Mining concessions, development costs, property, plant and equipment, net

12 Months Ended

Dec. 31, 2017

Disclosure of detailed information about property, plant and equipment [line items]

Disclosure of property, plant and equipment [text block]

11.	Mining concessions, development costs, property, plant and equipment, net

(a)

Below is presented the movement in cost:

	Balance as of January 1, 2016		Additions		Disposals		Sales		Reclassifications of assets held for sale		Reclassifications and transfers		Balance as of December 31, 2016		Additions		Disposals		Sales		Reclassifications and transfers		Balance as of December 31, 2017
	US$(000)		US$(000)		US$(000)		US$(000)				US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)

Cost
Lands		22,454		162		-		(6)		78		270		22,958		-		-		-		(268)		22,690
Mining concessions		198,009		-		-		-		-		-		198,009		2		-		(15,000)		(31,138)		151,873
Development costs		541,763		82,865		-		-		31,192		(3,428)		652,392		69,335		-		(10,107)		431		712,051
Buildings, constructions and other		1,018,956		581		-		(20)		10,458		79,192		1,109,167		835		(387)		(28,751)		198,387		1,279,251
Machinery and equipment		827,225		46,152		(6,569)		(2,844)		9,425		112,643		986,032		2,579		(3,749)		(50,097)		(5,742)		929,023
Transportation units		10,649		174		(341)		(396)		357		(27)		10,416		11		(190)		(1,079)		788		9,946
Furniture and fixtures		13,429		89		(61)		(88)		359		319		14,047		31		(157)		(487)		468		13,902
Units in transit		26,291		15,797		-		-		-		(12,037)		30,051		2,822		-		-		(28,124)		4,749
Work in progress		68,123		210,915		(352)		-		1,037		(173,935)		105,788		173,333		-		(190)		(177,809)		101,122
Stripping activity asset (e)		106,838		17,631		-		-		-		(2)		124,467		18,282		(13,573)		-		1,271		130,447
Mine closure costs		187,603		34,532		-		-		25,754		-		247,889		10,594		-		(17,195)		-		241,288
		3,021,340		408,898		(7,323)		(3,354)		78,660		2,995		3,501,216		277,824		(18,056)		(122,906)		(41,736)		3,596,342
Accumulated depreciation and amortization:
Mining concessions		77,450		16		-		-		-		-		77,466		8		-		(13,845)		(23,390)		40,239
Development costs		199,211		18,225		-		-		25,596		(1,396)		241,636		30,886		-		(7,910)		(241)		264,371
Buildings, construction and other		381,441		65,050		-		(9)		8,598		598		455,678		73,314		(115)		(28,208)		6,168		506,837
Machinery and equipment		475,941		81,753		(5,378)		(827)		6,640		(68)		558,061		74,744		(2,662)		(41,595)		(6,099)		582,449
Transportation units		7,932		1,103		(250)		(365)		358		14		8,792		837		(114)		(1,057)		(68)		8,390
Furniture and fixtures		7,577		1,156		(60)		(22)		319		202		9,172		1,109		(152)		(236)		(13)		9,880
Stripping activity asset		12,916		5,813		-		-		-		-		18,729		16,343		-		-		6,623		41,695
Mine closure costs		99,993		22,417		-		-		19,335		(470)		141,275		25,254		-		(8,408)		-		158,121
		1,262,461		195,533		(5,688)		(1,223)		60,846		(1,120)		1,510,809		222,495		(3,043)		(101,259)		(17,020)		1,611,982
Provision for impairment of long-lived assets:
Mine closure costs		4,080		-		-		-		6,910		-		10,990		17,916		-		(8,785)		-		20,121
Development costs		3,803		-		-		-		5,684		-		9,487		2,864		-		(2,198)		-		10,153
Mining concessions, development costs, property, plant and other		3,372		-		-		-		6,533		-		9,905		840		-		(6,214)		-		4,531
		11,255		-		-		-		19,127		-		30,382		21,620		-		(17,197)		-		34,805

Net cost		1,747,624												1,960,025										1,949,555

(b)

Impairment of long-lived assets

In accordance with its accounting policies and processes, each asset or CGU is evaluated annually at year end, to determine whether there are any indications of impairment. If any such indications of impairment exist, a formal estimate of the recoverable amount is performed.

In assessing whether impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the recoverable amount for each CGU is estimated based on discounted future estimated cash flows expected to be generated from the continued use of the CGUs using market based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, and its eventual disposal, based on the latest life of mine (LOM) plans. These cash flows were discounted using a real pre-tax discount rate that reflected current market assessments of the time value of money and the risks specific to the CGU.

The estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements are obtained from the planning process, including the LOM plans, one-year budgets and CGU-specific studies.

During 2017, the subsidiary La Zanja recorded an impairment loss related to its mining property for US$21,620,000. The principal factor in the impairment loss was the depletion of its reserves.

As a result of the sale of the mining units of Breapampa and Recuperada, as well as the sale of the assets of the Shila Paula mining unit, the Group recorded in 2017 a reversal of impairment losses by US$7.4 million, US$7.1 million and US$2.7 million, respectively, see note 1(e).

During 2016, the Group recorded an impairment loss with respect to its Shila-Paula mining unit for US$2,043,000. As a result of the recoverable amount analysis performed as of December 31, 2015, the Group recognized impairment losses for its mining units La Zanja by US$3,803,000 and Breapampa by US$7,452,000.

Key assumptions

The determination of value in use is most sensitive to the following key assumptions:

Production volumes

Commodity prices

Discount rate

Production volumes: Estimated production volumes are based on detailed life-of-mine plans and take into account development plans for the mines agreed by management as part of planning process. Production volumes are dependent on a number of variables, such as: the recoverable quantities; the production profile; the cost of the development of the infrastructure necessary to extract the reserves; the production costs; the contractual duration of mining rights; and the selling price of the commodities extracted.

As each producing mining unit has specific reserve characteristics and economic circumstances, the cash flows of the mines are computed using appropriate individual economic models and key assumptions established by management. The production profiles used were consistent with the reserves and resource volumes approved as part of the Group’s process for the estimation of proved and probable reserves and resource estimates.

Commodity prices: Forecast commodity prices are based on management’s estimates and are derived from forward price curves and long-term views of global supply and demand, building on past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for the different qualities and type of commodities, or, where appropriate, contracted prices were applied. These prices are reviewed at least annually.

Estimates prices for the current and long-term periods that have been used to estimate future cash flows are as follows:

	2018			2019 - 2022
	US$			US$

Gold		1,300.00	/Oz		1,300.00	/Oz
Silver		17.00	/Oz		18.00	/Oz
Copper		6,000.00	/MT		6,000.00	/MT
Lead		2,250.00	/MT		2,250.00	/MT
Zinc		2,750.00	/MT		2,600.00	/MT

Discount rate: In calculating the value in use, pre-tax discount rates of 8.33%, 9.30% and 5.89% were applied to the pre-tax cash flows of Buenaventura, El Brocal and La Zanja, respectively. These discount rates are derived from the Group’s post-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on its interest bearing borrowings the Group is obliged to service. The beta factors are evaluated annually based on publicly available market data.

(c)

The book value of assets held under finance leases, and assets under trustworthy equity, amounted to US$522.0 million as of December 31, 2017 (US$524.6 million as of December 31, 2016) and is presented in various items of property, plant and equipment. During the year 2017 and 2016 no acquisitions of assets under lease agreements were made. Leased assets are pledged as security for the related finance lease liabilities.

(d)

The amount of capitalized finance costs during the year 2017 was US$6.3 million (US$7.5 million during the year 2016) and is presented under investing activities in the consolidated statements of cash flows. The average rate used to determine the financial cost to be capitalized was 4.19 percent (3.52 percent during the year 2016).

(e)

In mid-2016, a landslide occurred in the west wall of the Tajo Norte; consequently, it was decided not to mine this area due to stability and operational design issues. According to the distribution of reserves, this area (Phase 10) contained 5.5 MT of ore and 9.2 MT of waste valued at US$13,573,000, which were withdrawn from the reserves.

Minera Yanacocha SRL and subsidiary [Member]

Disclosure of detailed information about property, plant and equipment [line items]

Disclosure of property, plant and equipment [text block]

10.

Property, plant and equipment, net

(a)

Below is presented the movement in cost:

	Opening								Final
	balance		Additions		Sales and disposals		Transfer/Other changes		balances
	US$(000)		US$(000)		US$(000)		US$(000)		US$(000)

Year 2017
Cost-
Land		9,459		-		-		-		9,459
Land improvements		36,454		-		-		-		36,454
Building and constructions		236,551		-		(42)		61,289		297,798
Machinery and equipment		379,164		-		(92,299)		-		286,865
Leach pads		1,670,835		-		-		51,951		1,722,786
Vehicles		11,024		-		-		-		11,024
Furniture and fixtures		2,556		-		-		-		2,556
Other equipment		57,773		-		-		-		57,773
Work in progress		483,225		51,624		-		(134,439)		400,410
Mining rights		37,521		-		-		-		37,521
Asset retirement and mine closure		409,797		97,326		-		-		507,123
Stripping activity asset		148,487		-		-		-		148,487
Mine development		701,156		-		-		21,199		722,355
		4,184,002		148,950		(92,341)		-		4,240,611

Accumulated depreciation and amortization
Land improvements		35,053		90		-		-		35,143
Building and constructions		235,340		5,020		(12)		-		240,348
Machinery and equipment		329,965		8,431		(88,421)		-		249,975
Leach pads		1,588,205		33,061		-		-		1,621,266
Vehicles		11,003		21		-		-		11,024
Furniture and fixtures		2,556		-		-		-		2,556
Other equipment		55,645		269		-		-		55,914
Mining rights		29,457		-		-		-		29,457
Asset retirement and mine closure		337,173		19,172		-		-		356,345
Stripping activity asset		142,170		1,082		-		-		143,252
Mine development		622,604		16,846		-		-		639,450
		3,389,171		83,992		(88,433)		-		3,384,730
Net cost		794,831								855,881

	Opening						Transfer/Other		Impairment		Final
	balance		Additions		Sales and disposals		changes		loss		balances
	US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)

Year 2016
Cost-
Land		11,521		-		-		201		(2,263)		9,459
Land improvements		41,909		-		-				(5,455)		36,454
Building and constructions		274,262		-		(26,410)		26,396		(37,697)		236,551
Machinery and equipment		511,942		-		(125,064)		22,865		(30,579)		379,164
Leach pads		1,890,823		-				15,276		(235,264)		1,670,835
Vehicles		15,198		-		(4,168)				(6)		11,024
Furniture and fixtures		2,556		-		-		-		-		2,556
Other equipment		60,462		353		-		217		(3,259)		57,773
Work in progress		476,353		78,609		-		(70,282)		(1,455)		483,225
Mining rights		49,544		-		(3,113)				(8,910)		37,521
Asset retirement and mine closure		452,145		351,798		-				(394,146)		409,797
Stripping activity asset		157,048		26,148		-				(34,709)		148,487
Mine development		814,563		-		-		5,079		(118,486)		701,156
		4,758,326		456,908		(158,755)		(248)		(872,229)		4,184,002

Accumulated depreciation and amortization
Land improvements		35,266		298		-		(511)		-		35,053
Building and constructions		196,515		61,530		(22,705)		-		-		235,340
Machinery and equipment		429,910		12,230		(112,175)		-		-		329,965
Leach pads		1,565,508		22,697		-		-		-		1,588,205
Vehicles		14,620		2,735		(6,352)		-		-		11,003
Furniture and fixtures		2,547		9		-		-		-		2,556
Other equipment		53,964		1,681		-		-		-		55,645
Mining rights		29,457		-		-		-		-		29,457
Asset retirement and mine closure		318,405		18,768		-		-		-		337,173
Stripping activity asset		138,178		3,992		-		-		-		142,170
Mine development		613,646		8,447		-		511		-		622,604
		3,398,016		132,387		(141,232)		-		-		3,389,171
Net cost		1,360,310										794,831

Additions to work in progress in 2017 are primarily related to the Water treatment project and Yanacocha Laybacks Checkpoint 2A and Asset Componentization project.

The depreciation and amortization expense for the year ended December 31, 2017 was recorded as Cost applicable to sales in the statement of comprehensive income.

(b)

Impairment of long-lived assets -

In accordance with its accounting policies and processes, each asset or Cash Generating Unit “CGU” is evaluated annually at year end, to determine whether there are any indications of impairment. If any such indications of impairment exist, a formal estimate of the recoverable amount is performed. The Company has two CGU: Yanacocha mine and Conga project.

In December 2017, the Company performed a formal evaluation of its cash generating units and concluded that there were no impairment indicators at December 31, 2017.

In December 2016, the Company determined that an impairment indicator existed as a result of the updated long-term mining and closure plans and the related increases in estimated future closure costs that resulted in the increase to the asset retirement cost asset. As a result of the recoverable amount analysis performed during 2016, the Company recorded an impairment loss related to Yanacocha mine of US$889.5 million (US$872.2 million and US$17.3 million related to property, plant and equipment and intangible assets, respectively).

In assessing whether impairment was required, the carrying value of the asset or CGU was compared with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Company’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the recoverable amount for each CGU was estimated based on estimated discounted future estimated cash flows expected to be generated from the continued use of the CGUs using market based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, and its eventual disposal, based on the latest life of mine (LOM) plans. These cash flows were discounted using a real pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.

Estimates included quantities of recoverable minerals, production levels, operating costs and capital requirements and sourced from out planning process, including the LOM plans, one-year budgets and CGU-specific studies.

Key assumptions used for the impairment testing as of December 31, 2016:

The determination of value in use was most sensitive to the following key assumptions:

Production volumes

Commodity prices

Discount rate

As each producing mining unit has specific reserve characteristics and economic circumstances, the cash flows of the mines were computed using appropriate individual economic models and key assumptions established by management. The production profiles used were consistent with the reserves and resource volumes approved as part of the Company’s process for the estimation of proved and probable reserves and resource estimates.

Commodity prices: Forecasted commodity prices were based on management’s estimates and were derived from forward price curves and long-term views of global supply and demand, building on past experience of the industry and consistent with external sources. These prices were adjusted to arrive at appropriate consistent price assumptions for the different qualities and type of commodities, or, where appropriate, contracted prices were applied.

Estimated prices for the current and long-term periods that have were used to estimate future revenues were as follows:

	Current		Long-term
	US$		US$

Gold (per ounce)		1,221		1,300

Discount rate: In calculating the value in use, a pre-tax discount rate of 7.1% was applied to the pre-tax cash flows. This discount rate was derived from the Company’s post-tax weighted average cost of capital (WACC), with appropriate adjustments made to reflect the risks specific to the CGU.

Sociedad Minera Cerro Verde S.A.A. [Member]

Disclosure of detailed information about property, plant and equipment [line items]

Disclosure of property, plant and equipment [text block]

8.	Property, plant and equipment, net

The changes in cost and accumulated depreciation accounts as of December 31, 2017 are shown below:

	January 1,										December 31,										December 31,
	2016		Additions		Adjustments		Disposals		Transfers		2016		Additions		Adjustments		Disposals		Transfers		2017
	US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)		US$(000)

Cost
Land		20,384		-		-		-		3,299		23,683		-		-		-		784		24,467
Buildings and other constructions		2,202,122		-		(11,114)		(5,633)		191,586		2,376,961		-		(13,532)		(1,169)		7,782		2,370,042
Machinery and equipment		4,203,431		-		11,114		(4,427)		232,062		4,442,180		-		13,532		(4,540)		102,336		4,553,508
Transportation units		19,627		-		-		(730)		213		19,110		-		-		(261)		1,708		20,557
Furniture and fixtures		950		-		-		(1)		-		949		-		-		-		-		949
Other equipment		24,728		-		-		(1,065)		1,008		24,671		-		-		(34)		340		24,977
Construction in progress and in-transit units		362,058		154,876		-		-		(428,168)		88,766		173,845		-		-		(112,950)		149,661	(a)
Stripping activity asset (see Note 2(j))		263,498		61,261		-		-		-		324,759		153,623		-		-		-		478,382
Asset retirement costs (see Note 12(b)		149,724		3,743		(16,091)		-		-		137,376		2,661		(3,710)		-		-		136,327
		7,246,522		219,880		(16,091)		(11,856)		-		7,438,455		330,129		(3,710)		(6,004)		-		7,758,870

Accumulated depreciation
Buildings and other constructions		60,903		88,925		(30)		(4,936)		-		144,862		86,391		(457)		(1,169)		-		229,627
Machinery and equipment		966,525		275,388		30		(3,964)		-		1,237,979		283,250		457		(4,349)		-		1,517,337
Transportation units		9,723		1,828		-		(686)		-		10,865		1,593		-		(237)		-		12,221
Furniture and fixtures		777		26		-		(1)		-		802		32		-		-		-		834
Other equipment		12,582		2,423		-		(1,052)		-		13,953		2,474		-		(27)		-		16,400
Stripping activity asset		111,552		97,513		-		-		-		209,065		76,262		-		-		-		285,327
Asset retirement costs		7,171		6,018		-		-		-		13,189		5,511		-		-		-		18,700
		1,169,233		472,121		-		(10,639)		-		1,630,715		455,513		-		(5,782)		-		2,080,446

Net cost		6,077,289										5,807,740										5,678,424

(a)	As of December 31, 2017 construction in progress relates to the tailing cyclone relocation (US$47.5 million), mine maintenance truck shop (US$38.4 million) and the purchase of used Komatsu 930E haul trucks from PT Freeport Indonesia (related party) (US$17.1 million).