Buenaventura Announces Closing of Transaction to Divest Its Chaupiloma Royalty Company to Franco-Nevada for $210 Million

Rhea-AI Summary

Buenaventura (NYSE: BVN) has closed a transaction to sell its Chaupiloma subsidiary, which owns a 1.8% net smelter return royalty on Newmont's Yanacocha mine, to Franco-Nevada for $210 million in cash. The deal includes a contingent payment of $15 million in Franco-Nevada shares upon certain conditions. This move aligns with Buenaventura's strategy to strengthen its financial position and reduce leverage.

The proceeds will be used to drive growth, particularly for the San Gabriel project, which is 57% complete and on track to produce its first gold bar by the second half of 2025. Buenaventura, Peru's largest publicly-traded precious metals mining company, operates several mines in Peru and holds a 19.58% stake in Sociedad Minera Cerro Verde, a significant copper producer.

Positive

• Received $210 million in cash from the sale of Chaupiloma subsidiary
• Potential for additional $15 million in Franco-Nevada shares upon certain conditions
• San Gabriel project is 57% complete and on track for first gold production in H2 2025
• Transaction strengthens financial position and reduces leverage

Negative

• Loss of future royalty income from the Yanacocha mine

Insights

Financial Analyst

This transaction marks a significant financial move for Buenaventura. The $210 million cash infusion will substantially improve the company's balance sheet, potentially reducing debt and enhancing financial flexibility. The deal's structure, including a contingent payment, demonstrates strategic thinking in balancing immediate cash needs with future upside potential.

Importantly, this divestment aligns with Buenaventura's stated goal of optimizing its portfolio and focusing on core assets. The allocation of proceeds towards the San Gabriel project, which is 57% complete, indicates a clear growth strategy. Investors should closely monitor how effectively management deploys this capital to drive future revenue growth and operational efficiency.

While the sale reduces future royalty income, the immediate financial benefits and strategic focus could outweigh this loss, potentially leading to improved shareholder value in the medium to long term.

Mining Industry Expert

This transaction reflects a broader trend in the mining sector where companies are streamlining their portfolios to focus on core operations. Buenaventura's decision to divest a non-core royalty asset to Franco-Nevada, a specialist in mining royalties, is strategically sound.

The deal's timing is noteworthy, considering the current robust precious metals market. By capitalizing on favorable market conditions, Buenaventura has likely maximized the value of this non-core asset. The contingent payment linked to the Conga project adds an interesting dimension, potentially providing additional upside if this controversial project moves forward.

Investors should pay attention to how this transaction impacts Buenaventura's overall resource portfolio and future production profile, particularly as it relates to the development of the San Gabriel project and its potential to offset any lost revenue from the divested royalty.

Market Research Analyst

This transaction could significantly impact Buenaventura's market perception. The immediate strengthening of the balance sheet may lead to improved credit ratings and potentially lower borrowing costs. This financial flexibility could be important in a capital-intensive industry like mining, especially given current global economic uncertainties.

The market is likely to view this move positively, as it demonstrates management's commitment to financial discipline and strategic focus. However, the true test will be in the execution of growth plans, particularly the San Gabriel project. Investors will be keenly watching for timely project delivery and operational efficiency improvements.

The contingent payment tied to the Conga project adds an interesting speculative element. While its value is relatively small ($15 million), it could serve as a barometer for market sentiment towards large-scale mining projects in Peru, a country that has faced social and political challenges in this sector.

Proceeds will strengthen balance sheet, enhancing shareholder returns

LIMA, Peru--(BUSINESS WIRE)-- Compañia de Minas Buenaventura S.A.A. (“Buenaventura” or “the Company”) (NYSE: BVN; Lima Stock Exchange: BUE.LM), Peru’s largest publicly-traded precious metals mining company, today announced that it has closed a transaction to sell to a subsidiary of Franco-Nevada Corporation 100% of Chaupiloma Dos de Cajamarca (“Chaupiloma”), Buenaventura’s subsidiary that owns 1.8% net smelter return royalty on all minerals (the “Royalty”) covering Newmont Corporation’s Yanacocha mine and adjacent mineral properties located in Peru.

Under the terms of the definitive agreement, consideration for the Royalty consists of $210 million paid to Buenaventura in cash upon closing, as well as a contingent payment of $15 million in Franco-Nevada common shares, payable upon achievement of certain conditions as described below.

"Today's announcement represents another critical step forward, aligned with our strategic objective of reinforcing Buenaventura’s financial strength to return to leverage levels reflecting our Company’s true operational performance, aligned with our commitment to our shareholders and bond holders,” said Leandro Garcia, CEO of Buenaventura. “This transaction enables Buenaventura to strengthen its financial position, with sale proceeds also directed towards driving further growth, led by progress on our San Gabriel project. Buenaventura’s San Gabriel project achieved 57% overall progress towards completion by second quarter’s end, meeting our planned targets. We remain on track to reach our goal of producing our first gold bar by the second half of 2025.”

Transaction Overview:

• $210 million in cash paid to Buenaventura and its affiliate on closing, whereby a wholly-owned subsidiary of Franco-Nevada acquired their Peruvian subsidiary Chaupiloma Dos De Cajamarca, which holds the Royalty.
• A contingent payment of 118,534 common shares of Franco-Nevada, representing $15 million as at signing, will be payable to Buenaventura and its affiliate upon the Conga project, a project of Minera Yanacocha which is primarily owned by Newmont Mining Corporation, achieving commercial production for a full year prior to the twentieth anniversary of closing.
• Buenaventura and its affiliate are entitled to receive a variable price equivalent to payments received by Chaupiloma for the Conga Royalty and two additional royalties.

Company Description

Compañía de Minas Buenaventura S.A.A. is Peru’s largest, publicly traded precious and base metals Company and a major holder of mining rights in Peru. The Company is engaged in the exploration, mining development, processing and trade of gold, silver and other base metals via wholly-owned mines and through its participation in joint venture projects. Buenaventura currently operates several mines in Peru: Orcopampa*, Uchucchacua*, Julcani*, Tambomayo*, La Zanja*, El Brocal and Coimolache.

The Company owns 19.58% of Sociedad Minera Cerro Verde, an important Peruvian copper producer (a partnership with Freeport-McMorRan Inc. and Sumitomo Corporation).

For a printed version of the Company’s 2023 Form 20-F, please contact the persons indicated above, or download a PDF format file from the Company’s web site.
(*) Operations wholly owned by Buenaventura

Note on Forward-Looking Statements

This press release may contain forward-looking information (as defined in the U.S. Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including those concerning Cerro Verde’s costs and expenses, results of exploration, the continued improving efficiency of operations, prevailing market prices of gold, silver, copper and other metals mined, the success of joint ventures, estimates of future explorations, development and production, subsidiaries’ plans for capital expenditures, estimates of reserves and Peruvian political, economic, social and legal developments. These forward-looking statements reflect the Company’s view with respect to Cerro Verde’s future financial performance. Actual results could differ materially from those projected in the forward-looking statements as a result of a variety of factors discussed elsewhere in this Press Release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813819889/en/

Contacts in Lima:

Daniel Dominguez, Chief Financial Officer

(511) 419 2540



Gabriel Salas, Head of Investor Relations

(511) 419 2591 / Gabriel.salas@buenaventura.pe



Company Website: https://www.buenaventura.com/en/inversionistas



Contacts in NY:

Barbara Cano

(646) 452 2334

barbara@inspirgroup.com

Source: Compañia de Minas Buenaventura S.A.A.

FAQ

What did Buenaventura (BVN) sell to Franco-Nevada?

Buenaventura sold its Chaupiloma subsidiary, which owns a 1.8% net smelter return royalty on Newmont's Yanacocha mine and adjacent properties, to Franco-Nevada.

How much did Buenaventura (BVN) receive for the Chaupiloma sale?

Buenaventura received $210 million in cash upon closing, with a potential additional $15 million in Franco-Nevada shares contingent on certain conditions.

What is the current progress of Buenaventura's (BVN) San Gabriel project?

The San Gabriel project has achieved 57% overall progress towards completion as of the second quarter's end and is on track to produce its first gold bar by the second half of 2025.

How will Buenaventura (BVN) use the proceeds from the Chaupiloma sale?

Buenaventura will use the proceeds to strengthen its financial position, reduce leverage, and drive further growth, particularly in the San Gabriel project.