Bloomberg News

Buenaventura May Sell Bonds to Finance Gold Mining Projects

July 31, 2007

Cia. de Minas Buenaventura SA, the world's seventh-largest gold producer, may sell bonds to help fund $1 billion in mining projects.

``Buenaventura has international presence and can gain access to financial markets,'' Chief Executive Officer Roque Benavides said in an interview yesterday. ``A debt offering would be very feasible when we need it.''

Buenaventura, which has a ``manageable'' $150 million in debt, is developing four gold deposits in Peru and exploring in Peru and Argentina, Benavides said. The company is seeking to develop new mines as output falls at Yanacocha, the world's largest gold mine. Buenaventura owns 44 percent of Yanacocha, and Newmont Mining Corp. (NEM:US) owns the rest.

Gold exports from Peru, the world's fifth-largest producer of the precious metal, dropped 9 percent to $1.8 billion in the first half because of falling output at Yanacocha. Newmont expects output from the mine to drop 38 percent to 1.6 million ounces this year.

The drop in earnings from Yanacocha was offset by an increase in production at Freeport-McMoRan Copper & Gold Inc. (FCX:US)'s Cerro Verde copper mine, in which Buenaventura holds an 18.5 percent stake, Benavides said. Cerro Verde contributed $41.7 million in equity income in the second quarter, compared with $5.9 million from Yanacocha.

Increase in Stake

``We'd make an effort to increase our stake if there's opportunity,'' Benavides said. ``We don't rule out the possibility of acquiring other companies.''

Buenaventura in May paid $164 million to unwind sales of 500,000 ounces for delivery in 2007 to 2009. The company still has 900,000 ounces in forward sales for 2010 to 2012.

``Buenaventura has enough cash flow to carry out the operation,'' Jorge Luis Rodriguez, head of research at Lima- based brokerage SAB Centura, said in an interview.

Most producers increased forward sales when gold touched a 20-year low in 1999 to protect against further price declines. Mining companies have been unwinding those contracts during a rally in gold that is in its seventh year.

Buenaventura's American depositary receipts, each representing one common share, rose for a second day, gaining 28 cents, or 0.7 percent, to $39.91 in New York Stock Exchange composite trading.

Gold futures for December delivery rose $2.70, or 0.4 percent, to $679.30 an ounce on the Comex division of the New York Mercantile Exchange. Copper for September delivery rose 6 cents, or 1.7 percent, to $3.6485 a pound.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net; Cris Valerio in New York at cvalerio2@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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Companies Mentioned

  • NEM
    (Newmont Mining Corp)
    • $24.67 USD
    • -0.37
    • -1.5%
  • FCX
    (Freeport-McMoRan Inc)
    • $34.51 USD
    • -0.38
    • -1.1%
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