Buenaventura’s gold hedge book unwinding torpedoes 1Q08 profits

Peru’s largest publicity traded metals company Buenaventura hopes to take advantage of higher gold prices in the future despite a $63 million loss for this first quarter of this year.

RENO, NV - 

The unwinding of Compañía de Minas Buenaventura's hedge book caused the company to take a US$63 million net loss for the first quarter of this year.

However, Buenaventura CEO Roque Benavides told analysts that, "We think that the weakness of the dollar is not over and we may see gold prices going higher than what they are today. "

"You all have the assurance that we have no hedge at this point and that full benefit of the price of gold going up will benefit shareholders," he explained, adding that Buenaventura feels that the gold price will not go lower than it is now. He estimated that the company averaged $890/oz in unwinding its hedge book.

Meanwhile, Benavides forecast that Orcopampa mine will yield 320,000 to 330,000 ounces of gold this year while the Cerro Verde copper mine is anticipated to yield 300,000 metric tons of copper during its first full year of expanded capacity this year.  The Uchucchacua mine is expected to produce 12 million ounces of silver this year.

Decrease in gold grades already took its toll at the Antapite gold mine, where production decreased 20% to 14,861 ounces of gold. Buenaventura estimates that Antapite will only produce 70,000 ounces this year.

Benavides noted that the Yanacocha joint venture with Newmont has inaugurated its San Jose reservoir, a reclaimed mine pit that will yield a sustainable amount of irrigation water that will supply water for 10,000 farmers in the area.

The possibility of doubling production at the Cerro Verde joint venture with Freeport-McMoRan Copper & Gold has Buenaventura excited as the mine could increase its yield from 200,000 metric tons of copper this year to 400,000 metric tons of copper by 2011 or 2012. Benavides said a concession has been granted to build a new power line to the city of Arequipa in Peru that will provide power for the mine expansion.

Permitting will not be a problem, according to Benavides. However, he noted that the expansion would cost $1 billion.

FINANCIALS

Buenaventura reported a first quarter net loss of $63 million or negative 49-cents for share, compared to the net income of 36.7 million or 29-cents per share reported during the first quarter of 2007.

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