What were the main milestones for Buenaventura in 2017?

The main milestone in 2017 was the achievement of commercial production in Tambomayo in August. Besides, on our four main underground mines (Tambomayo, Orcopampa, Uchucchacua and Marcapunta) we are developing a three-year debottlenecking project to reduce costs and enhance our exploration programs. On the exploration side, we had very good results in a new area of Uchucchacua called Cachipampa, while we continue to grow the potential of our Yumpaq area, a satellite deposit.

In base metals, a great milestone was the integration of El Brocal within the Buenaventura structure. On the operational side, we could connect the northern and southern areas of the Marcapunta mine. In 2017 we also signed an agreement with Gold Fields whereby we have acquired their oxides stockpiles, which will add to Coimolache’s production. Finally, Yanacocha approved the development of the Quecher Main project, which will extend its mine-life until 2027.

What are your expectations for this year from an operational perspective?

In 2018 we expect better results thanks to the improved base metals prices and the large, stable volumes from Cerro Verde. In gold we are going to increase production in Tambomayo and Coimolache, while in La Zanja we will see a decline –we will evaluate the development of a copper project there. In silver, where Uchucchacua is the main asset, we are also going to increase our production and improve our costs thanks to the better grades from the Cachipampa area; we are also integrating Mallay with Uchucchacua. We have decided not to go deeper at Mallay, where there is a lot of water and production costs increase, so moving forward Mallay will just provide additional processing capacity for Uchucchacua.

Finally, at Julcani, we are focusing on two main areas, the Acchilla mine and the Taipe-Galindo area; we are suspending operations at the Estela mine, which is more remote and presents higher costs; this way we are going to centralize the operation, reducing our footprint. We are going to produce lower volumes, but more efficiently.

How much more can El Brocal still grow?

With the integration tunnel in the underground mine and the improvements of the processing plant, the copper mine should produce 13,000 mt/d by the end of the year. Today, we are extracting around 8,000 mt/d at Marcapunta. This is an important project because with today’s copper prices, the margins from Marcapunta are going to be stronger than the ones from the zinc/lead open pit operation of El Brocal.

The potential of Marcapunta is very big. In the past, we had some limitations because the concentrate there has arsenic. With the integration of El Brocal and Buenaventura, we have developed an important market for our concentrate whereby we do not have this commercial restriction anymore. So, there is an opportunity to change our mining method from room and pillar to a different method that also extracts the ore from those pillars. If we are successful doing that, the Marcapunta mine could reach 20,000 mt/d.

Beyond Cerro Verde, will we see Buenaventura making additional investments in large copper operations?

Today, base metals represent 50% of our business. We have 65 years of experience doing business in Peru, and our vision is to have a long-term, profitable business. We will continue to produce gold and silver, because we have a great portfolio of projects, however copper will also be an important component for us to bring value to shareholders. In this respect, the integration of El Brocal is an important step for us: the open pit there is a medium-sized operation with concentrates that are more complex than what you find in a gold operation, and that is an expertise we need to have in-house, to be ready to develop other operations in industrial minerals.

How important is the debottlenecking project in mines that have been operating for decades?

Orcopampa has been in operation for 50 years, and Uchucchacua started operating 43 years ago, however in both operations the potential is very important. In Orcopampa, the deeper side of the mine offers high grade but the mineral is extracted through a ramp because the shaft has not been developed. So, we are extracting less volumes at higher costs, including additional ventilation costs. In other mines, we are dealing with better ventilation or dewatering solutions, to extend the mine cycles; we also want to move our backfill around as slurry, with pumps, rather than having to use trucks and scoops. Allocating our money to improve the efficiency of the running operations presents less technical risk, and a quicker return on investment, than developing a greenfield project.

Yet your pipeline includes greenfield projects as well. What are the main developments there?

In gold, we have San Gabriel. In silver, we have Yumpaq, and in base metals we have San Gregorio at El Brocal, as well as Faique and Trapiche. At Trapiche, the EIA is still in progress, but from the point of view of the mining method and the metallurgy, the project is very advanced. In 2018 we want to sign a long-term agreement with the community, to reduce the risk. Meanwhile, San Gabriel is an underground project, very similar to Tambomayo. Both the EIA and the agreements with the community are in place, however there we have some technical doubts about the mining method, which currently limits our margins. This year we want to increase our knowledge of the geomechanical aspects to develop a more efficient mining method. If we are successful with these developments, 2019 and 2020 would see additional permitting and engineering, and by 2021 we could be announcing the construction decisions.

What is your take on the political transition?

The transition has been abrupt, but it is acceptable because it has followed the existing legal framework. Martín Vizcarra may not have the same macroeconomic experience Pedro Pablo Kuczynski had, but the advantage of the new president is that he has more experience at the micro level, overseeing the relationships between the mining companies and the communities. This can actually be more helpful than we anticipate, because what delays projects is not so much permitting or bureaucracy, but the inability to sign fair, long-lasting agreements with the communities. Quellaveco is a success case under his watch and that should not be underestimated.