Buenaventura (BVN) shares soared 7.6% in the last trading session to close at $8.90. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock’s 9.5% gain over the past four weeks.
Buenaventura’s shares have appreciated following the announcement that the company has entered into an agreement to sell its 43.65% interest in Minera Yanacocha to Newmont. The net proceeds of $300 million and contingent payments of up to $100 million will accelerate debt reduction and support enhanced shareholder returns for Buenaventura.
Apart from strengthening its balance sheet, this move will allow Buenaventura to focus on its current project portfolio, particularly on less capital-intensive Yumpag, San Gabriel and Trapiche, while significantly reducing exposure to mine closure costs.
Additionally, Newmont will transfer its ownership interest in the La Zanja joint venture to Buenaventura in exchange for royalties on any future production from the La Zanja operation. The buyout is in-line with Buenaventura’s consolidation strategy in an important gold-copper district. Newmont will contribute $45 million to Buenaventura to cover future closure costs.
This miner is expected to post quarterly earnings of $0.30 per share in its upcoming report, which represents a year-over-year change of +230.4%. Revenues are expected to be $226.38 million, down 4.1% from the year-ago quarter.
Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.
For Buenaventura, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock’s price usually doesn’t keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on BVN going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank #3 (Hold). You can see
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