BVN Compania De Minas Buenaventura SA

 

FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

Report of Foreign Issuer

 

Pursuant to Rule 13a-16 or 15d-16 of the

 

Securities Exchange Act of 1934

 

For the month of August 2014

 

BUENAVENTURA MINING COMPANY INC.

 

(Translation of Registrant's Name into English)

 

CARLOS VILLARAN 790

 

SANTA CATALINA, LIMA 13, PERU

 

(Address of Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F X Form 40-F ___

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ___ No X

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________________.

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Unaudited interim consolidated financial statements as of June 30, 2014 and

2013 and for the three-month and six-month periods then ended

 

 

Report on review of interim consolidated financial statements

 

To the Board of Directors of Compañía de Minas Buenaventura S.A.A.

 

Introduction

 

We have reviewed the accompanying interim consolidated statements of financial position of Compañía de Minas Buenaventura S.A.A. (a Peruvian public corporation) and Subsidiaries (together the "Group") as of June 30, 2014, the interim consolidated statements of change in equity for the six-month periods ended June 30, 2014 and 2013, and the interim consolidated statements of profit or loss, statement of comprehensive income, and cash flows for the three-month and six-month periods ended June 30, 2014 and 2013, and explanatory notes. The Group’s Management is responsible for the preparation and presentation of these interim consolidated financial statements in accordance with IAS 34 “Interim Financial Reporting” (IAS 34). Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Peru and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

 

Lima, Peru

July 21, 2014

 

Countersigned by:

 

Víctor Burga
C.P.C.C. Register No.14859

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Consolidated statements of financial position

As of June 30, 2014 (unaudited) and December 31, 2013 (audited)

 

		Note		2014				2013
				US$(000)				US$(000)
Assets
Current assets
Cash		4(a)			138,052				61,898
Trade and other receivables, net		5(a)			272,746				260,434
Inventories, net		7			151,833				175,719
Income tax credit					55,658				37,370
Prepaid expenses					15,652				14,597
Embedded derivatives for concentrates sales, net		6(b)			5,957				1,857
					639,898				551,875
Non-current assets
Trade and other receivables, net		5(a)			18,156				20,607
Long-term inventories		7			39,124				23,366
Investments in associates		8(a)			2,363,055				2,358,410
Mining concessions, development costs, property, plant and equipment, net		9			1,535,626				1,515,460
Investment properties					11,160				-
Deferred income tax asset					72,322				83,525
Other assets, net					3,231				7,132
					4,042,674				4,008,500
Total assets					4,682,572				4,560,375
Liabilities and shareholders’ equity, net
Current liabilities
Borrowings					2,321				-
Trade and other payables					253,285				301,811
Provisions		10			71,826				69,800
Income tax payable					2,186				2,140
Financial obligations		11(a)			47,641				11,370
Derivative financial instruments		6(a)			10				1,093
					377,269				386,214
Non-current liabilities
Trade and other payables					15,057				12,229
Provisions		10			100,651				106,376
Financial obligations		11(a)			336,602				223,027
Deferred income tax liability					4,605				-
					456,915				341,632
Total liabilities					834,184				727,846
Shareholders’ equity, net
Capital stock, net of treasury shares for US$(000)62,665					750,497				750,497
Investment shares, net of treasury shares for US$(000)765					1,396				1,396
Additional paid-in capital					219,055				219,055
Legal reserve					162,688				162,663
Other reserves					269				269
Retained earnings					2,425,720				2,421,238
Other reserves of equity					104				104
Shareholders’ equity, net attributable to equity holders of the parent					3,559,729				3,555,222
Non-controlling interest					288,659				277,307
Total shareholders’ equity, net					3,848,388				3,832,529
Total liabilities and shareholders’ equity, net					4,682,572				4,560,375

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Interim consolidated statements of profit or loss (unaudited)

For the three-month and six-month periods ended June 30, 2014 and 2013

 

		Note		For the three–month periods ended June 30,								For the six–month periods ended June 30,
					2014				2013				2014				2013
					US$(000)				US$(000)				US$(000)				US$(000)
Operating income
Net sales		14(a)			297,710				273,099				571,678				613,972
Royalty income		18(a)			7,399				12,693				15,424				26,495
Total operating income					305,109				285,792				587,102				640,467
Operating costs
Cost of sales, without considering depreciation and amortization		15			(149,634	)			(172,869	)			(292,593	)			(331,004	)
Depreciation and amortization					(49,771	)			(46,494	)			(95,909	)			(85,670	)
Exploration in operating units		16			(21,907	)			(49,681	)			(53,635	)			(96,050	)
Mining royalties					(7,102	)			(6,929	)			(14,480	)			(16,595	)
Total operating costs					(228,414	)			(275,973	)			(456,617	)			(529,319	)
Gross profit					76,695				9,819				130,485				111,148
Operating expenses, net
Administrative expenses		17			(23,061	)			(22,262	)			(51,817	)			(37,168	)
Exploration in non-operating areas					(14,821	)			4,085				(25,195	)			(17,675	)
Paralyzed mining units		1(b)			(15,941	)			-				(15,941	)			-
Provision for contingencies					(2,002	)			(1,340	)			(9,643	)			(2,393	)
Selling expenses					(4,614	)			(3,970	)			(8,784	)			(8,480	)
Impairment loss on long-lived assets					-				-				(794	)			-
Other, net					8,268				9,320				9,724				9,631
Total operating expenses, net					(52,171	)			(14,167	)			(102,450	)			(56,085	)
Operating profit (loss)					24,524				(4,348	)			28,035				55,063
Other income, net
Share in the results of associates under equity method		8(b)			20,169				48,806				15,689				132,974
Finance income					1,842				2,228				3,648				3,184
Finance costs					(3,199	)			(8,678	)			(6,590	)			(9,881	)
Net loss from currency exchange difference					(268	)			(6,715	)			(764	)			(6,603	)
Total other income, net					18,544				35,641				11,983				119,674
Profit before income tax and non-controlling interest					43,068				31,293				40,018				174,737
Income tax		12(a)			(10,494	)			(10,434	)			(17,816	)			(42,945	)
Net profit					32,574				20,859				22,202				131,792
Attributable to:
Equity holders of the parent					23,088				18,953				6,976				121,630
Non-controlling interest					9,486				1,906				15,226				10,162
					32,574				20,859				22,202				131,792
Basic and diluted profit per share attributable to equity holders of the parent, stated in U.S. dollars					0.09				0.07				0.03				0.48
Weighted average number of outstanding shares (common and investment), in units					254,186,867				254,186,867				254,186,867				254,186,867

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Interim consolidated statements of other comprehensive income (unaudited)

For the three-month and six-month periods ended June 30, 2014 and 2013

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Net profit			32,574				20,859				22,202				131,792
Other comprehensive income of the period:
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Net unrealized gain (loss) on hedging derivative financial instruments, note 6(a)			(3,742	)			-				1,083				-
Income tax effect			1,296				-				(374	)			-
			(2,446	)			-				709				-
Other comprehensive income not to be reclassified to profit or loss in subsequent periods
Net unrealized loss in other investments			(114	)			(489	)			(114	)			(434	)
Income tax effect			34				-				34				-
			(80	)			(489	)			(80	)			(434	)
Other comprehensive income			(2,526	)			(489	)			629				(434	)
Total other comprehensive income, net of income tax			30,048				20,370				22,831				131,358
Attributable to:
Equity holders of the parent			21,685				18,464				7,279				121,196
Non-controlling interest			8,363				1,906				15,552				10,162
			30,048				20,370				22,831				131,358

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Interim consolidated statements of changes in shareholders’ equity (unaudited)

For the six-month periods ended June 30, 2014 and 2013

 

		Attributable to equity holders of the parent
		Capital stock, net of treasury shares
		Number of shares outstanding				Common shares				Investment shares				Additional paid-in capital				Legal reserve				Other reserves				Retained earnings				Other reserves of equity				Total				Non- controlling interest				Total shareholders’ equity, net
						US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)
As of January 1, 2013			253,415,190				750,540				1,399				219,471				162,663				269				2,572,943				925				3,708,210				263,647				3,971,857
Net profit			-				-				-				-				-				-				121,630				-				121,630				10,162				131,792
Other comprehensive income			-				-				-				-				-				-				-				(434	)			(434	)			-				(434	)
Total other comprehensive income			-				-				-				-				-				-				121,630				(434	)			121,196				10,162				131,358
Dividends declared and paid, note 13			-				-				-				-				-				-				(76,269	)			-				(76,269	)			(10,013	)			(86,282	)
Purchase of treasury shares			-				(43	)			(3	)			(416	)			-				-				-				-				(462	)			-				(462	)
As of June 30, 2013			253,415,190				750,497				1,396				219,055				162,663				269				2,618,304				491				3,752,675				263,796				4,016,471
As of January 1, 2014			253,715,190				750,497				1,396				219,055				162,663				269				2,421,238				104				3,555,222				277,307				3,832,529
Net profit			-				-				-				-				-				-				6,976				-				6,976				15,226				22,202
Other comprehensive income			-				-				-				-				-				-				303				-				303				326				629
Total comprehensive income			-				-				-				-				-				-				7,279				-				7,279				15,552				22,831
Dividends declared and paid, note 13			-				-				-				-				-				-				(2,797	)			-				(2,797	)			(4,200	)			(6,997	)
Proceeds from expired dividends			-				-				-				-				25				-				-				-				25				-				25
As of June 30, 2014			253,715,190				750,497				1,396				219,055				162,688				269				2,425,720				104				3,559,729				288,659				3,848,388

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Interim consolidated statements of cash flows (unaudited)

For the three-month and six-month periods ended June 30, 2014 and 2013

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Operating activities
Proceeds from sales			266,880				343,935				533,734				748,397
Value added tax recovered			21,981				19,907				39,685				33,707
Royalties received			8,429				13,976				15,424				26,178
Dividends received			2,065				7,064				4,442				7,064
Interest received			1,704				1,165				3,829				2,141
Payments to suppliers and third parties			(188,407	)			(219,791	)			(388,141	)			(477,919	)
Payments to employees			(51,341	)			(33,649	)			(106,961	)			(103,732	)
Payments of royalties			(3,513	)			(8,708	)			(10,966	)			(17,494	)
Income tax paid			(12,533	)			(30,910	)			(17,944	)			(54,988	)
Payments of interest			(3,505	)			(8,193	)			(5,453	)			(8,415	)
Net cash provided by operating activities			41,760				84,796				67,649				154,939
Investing activities
Proceeds from collection of loans to associates			1,426				14,964				10,458				14,964
Proceeds from sale of mining concessions, property, plant and equipment			67				3,015				90				3,015
Proceeds from sale of investments in shares			80				-				80				-
Payments for mine development activities and acquisitions of mining concessions, property, plant and equipment			(60,383	)			(147,223	)			(133,956	)			(233,264	)
Purchase of investment properties			-				-				(11,705	)			-
Loans to associates			(157	)			-				(157	)			-
Contributions to associates			(472	)			-				(1,475	)			(3,685	)
Decrease of time deposits			-				772				-				-
Net cash used in investing activities			(59,439	)			(128,472	)			(136,665	)			(218,970	)
Financing activities
Proceeds from borrowings			2,321				-				2,321				-
Proceeds from financial obligations			108,780				60,000				183,439				60,000
Payments of financial obligations			(29,053	)			(45	)			(33,593	)			(101	)
Dividends paid			(2,797	)			(76,269	)			(2,797	)			(76,269	)
Dividends paid to non-controlling interest			(2,240	)			(3,133	)			(4,200	)			(6,573	)
Purchase of treasury shares			-				(462	)			-				(462	)
Net cash provided by (used in) financing activities			77,011				(19,909	)			145,170				(23,405	)
Increase (decrease) in cash for the period, net			59,332				(63,585	)			76,154				(87,436	)
Cash at beginning of period			78,720				162,861				61,898				186,712
Cash at end of period			138,052				99,276				138,052				99,276

 

 

Compañía de Minas Buenaventura S.A.A. and Subsidiaries

 

Notes to the interim consolidated financial statements (unaudited)

As of June 30, 2014 and 2013

 

	1.	Identification and business activity

(a)

Identification –

Compañía de Minas Buenaventura S.A.A. (hereinafter “Buenaventura” or “the Company”) is a Peruvian publicly traded corporation incorporated in 1953 in Lima city. Buenaventura’s stock is traded on the Lima and New York Stock Exchanges through American Depositary Receipts (ADRs), which represent Company’s shares deposited in the Bank of New York. The Company’s legal domicile is located at Calle Las Begonias N° 415, San Isidro, Lima, Peru.

 

(b)

Business activity –

The Company and its Subsidiaries (hereinafter “the Group") are principally engaged in the exploration, mining, concentration, smelting and marketing of polymetallic ores and metals.

 The Company operates directly nine mining units located in Peru: Uchucchacua, Orcopampa, Julcani, Mallay, Breapampa, Poracota, Recuperada, Antapite and Shila-Paula (the last four mining units are currently paralyzed). In addition, the Group has a controlling interest in Sociedad Minera El Brocal S.A.A. (hereinafter “El Brocal”) which operates the Colquijirca mine, in Minera La Zanja S.R.L. (hereinafter “La Zanja”) which operates La Zanja mine, and in other entities engaged in mining, energy and services activities.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

(c)

The interim consolidated financial statements include the financial statements of the following subsidiaries:

 

				Ownership as of June 30, 2014 and December 31, 2013
		Country of incorporation and operation		Direct				Indirect
				%				%
Investments and mining concessions held, exploration and exploitation of minerals
Compañía Minera Condesa S.A.		Peru			100.00				-
Inversiones Colquijirca S.A.		Peru			99.99				-
Sociedad Minera El Brocal S.A.A.		Peru			2.71				51.36
El Molle Verde S.A.C.		Peru			100.00				-
Minera La Zanja S.R.L.		Peru			53.06				-
Compañía Minera Colquirrumi S.A.		Peru			100.00				-
Minera Julcani S.A. de C.V.		Mexico			100.00				-
Compañía de Minas Buenaventura Chile Ltda.		Chile			100.00				-
S.M.R.L. Chaupiloma Dos de Cajamarca		Peru			20.00				40.00
Metalúrgica Los Volcanes S.A.		Peru			100.00				-
Cerro Hablador S.A.C.		Peru			99.00				1.00
Apu Coropuna S.R.L.		Peru			70.00				-
Compañía Minera Nueva Italia S.A.		Peru			-				52.30
Electric power activity
Consorcio Energético de Huancavelica S.A.		Peru			100.00				-
Empresa de Generación Huanza S.A.		Peru			-				100.00
Empresa de Generación Huaura S.A.C.		Peru			0.01				99.99
Services
Buenaventura Ingenieros S.A.		Peru			100.00				-
Bisa Construcción S.A.		Peru			-				100.00
Contacto Corredores de Seguros S.A.		Peru			-				100.00
Bisa Argentina S.A.		Argentina			56.00				44.00
Industrial activities
Procesadora Industrial Río Seco S.A.		Peru			100.00				-

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

	2.	Basis of preparation and presentation, and changes in the accounting policies

2.1

Basis of preparation and presentation –

The unaudited interim consolidated financial statements have been prepared and presented in accordance with IAS 34 - “Interim Financial Reporting”, as issued by the International Accounting Standards Board.

 

The unaudited interim consolidated financial statements have been prepared on a historical cost basis, from the records of the Group, except for financial assets and liabilities at fair value through profit or loss. The unaudited interim consolidated financial statements are stated in U.S. dollars and all values have been rounded to the nearest thousands, except when otherwise indicated.

 

The unaudited interim consolidated financial statements provide comparative information for prior periods, however, do not include all information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s audited consolidated financial statements as of December 31, 2013 and for the year then ended.

 

2.2.

New standards and interpretations adopted by the Group –

Several standards and amendments apply from January 1, 2014; however, they do not impact the unaudited interim consolidated financial statements of the Group as of June 30, 2014.

 

	3.	Seasonality of operations

The Group operates continuously without major fluctuations due to seasonality factors.

 

	4.	Cash

(a)

This caption is made up as follow:

 

		As of June 30, 2014				As of December 31, 2013
		US$(000)				US$(000)
Cash			838				753
Bank accounts (b)			137,214				61,145
			138,052				61,898

 

(b)

The increase of this caption is mainly because of the proceeds from sales for the six-month period ended June 30, 2014 by US$533,734,000 and new proceeds from borrowings and financial obligations received in that period by US$183,439,000, partially offset by payments to suppliers and third parties by US$388,141,000, payments for mine development activities and acquisitions of mining concessions, property, plant and equipment by US$133,956,000 and payments to employees by US$106,961,000 made during that period.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

	5.	Trade and other receivables, net

(a)

This caption is made up as follow:

 

		As of June 30, 2014				As of December 31,  2013
		US$(000)				US$(000)
Trade receivables, net (b)
Domestic customers			135,651				89,275
Foreign customers			62,753				75,487
Related parties, note 18(b)			9,030				9,421
			207,434				174,183
Allowance for doubtful accounts			(21,741	)			(21,741	)
			185,693				152,442
Other receivables
Value added tax credit			53,203				65,196
Due from third parties			9,426				11,513
Application for devolution of value added tax credit			7,032				12,654
Related parties, note 18(b)			6,294				15,890
Claims to Peruvian tax authority			4,514				14
Loans to third parties			3,320				2,759
Advances to suppliers			1,760				3,630
Other accounts receivable			19,660				16,943
			105,209				128,599
Total trade and other receivables, net			290,902				281,041
Classification by maturity:
Current portion			272,746				260,434
Non-current portion			18,156				20,607
Total trade and other receivables, net			290,902				281,041

 

(b)

The increase in trade receivables balance as of June 30, 2014, as compared to the balance as of December 31, 2013, was mainly due to higher amount of revenue from domestic customers caused by the higher prices of metals as of June 30, 2014, compared to those existing as of December 31, 2013.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

	6.	Derivative financial instruments

(a)

Hedge copper price operations –

El Brocal’s operating activities includes extraction, production, concentration and commercialization of polymetallic ores, mainly copper. The volatility of copper’s price since the year 2013 has caused that El Brocal’s management has decided to enter into future contracts. These contracts, which have been negotiated since August 8, 2013, are intended to reduce the volatility of cash flows attributable to the fluctuations in the copper price, according to the risk strategy approved by El Brocal’s Board of Directors. The contracts have a maturity date in December 2014, and they are related to 50 percent of the annual production of copper as of June 30, 2014 (25 percent as of December 31, 2013).

 

As of June 30, 2014 and December 31, 2013, fair value of open futures contracts of El Brocal resulted in a liability of US$10,000 and US$1,093,000, respectively.

 

(b)

Embedded derivatives for concentrates sales, net –

The Group’s sales of concentrates are based on commercial contracts, under which a provisional sales value is determined based on future quotations (forward). The adjustment to sales is considered an embedded derivative, which is required to be separated from the host contract. Commercial contracts are linked to market prices of London Metal Exchange at the dates of the expected settlements of the open positions. The embedded derivative does not qualify for hedge accounting; therefore, changes in its fair value are recorded as an adjustment to net sales, see note 14(a).

 

As of June 30, 2014 and December 31, 2013, changes in net fair value of embedded derivatives for sales of concentrates resulted in an asset of US$5,957,000 and US$1,857,000, respectively. The related gains or losses are recognized in the ​​net sales caption in the interim consolidated statement of profit or loss in the corresponding periods.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

	7.	Inventories, net

This caption is made up as follow:

 

		As of June 30, 2014				As of December 31, 2013
		US$(000)				US$(000)
Finished goods			21,393				45,617
Products in process			114,659				112,287
Spare parts and supplies			60,717				47,828
			196,769				205,732
Provision for impairment of value of inventories			(5,812	)			(6,647	)
			190,957				199,085
Classification by use:
Current portion			151,833				175,719
Non-current portion			39,124				23,366
			190,957				199,085

 

	8.	Investments in associates

(a)

This caption is made up as follow:

 

		As of  January 1, 2014				Dividends received				Contributions				Adjustments				Share in net  profit (loss)				As of June  30,2014
		US$(000)				US$(000)				US$(000)				US$(000)				US$(000)				US$(000)
Minera Yanacocha S.R.L. (c)			1,368,797				-				-				(7,997	)			(37,374	)			1,323,426
Sociedad Minera Cerro Verde S.A.A. (d)			904,315				-				-				-				42,187				946,502
Compañía Minera Coimolache S.A.			43,367				(4,442	)			-				-				10,877				49,802
Canteras del Hallazgo S.A.C.			39,231				-				1,475				-				1				40,707
Other minor investments			2,700				-				-				(80	)			(2	)			2,618
			2,358,410				(4,442	)			1,475				(8,077	)			15,689				2,363,055

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

(b)

The table below presents the net share in profit (loss) of associates:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Sociedad Minera Cerro Verde S.A.A.			26,476				20,817				42,187				47,998
Compañía Minera Coimolache S.A.			6,086				2,069				10,877				10,209
Canteras del Hallazgo S.A.C.			80				2,121				1				-
Minera Yanacocha S.R.L.			(12,889	)			23,799				(37,374	)			74,767
Other minor investments			416				-				(2	)			-
			20,169				48,806				15,689				132,974

 

(c)

Investments that the Company maintains in Minera Yanacocha S.R.L, through Compañía Minera Condesa S.A., and in Sociedad Minera Cerro Verde S.A.A., represent the most significant investments of the Company.

 

Investment in Minera Yanacocha S.R.L. -

The Company, through its subsidiary Compañía Minera Condesa S.A., holds 43.65 percent of the capital stock of Minera Yanacocha S.R.L. (hereinafter “Yanacocha”). This entity has a gold mine located in Cajamarca, Peru, and is engaged in gold production and exploration and development of gold and copper in their own concessions or concessions owned by S.M.R.L. Chaupiloma Dos de Cajamarca, with which signed a contract of use of mineral rights.

 

During the last several years, Yanacocha has been developing the Conga project, which consists in two deposits of gold and porphyry of copper located at northeast of the Yanacocha operating area in the provinces of Celendin, Cajamarca and Hualgayoc, in Cajamarca region. As of June 30, 2014, the project has proven and probable reserves of 12.6 million ounces (unaudited) of contained gold and 3.3 billion pounds (unaudited) of copper content.

 

Due to local political and community protests by a potential impact on water resources, construction and development activities at the Conga project are suspended since November 2011. Currently, Yanacocha’s management is developing only the water sustainability activities recommended by independent experts, mainly, construction of water reservoirs, before to carrying out any development activities of the project.

 

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

Investment in Sociedad Minera Cerro Verde S.A.A. -

Sociedad Minera Cerro Verde S.A.A. (hereinafter “Cerro Verde”) is involved in extracting, producing and marketing of cathodes and copper concentrate from its mining unit located in Uchumayo, Arequipa, Peru.

 

Tax contingency

On June 23, 2004, Law No.28258 -Mining Royalty Law, was approved, and requires the holders of mining concessions to pay a royalty return for the exploitation of metallic and non-metallic mining resources, which is calculated using rates from one to three percent of the value of concentrate or its equivalent, according to the international market prices of the commodity published by the Ministry of Energy and Mines.

 

Based on the 1998 stability agreement, the payment of mining royalties was not applicable to Cerro Verde, because the contribution was created after Cerro Verde signed the stability contract with the Peruvian Government.

 

The Peruvian tax authority (SUNAT) has assessed mining royalties related to ore processed by Cerro Verde’s concentrator, which commenced operations in late 2006. Such assessments cover the period from October 2006 to December 2007, as well as years 2008 and 2009. SUNAT has issued resolutions rejecting the claims of Cerro Verde. Cerro Verde has appealed such decisions at the Tax Court. On July 23, 2013, SUNAT notified the final decision of the Tax Court confirming the assessments for the periods from October to December 2006, and for the years 2007 and 2008. By means of the decision of the Tax Court, the administrative stage for the appeal of these proceedings ended.

 

In September 2013, Cerro Verde filed judiciary appeals to Judiciary Court (Civil Court of the Superior Court of Arequipa) suing SUNAT, the Ministry of Energy and Mines and Tax Court for requiring Cerro Verde to pay mining royalties during the term of the stability agreement in force until December 31, 2013. Cerro Verde believes that the Stability Agreement entered into with the Peruvian Government in 1998 (which was in force from January 1, 1999 to December 31, 2013) guarantees that all minerals extracted from their production unit are included in the stabilized tax and administrative regime, which does not include the obligation to pay the mining royalties.

 

On October 1, 2013, SUNAT issued a payment order to Cerro Verde by 492 million of Nuevos Soles (US$176 million based on current exchange rates, including interest and penalties of US$104 million). As permitted by law, Cerro Verde requested and as has been granted an installment payment program that defers payment for six months and thereafter satisfies the amount via 66 equal monthly payments. In July 2013, claim on SUNAT’s assessment for 2009 was rejected, but no final decision has been issued by the Tax Court for that year.

 

In Cerro Verde management’s and legal advisors’ opinion, Cerro Verde has sound legal grounds; consequently, they expect to obtain favorable results on these legal proceedings.

 

9.

Mining concessions, development costs, property, plant and equipment, net

 

This caption is made up as follow:

 

		Cost				Accumulated depreciation / amortization				Provision for impairment of long– lived assets				Net cost
		US$(000)				US$(000)				US$(000)				US$(000)
As of January 1, 2014			2,534,901				(1,000,430	)			(19,011	)			1,515,460
Additions			133,956				-				-				133,956
Depreciation and amortization			-				(112,970	)			-				(112,970	)
Provision for impairment of long-lived assets			-				-				(794	)			(794	)
Retirements			(90	)			64				-				(26	)
As of June 30, 2014			2,668,767				(1,113,336	)			(19,805	)			1,535,626

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

Main additions during six-month period ended June 30, 2014 were:

 

		US$(000)
Operations expansion project of Sociedad Minera El Brocal S.A.A.			32,831
Development costs of Compañía de Minas Buenaventura S.A.A.			28,343
Construction of hydroelectric plant of Empresa de Generación Huanza S.A.			13,825
Development cost of Minera La Zanja S.R.L.			8,723
Machinery acquired by Sociedad Minera El Brocal S.A.A.			7,661
Development costs of Sociedad Minera El Brocal S.A.A.			7,445
Property, plant and equipment acquired by Minera La Zanja S.R.L.			6,595
Machinery acquired by Procesadora Industrial Río Seco S.A.			6,588
Replacement units acquired by Compañía de Minas Buenaventura S.A.A.			5,751
Work in progress of Compañía de Minas Buenaventura S.A.A.			5,076
Other minor			11,118
			133,956

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

10.

Provisions

 

This caption is made up as follow:

 

		As of January 1, 2014				Accretion				Debit (credit) in profit or loss				Disbursements				As of June 30, 2014
		US$(000)				US$(000)				US$(000)				US$(000)				US$(000)
Provision for closure of mining units and exploration projects			136,357				1,222				-				(6,037	)			131,542
Provision for obligations with local communities			6,974				-				8,609				(1,609	)			13,974
Provision for environmental liabilities			9,224				-				(85	)			(1,863	)			7,276
Provision for labor contingencies			6,021				-				(395	)			(300	)			5,326
Provision for security contingencies			1,679				-				3,535				(163	)			5,051
Workers’ profit sharing payable			7,206				-				2,333				(6,689	)			2,850
Provision for stock appreciation rights			1,971				-				1,931				(1,598	)			2,304
Provision for environmental contingencies			4,031				-				(2,106	)			(269	)			1,656
Board of Directors’ participation			1,604				-				1,252				(1,405	)			1,451
Employee bonuses			-				-				11,897				(11,897	)			-
Other provisions			1,109				-				25				(87	)			1,047
			176,176				1,222				26,996				(31,917	)			172,477
Classification by maturity:
Current portion			69,800																71,826
Non-current portion			106,376																100,651
			176,176																172,477

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

11.

Financial obligations

	(a)	This caption is made up as follow:

 

		Annual interest rate		Original maturity		As of June 30, 2014				As of December 31, 2013
						US$(000)				US$(000)
Empresa de Generación Huanza S.A.
Banco de Crédito del Perú – Finance lease (b)		Three-month Libor plus 4.00%		2021			204,000				119,000
Sociedad Minera El Brocal S.A.A.
Banco de Crédito del Perú – Leaseback (c)		Three-month Libor plus 5.00%		2019			169,149				115,397
Buenaventura Ingenieros S.A.
Banco de Crédito del Perú – Finance lease (d)		4.60%		2018			11,094				-
Total financial obligations							384,243				234,397
Classification by maturity:
Current portion							47,641				11,370
Non-current portion							336,602				223,027
Total financial obligations							384,243				234,397

 

(b)

On December 2, 2010, Empresa de Generación Huanza S.A. entered into a finance lease contract with Banco de Crédito del Perú, with the following terms and conditions:

 

-

Principal: US$119,000,000.

-

Term and annual interest rate: 6 years since August 2014, with an annual variable rate of three-month Libor plus 4.00 percent.

-

Guarantee: Leased equipments.

-

Amortization: Through 26 quarterly installments and a quota balloon of US$44,191,000.

 

On June 30, 2014, Empresa de Generación Huanza S.A. expanded the finance lease contract with Banco de Crédito del Perú, through the addition of a new tranche with the following terms and conditions:

 

-

Principal: US$108,780,000.

-

Term and annual interest rate: 6 years since August 2014, with an annual variable rate of three-month Libor plus 4.20 percent.

-

Guarantee: Leased equipments.

-

Amortization: Through 26 quarterly installments, which includes an inmediate first installment of US$23,780,000 and a quota balloon of US$68,905,000.

 

(c)

The shareholders’ meeting of El Brocal held on September 25, 2013, approved to enter into a sale and finance leaseback contract up to US$180,000,000 through the sale of assets by the same amount (consisting on equipment, machinery and production plants located in the Colquijirca mining unit) which has a term of 5 years and accrues interest calculated at an annual variable rate of three-month Libor plus 5 percent, equivalent to 5.23 percent as of June 30, 2014 (5.25 percent as of December 31, 2013). Proceeds from this loan were used to fully prepay the loan of US$120 million that El Brocal held with Banco de Crédito del Perú and also to comply with those obligations that are necessary to complete the operations expansion project.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

The financing is secured by a trust agreement on receivables, sales contracts and cash inflows on commercial contracts; and other related to the administration, use, disposal and claim of the assets specified in the contract.

 

In connection with the above financing, El Brocal complied with the following financial ratios as of June 30, 2014:

 

(i)

Debt service coverage ratio: Higher than 1.3 from January 1, 2014.

(ii)

Leverage ratio: Less than 1.0.

(iii)

Debt ratio:

 

a.

Less than 5.0 from the closing date to March 31, 2014;

b.

Less than 4.5 as of June 30, 2014;

c.

Less than 4.0 as of September 30, 2014;

d.

Less than 3.0 as of December 31, 2014;

e.

Less than 2.5 from January 1, 2015 to December 31, 2015; and,

f.

Less than 2.0 from January 1, 2016 and thereafter.

 

These financial ratios are calculated based on the financial statements of El Brocal as of each quarter ending March, June, September and December.

 

The compliance with the financial ratios described above is monitored by El Brocal’s management.

 

(d)

On March 28, 2014, Buenaventura Ingenieros S.A. entered into a finance lease contract with Banco de Crédito del Perú, for the construction of an administrative building, with the following terms and conditions:

 

-

Principal: US$11,826,000.

-

Term and annual interest rate: 5 years and 4 months since April 2014, with an annual rate of 4.60 percent.

-

Guarantee: Leased property.

-

Amortization: Through 64 monthly installments.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

12.

Income tax

	(a)	Current and deferred income (expense) tax portions shown in the unaudited interim consolidated statements of profit or loss for the three-month and six-month periods ended June 30, 2014 and 2013 are as follow:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Income tax
Current			(6,629	)			(7,872	)			(12,866	)			(26,021	)
Deferred			(1,455	)			(1,876	)			(1,201	)			(12,561	)
			(8,084	)			(9,748	)			(14,067	)			(38,582	)
Mining royalties and special mining tax
Current			(311	)			(1,083	)			(1,879	)			(5,164	)
Deferred			(2,099	)			397				(1,870	)			801
			(2,410	)			(686	)			(3,749	)			(4,363	)
Total income tax			(10,494	)			(10,434	)			(17,816	)			(42,945	)

 

Currently, the Peruvian tax authority is reviewing the Company’s income tax returns for the years 2008, 2009 and 2010, and the value added tax returns for the period from January to December 2008.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

(b)

The table below presents the reconciliation of income tax expense and the profit multiplied by income tax rate for the three-month and six-month periods ended June 30, 2014 and 2013:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Profit before income tax			43,068				31,293				40,018				174,737
Effect of share in the results of associates			(20,169	)			(48,806	)			(15,689	)			(132,974	)
			22,899				(17,513	)			24,329				41,763
Theoretical income tax benefit (expense)			(6,870	)			5,254				(7,299	)			(12,529	)
Permanent items and other:
Non-deductible expenses for tax purposes			(1,599	)			(5,889	)			(5,367	)			(14,196	)
Effect of  translation into U.S. dollars			1,435				(3,271	)			(974	)			(7,409	)
Mining royalties and special mining tax			(674	)			(407	)			(413	)			(1,174	)
Amortization of mining concessions			(15	)			43				(20	)			(1,007	)
Effect of exchange difference on tax loss carry-forward			310				(1,213	)			2				(2,231	)
Other permanent items			(671	)			(4,265	)			4				(36	)
Income tax expense			(8,084	)			(9,748	)			(14,067	)			(38,582	)
Mining royalties and special mining tax			(2,410	)			(686	)			(3,749	)			(4,363	)
Total income tax			(10,494	)			(10,434	)			(17,816	)			(42,945	)

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

13.

Dividends declared and paid

	(a)	The table below presents information about dividends declared and paid during the six-month periods ended June 30, 2014 and 2013

 

Meetings		Date		Dividends declared and paid				Dividends  per share
				US$(000)				US$
Dividends declared and paid in 2014
Mandatory Annual Shareholders’ Meeting		March 27, 2014			3,032				0.01
Less – Dividends on treasury shares					(235	)
					2,797
Dividends declared and paid in 2013
Mandatory Annual Shareholders’ Meeting		March 26, 2013			82,690				0.30
Less – Dividends on treasury shares					(6,421	)
					76,269

 

(b)

Dividends declared by subsidiaries and corresponding to non-controlling interest, for the three-month and six-month periods ended June 30, 2014 and 2013 are the following:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
S.M.R.L. Chaupiloma Dos de Cajamarca			2,240				3,860				4,200				7,300
Sociedad Minera El Brocal S.A.A.			-				-				-				2,713
			2,240				3,860				4,200				10,013

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

14.

Net sales

	(a)	The table below presents the detail of net sales for the three-month and six-month periods ended June 30, 2014 and 2013:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Sales by product
Gold			140,461				155,014				281,859				355,174
Silver			97,807				103,166				180,672				200,112
Copper			66,970				29,995				129,442				70,331
Lead			8,707				16,082				18,051				31,163
Zinc			6,182				19,009				13,134				39,248
			320,127				323,266				623,158				696,028
Commercial deductions			(41,884	)			(41,554	)			(78,914	)			(77,528	)
Adjustments to current period liquidations			(1,476	)			(7,533	)			(1,179	)			(12,455	)
Embedded derivatives for concentrates sales			11,152				(13,750	)			5,168				(13,137	)
Hedge operations			1,543				-				1,864				-
			289,462				260,429				550,097				592,908
Sales of services, electric power and other minor			8,248				12,670				21,581				21,064
			297,710				273,099				571,678				613,972

 

(b)

The tables below present information about volumes of metallic content sold and average sales prices for the three-month and six-month periods ended June 30, 2014 and 2013:

 

Volumes of metallic contents sold were the following:

 

		For the three–month periods ended June 30,								Increase (decrease)
		2014				2013
Gold			110,292	OZ			116,751	OZ			(6,459	)OZ
Silver			4,949,060	OZ			4,541,688	OZ			407,372	OZ
Copper			10,186	MT			4,503	MT			5,683	MT
Lead			4,199	MT			7,934	MT			(3,735	)MT
Zinc			2,943	MT			10,775	MT			(7,832	)MT

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

		For the six–month  periods ended June 30,								Increase (decrease)
		2014				2013
Gold			218,227	OZ			241,377	OZ			(23,150	)OZ
Silver			9,145,615	OZ			7,782,423	OZ			1,363,192	OZ
Copper			19,187	MT			9,611	MT			9,576	MT
Lead			8,502	MT			14,617	MT			(6,115	)MT
Zinc			6,114	MT			20,979	MT			(14,865	)MT

 

Net average sales prices were the following:

 

		For the three–month  periods ended June 30,								Increase (decrease)
		2014				2013
		US$				US$
Gold			1,273.54	/OZ			1,387.69	/OZ			(114.15	)/OZ
Silver			19.76	/OZ			23.88	/OZ			(4.12	)/OZ
Copper			6,575.03	/MT			7,067.56	/MT			(492.53	)/MT
Lead			2,073.27	/MT			2,066.47	/MT			6.80	/MT
Zinc			2,100.77	/MT			1,841.21	/MT			259.56	/MT

 

		For the six–month  periods ended June 30,								Increase (decrease)
		2014				2013
		US$				US$
Gold			1,291.59	/OZ			1,477.29	/OZ			(185.70	)/OZ
Silver			19.75	/OZ			25.82	/OZ			(6.07	)/OZ
Copper			6,746.34	/MT			7,506.29	/MT			(759.95	)/MT
Lead			2,123.10	/MT			2,136.69	/MT			(13.59	)/MT
Zinc			2,148.20	/MT			1,896.71	/MT			251.49	/MT

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

15.

Cost of sales, without considering depreciation and amortization

 

The table below presents the components of this caption for the three-month and six-month periods ended June 30, 2014 and 2013:

 

		For the three–month periods ended June 30,								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Beginning balance of finished goods and products in process			150,104				156,410				157,904				158,478
Cost of production
Services provided by third parties			71,472				75,872				129,127				142,812
Direct labor			29,318				25,290				52,771				53,685
Consumption of materials and supplies			24,461				29,235				50,371				60,731
Electricity and water			7,531				9,325				15,520				14,320
Rentals			4,375				2,131				7,767				4,022
Transport			3,967				4,852				7,209				9,376
Insurances			1,834				2,486				3,791				5,052
Maintenance and repair			1,826				1,783				3,680				3,338
Cost of concentrate purchased to third parties			-				(289	)			-				1,088
Purchase of by-products to third parties			-				-				-				914
Provision for impairment of value of finished goods			(835	)			1,155				(835	)			1,155
Other production expenses			(8,367	)			3,163				1,340				14,577
Total cost of production of the period			135,582				155,003				270,741				311,070
Ending balance of finished goods and products in process			(136,052	)			(138,544	)			(136,052	)			(138,544	)
Cost of sales, without considering depreciation and amortization			149,634				172,869				292,593				331,004

 

The balance of this caption decreased by US$38,411,000 during the six-month period ended June 30, 2014, as compared to the balance of the same period in 2013, mainly explained by the effect of lower costs incurred related to the four paralyzed mining units, see note 1(b).

 

16.

Exploration in operating units

The balance of this caption decreased by US$42,415,000, from US$96,050,000 during the six-month period ended June 30, 2013 to US$53,635,000 during the same period of 2014, mainly explained by the lower exploration activities performed in Poracota and Antapite mining units, due to lower expectations about reserves in such mining units.

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

17.

Administrative expenses

 

The balance of this caption increased by US$14,649,000, from US$37,168,000 during the six-month period ended June 30, 2013 to US$51,817,000 during the same period of 2014, mainly because during the first semester of 2013, the Group reversed a provision for stock appreciation rights by US$18,527,000, as a result of a reduction in the price of the ADR’s of the Company at the end of that semester as compared to December 31, 2012, while during the first semester of 2014, the Group recorded an increase of such provision by US$1,925,000; partially offset by lower transport and travel expenses by US$3,197,000 and lower personnel expenses by US$1,650,000 during the six-month period ended June 30, 2014 as compared to the same period in 2013.

 

18.

Related parties transactions

	(a)	The main transactions made by the Group with its related parties during the three-month and six-month periods ended June 30, 2014 and 2013 are presented below:

 

		For the three–month periods ended June 30								For the six–month periods ended June 30,
		2014				2013				2014				2013
		US$(000)				US$(000)				US$(000)				US$(000)
Royalties collected from Minera Yanacocha S.R.L. by:
S.M.R.L. Chaupiloma Dos de Cajamarca			7,399				12,693				15,424				26,495
Income for services rendered to Minera Yanacocha S.R.L. by:
Consorcio Energético de Huancavelica S.A. (electric power transmission)			152				229				381				458
Buenaventura Ingenieros S.A. (execution of specific work orders)			(68	)			133				137				309
Income for services rendered to Sociedad Minera Cerro Verde S.A.A. by:
Buenaventura Ingenieros S.A. (engineering services)			468				448				829				650
BISA Construcción S.A. (construction services)			41				-				82				-
Income for services rendered to Compañía Minera Coimolache S.A. by:
Buenaventura Ingenieros S.A. (engineering services)			145				171				274				416
Consorcio Energético de Huancavelica S.A. (electric power transmission)			125				125				250				250
Compañía de Minas Buenaventura S.A.A. (management and administrative services)			258				260				514				535
Dividends received from:
Compañía Minera Coimolache S.A.			2,065				3,363				4,442				7,064
Contributions and investments made to:
Canteras del Hallazgo S.A.C.			472				-				1,475				3,685
Interest income by loans to:
Compañía Minera Coimolache S.A.			50				203				123				530
Sales of supplies to Compañía Minera Coimolache S.A. by:
Procesadora Industrial Río Seco S.A.			8				-				14				-
Minera La Zanja S.R.L.			8				-				10				-

 

 

Notes to the interim consolidated financial statements (unaudited) (continued)

 

(b)

As a result of the transactions indicated in paragraph (a), the Group has the following accounts receivable and payable to associates:

 

		As of June 30,  2014				As of December 31, 2013
		US$(000)				US$(000)
Trade and other receivables -
Trade
Minera Yanacocha S.R.L.			9,030				9,220
Compañía Minera Coimolache S.A.			-				201
			9,030				9,421
Other
Compañía Minera Coimolache S.A. (c)			6,031				15,890
Canteras del Hallazgo S.A.C.			157				-
Minera Yanacocha S.R.L.			106				-
			6,294				15,890
			15,324				25,311
Classification by maturity:
Current portion			15,324				23,068
Non-current portion			-				2,243
			15,324				25,311
Trade and other payables
Compañía Minera Coimolache S.A.			1,437				614
Minera Yanacocha S.R.L.			379				783
Canteras del Hallazgo S.A.C.			-				30
			1,816				1,427
Classification by maturity:
Current portion			1,816				970
Non-current portion			-				457
			1,816				1,427

 

(c)

Compañía Minera Coimolache S.A. (“Coimolache”) -

 

On October 18, 2010, the Shareholders’ Meeting of Coimolache approved the development program and financial support of Tantahuatay Project; total budget for this project was estimated in US$110,000,000 and the financing structure agreed by shareholders is: 30 percent as capital contributions and 70 percent as shareholders’ loans. As of June 30, 2014, the outstanding loan by US$5,095,000 accrues interest calculated with a Libor interest rate to 6 months plus 3 percent.

 

 

Signature

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Compañía de Minas Buenaventura S.A.A.

 

/s/ CARLOS E. GALVEZ PINILLOS

 

Carlos E. Gálvez Pinillos

 

Chief Financial Officer

 

Date: August 18, 2014