perú
Banco Wiese Sudameris
Banco Interamericano de Finanzas - BIF
Other subsidiaries
2004
2005
9,521
-
3,431
22,302
3,283
346
13,150
496
26,229
As of December 31, 2004 and 2005, this caption is mainly conformed by pre and post-export loans obtained from various
domestic banks.
48
The weighted average annual interest rates on bank loans were 3.12 percent and 4.85 percent at December 31, 2004 and 2005,
respectively.
accoun
ounts
pay
16. Trade acc
oun
ts pa
yable
Trade accounts payable are mainly originated by the acquisition of materials, supplies and spare parts. These obligations are stated
in local and foreign currency, have current maturities and do not accrue interest. No guarantees have been granted.
17. Other liabilities
(a) This item is made up as follow:
Accrual for mine closing costs (c)
Stock appreciation rights (b)
Income tax payable
Other taxes payable
Accounts payable to a joint venture partner
Remuneration and similar benefits payable
Workers’ profit sharing payable
Derivative instruments payable
Accrual for labor contingencies
Royalties payable to the Peruvian Government
Royalties payable to third parties, note 36(b)
Dividends payable
Other liabilities, each individually less than S/1,500,000
2004
S/. 67,521
47,047
25,143
20,072
9,435
7,202
11,738
3,140
6,639
2,513
1,467
14,809
216,726
2005
S/. 92,371
59,324
37,299
20,538
18,218
17,100
14,657
8,100
4,744
3,825
2,874
2,274
20,125
301,449
(39,881)
(32,444)
(9,435)
(1,705)
(83,465)
133,261
(44,377)
(34,257)
(18,218)
(96,852)
204,597
Long - term portion
Accrual for mine closing costs
Stock appreciation rights
Accounts payable to a joint venture partner
Others
Current portion
(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
2006
2007
2008
2009
2010
Thereafter
383,400
400,200
396,800
343,500
282,700
558,000
2,364,600
In 2005, the Company recorded an expense amounting to S/26,883,000 in connection with this program (S/49,594,000 and S/
2,135,000 in 2003 and 2004, 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, 2004
Disbursements
Additions and changes in estimates
Accretion expense, note 30
Gain from exposure to inflation
Disbursements
Additions and changes in estimates, note 13
Accretion expense, note 30
49
S/. 51,202
(5,691)
21,019
7,056
(6,065)
67,521
(10,738)
27,967
7,621
92,371
The increase in the accrual of 2005 is explained mainly by the new estimation of the closing costs for the Colquirrumi mining unit,
which has not being operating for more than 15 years.
The accrual for mine closing costs is based on studies completed by independent parties, in accordance with current environmental
protection regulations, see note 36(a). The accrual for mine closing costs corresponds mainly to activities that have to be completed
for the restoration of the mining units and affected areas as a consequence of the exploitation activities. The main works that have
to be completed are the land movements, reforestation labor and remove of the mining plants.
18. Long-term debt
(a) Long-term debt, denominated in U.S. dollars, was as follows:
Annual
Guarantee
interest rate
Final maturity
2004
2005
(capital lease)
Leased property
5.34%
June 2008
-
1,181
(capital lease)
Leased property
6.36%
June 2007
-
808
(capital lease)
Leased property
5.00%
June 2007
1,044
676
BBVA Banco Continental
Pledgeovermachineryand ThreemonthLibor
equipmentforUS$1,000,000; plus2.35%
and cash flow from collection
of a client
November 2009
12,147
(Pre-paid in December
2005)
-
Pledge over machineryand Three month Libor
equipment for US$5,822,000; plus3.75%
and cash flow from
collections of two clients
September 2006
10,532
(Pre-paid in December
2005)
-
Guaranteed by
Buenaventura
4.50%
September
2005
22,981
-
Guaranteed by
Buenaventura
Three month Libor April 2005
plus 1.2% (3.76% as of
December31,2004)
4,323
-
336
51,363
(36,332)
15,031
333
2,998
(1,631)
1,367
Consorcio Energético de
Huancavelica S.A.
BBVA Banco Continental
Others
Current portion
Long-term portion
(b) The long-term debt maturity schedule as of December 31, 2005 is as follows:
ec
emb
er 31, (Stated in thousands of peruvian nuevos soles)
Dec
ecemb
ember
Year ended D
2007
2008
Amount
S/. 1,084
283
1,367
(c) The weighted average annual interest rates of the long - term debt were 4.92 percent and 5.56 percent during 2004 and 2005,
respectively.
19. Minority interest
The 2004 and 2005 movement of minority interest is as follows:
Beginning balance
Minority share in the results
Contributions from minority shareholders
Cumulative effect at change in accounting principle in
El Brocal (stripping costs)
Dividends paid to minority shareholders of S.M.R.L
Chaupiloma Dos de Cajamarca
Reduction of capital stock
Others
Ending balance
2004
S/. 48,428
28,171
13,778
2005
S/. 66,347
66,003
2,566
1,193
-
(25,684)
(33,521)
3,877
5,614
66,347
(36,840)
6,662
80,247
50
20. 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. As explained in note 2(s), the nominal value restated by inflation of the treasury shares is presented net from the capital
stock. The detail of the capital stock as of December 31, 2005 is as follows:
Result from
Number
Nominal
exposure to
Capital
of shares
value
inflation
stock
Common shares
137,444,962
S/. 549,780
S/. 96,634
S/. 646,414
Treasury shares
(10,565,130)
(42,261)
(7,398)
(49,659)
126,879,832
507,519
89,236
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.
The capital stock structure as of December 31, 2004 and 2005 is shown below:
Number of shares
Percentage
2004
2005
Less than 0.20%
1,581
1,395
From 0.20% to 1.00%
20
19
From 1.01% to 5.00%
21
23
From 5.01% to 10.00%
3
3
From 10.01% to 100.00%
1
1
Whole participation
2005
2004
8.63
9.67
12.68
10.66
42.27
46.25
22.40
19.40
14.02
14.02
The market value of the common shares is S/97.10, equivalent to US$28.30 as of December 31, 2005 (S/75.18, equivalent to
US$22.90 as of December 31, 2004), and presents a negotiation rate of 100 percent.
(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. As explained in note
2(s), the nominal value restated by inflation of the investment shares held in treasury is presented net from the investment
shares. The detail of the investment shares as of December 31, 2005 follows:
Result from
Number of
Nominal
exposure to Investment
shares
value
inflation
shares
Investment shares
372,320
S/. 1,489
S/. 260
S/. 1,749
Investment shares held in treasury
(30,988)
(124)
(3)
(127)
341,332
1,365
257
1,622
As a result of the restatement of the 2004 financial statements for inflation at December 31, 2004, the Company is permitted
to issue additional 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, 2005:
-
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/32,613,000.
(d) Legal reserve According to the Ley General de Sociedades (General Corporations Law), 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(s), the values of treasury shares are presented net of the capital stock and investment shares, and increasing
the additional capital account.
(f) Declared and paid dividends The information about declared and paid dividends in the years 2003, 2004 y 2005 is as follows:
Declared
Meeting/Board
Date
dividends
Dividends 2003
Mandatory annual shareholders’ meeting
March 31
S/. 44,198,000
Board of Directors
July 31
80,280,000
51
Dividends
per share
S/. 0.32
0.58
Board of Directors
October 28
47,771,000
172,249,000
(13,085,000)
159,164,000
0.35
March 26
October 28
77,823,000
73,208,000
151,031,000
(11,567,000)
139,464,000
0.56
0.53
Less - Dividends paid to Condesa
Dividends 2004
Board of Directors
Dividends 2005
March 31
80,623,000
0.58
Board of Directors
October 26
84,096,000
0.61
164,719,000
(12,713,000)
152,006,000
(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 and Cerro Verde from U.S. dollars to Peruvian Nuevos Soles. These
exchange differences will be presented in equity until the related investment is disposed of.
21. Taxa
axation
tion
(a) Buenaventura and their subsidiaries are subject to Peruvian tax law. As of December 31, 2005, the statutory income tax rate in
Peru is 30 percent.
Non - domiciled companies in Peru and individuals must pay an additional tax of 4.1 percent over received dividends.
(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:
eview b
open
by
authorities
Entity
Years op
en tto
o rre
y tax author
ities
Buenaventura
Buenaventura Ingenieros S.A.
Compañía de Exploraciones, Desarrollo e Inversiones
Mineras S.A.C. - CEDIMIN
Compañía Minera Colquirrumi S.A.
Consorcio Energético de Huancavelica S.A.
Contacto Corredores de Seguros S.A.
Minas Conga S.R.L.
S.M.R.L. Chaupiloma Dos de Cajamarca
Minera La Zanja S.R.L.
Minas Poracota S.A.
Minera Minasnioc S.A.C.
2001, 2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2001, 2003, 2004 and 2005
2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2002, 2003, 2004 and 2005
2001, 2002, 2003, 2004 and 2005
2002, 2003, 2004 and 2005
2004 and 2005
2005
2004 and 2005
The income tax of Buenaventura for 2000 was reviewed by the Tax Administration. As a consequence, Buenaventura received
an assessment that reduced the tax loss carryforward in S/114,001,000. 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.
The 2002 income tax of Cedimin was reviewed by the Tax Administration. As a consequence, Cedimin received an assessment
that modified the tax loss carryforward. The main issue is that Cedimin considered the loss from the sale of its shares in Minera
Huallanca S.A.C. and Minera Yanaquihua S.A by S/27,129,000 as deductible. In opinion of Cedimin´s legal advisors, such assessment
has no solid grounds and therefore, it is expected that Cedimin obtains a favorable opinion in the administrative process initiated
against the assessment.
Additionally, the 2000 and 2001 income tax of Condesa was reviewed by the Tax Administration. As a consequence, the
Company received tax assessments that reduced the tax loss carrryforward by S/1,360,000 in 2000 and by S/16,987,000 in
2001. In both periods, the main issue was that Condesa considered certain revenues - dividends and equity participation
- as taxable for determining the tax loss carryforward. In opinion of Condesa´s legal advisors, such assessment has no solid
grounds and therefore, it is expected that Condesa obtains a favorable opinion in the administrative process initiated
against the assessment.
52
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 Management’s and legal advisory
opinion, any additional tax assessment would not be significant to the consolidated financial statements as of December 31,
2004 and 2005.
(c) With the purpose of determining the income tax and the value added tax, the transfer prices 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 do not believe that the new regulations will result in significant
contingencies for the Company as of December 31, 2004 and 2005.
(d) The Company has the benefit to recover the value added tax of the sales export. Therefore, the tax paid in the acquisitions can
be applied to the tax from its sales or other tax obligations, or request a refund. During the year 2005, Buenaventura has asked
for the refund of the valued added tax for S/39,570,000. On December 31, 2005, the amount pending at refund from the tax
authority of S/8,310,000 is included in the caption “other accounts receivable”.
22. Net sales by geographic region sales agreements
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:
2003
2004
2005
Peru
Europe
North America
Asia
Oceania
South America
S/. 383,180
289,597
28,793
26,065
2,266
729,901
S/. 437,411
424,614
50,736
15,838
928,599
S/. 435,701
218,053
160,011
44,307
77,969
554
936,595
Income (expense) from hedging transactions
of subsidiary
5,405
(20,158)
908,441
936,595
735,306
In 2005, the Company’s three largest customers accounted for 18%, 17% and 13%, respectively, of total sales (20%, 16% and 13%
of total sales in 2004). As of December 31, 2005, 61% of the trade accounts receivable is related to these customers (48% 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, 2012.
23. Operating costs
This item is made up as follow:
2003
2004
2005
Contractors
S/. 115,313
Supplies
74,359
Personnel expenses
67,134
Others
49,194
Slow moving and obsolescence supplies reserve, note 10(b)
624
306,624
24. Exploration and development cost in operational mining sites
This item is made up as follow:
2003
Exploration expenses
Uchucchacua
Orcopampa
Antapite
Shila
Ishihuinca
Julcani
Paula
Others
S/. 122,803
84,327
82,893
47,785
2,889
340,697
S/. 137,828
88,427
75,363
32,327
9,382
343,327
2004
2005
S/. 22,926
21,883
12,967
5,034
4,129
1,627
1,301
42
S/. 38,111
22,628
13,817
4,708
6,843
4,191
3,446
2,571
S/. 34,797
26,299
18,707
12,580
4,872
4,708
-
69,909
96,315
101,963
16,445
86,354
31,120
127,435
34,090
136,053
Amortization of development costs, note 14(b)
53
25. Exploration costs in non-operational mining sites
2003
2004
2005
S/. 45,797
S/. 81,812
S/. 85,680
1,948
4,295
2,876
9,119
4,339
59,255
4,507
4,507
1,922
88,241
6,239
6,239
91,919
2003
S/. 29,493
49,594
16,673
3,859
1,730
943
750
989
5,952
13,178
123,161
2004
S/. 31,802
2,135
18,569
4,655
2,164
1,649
668
890
1,146
13,188
76,866
2005
S/. 32,369
26,883
20,984
7,407
1,970
1,540
2,224
1,227
76
17,950
112,630
2003
S/. 25,142
25,142
2004
S/. 24,918
6,639
31,557
2005
S/. 26,143
14,207
40,350
2003
S/. 18,425
2004
S/. 12,913
2005
S/. 11,900
6,231
1,120
25,776
3,412
1,514
17,839
2,117
1,847
15,864
2003
2004
2005
S/. 5,639
1,813
333
7,785
S/. 5,726
5,022
1,384
12,132
S/. 8,539
2,503
604
11,646
(7,361)
(1,326)
(8,687)
(4,609)
(2,906)
(7,515)
(2,824)
(2,973)
(5,797)
2003
2004
2005
In areas external to the mining sites
Mining concessions agreements
In mining sites
Huachocolpa
Julcani
Paula
Studies and project expenses
26. General and administrative expenses
Personnel expenses
Officers’ compensation, note 17(b)
Professional fees
Board members’ remuneration
Insurance
Supplies
Maintenance
Rentals
Accrual for doubtful receivable, note 7(c)
Other expenses
27. Royalties
Royalties to third parties, note 36(b)
Royalties to the Peruvian Government
28. Selling expenses
Freight
Sundry services
Others
29. Interests income and expense
Interest income
Interest on deposits
Change in the fair value of investment fund
Interest on loans
Interest expense
Interests on loans
Others
30. O ther
ther,, net
Other revenues
Gain on sale of property, plant and equipment
Revenue from insurance
S/. 1,175
-
54
S/.
259
273
S/. 1,160
922
Dividends received from Cerro Verde
Gain from sale of supplies
Others
Other expenses
Accretion expense, notes 3 and 17 (c)
Additional taxes
Social disbursements
Damages in Colquijirca mining unit
Depreciation, note 13 (c)
Labor contingencies
Administrative penalties
Employee termination bonuses
Accrual for impairment loss on investments
Others
2,871
2,989
7,035
4,871
287
5,690
5,025
7,107
4,724
1,246
1,313
2,643
1,657
1,046
874
6,336
19,839
(12,804)
7,056
2,232
925
1,404
3,443
817
3,318
19,195
(13,505)
7,621
6,990
2,883
2,325
717
1,604
730
2,542
25,412
(18,305)
Net
31. Income tax and workers’ profit sharing
(a) As explained in note 2(p), 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
Charge to
shareholders’
equity for change Balance
Workers’
in accounting
as of
Balance as of
Income
profit
principle
December 31,
January 1st, 2005
tax
sharing
(note 3)
2005
Deferred asset
Deferred income from sale of future production S/. 217,578
S/. 22,021
S/. 6,383
S/.
S/. 245,982
Accrual for mining closing
17,669
4,186
1,214
23,069
Officers’ compensation
11,922
678
196
12,796
Slow moving and obsolescence supplies reserves 3,091
4,612
1,337
9,040
Exploration expenses
11,512
(2,729)
(791)
7,992
Impairment of property, plant and equipment
5,840
(302)
(88)
5,450
Tax loss carryforward
3,967
3,967
Unrealized gain with affiliates
4,159
(393)
(114)
3,652
Royalties payable to the Peruvian government
1,946
(776)
(225)
945
Allowance for doubtful accounts receivable
1,786
286
83
2,155
Accrual for labor contingencies
2,087
561
163
2,811
Others
3,542
3,461
1,006
8,009
285,099
31,605
9,164
325,868
Less - Allowance for deferred asset
(12,739)
(914)
(266)
(13,919)
272,360
30,691
8,898
311,949
Deferred asset
Deferred liability
(19,956)
19,956
Other
(7,105)
2,517
730
(3,858)
Deferred liability
(27,061)
2,517
730
19,956
(3,858)
Deferred asset, net
245,299
33,208
9,628
19,956
308,091
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 under any circumstance - dividend distribution or sale of the investment - the reversal
of the basis difference will not be taxable. 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. On the other hand dividends distributions are income tax exempt.
- 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, without any tax effects.
(b) The current and deferred portions of the income tax and workers’ sharing expense (benefit) amounts for the years 2003, 2004
and 2005 included in the consolidated statements of income are made up as follows:
55
Expense (benefit) for income tax
Current
S.M.R.L. Chaupiloma Dos de Cajamarca
Buenaventura
Others
Deferred
Buenaventura
Others
Total
Expense (benefit) for workers’ profit sharing (i)
Current
Buenaventura
Others
2003
2004
S/. 30,683
6,543
-
S/. 37,509
12,642
10,345
8,368
2,126
S/. 44,970
11,828
19,765
28,107
1,257
1,283
38,509
1,051
620
72,661
2,147
540
108,614
(228,834)
(4,916)
(2,798)
(247)
(236,795)
(198,286)
21,582
7,370
384
29,336
101,997
(28,212)
(1,199)
(3,216)
(581)
(33,208)
75,406
2,111
-
2,426
2,998
3,664
373
8,147
5,729
3,431
220
187
2,298
305
86
9,852
622
48
18,197
2005
Deferred
Buenaventura
Others
(62,896)
6,256
(8,178)
(1,425)
2,136
(348)
(811)
112
(934)
(53)
(168)
(65,185)
8,504
(9,628)
Total
(62,887)
18,356
8,569
(i) In accordance with Peruvian legislation, mining companies that have more 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 Contacto Corredores de Seguros S.A. and Compañía Minera Condesa S.A. have less than 20 employees.
(c) During 2003, 2004 and 2005 the provision for tax and workers’ profit sharing recorded in the consolidated income statement
is as follow:
2003
2004
2005
Income before income tax and workers’ profit sharing S/. 37,298
S/. 834,174
S/. 1,101,377
Legal combined rate
32.84%
35.60%
35.60%
Expected income tax and workers’ profit sharing
according to the legal combined rate
12,249
296,966
392,090
Permanent differences
Share in affiliated companies (i)
(183,102)
(205,005)
(309,986)
Effect of fair value of derivative instruments (ii)
73,085
20,923
31,282
Effect of fair value of derivative contracts turned
into normal sale contracts (iii)
(94,794)
(61,424)
Gain in exchange difference at derivative instruments
1,886
Change in valuation allowance
(53,944)
1,180
Gain in normal sale contracts due to market price difference
3,765
Non-deductible exploration expenses
3,430
2,219
1,620
2,259
Effect of change in tax rate
(21,978)
Other permanent items
7,311
2,419
20,704
(273,422)
(176,613)
(308,115)
(261,173)
120,353
83,975
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 and May 2005, the Company modified certain conditions of its
56
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 has been recorded in each year because
the change of status of a permanent, to a temporary item occurred in December 2003 and May 2005.
(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. In both periods the workers’ profit sharing rate was 8 percent.
32. Basic and diluted earning per share
The computation of the Basic and diluted earning per share for the year ended December 31, 2003, 2004 and 2005 is presented below:
For the year ended December 31, 2003
Net income
(numerator)
Basic and diluted income
per share before the
cumulative effects of
accounting changes
247,448,000
Cumulative effect of
accounting change due to
mine closing
(72,295,000)
Cumulative effect of accounting
change due to stripping costs
Basic and diluted net
income per share
175,153,000
Shares
(denominator)
Earnings Net income
per share (numerator)
Shares
(denominator)
Earnings Net income
per share (numerator)
Shares
(denominator)
Earnings
per share
127,236,219
1.95
685,650,000
127,236,219
5.39
951,399,000
127,229,844
7.48
127,236,219
(0.57)
-
-
-
-
-
-
-
-
-
-
-
(10,416,000)
127,229,844
(0.08)
127,236,219
1.38
685,650,000
127,236,219
5.39
940,983,000
127,229,844
7.40
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, 2003, 2004 and 2005 was determined as follows:
2003
2004
2005
Common shares
Investment shares
137,444,962
372,320
137,817,282
(10,581,063)
127,236,219
127,236,219
Less - Treasury shares
137,444,962
372,320
137,817,282
(10,581,063)
127,236,219
127,236,219
137,444,962
372,320
137,817,282
(10,596,118)
127,221,164
127,229,844
Weighted average number of shares outstanding
33. Disclosure about information by segments
International Accounting Standard (IAS) 14, 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. The most important segment is Mining,
which activities are carried out through nine companies. Management considers that these mining companies can be combined
into one reportable mining segment because they show similar financial performance and similar characteristics related to the
nature of their products, the nature of their production process, their clients and legal environment. The electric, mining
consulting and insurance segments are not significant and, therefore, are not considered in the evaluation of business
development. Therefore, management considers that the Company’s only reportable segment is mining.
34. Derivative financial instruments
(a) 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. The
table below presents a summary of the commodity derivative contracts outstanding as of December 31, 2005:
Metal
Quantity (ounces)
Price range
Period
Gold
Silver
Minimal
292,500 (i)
200,000 (ii)
Maximum
340,000
400,000
(US$/Oz)
345 a 356.59
6.00
January 2006 - July 2011
January 2006 - 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, 2004 and 2005, 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.
- In 2005, Buenaventura recognized a loss of S/87,872,000 (losses of S/21,937,000 and S/668,030,000 in 2004 and 2003,
respectively) due to the changes in fair value occurred during those periods, which are presented separately in the
consolidated statements of income. In addition, it recognized expenses of S/36,837,000 for the reduction of the Company’s
57
hedge book exposure in 120,000 ounces of gold during the first quarter of 2004. These amounts are presented separately
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, 2005, El Brocal does not have derivative contracts to offset the risk of metal price fluctuations.
In addition, the liability presented in the consolidated balance sheets for S/59,138,000 and S/168,017,000 as current and noncurrent portions, respectively, corresponds to the fair value of derivative instruments of Buenaventura as of December 31, 2005
(S/70,927,000 and S/267,852,000 as current and non-current portions, respectively, as of December 31, 2004).
In 2006, Buenaventura’s management has decided to change the nature of the derivative contracts as of December 31, 2005 in
order to qualify them as normal sale contracts. The values of these contracts will be settled on the date that the modifications
are accepted by Buenaventura and the counterparty.
(b) Normal sale contracts of gold zinc and silver
During 2005 and 2003, Buenaventura modified the terms of certain derivative instruments contracts in order to qualify them
as normal sale contracts. Likewise, during 2004, El Brocal made similar changes to their derivative contracts in order to qualify
them as normal sale contracts. As of December 31, 2005, the settled values for these contracts amounting to S/107,079,000 and
S/613,791,000, as current and non-current liabilities, respectively are presented as “deferred income from sale of future
production” in the consolidated balance sheets (S/74,937,000 and S/568,772,000 like current and non-current liabilities as of
December 2004). Since this date, such amount will be credited to income as delivery of the committed ounces of gold occurs.
In 2005, Buenaventura delivered 282,000 ounces of gold as part of the sale contracts above mentioned (198,000 ounces in
2004). As a consequence, Buenaventura recognized revenues of S/92,753,000 in the caption “realized revenue from sale of
future production” in the consolidated statements of income (S/68,837,000 during 2004).
As of December 31, 2005 Buenaventura is committed to sell 1,981,000 ounces of gold at prices ranging up US$451 per ounce
until December 2012. During 2005, El Brocal has complied with all the settled deliveries of zinc and silver.
35. Fair vvalue
alue of financial instr
umen
ts
instrumen
uments
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 estimated fair value of the long-term debt 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/227,155,000 and is based on quotations received from the Company’s
counter- parties, see note 34.
36. 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, 2005, the activities as defined in the PAMAs respective to the Uchucchacua,
Julcani, Orcopampa, Colquijirca and Ishihuinca mining units had been completed.
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 in connection with protection, conservation and recuperation
of the environment standards.
On August 15, 2005 the corresponding ruling was approved. In accordance with the first regulation, the mining site closing
plans approved before the issuance of this ruling have to be adequate to the new disposals in a term no greater than nine
months since its publication.
During the year 2005 the Company made disbursements in connection with activities included in the mining site closing plans
by S/10,738,000 (S/5,691,000 and S/3,637,000 during the years 2004 and 2003). As of December 31, 2005, the Company has
recognized a liability of S/92,371,000 (S/67,521,000 as of December 31, 2004) related to its future obligations for the closing
of the mining units, see note 17(a).
On July 6, 2004, the Peruvian Congress enacted the Law N°28271 “Law that Regulates the Environmental Liabilities for the
Mining Activity”.This law has the purpose to regulate the identification of environmental liabilities of mining activities and the
financing to restore the affected areas. According to this law, an environmental liability corresponds to the impact caused to the
environment by mining activities, Buenaventura´s management is performing an inventory in areas currently abandoned or
inactive in which the company previously carried-out exploitation activities, in order to determine what activities are necessary.
In Buenaventura´s management opinion, the impact of these obligations is not significant for the 2005 financial statements.
(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:
Year in which
Lease holder
Leasing company
the contracts end
Royalties
Compañía de Minas
Sindicato Minero Orcopampa S.A.
2043
10 % of the valorized production
Buenaventura S.A.A.
(Arequipa)
subject to certain conditions.
58
Inversiones Mineras
del Sur S.A.
El Futuro de Ica S.R.L.
(Arequipa)
2015
7 % of concentrates revenues.
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:
2003
2004
2005
Sindicato Minero Orcopampa S.A.
El Futuro de Ica S.R.L.
S/. 22,869
S/. 22,706
S/. 23,932
2,273
2,212
2,211
25,142
24,918
26,143
Royalties payable amount to S/2,874,000 as of December 31, 2005 (S/2,513,000 as of December 31, 2004), see Note 17(a).
Legal processes of Buenaventura Demand presented a the Federal Court at the United States of America –
Buenaventura and Condesa, together with Newmont Mining, Newmont Second and certain individual persons, were seeded in a legal
action in the Federal Court of the United Stated of America – Tenth Circuit (Colorado) with a French citizen that informed that he was
affected by the revocation of BRGM, Mine Or and their related entities (SCRCM) over preferential rights on the shares of CEDIMIN.
On March 16, 2005 all the involved parts reached to an extrajudicial agreement. As a consequence of this agreement, the
demand, pending of motion at the Federal Court of the United States of America - Tenth Circuit and subsequently dismissed by
the District Court, was filed definitively.
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.
37. Transaction with affiliated companies
(a) The Company had the following transactions with its affiliated companies during the years ended December 31, 2003, 2004 and 2005:
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 2005, royalties earned amounted to S/152,342,000 (S/116,857,000 and S/128,889,000
in 2003 and 2004, respectively) and are presented as “royalties income” in the consolidated statements of income.
Compañía Minera Condesa S.A. (“Condesa”) During 2005, Compañía Minera Condesa S.A. received cash dividends from Yanacocha for approximately S/264,034,000 (S/
482,025,000 and S/414,911,000 in 2003 and 2004, respectively).
Buenaventura Ingenieros S.A. (“Bisa”) In March 2002, Buenaventura Ingenieros S.A. signed a technical service agreement with Yanacocha to perform 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 expired on December 31, 2004 and was renewed in January, 2005
under the same terms.
In 2005, the revenues related to this service contract amounted to approximately S/12,343,000 (S/11,408,000 and S/10,176,000
in 2003 and 2004 respectively).
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 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 Conenhua signed a 10-year agreement covering
electric energy transmission and infrastructure operation beginning November 2001. In exchange for operating and managing
the transmission project, Yanacocha will pay an annual fee of US$3.7 million. During 2005, the revenues for these services
amounted to approximately S/12,813,000 in 2005 (S/14,282,000 and S/13,265,000 in 2003 and 2004, respectively).
The profit between Conenhua and Yanacocha is not significant and, therefore, has not been eliminated in the consolidated
financial statements.
(b) As a result of the above and other minor transactions, the Company has the following accounts receivable from affiliated
companies:
2004
2005
Minera Yanacocha S.R.L.
Others
S/. 45,708
370
46,078
S/. 65,666
372
66,038
38. Explanation added for English language translation
The accompanying consolidated financial statements are presented on the basis of accounting principles generally accepted in
Peru. Certain accounting practices applied by the Company that conform with generally accepted accounting principles in Peru
may differ in certain respects to generally accepted accounting principles in other countries.
59
60
BALANCE SHEETS
COMPAÑÍA DE MINAS BUENAVENTURA S.A.A.
As of December 31, 2004 and 2005
Note
2004
2005
2005
(Note 4)
6
7
8
9
34(b)
10
11
S/. 303,887
52,155
64,252
5,478
14,704
47,909
30,460
518,845
46,107
2,193,150
225,371
98,385
6,199
255,407
3,343,464
S/. 291,440
52,884
37,565
14,307
25,979
69,623
29,675
521,473
10,714
2,841,039
240,434
116,997
5,303
291,797
4,027,757
US$ 84,943
15,414
10,949
4,170
7,572
20,292
8,649
151,989
3,123
828,050
70,077
34,100
1,545
85,047
1,173,931
15
16
34(b)
31(a)
31(b)
30,855
80,368
18,453
70,927
72,313
21,501
113,986
23,459
59,138
107,079
6,267
33,223
6,837
17,236
31,209
16
31(a)
31(b)
272,916
53,791
267,852
568,772
1,163,331
325,163
51,482
168,017
613,791
1,158,453
94,772
15,005
48,970
178,896
337,643
Assets
Current assets
Investment funds
Trade accounts receivable
Other accounts receivable, net
Accounts receivable from subsidiaries and affiliates
Inventories, net
Prepaid tax and expenses
Total cur
currren
entt assets
Long-term accounts receivable from subsidiaries
Investments in shares
Property, plant and equipment, net
Development costs, net
Goodwill, net
Deferred income tax and workers’ profit sharing asset, net
Total assets
shareholders
equity
Liabilities and shar
eholders
y, net
Current liabilities
Accounts payable to subsidiaries and affiliates
currren
entt liabilities
Total cur
Other long-term liabilities
Total liabilities
34(b)
12
13
14
28
eholders
y, net
Shar
equity
hareholders
17
Capital stock, net of treasury shares of S/49,659,000
in 2004 and 2005
Investment shares, net of treasury shares of S/66,000 in 2004
and S/127,000 in 2005
Additional capital
Legal reserve
Other reserves
Retained earnings
Cumulative translation loss
Cumulative unrealized gain on investments in shares carried at fair value
shareholders
equity
Total shar
eholders
y, net
596,755
596,755
173,930
1,683
610,659
129,276
923
734,059
(148,513)
256,331
(1,040)
2,180,133
1,622
609,734
129,276
923
1,598,716
(67,962)
240
2,869,304
473
177,713
37,679
269
465,962
(19,808)
70
836,288
Total liabilities and shar
eholders
y, net
shareholders
equity
3,343,464
4,027,757
1,173,931
These statements have been extracted and translated into English from the 2005 annual report of Compañía de Minas Buenaventura S.A.A., originally issued in
Spanish language.
61
STATEMENTS OF INCOME
Note
2004
2005
2005
(Note 4)
Operating revenues
Net sales
Realized income from sale of future production
Royalties income
Total rre
evenues
Costs of operations
Operating costs
Exploration and development costs
in operational mining sites
oper
era
Total ccosts
osts of op
er
ations
Gross margin
Operating expenses
General and administrative
Exploration costs in non-operational mining sites
Royalties
Selling
oper
era
xpenses
Total op
er
ating eexp
xp
enses
Operating income (loss)
Other income (expenses), net
Share in affiliated companies, net
Loss from change in the fair value of
derivative instruments
Interest income
Interest expense
Gain (loss) from exposure to inflation
Other, net
income
(exp
xpenses),
Total other inc
ome (e
xp
enses), 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
19
31(b)
34(a)
S/. 521,862
8,614
530,476
S/. 683,599
68,837
9,377
761,813
S/. 662,646
92,753
10,856
766,255
US$ 193,135
27,034
3,164
223,333
20
275,763
332,290
361,357
105,321
21
13(c)
56,989
24,595
357,347
90,332
30,696
453,318
87,498
39,471
488,326
25,502
11,505
142,328
173,129
308,495
277,929
81,005
96,043
45,225
22,869
15,028
910
180,075
56,753
46,821
27,052
6,200
994
137,820
84,802
51,605
33,111
4,496
896
174,910
24,716
15,041
9,651
1,310
261
50,979
(6,946)
170,675
103,019
30,026
12(b)
627,888
624,624
919,047
267,866
31(a)
26
26
2(a)
27
(662,714)
9,421
(202)
825
(10,220)
(35,002)
(59,197)
9,385
(1,022)
(18,464)
(4,680)
550,646
(87,872)
8,545
(1,823)
(413)
837,484
(25,611)
2,490
(531)
(121)
244,093
(41,948)
62,896
228,834
721,321
(9,254)
(31,927)
940,503
2,449
8,447
274,119
714
2,462
249,782
680,140
951,399
277,295
3(a)
(72,295)
-
-
-
3(b)
177,487
680,140
(10,416)
940,983
(3,036)
274,259
1.96
5.35
7.48
2.18
(0.57)
-
-
-
-
-
(0.08)
(0.02)
22
23
24
25
28(b)
28(b)
Basic and diluted earnings per share before cumulative
effect of accounting change, stated in Peruvian
nuevos soles and U.S. dollars
29
Cumulative effect of accounting change for mine
closing costs
29
Cumulative effect of change in accounting principle due
to stripping costs
Basic and diluted earnings per share, stated in
nuevos soles and U.S. dollars
Weigh
ver
age numb
er of shar
es outstanding
eightted aav
erage
number
shares
29
29
1.39
5.35
7.40
2.16
127,236,219
127,236,219
127,229,844
127,229,844
Spanish language.
62
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Capital stock, net of
treasury shares
Number
of shares
126,879,832
Balance as of January 1st, 2003
Loss in the initial valuation of
investments in shares maintained
at fair value, note 2(e)
Declared and paid dividends, note 17(f) Shares carried at fair value
Loss in the initial valuation of
derivative instruments, note 2(q)
Gain in the initial valuation of derivative
instruments classified as hedging
instruments held by El Brocal, note 2(q) Loss from change in the fair value of
derivative instruments classified as hedging
instruments held by Subsidiary
Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
maintained through Compañía
Minera Condesa S.A., note 17(g)
Net income
Balance as of December 31, 2003 126,879,832
Investments in shares maintained
at fair value
Gain from change in the fair value
of derivative instruments classified
as hedging instruments held
by El Brocal, note 31(a)
Transfer due to change in terms of
hedging contracts held by
the subsidiary El Brocal
Realized income from sale of future
Others
Compañía Minera Condesa S.A., note 17(g) Net income
Effect of adoption of the equity method
on Sociedad Minera Cerro Verde
S.A.A. investment, note 12(g)
Declared and paid dividends, note 17(f) Investments in shares maintained
at fair value
Realized revenue from sale of future
Investment shares acquired by Subsidiary Cumulative loss for translation of
investment in Minera Yanacocha S.R.L.,
(maintained through Compañía Minera
Condesa S.A.) and in Sociedad Minera
Cerro Verde S.A.A., note 17(g)
Net income
Common Investment Additional
shares
shares
capital
S/. 596,755
S/. 1,683 S/. 610,659
Legal
Other
reserve reserves
Cumulative
unrealized Cumulative
gain on unrealized
Cumulative investments in loss on
transaction shares carried derivative
loss at fair valueinstruments
Retained
earnings
S/. 81,537
- S/. 686,945
S/. 7,369
-
Total
- S/. 1,984,948
-
-
-
-
(5,957)
- (159,164)
-
-
209,130
-
(5,957)
(159,164)
209,130
-
-
-
-
- (458,189)
-
-
-
(458,189)
-
-
-
-
-
-
-
-
1,742
1,742
-
-
-
17,749
-
(17,749)
-
-
(8,085)
-
(8,085)
-
596,755
-
1,683
-
610,659
-
99,286
-
177,487
223,373
- (139,464)
(36,764)
(29,395)
-
209,130
-
(6,343)
-
(36,764)
177,487
1,705,148
(139,464)
-
-
-
-
-
-
-
47,201
-
47,201
-
-
-
-
-
-
-
-
4,621
4,621
-
-
-
-
-
-
-
-
-
-
-
-
-
29,990
-
923
(29,990)
-
-
-
682
-
682
923
596,755
1,683
610,659
129,276
923
- (119,118)
680,140
734,059 (148,513)
256,331
(1,040)
(119,118)
680,140
2,180,133
-
-
-
-
75,680
- (152,006)
(10,348)
-
(256,043)
-
-
(190,711)
(152,006)
-
-
-
-
-
-
-
(48)
-
(48)
-
(61)
(925)
-
-
-
-
-
1,040
-
1,040
(986)
596,755
1,622
609,734
129,276
923
940,983
1,598,716
90,899
(67,962)
240
-
90,899
940,983
2,869,304
Spanish language.
63
STATEMENTS OF CASH FLOWS
2003
Operating activities
Collection from customers
S/. 508,007
Collection of dividends
547,356
Collection of royalties
8,614
Collection of interest
11,668
Payments to suppliers and third parties
(293,516)
Payments of exploration expenditures
(91,291)
Payments to employees
(74,693)
Payments of royalties
(22,346)
Payments of income tax
(11,046)
Payments of interest
(203)
582,550
Investing activities
Net decrease (increase) of accounts receivable
from subsidiaries and affiliates
45,640
Decrease (increase) on time deposits
Decrease (increase) of investment fund
(53,068)
Proceeds from sale of plant and equipment
1,274
Payments by purchase of investments in shares
(4,663)
Purchase of mining rights, property, plant and equipment
(46,923)
Development expenditures
(32,685)
Payments from derivative instruments settled, net
(19,020)
Proceeds from sale of shares
Net cash used in investing activities
(109,445)
Financing activities
Payments of dividends
(172,249)
Net cash used in financing activities
(172,249)
Net increase (decrease) in cash and cash equivalents
during the year
300,856
Cash and cash equivalents at beginning of year
88,787
389,643
Cash and cash equivalents at year-end, note 6
Reconciliation of net income to net cash provided
by operating activities
Net income
177,487
Add (deduct)
Loss from change in the fair value of derivative instruments
662,714
25,795
Officers’ compensation, note 16
49,594
Amortization of development costs
10,553
Slow moving and obsolescence supplies reserve
361
Cumulative effect of accounting change
72,295
Accretion expense
2,795
Net cost of retired plant and equipment
910
Share in subsidiaries and affiliated companies, net of dividends
(80,533)
Income from sale of future production
Provisions for deferred income tax and workers’ profit sharing (291,730)
Gain from change in the fair value of investment fund
(1,813)
Loss (gain) from exposure to inflation
(825)
Gain on sale of plant and equipment
(1,030)
Allowance for doubtful accounts
307
Net changes in assets and liabilities accounts
Decrease (increase) of operating assets Trade and other accounts receivable
(19,759)
Inventories
(3,391)
Prepaid taxes and expenses
(13,911)
Increase (decrease) of operating liabilities Trade accounts payable and other current liabilities
(7,269)
582,550
Transac
tions tha
ec
ash flo
ws:
ansactions
thatt did not aff
affec
ectt ccash
flow
Transfer from derivative instruments to deferred income
from sale of future production
709,963
Collection of dividends with application on account
payable to subsidiaries
Increase of the book value of long-term assets
4,566
Capitalization of accounts receivable from
Compañía Minera Colquirrumi S.A.
-
2004
2005
2005
(Note 4)
S/. 675,031
146,605
9,282
9,089
(357,324)
(105,847)
(77,635)
(23,291)
(14,564)
(1,022)
260,324
S/. 689,333
710,832
10,243
7,394
(386,291)
(148,366)
(88,412)
(34,041)
(5,902)
(1,823)
752,967
US$ 200,913
207,179
2,985
2,155
(112,589)
(43,243)
(25,768)
(9,922)
(1,720)
(531)
219,459
(51,311)
(24,255)
469
(8,299)
(30,665)
(35,143)
(70,430)
330
(219,304)
31,115
24,255
4,053
602
(519,791)
(50,910)
(41,607)
(24,157)
(576,440)
9,069
7,069
1,181
176
(151,498)
(14,838)
(12,127)
(7,041)
(168,009)
(151,031)
(151,031)
(164,719)
(164,719)
(48,009)
(48,009)
(110,011)
389,643
279,632
11,808
279,632
291,440
3,441
81,502
84,943
680,140
940,983
274,259
22,360
30,985
2,135
27,335
2,426
2,555
994
(482,890)
(68,837)
27,838
(2,529)
18,464
(203)
-
87,872
39,996
26,883
21,693
16,435
10,416
5,601
1,485
896
(208,215)
(92,753)
(36,390)
(2,503)
-
25,611
11,657
7,835
6,323
4,790
3,036
1,632
433
261
(60,686)
(27,034)
(10,606)
(730)
-
221
4,528
(10,732)
17,245
(34,765)
785
5,026
(10,133)
229
5,534
260,324
(42,697)
752,967
(12,444)
219,459
-
172,540
50,289
6,341
6,384
7,716
1,861
2,249
3,532
-
-
Spanish language.
64
Management
Alberto Benavides de la Quintana
Chairman of the Board
Roque Benavides G.
President & CEO
Since 02/22/01
Raúl Benavides G.
Carlos Gálvez P.
Mario Santillán F.
César Vidal C.
Vice President Business Development
Vice President & CFO
Vice President Operations
Vice President Explorations
Since
Since
Since
Since
Humberto Rodríguez C.
Comptroller
Since 01/01/84
Jaime Ayllón B.
Fernando Castre F.
Fernando Espá G
Isaac Galarza C.
Alejandro Hermoza M.
Mario Palla P.
Bernardo Rubio C.
Federico Zúñiga T.
Assistant Manager for IT Systems
Assistant Manager Internal Audit
Assistant Manager for Commercialization
Assistant Manager for Logistics
Assistant Manager for Administration and Human Resources
Assistant Manager (Minera Colquirrumi)
Assistant Manager for Concentration Plants
Assistant Manager for Accounting
Since 01/01/02
Since 05/23/05
Since 01/01/93
Since 01/01/94
Since 06/16/03
Since 07/01/03
Since 06/01/95
Since 01/01/84
Luis de la Cruz R.
Head of La Zanja Project and
Officer in charge of Community Relations
Since 09/19/05
Julio Meza P.
Carlos Rodríguez V.
Chief Geologist
Environmental Issues Director
Since 07/01/04
Since 09/19/05
Julcani/Recuperada
Felix Lewandowsky M.
Orlando Quintanilla R.
Ronald Estrella
Mario Calderón S.
Mario Loayza F.
Juan Carlos Vargas B
General Superintendent
Assistant Superintendent
Head of Recuperada Mine
Head of Geologists
Head of Concentration Plant
Head of Human Resources
Uchucchacua
Daniel Briones A.
Jose Luis Ilizarbe C.
Iván Romero M.
Raúl Goicochea F.
Renán Valenzuela G.
Jorge Páez J.
Alejandro Merino T.
Assistant Superintendent
Mine Superintendent
Concentration Plant Superintendent
Head of Unit Geologists
Unit Accountant
Orcopampa
Julio Rojas E.
Marco Oyanguren L.
César Hinostroza R.
Luis Gamarra E.
Percy Cárdenas A.
Luis Góngora C.
Mine Superintendent
Chief of Processing Plant
Head of Unit Geologists
Unit Accountant
65
07/01/97
02/22/01
05/01/92
01/02/96
BOARD AND MANAGEMENT RESUME
Alberto Benavides de la Quintana, Chairman of the Board* and member of the Compensations Committee. A Mining Engineer
with a degree from the Universidad Nacional de Ingeniería (UNI) and MSc in Geology from Harvard University where he also took the
Advanced Management Program offered by the Harvard Business School. A former employee of the Cerro de Pasco Corporation, Mr.
Benavides has also served as Director for a number of companies including the Banco Central de Reserva del Perú.
Norman Anderson, Director*. A Geologist, holding a degree from the University of Manitoba. Former employment includes
working for AMAX and Cyprus Amax Inc. and serving as Executive President for Cominco.
Luis Coleridge Alcántara, 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.
Germán Suárez Chavez, Director. Member of the Compensations Committee and the Auditing Committee. Mr. Suárez is an
economist from the UNMSM and holds an MSc in Economics from the University of Columbia. He has served as Chairman of the Board for
the Banco Central de Reserva del Perú, where he has worked for most of his professional career. He was also President of the Banco de la
Nación, Director of a number of companies and Governor before the IMF and the IADB.
Felipe Ortiz-de-Zevallos, Director*, Member of the 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
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*. Mr. Paverd is a graduate of Rhodes University (BSc and MSc), and holds a PhD from James Cook University
of North Queensland. He has 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 Ganoza, Director* and General Manager. 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 Oxford
University. He has worked at Buenaventura since 1977, is Director of 7 subsidiary companies and was President of SNMPE and CONFIEP.
Carlos E. Gálvez Pinillos, Finance and Administration Manager. 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 Ganoza, is the Company’s Business Development Manager. He holds a BA in Mining Engineering from the
University of Missouri-Rolla, a Masters Degree in Mining Management from Pennsylvania State University and has 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 Farje, Operations Manager. 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, Explorations Manager. 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 Dasso, 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 also an ex-President of the SNMPE and currently President of CONFIEP.
Carlos Humberto Rodríguez Calle. Comptroller. BA in Economic, Marketing and Accounting Sciences from PUCP, with Business
Studies at the U. de Piura. Former employment includes working for Petrolera Amotape S. A , Cyanamid Peruana S.A.; he 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.
66
Stock Market Information
Buenaventura’s Common and Investment Shares have been listed in the Lima Stock Exchange since 1871 and 1979 respectively.
The Company’s American Depositary Shares (ADS) have been listed 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 1 ADS equaled 2 Common Shares. As from November 13, 2003
1 ADS equals to 1 Common Share.
Shareholders structure and their respective nationalities (only includes shareholders controlling more than 5% interest as of
year-end 2005.
Name
Interest Participation (%)
Alberto Benavides Q.
Nationality
14.022
Peruvian
7.687
Peruvian
Merrill Lynch Investment Managers Ltd. (UK)
6.262
Fidelity Management & Research Co.
Total
5.453
33.424
British
North American
Shareholders structure, Common Shares as of year-end 2005.
Ownership
Number of Shareholders
Less than 1%
1,414
20.32
Between 1% - 5%
23
46.25
Between 5% - 10%
3
19.41
1
1,441
14.02
100.00
More than 10%
Total
Shareholders structure, Investment Shares as of year-end 2005
Ownership
Number of Shareholders
Less than 1%
1,101
44.05
Between 1% - 5%
2
2.51
Between 5% - 10%
2
14.85
2
1,107
38.59
100.00
More than 10%
Total
67
Corporate Information
Compañía de Minas Buenaventura S.A.A.
Investor Relations
Daniel Dominguez
Telephone:
(511) 419 2536
E-mail:
ddominguez@buenaventura.com.pe
I-Advize Corporate Communications, Inc
Maria Barona / Pete Majeski
Telephone:
(212) 406 3690
E-mail:
pmajeski@i-advize.com
mbarona@i-advize.com
68

BUENAVENTURA INGLESok 2005

Transcription

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