Buenaventura contemplates $1bn project development portfolio

Peruvian gold miner Buenaventura has a project development portfolio that could see it invest $1 billion in six projects and joint ventures, president and chief executive Roque Benavides told MB.

Projects waiting for authorisation that Buenaventura will participate in include the $1.2 billion Minas Conga and $500 million Cerro Quillish projects in northern Cajamarca department led by Yanacocha, its joint venture with Newmont Gold.

Other projects include San Gregorio in Pasco department, Pilancones in Piura, La Zanja and Tantahuatay in Cajamarca. Buenaventura will contribute $1.09 billion of the $2.3 billion development cost of these projects.

Yanacocha, Peru`s largest gold producer in which Buenaventura owns a 43.65-percent stake, is expected to produce 1.6 million oz of gold this year and 1.8 million oz in 2008.

Production from Yanacocha has declined from over 3 million oz per year due to depletion of reserves, a fact which has helped Peru`s export earnings from copper overtake those from gold.

However, Benevides said there may be potential to increase production again in the future depending upon exploration results.

"We continue to explore as we have a very large land package and we believe there is still a lot of potential to find ore in the area. But if they are going to be the easy ounces like we have had in the past or higher cost ounces, we do not know," he said.

Buenaventura is forecast to produce about 500,000 oz of gold this year from its direct operations including 250,000 oz from Orcopampa in Arequipa department and 100,000 oz from Antapite in Huancavelica department.

"If we can improve on this we will," said Benavides.

Silver production will stay at about 16-17 million oz in 2007 and 2008 including the company`s equity share from the Yanacocha and Brocal companies, but with the bulk coming from its Uchucchacua mine in Lima department, while zinc production is forecast at 30,182 tonnes.

The Breapampa gold project, a joint venture with Newmont, is likely to be the next mine in production. Buenventura will acquire a 60-percent stake by investing $5 million and bringing the deposit into production, with output of 60,000-80,000 oz per year from the end of 2008.

The strategy of the company is to focus on gold and silver projects, but Benevides says the company will take advantage of any opportunities that present themselves.

"We are in mining to make money. We love to continue investing, we generate a lot of cash and we are looking for opportunities, although we think the best way to grow as a company is organic through exploration," he said.

Buenaventura will spend $18 million on exploration in Peru this year in 13 departments and has four projects at development stage and eight other prospects. Development projects are the Marcapunta copper and Pozo Rico silver projects, and Poracota and La Zanja are gold development projects.

"Pozo Rico is a continuation of the expansion of the Uchucchacua silver mine that we are trying to get into production as fast as we can. At Marcapunta we started production of 1,000 tpd at the mill this month to process copper ore. We are seeing how the metallurgy works," he said.

The company is trucking ore from Pozo Rico to its Uchucchacua mine for processing "but if the reserve base expands we may have to put a plant in", he said.

Development of La Zanja gold-silver project is being held up by permitting and local community issues, he said. The La Zanja exploration camp was burnt to the ground in November 2004.

The company is also looking to diversify internationally and is exploring for gold in Argentina, Brazil, and is open to opportunities in Chile and Mexico.