Incorporated: 1953 as Compañia de Minas Buenaventura S.A.
NAIC: 212111 Hydroelectric Power Generation; 212112 Electric Power Distribution; 212221 Gold Ore Mining; 212222 Silver Ore Mining; 212231 Lead Ore and Zinc Ore Mining; 212234 Copper Ore and Nickel Ore Mining; 541330 Engineering Services
SIC: 1221 Bituminous Coal & Lignite - Surface; 1222 Bituminous Coal - Underground; 1041 Gold Ores; 1044 Silver Ores; 1031 Lead & Zinc Ores; 1021 Copper Ores; 1061 Ferroalloy Ores Except Vanadium; 8711 Engineering Services
Compañia de Minas Buenaventura S.A.A., the leading Peruvian producer of precious metals, is sitting on a gold mine: Yanacocha, the largest one in Latin America. It shares ownership of this mine with U.S.-based Newmont Mining Company. Besides being Peru's chief gold producer, Buenaventura ranks second in the extraction of silver, of which Peru ranks second in the world only to Mexico. The company, which directly owns six mining units, mines ores containing lead and zinc as well as gold and silver. Its treatment plants, after removing rock and earth, yield concentrates that are smelted and refined by other firms. Buenaventura also holds controlling interests in two other mining companies and smaller stakes in a number of others. In addition, it owns a distributor of electric power and a consulting company offering mining engineering services.
Buenaventura's First Mining Operations: 1953-75
Descended from a distinguished Peruvian family, Alberto Benavides de la Quintana was a mining engineer working for Cerro de Pasco Corporation, the U.S.-based company that dominated mining in Peru. In the early 1950s Benavides had his eye on Julcani, a mine in central Peru, dating from the 18th century, that Cerro de Pasco was no longer interested in renting from the owner, which had failed to make it a going concern.
In 1953 Benavides established Buenaventura (Good Fortune) to successfully exploit this mine. According to one account, he and his Peruvian backers put up the initial money and took 60 percent of the stock. Cerro de Pasco subscribed 20 percent, and Sociedad Minera Suizo-Peruana Julcani S.A., which had formerly owned the mine, took the rest. According to other accounts, however, Cerro de Pasco took a one-third share. Cerro de Pasco also lent Buenaventura $200,000 in return for the right to buy the mineral concentrates extracted from the mine. A plant with capacity to handle several hundred metric tons of ore a day was installed next to the mine, with the yield consisting of silver, zinc, and bismuth concentrates.
Buenaventura opened another mine, Recuperada, in 1956, about 25 miles west of Julcani at Huachocolpa, where, four years later it inaugurated the Corralpampa concentrate plant, which processed the mine's lead, zinc, and cadmium ores. Also in 1960, it began mining operations at Orcopampa, a deposit in southern Peru where, in 1967, it opened a concentration plant for ore containing gold, silver, and copper. Also in 1960, Buenaventura began assessing the commercial potential of two gold and silver mines in the Uchucchacua zone, about 265 miles northeast of Lima, where a concentration plant was installed in 1975. By 1985 this plant had the capacity to process l,000 metric tons of ore per day.
These various company operations were employing over 1,000 workers in the mid-1960s, mining ore and converting it to concentrates of lead, copper, silver, and zinc. Buenaventura's revenues came to about $4 million in 1965. The company was first listed on the Bolsa de Valores de Lima in 1971. In 1972 Buenaventura acquired a majority stake in Compañia Minera Colquirrumi S.A., which had mines in northern Peru, and Compañía Minera Condesa S.A. in central Peru.
A Golden Glow: 1974-88
Cerro de Pasco ceased to exist at the beginning of 1974, when the Peruvian government bought its properties and established an agency, Centromín Perú, to administer them. Centromín thus became Buenaventura's minority partner, but only for its properties already in existence, not future ones. Over time it divested some of the shares, and its participation fell to one-sixth. Benavides retained excellent connections among both the civil authorities and the military figures that ruled Peru. By 1979 Buenaventura was the most important private Peruvian-owned mining company, with gross sales (including Colquirrumi's sales) of $56.5 million that year. The company was about to begin construction of a hydroelectric plant at Uchucchacua. It was offering management services to smaller family firms in this field and was acting as a consultant for mining projects in Bolivia, Ecuador, and Venezuela.
World silver prices, which had sharply increased in the late 1970s, declined over the next decade from the 1980 peak, and consequently Buenaventura began investigating, and subsequently exploiting, Orcopampa's gold potential, while continuing to extract silver as a byproduct. In 1983 it established a subsidiary named Compañía de Minas Orcopampa S.A. for the mine and plant, which constituted Buenaventura's main source of revenue. Orcopampa was the largest private-sector gold producer in Peru by 1985. The combination of Buenaventura's other mines and Orcopampa also ranked second in Peru's silver production.
During the year Buenaventura completed a major project: the Gandolini Tunnel, almost three miles long, for the drainage of water from Julcani. This allowed Buenaventura to expand the partly exhausted mine. The hydroelectric power plant at Orcopampa, partly financed by the International Finance Corp., a unit of the World Bank, was completed in 1988. Electrical, infrastructural, and mine capacity expansion by Buenaventura at Orcopampa was mainly financed by reinvesting company profits.
President and, from 1980, chairman of the board of Buenaventura, Benavides was described by David G. Becker as one of Peru's most progressive business leaders and a pioneer in regional development. Becker credited him for the development of an entire city, Santiago de Cocha Ccasa, at company expense around one of its mines. Buenaventura provided not only homes and municipal facilities but also worked to attract other businesses to the area. The residential area near the Uchucchacua mine was intended to be attractive as well as functional, and economic ties were fostered to the neighboring town of Oyón.
The Yanacocha Gold Bonanza: 1984-96
Buenaventura's most important venture was still to come. Since 1982 geologists working for Newmont Mining had been exploring gold deposits at Yanacocha, above the Andes Mountains treeline near Cajamarca in northern Peru, that were unusually free of impurities such as copper, arsenic, and lead. "With my 45 years in mining," Newmont's general manager in Peru later told Sally Bowen for an article in AméricaEconomía, "I'd never seen a vein like this." Yet there was no commercial way to exploit the deposits until the development of a technique called dump-leaching.
Newmont was not ready to invest further until 1992, when the government routed the terrorist insurgent movement Shining Path. Then it founded Minera Yanacocha S.A., with the French government agency Bureau de Recherches Geologiques et Minieres (BRGM), Buenaventura, and the International Finance Corp. as minority partners. Buenaventura, which had been invited into the joint-venture project in 1984 because of its reputation and excellent government connections, received a 20 percent share in Minera Yanacocha.
Production began in 1993 at the 62,000-acre site. Dump-leaching required sprinkling the gold bearing material with salts of prussic acid. The solution was then drained off and deposited in pools from which the gold-silver mixture was separated and then smelted in small furnaces. The deadly cyanide-bearing prussic acid solution was transported in extra-resistant double lined plastic for safety. Heavily armed guards patrolled the nearby hills to protect the facilities from Shining Path remnants or other malefactors. They were said to be capable of repelling an attack of up to 400 well armed combatants. By 1996 Yanacocha was the leading gold mine in Latin America, producing 625,000 ounces a year, and doing so at a production cost of only $121 an ounce, about a third of the market price, making Yanacocha the lowest-cost gold mine in the world.
On Sounder Financial Footing: 1996-2001
Buenaventura had been offering its shares on the Lima exchange for many years and had well over 1,000 small shareholders. In 1996 it was listed on the New York Stock Exchange for the first time and collected $175 million from the sale of American Depositary Receipts, the equivalent of shares. By this time its stake in the Minera Yanacocha consortium had increased to 32.3 percent. Its share rose again, to 43.65 percent, in 1996, after the French government tried to include BRGM's 24.7 percent stake in a privatization sale to an Australian corporation, Normandy Mining Ltd. Newmont and Buenaventura exercised what they described as their right of first refusal concerning the creation of new shareholders. The dispute, which was taken to court, ended in 2000, when BRGM and Normandy accepted an additional payment of $80 million, beyond the court-ordered $109 million from Newmont and Buenaventura, with the latter providing $40.6 million of this sum.
Financial management of Buenaventura had fallen to Benavides's son Roque by this time. "In geology and project vision, Alberto Benavides is extraordinary," a stockbroker told Peter Hudson for an article in AméricaEconomía. "But he isn't a financier; if he had had to manage alone the ADR business and the negotiations with BRGM, he would have been eaten alive." Roque Benavides Ganoza became president and chief executive officer of Buenaventura in 2001.
Further Expansion: 1997-2006
Yanacocha's gold output passed a million ounces a year for the first time in 1997. The mine actually consisted of three separate mines to be combined eventually into one open pit. In addition to this mine and gold bearing Orcopampa, the company had five mainly silver producing mines and was Peru's chief silver producer, accounting for about 15 percent of production. More than half of this output was from Uchucchacua. Besides Yanacocha and Buenaventura's wholly owned units, its facilities included Shila, a gold-silver mine, where production began in 1989, about 15 miles south of Orcopampa. Shila was owned by a subsidiary which Buenaventura had formed in 1979 and in which it held two-thirds of the stock. Another such facility was Ishihuinca, a gold mine in southern Peru which Buenaventura acquired in 1985 by purchasing majority control of its owner, Inversiones Minera del Sur S.A. (Inminsur).
Production began at another Inminsur mine, Antopite, in 2000. This gold-silver mine was about 260 miles southeast of Lima. In addition, Buenaventura held appreciable, but minority, stakes in such mining companies as Sociedad El Brocal S.A.A., which was operating the silver-lead-zinc Coalquijirca mine near the settlement of Cerro de Pasco, and Compañía Minera Caudalosa S.A., plus a small stake in Sociedad Minera Cerro Verde S.R.L., a company that held the Cerro Verde copper mine in southern Peru. In 2005 it doubled its participation in this company to 18.5 percent.
Also in 2005, Buenaventura reopened its Recuperada mine, which it had shut down four years earlier because of low silver prices. A year earlier, Buenaventura had purchased the half-interest in the Paula gold-silver mine it did not already own and had merged it with Shila (although Paula was about 70 miles south of Shila). In 2006, Buenaventura purchased the remaining share of Inminsura that it did not already own and merged it into the parent company.
Gold production at Yanacocha fell from 3.33 million ounces in 2005 to 2.61 million ounces in 2006 (when production costs had passed $200 an ounce), indicating that the mine's bounty would slowly be coming to an end. Meanwhile, however, Buenaventura was enjoying the rise in world gold prices, its net sales reaching $548.07 million and its consolidated revenues, $648.87 million. Of the sales total, gold accounted for 63 percent; zinc, 12 percent; silver, 10 percent; and copper and lead, 6 percent each. Buenaventura accounted for about half of Peru's gold production. Alberto Benavides, now 86, was chairman of the board and the largest stockholder, with 14.61 percent of the shares; the combined Benavides family owned 27.2 percent.
Principal Subsidiaries
Buenaventura Ingenieros S.A.; Compañía de Exploraciones, Desarrollo e Inversiones Mineras S.A.C.-CEDEMIN; Compañía Minera Colquirrumi S.A. (90%).; Compañía Minera Condesa S.A (90%); Consorcio Energético de Huancavelica S.A.; Contacto Corredores de Seguros S.A.; Inversiones Colquijirca S.A (61%).; Minas Conga S.R.L. (60%); Minas Poracota S.A.; Minera La Zanja S.R.L. (53%); Minera Minasnioc S.A.C. (60%); S.M.R.L. Chaupiloma Dos de Cajamarca (60%).
Principal Operating Units
Antopite; Colquijirca; Ishihuinca; Julcani/Recuperada; Orcopampa; Shila; Uchucchacua.
Principal Competitors
Compañia Minera Ares S.A.C.; Minera Aurífica Retomas S.A.; Minera Barrick Misquichilca S.A.
Further Reading
Becker, David G., The New Bourgeoisie and the Limits of Dependence: Mines, Class and Power in "Revolutionary" Peru, Princeton, N.J.: Princeton University Press, 1983, esp. pp. 179-81.
Bowen, Sally, "El Dorado en los Andes," AméricaEconomía, December 1993/January 1994, pp. 25-26.
Gooding, Kenneth, "Peruvian Company to Join Gold Index," Financial Times, July 1, 1998, p. 43.
Hudson, Peter, "El factor Alberto," AméricaEconomía, September 1996, pp. 74-75.
Lazaroff, Leon, "Staking a Claim," LatinFinance, March 1998, pp. 125-26.
Malpica Silva Santiestaban, Carlos, El poder económico en el Perú, Lima: Perugraph Editores, 1989, Vol. 1, pp. 340-47.
Purser, W. F. C., Metal-Mining in Peru, New York: Praeger, 1971, 339 p.
Tait, Nikki, "Newmont Settles Yanacocha Dispute," Financial Times, October 23, 2000, p. 34.
— Robert Halasz
