27. Finance costs and finance income

(a)This caption is made up as follows:


	2019	2018	2017
	US$(000)	US$(000)	US$(000)

Finance income:
Interest on time deposits	4,971	5,176	1,050
Dividends income	3,625	—	—
Interests on third parties loans	460	561	813
Interests on loans to related parties, note 30(a)	86	92	1,685
Interests on tax claims	16	1,701	153
Other minor	517	340	43

	9,675	7,870	3,744
Unrealized variation of the fair value related to contingent consideration liability (b)	—	1,815	1,773

Total finance revenues	9,675	9,685	5,517

Finance costs:
Interest on borrowings	28,418	31,538	28,019
Tax on financial transactions	166	173	180
Interest on loans	1	2	1,053
Other minor	55	703	72
	28,640	32,416	29,324
Accretion expense for mine closure, note 15(b)	10,390	4,982	4,318
Accrual of debt issuance costs, note 16(f)	2,109	1,024	909
Unrealized variation of the fair value related to contingent consideration liability (b)	655	—	—
Accretion expense of leases liability	379	—	—
Total finance costs	42,173	38,422	34,551

(b)Contingent consideration -

On August 18, 2014, Buenaventura acquired from Minera Gold Fields Peru S.A. (“Gold Fields”) 51 percent of the voting shares of Canteras del Hallazgo S.A.C., which represent the whole interest of Gold Fields in the equity of such entity.

Through the fusion with Canteras del Hallazgo S.A.C, the Group is the owner of the Chucapaca project, which is located in the Ichuña district, in the General Sanchez Cerro province, in the Moquegua department, Peru. According to previously performed studies, there is evidence of the existence of gold, silver, copper and antimony in the area, specifically in the Canahuire deposit.

The purchase and sale agreement considered a contingent consideration of US$23,026,000, which corresponds to the present value of the future royalty payments equivalent to 1.5 percent over the future sales of the minerals arising from the mining properties acquired. The fair value of the future royalty payments was determined using the income approach.

Significant increase (decrease) in the future sales of mineral would result in higher (lower) fair value of the contingent consideration liability, while significant increase (decrease) in the discount rate would result in lower (higher) fair value of the liability. Changes in the fair value of this contingent consideration have been recognized through profit or loss in the consolidated statement of profit or loss.

As of December 31, 2019, it is highly probable that the Group reaches the projected future sales. The fair value of the contingent consideration determined as of December 31, 2019 reflects this assumption and changes in metal prices.

A reconciliation of fair value measurement of the contingent consideration liability is provided below:


	2019	2018	2017
	US$(000)	US$(000)	US$(000)

Beginning balance	15,755	17,570	19,343

Variation of the fair value in results	655	(1,815)	(1,773)
Final balance	16,410	15,755	17,570

Significant unobservable valuation inputs are provided below:


	2019	2018

Annual average of future sales of mineral (US$000)	190,815	193,906
Useful life of mining properties	14	13
Pre-tax discount rate (%)	10	10

The Group has the preferential right of acquisition of the royalty in case Gold Fields decides to sell it.