Notes to the Consolidated Financial Statements
To the Shareholders of Compaa de Minas Buenaventura S.A.A.
We have made a limited review of the accompanying consolidated balance sheet of
Compaa de Minas Buenaventura S.A.A. (a Peruvian company) and subsidiaries
(together, the Company) as of March 31, 2003 and the related consolidated
statements of income, changes in shareholders'equity and cash flows for the
three-month period then ended, stated in Peruvian nuevos soles. The preparation
of these consolidated financial statements is a responsibility of the Company's
management.
We conducted our limited review in accordance with auditing standards generally
accepted in Peru. A limited review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries to persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the interim consolidated financial statements referred to above for
them to be in conformity with the accounting principles generally accepted in
Peru.
Effective January 1, 2003, the Company has adopted IAS 39 Financial Instruments
- Recognition and Measurement which effects are described in notes 5 and 12 to
the consolidated financial statements.
Countersigned by:
Vctor Burga
C.P.C. Register No.14859
Lima, Peru
April 22, 2003
Compaa de Minas Buenaventura S.A.A. and subsidiaries
Consolidated Balance Sheets
As of December 31, 2002 (audited) and March 31, 2003 (unaudited)
Note 2002 2003 2003
S/(000) S/(000) US$(000)
16. Assets
º Current assets
Cash and cash equivalents 3 90,642 109,361 31,471
Trade and other accounts receivable,
net 85,932 79,330 22,829
Accounts receivable from affiliates 11 30,661 30,338 8,730
Inventories, net 4 74,408 80,423 23,143
Current portion of prepaid taxes and
expenses 30,860 36,308 10,448
º Total current assets 312,503 335,760 96,621
Long-term account receivable 8,969 9,456 2,721
Prepaid taxes and expenses 13,233 9,500 2,734
Investments in shares 5 1,184,448 1,237,043 355,984
Property, plant and equipment, net 369,352 368,313 105,989
Development costs and mineral lands,
net 148,194 151,002 43,454
Mining concessions, net 6 173,768 169,627 48,814
º Total assets 2,210,467 2,280,701 656,317
º Liabilities and shareholders'
equity, net
º Current liabilities
Bank loans 7 43,826 35,205 10,131
Trade accounts payable 36,344 27,953 8,044
Accounts payable to affiliates 11 22 22 6
Dividends payable 9(e) 1,343 43,394 12,488
Other current liabilities 62,285 58,941 16,961
Current portion of long-term debt 8 17,192 18,643 5,365
º Total current liabilities 161,012 184,158 52,995
º Derivative instruments 12(a) - 335,552 96,562
º Deferred income tax and workers'
profit sharing 17,464 16,948 4,877
Long-term debt 8 113,331 105,223 30,280
º Total liabilities 291,807 641,881 184,714
º Minority interest 45,986 65,623 18,884
º Shareholders' equity, net 9
Capital stock 610,735 610,735 175,751
Investment shares 1,652 1,652 475
Additional paid-in capital 545,266 545,266 156,911
Legal reserve 77,042 95,416 27,458
Retained earnings 646,313 335,579 96,570
Cumulative translation adjustment 6,961 (16,192) (4,660)
Unrealized gain on investments in
shares carried at fair value - 16,036 4,615
Treasury shares (15,295) (15,295) (4,401)
º Total shareholders' equity 1,872,674 1,573,197 452,719
Total liabilities and shareholders'
equity, net 2,210,467 2,280,701 656,317
Compaa de Minas Buenaventura S.A.A. and subsidiaries
Consolidated Statements of Income (unaudited)
For the three-month period ended March 31, 2002 and 2003
Note 2002 2003 2003
S/(000) S/(000) US$(000)
º Operating revenues
Net sales 126,082 153,738 44,241
Royalty income 11(a) 15,325 24,196 6,963
º Total revenues 141,407 177,934 51,204
Costs of operation
Operating costs 69,940 67,532 19,434
Depreciation 8,965 8,308 2,391
Exploration and development costs in
operational
mining sites 12,104 14,821 4,265
Total costs of operation 91,009 90,661 26,090
Gross margin 50,398 87,273 25,114
º Operating expenses
General and administrative 15,038 16,757 4,822
Exploration costs in non-operational 8,667 2,494
mining areas 3,692
Sales 5,522 4,906 1,412
Royalties 2,990 4,575 1,317
º Total operating expenses 27,242 34,905 10,045
º Operating income 23,156 52,368 15,069
Other income (expenses)
Gain from change in the fair value of
derivative instruments 12(a) - 91,620 26,365
Share in affiliated companies, net 5(d) 30,399 64,907 18,678
Realized gain (loss) on derivative 12(b) (1,288)
instruments 15,566 (371)
Interest income 2,289 1,186 341
Gain from exposure to inflation 175 856 246
Interest expense (4,107) (2,310) (665)
Amortization of mining concessions 6 (4,120) (3,975) (1,144)
Loss from sale of subsidiary's shares 1(d) (6,680) - -
Other, net (3,849) 2,662 766
Total other income, net 29,673 153,658 44,216
Income before income tax and minority
interest 52,829 206,026 59,285
Income tax (5,772) (6,441) (1,854)
Income before minority interest 47,057 199,585 57,431
Minority interest (1,923) (13,330) (3,836)
º Net income 45,134 186,255 53,595
Basic and diluted earnings per share,
stated in Peruvian Nuevos Soles and
U.S. dollars 13 0.35 1.46 0.42
Weighted average number of shares 13
outstanding 127,225,692 127,225,692 127,225,692
Compaa de Minas Buenaventura S.A.A. and subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (unaudited)
For the three-month period ended March 31, 2002 and 2003
Capital stock
_____________________________
Unrealized gain
Additional Cumulative on investments
Investment paid-in Legal Retained translation carried at fair Treasury
Number of shares Common shares shares capital reserve earnings adjustment value shares Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balance as of
January 1, 2002 137,444,962 186,922 504 525,585 37,375 789,231 5,964 - (19,418) 1,526,163
Declared and paid
dividends, net of
dividends paid to a
subsidiary, note
9(e) - - - - - (27,601) - - - (27,601)
Capitalization of
retained earnings,
notes 9(a) and (b) - 423,813 1,148 - - (424,961) - - - -
Transfer to legal
reserve - - - - 4,621 (4,621) - - - -
Gain from sale of
ADR, note 9(c) - - - 19,681 - - - - 4,123 23,804
Cumulative gain for
translation of
investment in Minera
Yanacocha S.R.L. - - - - - - 4,971 - - 4,971
Net income - - - - - 45,134 - - - 45,134
__________ __________ __________ __________ __________ __________ __________ __________ __________ __________
Balance as of March
31, 2002 137,444,962 610,735 1,652 545,266 41,996 377,182 10,935 - (15,295) 1,572,471
__________ __________ __________ __________ __________ _________ __________ __________ __________ __________
º Balance as of
January 1, 2003 137,444,962 610,735 1,652 545,266 77,042 646,313 6,961 - (15,295) 1,872,674
º Declared
dividends, note 9(e) - - - - - (41,759) - - - (41,759)
º Investments kept
at fair value, note
5(a) - - - - - (5,627) - 16,036 - 10,409
º Loss on derivative
instruments, note
12(a) - - - - - (431,229) - - - (431,229)
º Transfer to legal
reserve - - - - 18,374 (18,374) - - - -
º Cumulative loss
for translation of
investment in Minera
Yanacocha S.R.L. - - - - - - (23,153) - - (23,153)
º Net income - - - - - 186,255 - - - 186,255
__________ __________ __________ __________ __________ __________ __________ __________ __________ __________
Balance as of March
31, 2003 137,444,962 610,735 1,652 545,266 95,416 335,579 (16,192) 16,036 (15,295) 1,573,197
__________ __________ __________ __________ __________ __________ __________ __________ __________ __________
|
Compaa de Minas Buenaventura S.A.A. and subsidiaries
Consolidated Statements of Cash Flows (unaudited)
For the three-month period ended March 31, 2002 and 2003
2002 2003 2003
S/(000) S/(000) US$(000)
Operating activities
Collection from customers 117,130 176,414 50,767
Collection of royalties 15,886 24,083 6,930
Collection of interest 2,275 2,440 702
Payments to suppliers and third parties (46,289) (76,052) (21,885)
Payments to employees (30,491) (32,094) (9,236)
Payments of exploration expenditures (11,517) (19,135) (5,506)
Payments of income tax (3,615) (10,835) (3,118)
Payments of royalties (3,467) (6,366) (1,832)
Payments of interest (3,527) (3,824) (1,100)
Net cash provided by operating activities 36,385 54,631 15,722
º Investing activities
Purchase of plant and equipment (18,628) (10,816) (3,112)
Proceeds from (payments by) derivative
instruments settled 15,566 (1,288) (371)
Proceeds from sale of plant and equipment 2,055 392 113
Development expenditures (9,782) (7,422) (2,136)
Purchase of investments in shares (3,865) (1,500) (432)
Net cash used in investing activities (14,654) (20,634) (5,938)
º Financing Activities
Decrease of bank loans, net (26,845) (8,621) (2,481)
Increase (decrease) of long - term debt,
net 2,216 (6,657) (1,916)
Proceeds from sale of treasury ADR 23,804 - -
Net cash used in financing activities (825) (15,278) (4,397)
Net increase in cash during the period 20,906 18,719 5,387
Cash at beginning of period 86,317 90,642 26,084
Cash at period-end 107,223 109,361 31,471
2002 2003 2003
S/(000) S/(000) US$(000)
Reconciliation of net income to net cash
provided by operating activities
Net income 45,134 186,255 53,595
Add (deduct)
Gain from change in the fair value of
derivative instruments - (91,620) (26,365)
Share in affiliated companies, net (30,399) (64,907) (18,678)
Depreciation 9,087 8,791 2,530
Gain from exposure to inflation (175) (856) (246)
Amortization of development costs in
operational mining sites 4,279 3,870 1,114
Amortization of mining concessions 4,120 3,975 1,144
Net cost of retired plant and equipment - 1,357 391
Loss on sale of plant and equipment 4,332 37 11
Minority interest 1,923 13,330 3,836
Deferred income tax 2,157 (516) (148)
Loss on sale of investments in shares 6,680 - -
º Net changes in assets and liabilities
accounts
Decrease (increase) of operating assets -
Trade and other accounts receivable (24,507) 8,237 2,371
Inventories 6,246 (3,594) (1,034)
Prepaid taxes and expenses 7,724 (1,715) (493)
Decrease of operating liabilities -
Trade and other accounts payable (216) (8,013) (2,306)
º Net cash provided by operating activities 36,385 54,631 15,722
Compaa de Minas Buenaventura S.A.A. and subsidiaries
Notes to the interim consolidated financial statements (unaudited)
As of March 31, 2003 and 2002
1. Interim unaudited consolidated
financial statements
a. The accompanying interim consolidated
financial statements have been prepared
from the accounting books and records of
Compaa de Minas Buenaventura S.A.A.
(Buenaventura) and subsidiaries
(together, the Company), which are
maintained in nominal Peruvian currency
and adjusted to reflect changes in the
National Wholesale Price Level Index
(IPM). According to such index, prices
decreased 0.5 percent and increased 1.1
percent during the three-month period
ended March 31, 2002 and 2003,
respectively.
Figures presented in the consolidated financial
statements as of December 31, 2002 and for the
three-month period ended March 31, 2002 have been
inflation adjusted to reflect the change in the
National Wholesale Price Index (IPM) at March 31,
2003.
(b) The criteria and accounting principles used by
Management in the following interim consolidated
financial statements preparation, which should be
read together with the 2002 audited report, are
similar to those used in the preparation of
Buenaventura's annual consolidated financial
statements, except for matters related to the
adoption of IAS 39, Recognition and Measurement of
Financial Instruments, effective January 1, 2003
(see notes 5 and 12). Additionally, in preparing
the interim consolidated financial statements,
Management made certain estimates and assumptions;
accordingly actual results may differ from those
presented in this report.
(c) Certain figures of the consolidated financial
statements as of December 31, 2002 and for the
three-month period ended March 31, 2002 have been
reclassified to conform to presentation standards
adopted for 2003 financial reporting purposes.
(d) The interim consolidated financial
statements include the financial
statements of the following subsidiaries:
Ownership percentages as of
December 31, 2002 March 31, 2003
Subsidiaries Direct Indirect Direct Indirect Economic activity
% % % %
Buenaventura 100.00 - Advisory and engineering
Ingenieros S.A. services related to the mining
100.00 - industry.
Cedimin S.A.C. - 100.00 44.83 55.17 Holds investments in S.M.R.L.
Chaupiloma Dos de Cajamarca,
Minas Conga S.R.L. and other
affiliated companies engaged in
mining activities.
Compaa Minera 99.99 - 99.99 - Holds investments in
Condesa S.A. Buenaventura, Yanacocha and
other affiliated companies
engaged in mining activities.
Compaa Minera 73.63 - 73.63 - Extraction, concentration and
Colquirrumi S.A. commercialization of
polymetallic ores, mainly zinc
and lead. Currently is also
engaged in electric power sales.
Consorcio 100.00 - Transmission of electric power
Energtico de to mining companies.
Huancavelica S.A. 100.00 -
Contacto - 100.00 - 100.00 Placement of insurance contracts
Corredores de and provision of administrative
Seguros S.A. and technical services in
insurance matters.
Inversiones 59.02 - 59.90 - Extraction, concentration and
Colquijirca S.A. commercialization of
polymetallic ores, mainly zinc
and lead, through its subsidiary
Sociedad Minera El Brocal S.A.A.
Inversiones 78.04 - 78.04 - Extraction, concentration and
Mineras del Sur commercialization of gold in
S.A. bars and concentrates.
Metalrgica Los 100.00 - Treatment of minerals and
Volcanes S.A. 100.00 - concentrates.
Minera Paula 49 - 51.00 - 51.00 Extraction, concentration and
S.A.C. commercialization of
concentrates, primarily gold.
Minas Conga - 60.00 - 60.00 Effective December 19, 2000,
S.R.L. this entity transferred to
Yanacocha its exploration and
exploitation rights to the
S.M.R.L. Chaupiloma Dos de
Cajamarca's mining concessions.
Minera Shila 50.00 50.00 - - Extraction, concentration and
S.A.C. commercialization of
concentrates, primarily gold.
This Company was absorbed by
Cedimin S.A.C. effective January
2, 2003.
S.M.R.L. 20.00 40.00 20.00 40.00 Owner of the mining concessions
Chaupiloma Dos de explored and exploited by
Cajamarca Yanacocha.
During the first quarter of 2003, the
Company purchased 1,572,000 shares of its
subsidiary Inversiones Colquijirca S.A.
for S/1 per share. As a result of this
transaction the Company's ownership in
Inversiones Colquijirca S.A. increased
from 59.02% as of December 31, 2002 to
59.90% as of March 31, 2003.
On March 31, 2002, the Company
transferred its participation in Minera
Huallanca S.A.C. (Huallanca) to BHL - Per
S.A.C., by selling its Huallanca's shares
for US$2,000,000. From this amount,
US$1,500,000 will be collected in three
equal semi-annual installments finishing
on September 30, 2004 and the remaining
US$500,000 will be collected on September
30, 2006 provided that: (i) the level of
economic reserves measured between
September 30, 2004 and September 30, 2006
allows Huallanca to produce 15,000
MT/month of mineral and (ii) the average
price of zinc is higher than US$1,050/MT
in that period. If these conditions are
not met, the final price of the
transaction will be reduced to
US$1,500,000. This transaction has
generated a loss amounting to
S/6,680,000, assuming a sales price of
US$1,500,000, which is separately
presented in the consolidated statements
of income.
On April 2, 2002, the Company sold to
third parties its participation in Minera
Yanaquihua S.A.C. Under the sale
agreement, the buyers will pay royalties
equal to a percentage of the net sales of
Minera Yanaquihua S.A.C.; the royalty
payment percentages will be equal to 5%
in 2004, 6% in 2005, 7% in 2006 and 8% in
2007. Under the contract, the buyers have
an option to forego continued royalty
payments and to buy out the annual
royalties section of the agreement for an
amount equal to US$ 3,000,000; if this
option has not been exercised at December
31, 2007, the royalties will increase to
10% of yearly net sales effective January
1st, 2008. The Company's former carrying
amount of the investment of S/5,189,000
(US$1,492,000) is shown as a long-term
account receivable. No income was
recognized on this transaction.
(e) The interim consolidated financial
statements of the Company as of March 31,
2002 and for the three-month period then
ended were reviewed by other independent
auditors, whose report dated April 23,
2002 expressed that based on their
review, they were not aware of any
material modifications that should be
made to those financial statements.
2. Convenience Translation
of Peruvian Nuevos Soles
amounts into
U.S. dollar amounts
The consolidated financial
statements are stated in
Peruvian Nuevos Soles. U.S.
dollars amounts are
included solely for the
convenience of the reader,
and were obtained by
dividing Peruvian Nuevos
Soles amounts by the
exchange rate for selling
U.S. dollars at March 31,
2003 (S/3.475 to US$1), as
published by the
Superintendencia de Banca y
Seguros (Superintendent of
Bank and Insurance, or
SBS). The convenience
translation should not be
construed as representation
that the amounts of the
consolidated financial
statements in Peruvian
Nuevos Soles have been, or
could be converted into
U.S. dollars at the
foregoing or any other rate
of exchange.
3. Cash and cash
equivalents
(a) This item is made up as follows:
As of As of
December 31, March 31,
2002 2003
S/(000) S/(000)
Cash 1,143 1,343
Current demand deposit accounts 5,887 13,570
Saving accounts 6,786 -
Time deposits
In local currency 73,805 69,804
In foreign currency 3,021 24,644
90,642 109,361
(b) The Company maintains a time deposit
in Peruvian currency for S/69,800,000 at
an annual interest rate of 5.7 percent
with maturity on April 9, 2003.
(c) On March 2003, the Company opened
time deposits in foreign currency for
US$6,000,000 with annual interest rates
ranging from 1.10% to 1.25% and
maturities between 15 and 30 days.
4. Inventories, net
(a) This item is made up as follows:
As of December, 31 As of
2002 March 31,
2003
S/(000) S/(000)
Mineral concentrates 31,669 37,858
Supplies 48,678 48,504
80,347 86,362
Less - Slow moving and obsolescence
supplies reserves 5,939 5,939
74,408 80,423
In Management's opinion, the reserve
above created by current and prior year
write-offs, is sufficient to cover the
risks of slow moving and obsolete
supplies at December 31, 2002 and March
31, 2003.
5. Investments in shares
This item is made up as follows:
Equity ownership percentage Amount
As of December31, As of March As of As of March
2002 31, 2003 December 31, 31, 2003
2002
% % S/(000) S/(000)
Investments carried at fair
value (a)
Sociedad Minera Cerro Verde 9.17 9.17 19,383
S. A. 29,792
Other 4,783 5,103
24,166 34,895
Equity method investments
Minera Yanacocha S.R.L. (c) 43.65 43.65 1,159,467 1,201,387
Sociedad Minera Coshuro de
Responsabilidad Limitada 45.90 45.90 815 761
1,160,282 1,202,148
1,184,448 1,237,043
(a) Until December 31, 2002, the Company
carried at cost the investments in shares
in entities in which its ownership is
less than 20 percent, less any impairment
recognized as a result of declines in
value deemed to be permanent. Effective
January 1, 2003, the Company has adopted
IAS 39, Financial Instruments -
Recognition and Measurement, which
requires that these investments be
measured at fair value, and changes in
this value be recognized separately in
the statement of changes in shareholders'
equity. The initial effect on the
adoption of this IAS must be recorded as
a debit or credit to retained earnings.
Accordingly, the Company has recorded a
charge of S/5,627,000 to retained
earnings, and presents the change in its
fair value occurred during the first
quarter of 2003 of S/16,036,000 in the
caption unrealized gain on investments in
shares carried at fair value in the
consolidated statement of shareholders'
equity.
The Company has determined the fair value
as of March 31, 2003 based on the quoted
market price of Sociedad Minera Cerro
Verde S.A.'s shares as of that date. The
Company has not considered the fair value
of the other investments due to the
effect is not material to the interim
consolidated financial statements.
(b) The amount to be recorded as equity
participation in Minera Yanacocha S.R.L
(hereinafter, Yanacocha) was determined
from audited financial statements as of
December 31, 2002 and unaudited financial
statements as of March 31, 2003.
(c) The calculation of the equity
investment in Yanacocha is as follows:
As of March 31,
2002 2003
S/(000) S/(000)
Yanacocha shareholders' equity at beginning 1,808,431 2,414,002
Participation percentage 43.65% 43.65%
Company's participation in Yanacocha equity
as of January 1st 789,380 1,053,712
Payment over the book value of Yanacocha's
shares, net of cumulative amortization (i) 125,461 117,213
Elimination of intercompany gains (ii) (12,441) (11,458)
Balance of investment as of January 1st 902,400 1,159,467
Participation in Yanacocha income 32,716 66,791
Amortization of payment above the book value
of Yanacocha's shares (i) (2,484) (2,035)
Realization of intercompany gains (ii) 199 317
Cumulative translation effect 4,971 (23,153)
Other (2,977) -
Balance as of March 31, 934,825 1,201,387
(i) Corresponds to a premium paid
over the book value of Yanacocha
shares in previous years, in
connection with the Company's
acquisition of an additional 11.35
percent interest in Yanacocha,
through exercise of its preferential
rights.
(ii) The elimination of related
inter-company gains corresponds to
profits generated in past years, and
is presented net of the investment
in Yanacocha for reporting purposes.
The Company increases the investment
and recognizes a gain in the share
in affiliated companies as Yanacocha
depreciates and amortizes the
acquired assets.
(d) The amount recognized in the
consolidated statements of
income as share in affiliated
companies, net is made up as
follows:
For the three-month period
ended as of March 31,
2002 2003
S/(000) S/(000)
Minera Yanacocha S.R.L. 30,431 65,073
Other (32) (166)
30,399 64,907
The share in Yanacocha's income has increased in
the three-month period ended March 31, 2003, as
compared to the same period of 2002, due mainly to
the following reasons: (i) the increase of the
realized gold price from US$290 per ounce during
the three-month period ended March 31, 2002 to
US$352 per ounce during the three-month period
ended March 31, 2003, (ii) increase of the volume
of ounces of gold sold from 483,201 during the
three-month period ended March 31, 2002 to 652,655
during the three-month period ended March 31,
2003, and (iii) decrease of cash cost per ounce
from US$146 during the three-month period ended
March 31, 2002 to US$134 during the three-month
period ended March 31, 2003. Increased revenues
have been partially offset by an increase in asset
retirement and restoration obligations of US$36
million (Buenaventura equity participation of
US$16 million).
(e) Presented below is selected information about
Yanacocha, the Company's most significant
investment:
Economic activity -
Yanacocha is engaged in the exploration for and
exploitation of gold in the open pit mines of
Carachugo, San Jos, Maqui Maqui, Cerro Yanacocha
and La Quinua; all mines are located in the
department of Cajamarca, Peru.
Summary financial information based on the
Yanacocha financial statements -
Presented below is certain summary financial
information extracted from the Yanacocha financial
statements and adjusted to conform to accounting
practices and principles of the Company:
Summary data from the Yanacocha balance sheet as
of December 31, 2002 (audited) and March 31, 2003
(unaudited):
2002 2003
US$(000) US$(000)
Total assets 1,055,280 1,199,409
Total liabilities 374,755 475,345
Shareholders' equity 680,525 724,064
Summary data from the Yanacocha statements
of income for the three-month period ended
March 31, 2002 and 2003 (unaudited) :
2002 2003
US$(000) US$(000)
Total revenues 140,303 230,041
Operating income 26,710 70,169
Net income 20,846 43,606
6. Mining concessions, net
Corresponds to the amount
paid over the fair value of
net assets as a result of
the additional purchase of
ownerships in subsidiaries.
Movements within the mining
concession cost and
accumulated amortization
accounts were as follows:
Balance Balance
as of as of
December 31, March 31,
2002 Additions Retirements 2003
S/(000) S/(000) S/(000) S/(000)
16. Cost
Cedimin S.A.C. 166,128 - - 166,128
Inversiones Colquijirca
S.A. 40,132 - - 40,132
Consorcio Energtico de
Huancavelica S.A. 8,609 - - 8,609
Sociedad Minera
El Brocal S.A.A. 5,409 - (166) 5,243
220,278 - (166) 220,112
Accumulated amortization
Cedimin S.A.C. 30,416 2,572 - 32,988
Inversiones Colquijirca
S.A. 14,213 1,035 - 15,248
Consorcio Energtico de
Huancavelica S.A. 955 213 - 1,168
Sociedad Minera
El Brocal S.A.A. 926 155 - 1,081
46,510 3,975 - 50,485
Net cost 173,768 169,627
7. Bank loans
Bank loans, contracted in
U.S. dollars, are as
follows:
As of As of
Annual December 31, March 31,
interest rate 2002 2003
S/(000) S/(000)
Sociedad Minera
El Brocal S.A.A.
Banco de Crdito del Per Ranging from
3.68% to 4.45% 10,661 4,795
Banco Wiese Sudameris 5.27% 4,922 3,875
Banco Internacional del Per Ranging from
- Interbank 5.18% to 5.32% 7,107 5,352
Banco Interamericano de Ranging from
Finanzas - BIF 4.32% to 4.48 % 3,127 -
Inversiones Mineras del
Sur S.A.
Banco Wiese Sudameris 3.38% 7,722 -
Banco Wiese Sudameris 3.88% 6,397 -
Banco de Crdito del Per Ranging from
2.62% to 3.07% 3,554 19,808
Other subsidiaries 336 1,375
43,826 35,205
Bank loans were obtained to
finance working capital
needs and have short-term
maturities. Loans obtained
by Sociedad Minera El
Brocal S.A.A. are
guaranteed by the related
shipments of lead and zinc
concentrates inventories.
The other bank loans do not
have specific guarantees.
8. Long term debt
(a) Long-term debt is composed of the
following loans, principally denominated
in U.S. dollars:
Annual As of As of
interest Maturity December 31, March 31,
Guarantee rate rate 2002 2003
S/(000) S/(000)
Inversiones Mineras del
Sur S.A.
Banco de Crdito del Per Guaranteed by 4.50% January 2008 71,075 69,500
(i) Buenaventura
Consorcio Energtico de
Huancavelica S.A.
BBVA Banco Continental Guaranteed by Libor plus April 2005 33,109 28,900
Buenaventura 1.20%
(2.866% as
of
March 31,
2003)
Sociedad Minera El
Brocal S.A.A.
Banco de Crdito del Per No specific guarantees Libor plus September 19,546 19,111
3.75% 2006
(5.029% as
of March
31, 2003)
Teck Cominco Metals Ltd. No specific guarantees Libor plus December 6,007 5,819
(ii) 6.00% 2006
(7.279% as
of March
31, 2003)
Other 786 536
130,523 123,866
Less Current portion 17,192 18,643
Long-term portion 113,331 105,223
i. This note contains a quarterly roll over
provisin, has a final maturity date in 2006
and is fully guaranteed by Buenaventura. In
January 2003, this loan was rolled over and an
annual interest rate of 4.50% was established.
ii. This loan is subordinated to the obligations
established in the loan agreement signed with
Banco de Crdito del Per, see (i).
(b) The long-term debt maturity schedule of the
non-current portion of long-term debt is as
follows:
Year ended March 31, Amount
S/(000)
2005 22,095
2006 9,240
2007 4,388
2008 69,500
105,223
9. Shareholders' equity
(a) Capital stock -
As of March 31, 2003 the capital stock is
made up as follows:
Nominal
value Restatement for inflation effect Total
S/(000) S/(000) S/(000)
Capital stock 549,780 60,955 610,735
The Mandatory Annual Shareholders'
meeting held on March 26, 2002 decided to
increase the Company's capital stock from
S/137,444,962 to S/549,779,848 (from
S/186,922,000 to S/610,735,000, in
constant values as of March 31, 2003)
through the capitalization of a portion
of retained earnings as of December 31,
2001, and by increasing the nominal value
of the common shares - Series A and B
from S/1 to S/4. From the capitalized
amount of S/412,334,886 (S/423,813,000 in
constant values as of March 31, 2003),
S/129,266,262 corresponds to common
shares - Series A and S/283,068,624 to
common shares - Series B.
The Shareholders' Meeting held on April
30, 2002 approved the re-designation of
common shares - Series B as common shares
- Series A, and then immediately approved
the re-designation of common shares
Series A as common shares. Both decisions
were effective May 3, 2002, at which date
the Company's capital stock is comprised
of 137,444,962 common shares with a
nominal value of S/4 each.
(b) Investment shares -
As of March 31, 2003 the investment
shares is made up as follows:
Nominal Restatement for inflation effect Total
value
S/(000) S/(000) S/(000)
Investment shares 1,489 163 1,652
The Annual Shareholders' meeting
mentioned in paragraph (a) above, also
decided to increase the investment shares
account from S/372,320 to S/1,489,280
(From S/504,000 to S/1,652,000, in
constant values as of March 31, 2003), by
increasing the nominal value of
investment shares from S/1 to S/4,
concurrent with capitalization of a
portion of retained earnings equal to
S/1,116,960 (S/1,148,000 in constant
values as of March 31, 2003). As a
consequence, effective May 3, 2002, there
are 372,320 investment shares with a
nominal value of S/4 each.
(c) Additional paid-in capital -
The additional paid-in capital
principally relates to the premium
received on the issuance of Series B
common shares. Additionally, it includes
a gain that resulted from the sale of
treasury ADR.
In the first quarter of 2002, Condesa
sold to third parties an additional
314,500 ADR for approximately
S/23,804,000, realizing a gain of
S/19,681,000, which is presented as
additional paid-in capital in the
consolidated statements of changes in
shareholders' equity.
(d) Legal reserve -
According to the Ley General de
Sociedades (General Corporations Law),
applicable to individual and
unconsolidated financial statements, a
minimum of 10% of distributable income in
each year, after deducting income tax,
shall be transferred to a legal reserve,
until such reserve is equal to 20 percent
of capital stock. This legal reserve may
be used to offset losses or may be
capitalized; however, if used to offset
losses or if capitalized, the reserve
must be replenished with future profits.
(e) Declared dividends -
The Annual Shareholders meeting held on
March 26, 2002 approved a cash dividend
of S/29,897,000 (equivalent to S/0.21 per
share) from retained earnings as of
December 31, 2001. The cash dividend
includes dividends of S/2,296,000 paid to
a subsidiary. The dividends were
available to shareholders from April
2002.
The Annual Shareholders meeting held on
March 31, 2003 approved a cash dividend
of S/41,759,000 (equivalent to S/0.303
per share) from retained earnings as of
December 31, 2002. These dividends will
be available to shareholders from April
25, 2003 and are included as dividends
payable in the consolidated balance
sheets as of March 31, 2003.
10. Legal proceedings
Damages claimed by a French citizen
In February of 2002, the
Company and Condesa,
together with Newmont
Mining, Newmont Second and
certain individual persons,
were defendants in an
action initiated by a
French citizen, with
jurisdiction before the
District Court of the state
of Colorado in the United
States. The plaintiff
alleges that he was engaged
as an advisor to Normandy
respective to a lawsuit
that concluded in October
of 1998, and that such
lawsuit separately
motivated the execution of
a Global Transaction
Agreement in 2000 between
the Company, BRGM, Mine Or,
Normandy and their related
entities (SEREM). The
Global Transaction
Agreement provided for full
and permanent
revocation and annulment of
any preferential rights on
the shares of Cedimin
S.A.C. in exchange for a
one-time payment of US$80
million by the Company, of
which the Company paid
US$40 million.
The plaintiff asserts that
he was injured because
Normandy had promised to
pay him a commission based
fee if he was able to
increase the amount of the
Company's payment as
ordered by the Court, which
did not occur, and seeks
damages of not less than
US$25 million plus
interest, in addition to
unspecified punitive
damages that could increase
the amount by threefold.
Additionally, the plaintiff
alleges violations of the
federal RICO statute and
similar provisions of
Colorado law, interference
with contract rights,
defamation and other
damages.
The defendants have filed
various motions to dismiss
the action and believe the
arguments presented for
dismissal have solid legal
ground; however, rather
than responding to these
motions for dismissal, the
plaintiff has filed another
demand. The Company and
Condesa have presented
motions to reject the new
demand.
At this date is not
possible to predict when
the court will rule on the
motions, the possible
outcome of such motions or
a possible range of loss.
11. Transaction with
affiliated companies
(a) S.M.R.L. Chaupiloma Dos de Cajamarca
(Chaupiloma) is the legal owner of the
mineral rights on the mining concessions
exploited by Yanacocha., and receives a 3
percent royalty on the net sales of
Yanacocha. For the three-month period
ended March 31, 2003, royalties earned
amounted to S/24,196,000 (S/15,325,000
for the three-month period ended March
31, 2002) and are presented as royalty
income in the consolidated statements of
income.
(b) In March 2002, Buenaventura
Ingenieros S.A. signed a technical
service agreement with Yanacocha to
perform a number of specialized
activities and services. Pursuant to the
agreement, the services performed will be
related to the construction of mining
projects and will include completion of
analysis and studies, work plan design,
and functions related to planning,
monitoring and administrating the
infrastructure projects required by
Yanacocha in its
operations. This contract will expire on
December 31, 2003. The revenues related
to this service contract amounted to
approximately S/2,746,000 for the
three-month period ended March 31, 2003.
(c) In November 2000, Consorcio Energtico
de Huancavelica S.A. signed an agreement
with Yanacocha for the construction of a
220 kW transmission line between Trujillo
and Cajamarca, a 60 kW transmission line
between Cajamarca and La Pajuela, and the
Cajamarca Norte substation; this
agreement also encompassed activities
necessary to enlarge the Trujillo
substation. Pursuant to this contract,
the construction work should be finished
in October of 2001. Concurrently,
Yanacocha and the Company signed a
10-year agreement covering electric
energy transmission and infrastructure
operation beginning November 2001. In
exchange for Buenaventura operating and
managing the transmission project,
Yanacocha will pay an annual fee of
US$3.7 million. The revenues for these
services for the three-month period ended
March 31, 2002 and 2003 amounted to
approximately S/3,308,000 and
S/3,384,000, respectively.
(d) As a result of these and other minor
transactions, the Company has the
following accounts receivable and payable
from affiliated companies:
As of
As of March 31,
December 31, 2002 2003
S/(000) S/(000)
Receivable
Minera Yanacocha S.R.L. 30,481 30,163
Other 180 175
30,661 30,338
Payable
Compaa Minera Coimolache S.A. 22 22
12. Derivative financial
instruments
(a) Until December 31, 2002, the Company
did not account for the fair value of the
derivative instruments and only disclosed
the amount in notes to the consolidated
financial statements. Effective January
1, 2003, the Company has adopted IAS 39,
Financial Instruments - Recognition and
Measurement, which requires that the
derivative instruments be recognized as
assets or liabilities in the consolidated
balance sheet, and measured at their fair
value. The initial effect on the adoption
of this IAS must be recorded as a debit
or credit to retained earnings.
Subsequent changes in the fair value must
be recognized in the results of the
period, unless certain criteria specified
in IAS 39 are met.
Management's intention is to hold
derivative instruments to hedge the
fluctuations in metal prices, mainly gold
and silver, and not for trading purposes;
however, the Company does not meet all
the criteria stated in IAS 39 to
accounted for the derivative instruments
as a hedge. Accordingly, the Company has
recorded their derivative instruments as
follow:
º Recorded a charge of S/431,229,000 to retained
earnings that includes a minority interest
effect of S/4,057,000, and
º Recognized a gain of
S/91,620,000 due to the
change in fair value
occurred during the first
quarter of 2003, which is
presented as other income
in the consolidated
statement of income.
In addition, S/335,552,000 is presented as a
liability in the consolidated balance sheet in
connection with the fair value of the open
derivate instruments as of March 31, 2003, as
detailed in the paragraph (c) below.
(b) For the three-month period ended March 31,
2003, the Company recognized expenses amounting
to S/1,288,000 (revenues amounting to
S/15,566,000 for three-month period ended March
31, 2002) in connection with derivative
operations settled in those periods.
(c) The tables below present details related to
commodity derivative instruments outstanding as
of March 31, 2003:
Compaa de Minas Buenaventura S.A.A. -
Quantity
Metal (ounces) Collared price range Period
Minimum Maximum (US$/Oz)
Silver 5,350,000(i) 9,575,000 US$5.80 to US$6.20 April 2003 - August 2006
Gold 692,500(ii) 3,404,000 US$332.13 to US$420 April 2003 - December 2011
i. Includes:
º 3,200,000 Oz Ag with a guaranteed minimum
sale price of US$5.80 Oz/Ag (minimum price
valid only and when silver price is above
US$4.15 Oz/Ag) and a maximum sale price of
US$6.20 Oz/Ag.
º 1,025,000 Oz Ag with a guaranteed sales
price of US$6 Oz/Ag, only and when the
silver price is above US$4 Oz/Ag.
(ii) Includes guaranteed sales
135,000, 202,500 and 45,000 Oz Au
only and when gold prices are above
US$279.50, US$265 and US$290 Oz/Au,
respectively.
Sociedad Minera El Brocal S.A.A.
Metal Quantity Price Period
Call options
Zinc 8,100 MT US$900/MT April 2003 - December 2003
Put options
Zinc 16,200 MT US$775/MT April 2003 - December 2003
Future contracts
Zinc (*) 8,100 MT US$895/MT April 2003 - December 2003
Zinc 8,100 MT US$869/MT April 2003 - December 2003
Zinc 4,050 MT US$860/MT April 2003 December 2003
Silver 450,000 Oz US$5.10/Oz April 2003 - December 2003
Silver 225,000 Oz US$5.05/Oz April 2003 - December 2003
(*) This derivative instrument has a daily
fade-out provision if zinc price is at or
below US$ 750/MT.
(d) The Company maintains a foreign
currency forward contract for
US$20,186,391 that expires on April
9, 2003 and has a specific exchange
rate of S/3.5081 for each U.S.
dollar.
13. Basic and diluted earnings per
share
The computation of the basic and
diluted earnings per share for the
three-month period ended March 31,
2002 and 2003 is presented below:
For the three-month
period ended March 31,
2002 2003
Net income (numerator) S/45,134,000 S/186,255,000
Shares (denominator) 127,225,692 127,225,692
Earnings per share S/0.35 S/1.46
The number of shares to be used as
the denominator in the calculation
of basic and diluted earnings per
share for the three-month period
ended March 31, 2002 and 2003 was
determined as follows:
2002 2003
Common shares 137,444,962 137,444,962
Investment shares 372,320 372,320
137,817,282 137,817,282
Less - treasury shares 10,591,590 10,591,590
127,225,692 127,225,692
14. Statistical data
Statistical data of the Company
related to the volume of
inventories sold and average sale
prices by product for the
three-month period ended March 31,
2002 and 2003 are as follows:
(a) Mineral volumes sold were:
2002 2003
Gold 62,734 Oz 76,668 Oz
Silver 3,112,469 Oz 2,062,064 Oz
Lead 5,234 MT 4,565 MT
Zinc 11,340 MT 13,603 MT
Copper - 66 MT
(b) Average sales prices were:
2002 2003
US$ US$
Gold 287.89/Oz 349.80/Oz
Silver 4.43/Oz 4.67/Oz
Lead 489.66/MT 459.45/MT
Zinc 793.36/MT 785.96/MT
Copper - 1,656.11/MT
15. Explanation added for
English language
translation
The accompanying
consolidated financial
statements are presented on
the basis of accounting
principles generally
accepted in Peru. Certain
accounting practices
applied by the Company that
conform with generally
accepted accounting
principles in Peru may
differ in certain respects
to generally accepted
accounting principles in
other countries.
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