Bear Of The Day: Buenaventura

Over the next year many precious metals are expected to fetch a lower price level. This is due to a few factors; uncertainty about demand coming from China due to lower than expected growth, lower than expected oil prices which has lowered the expected trading range for gold in 2016, and falling inflation. Just over a week ago, Standard & Poor’s cut their price forecasts for aluminum, copper, zinc, nickel, and gold. This is not good news for Compania de Minas Buenaventura (BVN – Snapshot Report), who is Peru’s largest publicly traded precious metals mining company, and the Zacks Bear of the Day.  

This Zacks Rank #5 (Strong Sell) company is a leading mining company producing precious metals and holding mining rights in Peru. Since its inception in 1953, Buenaventura has focused on exploration and exploitation activities both by its own and through joint ventures. Buenaventura also is an important shareholder of Minera Yanacocha S.R.L., one of the leading gold producers in Latin America.

Further, it is not just the recent precious metal forecasts that have negatively impacted both the top and bottom lines for Buenaventura, this problem has been going on for a bit now. In their most recent earnings report Buenaventura saw total revenues decline -15% y/y, and Net sales decline -16% y/y. To make matters worse, the company saw declining average realized prices in every metal besides zinc; Gold down -7%, Silver down -18%, and Copper fell -22% year over year. To further complicate matters, volumes for these three metals are down year over year as well; Gold -16%, Silver -3%, and Copper -13%.  

Decreasing Estimates
It was not just S&P who cut their precious metal price forecasts, most major agencies are following suit as well. This has caused significant downgrades for EPS and Revenue expectations for the company. As you can see in the table below, estimates have significantly declined over the past year.  

Over the past 30 days, estimates for Q3 15, Q4 15, FY 15 and FY 16 have all seen significant negative revisions; Q3 15 fell from $0.08 to -$0.05, Q4 15 dropped from $0.10 to -$0.05, FY 15 plummeted from $0.04 to -$0.04, and FY 16 collapsed from $0.28 to -$0.13.

Bottom Line

It looks like a very tough road ahead for precious metal miners, and as one of the leading miners, Buenaventura is not immune to this issue. Unfortunately, this negative sediment for precious metals is expected to run into 2016.  

If you are inclined to invest in the Mining sector, we would exercise caution because none of the same sector stocks have a rating better than a Zacks Rank #3 (Hold). It would be advised to look into other sectors for buying opportunities.