The Sociedad Minera Cerro Verde S.A.A was founded in Peru on August 20, 1993 as a result of the privatization process of certain mining units carried out by the Peruvian government that year. The Company has traded its shares on the Bolsa de Valores de Lima since November 14, 2020.
The Company operates an open pit mine with a processing capacity of 548,500 metric tons per day that includes:
- Concentrator plants.
- A solvent extraction and electrodeposition plant to process leachable material.
- A low-grade material leach (ROM) system with a throughput capacity of 100,000 metric tons per day.
COVID-19 has had a significant impact on the global economy. As a consequence, in April 2020 Cerro Verde revised its plan of operations; objectives were focused on the short-term and consist of maximizing cash flow and protecting liquidity in a weak and uncertain economic environment and preserving asset values for anticipated improved copper prices as economic conditions recover.
In addition, the Company implemented a number of cost reduction initiatives, including the areas of employee retirement programs, third party service costs, facilities costs, travel, and other expenses.
It should be noted that in a comparison of 2019 to 2020 financial statements, cash flow increased by 52,239 million, thereby achieving one of the short-term objectives. In general, 2020 was not a year of growth for Cerro Verde due to the health crisis that was experienced worldwide. However, with the beginning of 2021 and the new hope brought with the launching of vaccines against the disease, the situation has improved.
During the first quarter of 2021, Cerro Verde has progressively re-established its operations and is currently processing material at its concentrators at approximately 90% of pre-pandemic levels, with milling rates expected to return to pre-pandemic levels of approximately 400,000 metric tons of ore per day by 2022.
During the first quarter of 2021, the Company reported a net income of $276.2 million, achieving a significant improvement compared to a loss of $60.5 million in the first quarter of 2020. This is mainly attributed to the fact that the price of copper managed to triple to the US$1.95 average per pound it reached in the first quarter of 2020, which caused an increase of $533 million compared to the first quarter of 2020.
Sales of copper concentrates and cathodes in the first quarter of 2021 amounted to 212.4 million pounds, compared to 209.2 million pounds during the first quarter of 2020.
During the first quarter of 2021, cost of sales was 50% of sales, a significant improvement over the first quarter of 2020, when it was 109% of sales.
Copper production has also benefited during the year. In the first quarter of 2021 Cerro Verde produced 216.8 million pounds of copper concentrates and cathodes, representing an increase of 6.2% compared to the 203.3 million pounds achieved in the same quarter of 2020. This is mainly due to higher tonnage processed and a higher recovery factor.
Seeing its net earnings improve, Cerro Verde decided that it was a good time to invest. In the period January to March 2021, the Company has invested US$28.8 million.
Now, during the second quarter of 2021, the U.S. mining company Freeport-McMoran, which has a 53.56% stake in the Cerro Verde mine (Arequipa), reported that the mining unit began operating at 95% of its milling capacity.
Cerro Verde's second quarter 2021 earnings were US$313 million, higher than the US$68.7 million recorded in 2020 and higher than the increase recorded during the first quarter.
Second quarter 2021 copper sales volumes are higher than the 219 million pounds in 2020. In line with this, South American mining copper sales are forecast to approach 1.05 billion pounds this year, slightly higher than 2020.
The South American mining company has been gradually recovering from the health crisis caused by COVID-19, showing good sales and profitability, making it a great investment opportunity.
