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Debt issues delay Buenaventura's San Gabriel gold project

Highlights

Company plans to sell one of its assets

Counting on higher cash flow from mines

Gold, silver production increases in Q2

Lima — Peru's largest precious metals producer, Buenaventura, increased production of gold, silver, copper, zinc and lead in the second quarter vs. last year's pandemic lockdown. Development of the company's delayed $430 million San Gabriel gold-silver project now depends on Buenaventura selling off some assets to reduce its debt burden, CEO Leandro Garcia said Aug. 3 during a conference call.

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Peruvian precious and base metals producer Buenaventura said its $370 million-$430 million San Gabriel gold-silver project will be delayed until it can trim its debt burden.

Buenaventura, which had planned to start construction at San Gabriel in Q2, is looking to sell one of its assets and receive further dividends from its 19.58% stake in Freeport-McMoRan's Cerro Verde copper mine, Garcia said.

"With that sale, we aim to pay our syndicated loan and reduce our leverage level," Garcia said during the call. "We're evaluating all alternatives. With those actions, we'll be in shape to begin the development of San Gabriel."

Buenaventura, which raised $550 million from a July 23 bond sale to pay off tax debts, is also counting on improved cash flow from its mines this year to help fund the 120,000-150,000 oz/y project, Garcia said. The company also received a $39.2 million dividend from Cerro Verde in the second quarter.

Buenaventura, which was hampered by a three-month lockdown last year, produced 73,388 oz of gold (up 18%) and 3.51 million oz of silver (up 76%) in the second quarter, according to a statement.

Newmont Mining's Yanacocha mine, in which Buenaventura holds a 43.65% stake, produced 66,563 oz of gold (down 2%), while Cerro Verde produced 93,576 mt of copper (up 16%). Copper output jumped 40% to 24,769 mt, while zinc tripled to 11,990 mt and lead nearly doubled to 6,332 mt, the company said.

Gold prices climbed 4% to $1,812/oz, while silver was up 59% to $27.06/oz, copper gained 77% to $10,033/mt, zinc soared 88% to $3,010/mt, and lead rose 36% to $2,192/mt.

Buenaventura posted a $37.5 million profit compared with a $19.1 million loss a year earlier as sales more than doubled to $146 million. The company almost doubled capex to $21.5 million in the quarter, in addition to allocating $14.5 million to exploration.

--Alex Emery, newsdesk@spglobal.com