Peru Mining: Minas Buenaventura - Index

Minas Buenaventura is Peru's largest publicly-traded precious metals company and a major holder of mining rights in Peru.

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Zoom.

Minas Buenaventura, Interactive Mind Map

Interactive Mind Map based on Mining Operations of Minas Buenaventura.

Graphic organizers are visual representations of knowledge, concepts or ideas.
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Mind Map Zoom

So why is Gold Fields (GFI) in JV with Vena Resources (VEM.to), Otto?

Good question. Hmmmm...let's see now.

First, let's take this morning's news release about the major new gold discovery made by Gold Fields (GFI) and Buenaventura. Here's how the NR kicks off:

JOHANNESBURG, May 11, 2010 /PRNewswire-FirstCall/ -- Chucapaca's joint venture partners, Gold Fields Limited (51%) (Gold Fields) (JSE, NYSE, NASDAQ Dubai: GFI) and Compania de Minas Buenaventura S.A.A. (49%) (Buenaventura, BVN), are pleased to announce the discovery of a major gold-copper-silver deposit in their Chucapaca project area (CPA) in southern Peru.

Called the Canahuire deposit, it has a Mineral Resource estimate of 5.6 million gold equivalent ounces[1] (Table 1), with mineralisation potential beyond the extent of current drilling. The Inferred Mineral Resource for Canahuire is approximately 83.7 Mt at 1.9 g/t gold, 0.09% copper and 8.2 g/t silver for a total of 5.6 million gold equivalent (AuEq1) ounces. CONTINUES HERE

And if you do the math, 5.1m oz of that total is pure gold.

Second, let's remember what the GFI Head of Exploration said about the area in and around Chucapaca. In his opinion, what we have here is a "new district".

Third, let's check a map:

click to enlarge (gets big)

And here's a nice close-up.

Oh look! Esquilache is just 25km away from a major new gold discovery made by GFI....hoodathunkit, eh?

Fourth, let's remind ourselves of the VEM.to NR dated May 4th 2010.

TORONTO, ONTARIO--(Marketwire - May 4, 2010) - Vena Resources Inc. (TSX:VEM - News;VEM - News; FRANKFURT:V1R - News; OTCBB:VNARF - News), a Company with strong partnerships with four of the world's largest mining companies, is pleased to announce that after field reviews conducted by its partner Gold Fields Limited ("Gold Fields") (NYSE:GFINews; JSE:GFI)(NASDAQ Dubai:GFI) in the Amantina region (18,900 hectares) in southern Peru, a technical committee comprised of geologists from both Vena and Gold Fields has agreed to advance the exploration to focus on a significant diatreme breccia target that had been previously identified by Vena in 2007. LIMA: -

The explosive breccia target known as the Amantina prospect is located approximately nine kilometres east of the historic Esquilache silver mine where Vena is actively exploring and approximately 27 kilometres east of the Gold Fields / Buenaventura Chucapaca JV project. The Amantina prospect consists of a polymictic breccia with a strongly silicified chalcedonic matrix surrounded by a zone of hydrothermal heterolithic breccias developed in Tertiary aged andesitic volcanics. The core breccia measures approximately 400 x 200 metres and trends N 20 degrees E. Additional lenticular outcrops of breccia poke through the extensive soil cover approximately 250 metres to the southeast and indicate that the overall size of the diatreme pipe may be much larger than the observed outcrop. The breccia body responded as a chargeability / resistivity high (disseminated pyrite in the siliceous matrix) during the 2007 induced polarization survey conducted by Vena and two other similar targets were identified to the southwest and northeast.

Strongly anomalous mercury, arsenic, lead and antimony geochemistry combined with the chalcedonic content of the breccia matrix suggest that CONTINUES HERE

Hey, there are never any guarantees when you're out exploring for gold, but GFI didn't just pick the VEM Esquilache/Amantina concession to JV because it had some leftover geologists that wanted a new spot in the mountains to go hiking. DYODD, dude.

Orcopampa Mine Index

The Orcopampa mine is located in the province of Castilla in the department of Arequipa, approximately 1,350 kilometers southeast of the city of Lima at an altitude of between 3,800 and 4,500 meters above sea level.

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Orcopampa Mine Index

Orcopampa Mine, Minas Buenaventura, Peru, Documentary 1 and News

The Orcopampa mine is located in the province of Castilla in the department of Arequipa, approximately 1,350 kilometers southeast of the city of Lima at an altitude of between 3,800 and 4,500 meters above sea level.

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Orcopampa Mine, Minas Buenaventura, Peru, Documentary 1

Peru's Roll Call of Shame: Reaction

Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them?

Manic Depressive Prince, Elsinore
Long time ago and quoted out of context

I've had plenty of mailbox regarding this post on Feb 5th (which contained the chart you see above) about the number of deaths in the Peruvian mining industry over the last four and a bit years, but none better than a mail received yesterday evening from reader 'TK'. Said reader has kindly given me permission to paste an excerpt from his mail and here it is:

I have to admit the roll call of shame on your website 5 Feb was a shocker to me.

Not that I thought miners all walked around with halos over their heads, but I own some Pan American Silver and the news that there have been so many deaths at their operations in Peru is disturbing. I have been hearing more about, and starting to pay more attention to, the nasty stuff some of these companies are up to, and getting away from owning them and moving to ones that can actually live up to their claims.

Pan American isn’t one I expected to hear this about, as they have a pretty clean image. That they have worked with Doe Run Peru, another on your list, makes it worse.

TK, you're my kind of investor. Mining is a positive thing for society and the good players in the industry should be supported, but the modern responsible miners are still offset by those that are using dubious practices to forward their bottom lines. People should ask serious questions of companies such as Pan American Silver (PAAS) (PAA.to),Volcan (VOLCABC1), Buenaventura (BVN) and any other company with a clear, long-standing track record of neglect towards their workforces. At the same time, why aren't there voices congratulating those miners such as Southern Copper (PCU) that show us exemplary attitudes and minimal accident rates? Australian mining companies are very hot on their worker accident rates.....why doesn't the USA or Canada care about these things?

UPDATE: Reader 'PR' writes in to note that Pan American Silver (PAAS) (PAA.to) has its earnings call coming up on Feb 16th. Any of you mighty analyst suits ready to ask the brass about the company's health and safety record on the conference call? Go on, I double dog dare you.

The roll call of shame: Peru's most dangerous mining companies

News this week from Peru's mining industry wasn't very good, with eight miners dead in an accident in an informal coal mine in the Oyon region of the country. The Minister in charge promised to levy severe sanctions against the unlicensed company in question and its owner (quite right too), but it has thrown a bit of a spotlight on the dangerous life that miners face in the country.

So eight dead and sanctions to come. Fair enough, but what about the other mining companies in the region that are also tried and tested deathtraps for its workforce. Here is a table showing the top 20 offenders in this category (that account for 57% of all mining deaths in Peru in the period) and to my surprise, it features not just little, national based companies but some of the large multinationals that quote in the northern exchanges.


Top of the list is the very large zinc/lead/silver miner Volcan (Lima stock exchange, ticker VOLCABC1) which doesn't have a bad safety record, but an abysmal one. In the last four years (including one death at the end of last month), it has watched as no less than 31 of its employees die on the job. Run by the ......errr.....eccentric Letts family, it's infamous for its poor working practices. Look above and see why, cos that's 12% of ALL mining deaths in the country from this single company and they don't get so much as a slapped wrist. Oh, how great it is to have friends in power, eh.........

Next on the roll call of shame comes Pan American Silver (PAAS), which should bring shame upon those up North. This large North American silver company is quoted on both the US and Canadian exchanges, but strangely doesn't make much mention of the thirteen Peruvian deaths at its operations since 2006. This company is a stain on those who talk the good talk about responsible mining practices but can't walk the walk.

Then comes Buenaventura (BVN), a Peruvian company quoted in the USA. Again, how can these publicly quoted companies get away with this? As we go down the list, there are plenty of Lima stock exchange-quoted companies, but ones that will catch the eye of those not so au fait with the local companies are Doe Run Peru (natch) and Barrick at its Misquichilca gold mine.

Not all foreigners are bad ones, though. Companies such as Southern Copper or Xstrata at Tintaya would have preferred zero deaths in the entended period shown, but as it is both companies have one death to their names. Nobody is claiming that mining isn't anything but dangerous and death, sad as it may be, will happen. But when companies such as VOLCABC1 and PAAS have an ongoing and regular pattern of above-average fatalities at their operations, there's something not right at all. Here's the monthly Peruvian death toll chart (2000 to date) that puts it all into its macabre context:

Yanacocha: A nice catch by Reuters

Reuters is on the ball regarding Yanacocha and yesterday immediately noted a discrepancy between production estimates at South America's biggest gold mine for 2010. In the left corner we have Newmont (NEM) with upbeat estimates and in the right corner its JV partner at the mine, Buenaventura (BVN), with a negative outlook for production next year. Here's the excerpt from the note:

"This year, we're going to have something similar to 2008 production ... and for the next few years, we're going to maintain levels of around 1.8, 1.9 million ounces," Carlos Santa Cruz, Newmont's vice president of South American operations, told reporters.

His statement conflicts with one made last month by Roque Benavides, Buenaventura's chief executive, who said he expected to see production at Yanacocha falling roughly 25 percent to 1.5 million ounces in 2010, as lower ore grades are explored."

But hey...what's four hundred and forty two million dollars of gold between friends anyway, right?

Intriguing: Buenaventura (BVN) wants to buy into Argentine junior exposure

So which projects? It would likely be gold target, but BVN produces plenty of silver too, so a silver/gold of plain old silver would be possible.

That Mansfield Minerals (MDR.v) Lindero property strikes me as being the right kind of fit; 2m oz Au and MDR has things in Peru, too. Mind you, I'm just throwing out an educated guess....anyone else have an idea?

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LIMA (Reuters) - Peruvian precious metals miner Buenaventura (BUEv.LM: Quote, Profile, Research, Stock Buzz) (BVN.N: Quote, Profile, Research, Stock Buzz) is in talks to buy controlling stakes in two Argentine junior miners, the company's top official said on Thursday.

"The idea in these specific projects is that we'd have a majority participation, or 100 percent control," Chief Executive Roque Benavides said at the Reuters Latin American Investment Summit in Lima.

"We are in conversations. There is nothing concrete to report yet."

Operations at the company's La Zanja gold project in Peru, which is expected to produce some 100,000 ounces of gold per year, could start as early as the first quarter of 2010, said Benavides.

He forecast the company's gold output for the year, excluding its share of production from the Yanacocha mine, at a bit above 450,000 ounces, which is more than the 422,732 ounces reported for 2008.

(Reporting by Marco Aquino and Dana Ford)

Gold and gold miners: A chart study of correlations

Yesterday in the comments section of this post, reader Pedro Candela asked.......

"which gold companies' shares would you recommend to buy that have a very good correlation with gold bullion prices?"

....and as I hadn't looked at the relevant charts of gold versus the gold miners for a while this interesting question piqued my interest. What we're trying to gauge here is beta correlation to gold, but that's just a fancy name for the leverage a gold mining company has versus its major product.

The subject of this post is hardly new, of course. The "gold vs gold miners" debate has been going on since before I was born and will go on long after my time is up. But all the same, here follow a few thoughts that came from the charting inspired by Pedro's question and a few charts themselves. Firstly, we need to narrow down the wide range of miners on offer. Logic suggests that to get a fairly close correlation to gold, a gold miner must be:

1) Big, most probably a tier 1 miner, possibly a tier 2. This rules out a lot of the small producers (Troy, Metanor, etc ad infinitum) that get pushed around more by their own local circumstances.

2) Stable, so companies that have a short company history (i.e. recent start-ups like JAG) or a patchy record in the non-production part of company life (DROOY springs to mind) don't interest us.

3) Mostly gold. The company should make as much of its revenue as possible from gold and only gold. Silver revenues, as long as they aren't too big, don't skew things too much but a big reliance on other metals isn't the ideal. So a company such as Freeport (FCX) is left out as it makes most of its money from copper, even though it churns out plenty of gold ounces.

4) Unhedged (or mostly unhedged) on production so that market movements of gold are better reflected in the company itself. Nowadays this doesn't tend to be a big issue.

So here we go with the charts. Be warned that they may look "messy" at first sight, but believe me they could have been a lot worse! This is because I've narrowed the field down to just eight gold companies, namely...

• Yamana Gold (AUY)
• Buenaventura (BVN)
• Newmont (NEM)
• Gold Fields (GFI)
• Goldcorp (GG)
• Kinross (KGC)
• Barrick (ABX)
• Royal Gold (RGLD)

...as representatives of their sector. If I've missed out your fave gold play, sorry, but you can always run the same chart exercise with your own parameters.

All the above gold mining plays are then compared to GLD (the gold ETF) which acts as an excellent proxy to gold itself. Please note that all companies are quoted on their USA tickers so that exchange rate issues are discounted. Also please note the line for GLD is that black one made up of broken daily trading highs and lows (called the OHLC) while the other tickers are the unbroken, coloured lines. Finally, click on any of the charts to get a bigger view.

Firstly, a very interesting set of three charts that compare all nine tickers over three time periods. This chart for 2009 only (Jan 1st to date);

Next this chart below from November 1st 2008 to date;

Thirdly this chart from September 1st 2008 to date;

These three charts looked at in conjunction make it clear that the timescale involved is most important, this is because the gold miners are almost to a man levered to the price of gold, and some display heavily leverage (or beta).

If we focus in on the "Sept 1st to date" chart above, we see that the price of gold has done comparatively better than all but two of the miners. This is because the time period takes into account the September and October 2008 big swoon period when stocks of all types dumped heavily, but gold was supported by people moving into it as a safe haven option. However by looking at exactly the same companies but starting the ball rolling at November 1st, that bad period is behind us and the miners have bounced back well, with all of them outperforming the metal. And by way of exaggeration to prove a point, we can take a look at the Sept-Oct 2008 segment of time in isolation and see just how those gold stocks were slammed compared to gold:

Gold went down 10% in that period, while the miners dropped 40%, 50% even 60%. That's a nasty pill to swallow in just two months if you bought gold miners "for safety" and really is the crux of the whole matter; miners do typically display high beta correlation to gold. The mining companies will sometimes match the percentage moves in gold quite faithfully. Sometimes they will outperform gold by a lot. And sometimes they will underperform against gold. It all depends on the internal state of the company, the external state of the economy and a thousand other factors, not necessarily gold itself.

Here's the one year chart with the same comparisons........
........and we again note that gold the metal beats out all but one of our examples, a direct reflection of the 2008/2009 bear market.

And here's an altogether longer, four year view.....
.....and perhaps this four year timescale above gives the best understanding of which gold company is the "best match" to gold the metal. After studying it for a while you'll probably come to the same conclusion as I and choose Royal Gold (RGLD) as the best fit. Here's the same four year chart that isolates RGLD versus GLD:
In the end it's not that surprising that RGLD matches GLD's movements in the most faithful manner, because RGLD is a gold royalty company and not a true miner (check the company website to see what I mean if you're unsure). But even then, if we go back to the one year chart above we note that RGLD has displayed strong positive leverage to gold for the last 12 months.

The bottom line to all this is really two separate conclusions:

1) The timescale of the study is of the utmost importance. Gold companies act differently to their metal product depending on wider circumstances. So when, for example, a company representative boasts that their company has outperformed gold or the market or whatever by X percent in the last X weeks/months/years, unfurl that red flag!! Don't just swallow the IR guy's timescales whole but check his company against a whole range of times and perhaps against a range of peers, too. It will give you a better idea about the company's true performance.

2) Gold miners offer significant leverage to gold. Period. If you buy the miner it means you're getting extra bang-per-buck on the forward movements of gold itself. The miners are also affected by the foibles of the people that run them, errar humanum est and all that jazz. So don't fall into the trap of thinking that gold miners are as safe an alternative as an investment in physical gold. They're not. They are far more speculative. And in the end, this is why I hold a chunk of gold bullion in my long-term portfolio and not an equivalent bunch of shares in NEM, ABX, BVN or whatever.

As for a recommendation amongst that lot, Pedro: DYODD!

UPDATE: Trend&Value picks up the baton. I agree with his final sentence.