Jan. 19, 2015

Roque Benavides


Roque Benavides

President, Minas Buenaventura

"Peru is currently producing 1.2 million tons of copper per annum."


As well as his position at Minas Buenaventura, Roque Benavides is also member of the Executive Committee of Yanacocha and the Cerro Verde Board of Directors. He has also served as a Director of the Sociedad Nacional de Minería, Petróleo y Energía since 1988, and as Chairman of the Board from 1993 to 1995. He was Chairman of the Confederación Nacional de Instituciones Empresariales Privadas (CONFIEP) from 1999 to March 2001. He is a Board Member of the World Gold Council and Silver Institute. He received a BSc Degree in Engineering from Pontificia Universidad Católica del Perú in Lima, Peru in 1977 and an MBA from Henley. He is a Board Member of Banco de Crédito and UNACEM, both Peruvian-listed companies.

In light of the recent slowdown, what is your outlook for 2015 and beyond in terms of mineral prices?

Having been in the industry for the past 35 years I have seen prices rise and fall, which is quite normal. This is the essence of this industry, which does not control prices because an ounce of gold or copper produced in Peru, South Africa, Australia, Canada, Chile, or the US is sold at the same price in the open market. What we can control are our costs. Costs have to do with the competitiveness of the country and of the company, and in that respect, we are positioned at the low end of the gold, copper, and silver producers, so what matters here is to be a low-cost producer, which is precisely what Buenaventura offers to the market. Investment and prices may decline, but what matters is the long term is cost, and demand continues to grow.

Regarding Buenaventura's stock price, JP Morgan recently declared Buenaventura stock overweight. What was your reaction to this?

Analysts sometimes treat us well, and sometimes less so, although our operations are consistent regardless. However, the share price of Buenaventura has been over-penalized because of falling metal prices and the performance of emerging markets. Probably, were we based in Canada or the US we would not have been penalized as severely. We are, however, classified as an emerging market company, and emerging markets have not been doing too well.

“Peru is currently producing 1.2 million tons of copper per annum."

Could you summarize the outlook for copper in 2015 in Peru?

Peru is currently producing 1.2 million tons of copper per annum. With the expansion of Cerro Verde and the construction of Las Bambas and Constancia, within two years, we will be producing 2.5 million tons, which means more than a doubling of production. This still lags far behind Chile, which produces 5 million tons of copper.

There has been much talk about infrastructure investment this year and much will be implemented in 2015, while the new mineral port has also been opened by Trafigura and others. How do those developments affect you?

Peru still lacks infrastructure, and from a geographical standpoint it is difficult when you have a low-population coastal area and the high Andes. Then there is the Amazon jungle to contend with. In order to generate the necessary infrastructure to connect the country, you need economic activity that justifies it. Mining is part of this justification, and obviously Peru had been doing well to improve its infrastructure with roads, electricity, and communications, although the country still has a long way to go. In the case of the port specifically, through our subsidiary, Sociedad Minera El Brocal, we are also part of this process, and it is set to become an important facility that will reduce the costs of shipping, while the vessels themselves will arrive and depart faster than at present, all of which vitally reduces costs.

In 2014 the Proceedings of the National Academy of Sciences published a study on mining and hydrocarbon projects across the world entitled “Conflict translates environmental and social risk into business costs." It found that businesses often misjudged the inherent political risks of large projects. Buenaventura has had related problems with Yanacocha and Conga. How would you judge the political risk of Peruvian projects?

A country like Peru, which is regarded as a star, generates expectations. The rural population naturally has expectations of sharing in the benefits of national growth rates. The problem is how to deal with those expectations, especially when they have to do with the distribution of wealth. The mining sector, as part of the private sector, generates wealth, taxes, and production, and the resulting wealth and taxes have to be redistributed by the authorities. The problem in countries like Peru is that the state is absent in certain rural areas and mining companies have to assume its role, which is almost impossible. That generates conflict, which we have to address. Expectations need to be met through additional infrastructure, and by providing opportunities, services, education, and healthcare. In the case of the Conga gold and copper mining project in Cajamarca Region of Northern Peru, matters were compounded by the political campaign, and certain politicians, the president among them, argued that Conga was not feasible. Yet following his election, he came out in support of Conga. These are ongoing political issues, and we are always working with communities, stakeholders, and the state to make our projects positive for those involved.

For the next three years, how do you plan to increase production during a time of falling mineral prices, and how do you plan to keep costs low in that environment?

Many believe that the mining industry develops in times of high prices, and that is indeed part of the story, although overall mining essentially develops with political and economic stability. Mining develops when there is security for the people, and when there is infrastructure. Peru is on the right track, and we are improving infrastructure. The fact is that Peru has signed a free trade agreement (FTA) with two-thirds of total global GDP; 55 nations worldwide, and we have an investment grade rating, and are part of the Pacific Alliance, which makes us part of a group of successful companies in Latin America. Meanwhile, we have finalized all sea border disputes with Chile, which means that Peru is stable, economically and politically. In the case of Buenaventura, we have a pipeline project and expect to continue related developments. In fact we recently bought 51% of the Chucapaca project from Goldfields at a cost of $81 million, which is a vast amount for Buenaventura. We were formerly 49% stakeholders, but today hold a 100% stake. Meanwhile, we plan to develop Chucapaca, and are dealing with social issues related to the purchase of the surface land, which we need for the development of the project. We will most likely bring this into production by 2017.

© The Business Year - January 2015