By Ryan Dube
LIMA, Peru--Peruvian precious-metals miner Compania de Minas
Buenaventura SAA (BVN, BUENAVC1.VL) said Wednesday it plans to
lower the capital expenditures at its $5.0 billion Minas Conga
copper and gold project as part of a broader strategy to reduce
company costs amid weak metal prices.
After years of enjoying record-high metal prices, many mining
companies in Peru and other jurisdictions are now cutting costs due
to the sharp declines in prices for copper, gold and other
metals.
"This current market situation is an opportunity to renew the
capex of this project," Buenaventura Chief Financial Officer Carlos
Galvez said in a conference call. "We have to review the initial
capex and eventually it will be lower than initially expected."
Buenaventura has a 43.65% stake in Minas Conga, while Newmont
Mining Corp. (NEM) owns 51.35%. The World Bank's International
Finance Corp. owns the remaining 5% of the project.
Minas Conga is one of the biggest private-sector investment
projects in Peru. The companies have faced difficulties developing
the project due to opposition from local politicians and residents
concerned that it will impact their water supply in the northern
Andean region of Cajamarca. Construction of the mining operation
has been put on hold while the companies build reservoirs that
would provide water to residents and replace mountain lakes that
are to be drained.
Minas Conga could have an average annual output of 580,000 to
680,000 ounces of gold and 155 million to 235 million pounds of
copper during its first five years.
Buenaventura is reviewing capex for projects, including its
49%-owned Chucapaca gold project. Mr. Galvez said in June that the
project will likely require investments of around $1 billion, about
half of an earlier estimate. A new feasibility study for Chucapaca
is expected around the end of this year.
In addition, the company is reducing costs at its current
operations, including closing some unprofitable mines and laying
off workers. Buenaventura said Tuesday in its second-quarter
financial results that it was stopping production at its Antapite,
Poracota and Shila-Paula mines. It is also aiming to improve
efficiency at its Orcopampa and Uchucchacua mines, and focus on
brownfield exploration.
Mr. Galvez said Wednesday that the mine closures and cost
cutting will result in monthly savings of about $15 million. They
will also require the company to lay off about 2,000 workers, he
said.
The lower metal prices have cut into profits. Buenaventura's
second quarter net income fell 88% to $19 million, from $153
million in the year-earlier period due to weak metal prices.
Write to Ryan Dube at ryan.dube@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires