Executive Summary / Key Takeaways

• Compañía de Minas Buenaventura (NYSE:BVN) is poised for a significant transformation with the imminent ramp-up and production at its San Gabriel gold project, expected to become a primary gold-producing asset.
• The company demonstrated strong financial performance in Q2 2025, with EBITDA from direct operations rising to $130 million and net income reaching $91 million, supported by robust copper production and strategic asset management.
• BVN is actively deleveraging and committed to shareholder returns, having redeemed its 2026 bonds and proposing an $80 million dividend for 2024, aligning with its policy of distributing at least 20% of net profit.
• Strategic initiatives, including the transition to owner-operated mines and the commercialization of Cerro Verde copper concentrate, aim to enhance cost efficiency and leverage market opportunities.
• While San Gabriel faces initial ramp-up challenges due to tailings facility constraints and higher-than-anticipated operating costs from ground conditions, its long-term production potential and the company's diversified portfolio position BVN for sustained value creation amidst increasing global demand for metals.

A Legacy Forged in Peru: Buenaventura's Strategic Evolution

Compañía de Minas Buenaventura S.A.A., established in 1953 in Lima, Peru, has built a formidable legacy as a diversified miner, engaging in the exploration, mining, concentration, smelting, and marketing of polymetallic ores and metals. The company's core business spans gold, silver, lead, zinc, and copper deposits, complemented by its operation of a monohydrate manganese sulphate crystallization plant and hydroelectric power plants. This integrated approach, deeply rooted in Peruvian geology, has shaped BVN's strategic responses to market dynamics and its foundational strengths.

The global mining landscape is currently undergoing a profound transformation, driven by the accelerating transition towards decarbonization. Copper, in particular, has emerged as a critical enabler for renewable energy infrastructure, electric vehicles, and next-generation technologies like AI-driven data centers. Global copper demand is projected to nearly double by 2035, creating a compelling opportunity for companies like Buenaventura that are strategically aligned with this paradigm shift.

In this competitive environment, BVN stands as a regional leader in Peru, benefiting from its established operational footprint and deep understanding of local regulations and community engagement. While larger global competitors such as Barrick Gold Corporation , Newmont Corporation , and Southern Copper Corporation boast broader geographic diversification and often greater scale in technological investments, BVN's localized expertise and diversified mine operations offer distinct advantages. Its ownership of hydroelectric power plants, for instance, provides a degree of energy self-sufficiency, potentially translating into superior margins through reduced energy costs and more stable operations compared to rivals dependent on external power sources.

Technological Edge and Operational Excellence

Buenaventura's operational strength is underpinned by its integrated mining and processing capabilities across a diverse portfolio, significantly enhanced by its ownership and operation of hydroelectric power plants. These plants provide a tangible benefit of reduced energy costs and a reliable power supply, which can lead to superior margins by mitigating exposure to volatile energy prices. This energy independence fosters more robust growth, particularly in an industry where energy costs are a substantial component of operational expenditure.

The company is also strategically implementing the UDF mining method, engaging dedicated experts, conducting trial mines at Tambomayo, and benchmarking against operations in Nevada, USA. This initiative aims to optimize ore recovery and reduce dilution, directly impacting the efficiency and profitability of its underground operations. Furthermore, BVN is making a significant investment in its operational future by transitioning from contractors to its own personnel and equipment in key mines like Uchucchacua, Yumpag, and El Brocal. This long-term strategy, which includes the delivery of new, larger-capacity equipment from Sandvik (SANDVY) in 2025 and 2026, is designed to reduce costs, enhance operational control, and improve overall efficiency. For example, at El Brocal, the company is moving to larger 14-17 tonne loaders for development and production, a move expected to yield long-term cost savings. These technological and operational advancements contribute to a competitive moat by enhancing cost efficiency, operational control, and resource recovery, supporting long-term growth and profitability.

Financial Momentum and Strategic Capital Allocation

Buenaventura's financial performance in the first half of 2025 underscores its strategic progress. In the second quarter of 2025, EBITDA from direct operations increased to $130 million, up from $107 million in the second quarter of 2024. Net income also saw a healthy rise to $91 million, compared to $71 million in the same period of the prior year. This strong performance builds on a robust 2024, where full-year EBITDA from direct operations, excluding the sale of Chaupiloma Royalty Company, reached $431 million, a substantial increase from $199 million in 2023. Net income for the full year 2024 was $402.7 million, significantly up from $19.9 million in 2023.

The company's liquidity position remains solid, with a cash position of $589 million and total debt of $860 million as of June 30, 2025, resulting in a manageable leverage ratio of 0.56x. Demonstrating a commitment to financial stability and deleveraging, Buenaventura redeemed the remaining $149 million of its 2026 bonds on July 23, 2025.

Shareholder returns are also a priority, with the Board proposing an $80 million dividend for 2024, aligning with the company's policy of distributing at least 20% of its net profit. Dividends from its stake in Cerro Verde continue to be a significant cash inflow, with $59 million announced on July 24, 2025, expected in August, bringing the total to $108 million for the year. An earlier $49 million dividend from Cerro Verde was received in April 2025. For the full year 2025, the company anticipates receiving $150 million in dividends from Cerro Verde. These proceeds, along with those from asset sales, are primarily allocated to funding the San Gabriel project, with the company's $200 million revolver facilities remaining undrawn, highlighting prudent capital management.

When comparing BVN's financial metrics to its peers, its TTM P/E ratio of 11.55 appears attractive against Newmont (NEM) at 15.01, Barrick Gold (GOLD) at 27.37, and Southern Copper (SCCO) at 24.32, suggesting potential undervaluation relative to some major players in the sector. BVN's strong EBITDA margin of 53.70% also indicates efficient operational performance.

San Gabriel: The Golden Catalyst

The San Gabriel gold project stands as the cornerstone of Buenaventura's future growth strategy, poised to become its primary gold-producing asset. The project has achieved significant progress, reaching 88% overall completion by the second quarter of 2025, with engineering and procurement finalized and construction advancing at 86%. Mechanical works for the primary crusher, SAG and Ball mills are 100% complete, and CIL tanks are at 98%. The filtered tailings plant is 87% complete.

Management anticipates commencing the ramp-up phase in the third quarter of 2025, with the production of the first gold bar expected in the fourth quarter of 2025. This critical milestone is subject to the timely approval of necessary operating permits, which management views as a "very simple permit" and does not foresee as a major risk, noting that authorities have been invited to visit the site in September 2025. The total capital expenditure for San Gabriel is now expected to be between $720 million and $750 million, with $588 million disbursed as of June 2025. An additional $130 million to $160 million is projected for disbursement in the second half of 2025.

Upon reaching full production, San Gabriel is expected to yield between 100,000 and 120,000 ounces of gold annually, generating an estimated EBITDA of $90 million to $110 million per year at a gold price of $2,000 per ounce. The projected cash cost is approximately $1,300 per ounce of gold, with annual sustaining capital expenditure between $5 million and $7 million. The increase in cash cost from an original plan of $800 per ounce is attributed to challenging ground conditions ("poor ground" requiring significant reinforcement), a shift to more expensive underhand mining methods, and increased use of cemented backfill.

The ramp-up to full capacity (3,000 tonnes per day) is expected to extend throughout 2026, with stabilization anticipated in the second half of 2026. This extended ramp-up is primarily constrained by the dry stacking tailings facility, which is situated in a narrow, V-shaped valley. This unique geological feature makes initial tailings placement tricky and requires a cautious approach to achieve full throughput. Commercial production is defined as 20 continuous days of operation at 65% capacity, producing two gold bars.

Operational Pillars: Silver and Copper Strength

Beyond San Gabriel, Buenaventura's existing operations in silver and copper continue to be vital contributors to its portfolio. In the second quarter of 2025, silver production reached 3.6 million ounces, an 11% decrease compared to 4 million ounces in Q2 2024, primarily due to lower production at Yumpag, Tambomayo, and Julcani. However, Q1 2025 saw a 20% year-over-year increase in silver production to 3.7 million ounces, largely driven by Yumpag's full-scale operation, which contributed 2.2 million ounces. Yumpag is proving to be a key growth driver, maintaining steady production at 1,000 tonnes per day.

At Uchucchacua, seismic activity detected in Q2 2025 near the current operation area led to a cautious approach and a temporary shift in extraction towards polymetallic stops, necessitating additional backfilling with wet tailings. Despite this, the company expects to reach 2,000 tonnes per day throughput by the end of 2025, aiming to reduce operating costs by 10% by year-end, with further ramp-up continuing into 2026 to reach closer to 2,500-3,000 tonnes per day.

Copper operations also demonstrated strength, with production increasing by 28% year-over-year in Q2 2025, primarily due to the resumption of operations at El Brocal, which had been halted in Q2 2024. El Brocal is strategically mining slightly higher grades (around 1.45% copper) and prioritizing blocks with higher gold and silver content to positively impact cash costs through larger byproduct credits. The average cost for El Brocal is expected to stabilize around $6,500 per tonne of copper. The underground mine at El Brocal achieved a record average throughput of approximately 12,000 tonnes per day in Q3 2024, ahead of schedule, with a goal to reach 12,500 tonnes per day by Q1 or Q2 2025.

A new commercial strategy involves the sale of part of Cerro Verde's copper concentrate. Approximately 20,000 metric tonnes were sold by the end of Q2 2025, out of a total of 40,000 metric tonnes expected for the full year 2025. This initiative, contracted until 2027, is expected to generate a margin of $2.4 million to $2.6 million for the full year and provides leverage for securing better terms on Buenaventura's own concentrates.

Future Growth and Exploration

Buenaventura's long-term growth is further supported by its exploration pipeline. The Trapiche project, a copper asset, is currently in the midst of its feasibility study, with column leaching tests being processed to confirm the business case. The environmental impact study is on track for approval by the end of 2025, and the feasibility study is expected to conclude in the third quarter of 2026. The Algarrobo project, secured through an agreement with PROINVERSIÓN, represents a multi-stage development with a potential capital expenditure of $400 million to $800 million for construction, following social agreements, permitting, and a feasibility study. For 2025, the company has allocated an exploration budget of $40 million to $45 million for operating units and $20 million for non-operating areas.

Risks and Challenges

Despite the positive outlook, investors should consider several risks. The San Gabriel project, while nearing completion, faces potential delays in achieving steady-state production due to the unique challenges of ramping up the dry stacking tailings facility in a V-shaped valley. The higher-than-anticipated operating costs at San Gabriel, driven by poor ground conditions and revised mining methods, could also impact initial profitability. At Uchucchacua, the detected seismic activity and subsequent operational adjustments, though managed, highlight inherent geological risks. Permitting delays at Coimolache have impacted its profitability, and the continuity of Julcani in the company's portfolio is under evaluation due to elevated costs. Furthermore, the mining industry remains susceptible to commodity price volatility and geopolitical risks in operating regions.

Conclusion

Buenaventura stands at a pivotal moment, with the San Gabriel project poised to transform its gold production profile and significantly contribute to its financial performance. The company's strategic focus on optimizing existing operations, deleveraging its balance sheet, and returning value to shareholders, coupled with its robust financial performance in Q2 2025, paints a compelling investment picture. While challenges such as San Gabriel's ramp-up and operational adjustments at Uchucchacua exist, Buenaventura's commitment to technological advancements, cost efficiency, and a diversified portfolio positions it to capitalize on the increasing global demand for metals, particularly copper. The imminent production from San Gabriel, alongside the steady performance of its silver and copper assets, underscores Buenaventura's potential for sustained value creation in the evolving mining landscape.