[Federal Register Volume 61, Number 65 (Wednesday, April 3, 1996)]
[Notices]
[Pages 14840-14843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8168]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-21862/International Series Release No. 960; 812-9916]


Compania de Minas Buenaventura S.A.; Notice of Application

March 28, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANT: Compania de Minas Buenaventura S.A.

RELEVANT ACT SECTIONS: Applicant requests an order under section 
3(b)(2) or, in the alternative, section 6(c).

[[Page 14841]]
Applicant also requests an order under section 45(a).

SUMMARY OF APPLICATION: Applicant requests an order declaring that it 
is primarily engaged in a business other than that of investing, 
reinvesting, owning, holding or trading in securities, and therefore is 
not an ``investment company'' as defined in the Act. In the 
alternative, Applicant seeks an order exempting it from all provisions 
of the Act. Applicant also seeks an order granting confidential 
treatment with respect to certain asset valuation information.

FILING DATES: The application was filed on December 21, 1995 and an 
amended and restated application was filed on March 19, 1996.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on April 18, 1996, 
and should be accompanied by proof of service on Applicant, in the form 
of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reasons 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request such notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549. 
Applicant: Carlos Villaran 790, Santa Catalina, Apartado 2055, Lima 13, 
Peru with a copy to Douglas W. Jones, Esq., or Arnold B. Peinado III, 
Esq., Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New 
York, New York 10005-1413.

FOR FURTHER INFORMATION CONTACT:
H.R. Hallock, Jr., Special Counsel at (202) 942-0564 or Robert A. 
Robertson, Branch Chief, (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. Applicant is a Peruvian ``sociedad anonima,'' an entity similar 
to a corporation established under state law in the United States. 
Applicant's common shares (a class of voting equity securities) and 
``labor'' shares (a class of non-voting equity securities) have been 
listed in Peru on the Bolsa de Valores de Lima (the ``Lima Stock 
Exchange'') since the 1970s. As of December 31, 1995, Applicant had a 
total market capitalization of S/.1,577,091,515 (US$682,723,600),\1\ 
making it one of the largest companies on the Lima Stock Exchange.

    \1\ References to ``S/.'' are to Peruvian Nuevos Soles. United 
States dollar amounts have been translated at the exchange rate of 
S/.2.31 per US $1.00, the average rate for dollars on December 31, 
1995, as published by the Peruvian ``Superintendencia de Banca y 
Seguros'' (the Superintendency of Banks and Insurance).
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    2. Applicant was founded in 1953 by Mr. Alberto Benavides de la 
Quintana, the Chairman and Chief Executive Officer of Applicant, to 
engage in the mining business in Peru. Other members of Mr. Benavides' 
family (collectively, the ``Benavides Family'') serve as officers or 
directors of Applicant and its subsidiaries, and one of them directs 
Applicant's exploration projects. The Benavides Family currently owns 
approximately 42% of Applicant's outstanding common shares. No other 
shareholder or group of shareholders owns a greater share percentage, 
and, as a result, the Benavides Family effectively controls Applicant.
    3. Since 1953, Applicant has been principally engaged in the 
exploration and development of mining properties in Peru, the mining 
and processing of gold, silver, zinc and other metals, and the sale 
worldwide of its mining products. Until the 1980s, Applicant's revenue 
was principally derived from silver mining. Applicant began to 
diversify in the 1980s, and now gold mining accounts for a significant 
part of its revenues. Applicant is Peru's largest private producer of 
silver, and Minera Yanacocha S.A. (``Yanacocha''), which is 43.65% 
owned by Applicant through its 99.99% owned subsidiary, Compania Minera 
S.A. (``Condesa''), is South America's largest producer of gold.
    4. Applicant currently conducts its mining operations directly and 
through various majority-owned subsidiaries, Yanacocha (a controlled 
company) and other affiliated companies. Although Applicant has tended 
to place significant new mining prospects into separate subsidiaries, 
Applicant continues to hold directly two significant mining properties, 
Julcani and Uchucchacua. Applicant and such majority-owned 
subsidiaries, Yanacocha and other affiliated companies are engaged 
solely in mining or ancillary businesses.
    5. Applicant currently has ten majority-owned subsidiaries, seven 
of which are principally engaged in the mining business in Peru.\2\ The 
most significant majority-owned subsidiaries, in terms of assets, 
currently are Orcopampa, Shila and Iminsur. Orcopampa, which has its 
labor shares listed on the Lima Stock Exchange, is currently Peru's 
fifth largest gold producer. Shila and Iminsur are currently Peru's 
ninth and twelfth largest producers of gold, respectively. In contrast, 
the aggregate value of the three majority-owned subsidiaries that 
provide ancillary services to mining, BISA (engineering), Contacto 
(insurance) and CONENHUA (electric power), was S/.21.945,000 
(US$9,500,000), or only about 2.68% of Applicant's total assets at 
December 31, 1995.

    \2\ Buenaventura Ingenieros S.A. (``BISA'') (99.99%), Contacto 
Corredores de Seguros S.A. (``Contacto'') (99.98%), Compania de 
Minas Orcopampa S.A. (``Orcopampa'') (83.43%), Minera Shila S.A. 
(``Shila'') (67.45%), Compania Minera Colquirrumi S.A. (55.94%)/. 
Compania de Minas Recuperada S.A. (86.40%), Metalurgica Los 
Volcanoes S.A. (83.42%), Condesa (99.99%), Inversions Mineras del 
Sur S.A. (``Iminsur'') (51%) and Consorcio Energetico Huancavelica 
S.A. (``CONENHUA'') (85.78%).
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    6. Yanacocha was formed in 1992 by the Applicant (acting through 
Condesa), in association with Newmont Second Capital Corporation 
(``Newmont Second''), a wholly-owned subsidiary of Newmont Gold Company 
(``Newmont'') and Societe d'Etudes, de Recherches et d'Exploitations 
Minieres (``SEREM''), then a wholly-owned subsidiary of Bureau de 
Recherches Geologiques et Minieres (``BRGM''), to explore for and 
exploit large-scale gold deposits in northern Peru. Newmont and BRGM 
are both international mining companies. Condesa acquired only a 
minority position in Yanacocha principally because of the large 
expected capital investment in the project and Applicant's desire to 
diversify its risk and benefit from a strategic alliance with Newmont 
and BRGM.
    7. Currently, Applicant (through Condesa) owns 43.65% of Yanacocha, 
with the balance owned by Newmont Second (51.35%) and the International 
Finance Corporation (``IFC'') (5%).\3\ Applicant is involved in legal 
proceedings in the Peruvian courts regarding its ownership of shares 
representing an 11.35% interest in Yanacocha. One of the issues in 
dispute in these proceedings is the valuation of

[[Page 14842]]
Yanacocha as of certain specified dates.\4\ As a result of its greater 
than 25% ownership interest in Yanacocha, Applicant is presumed under 
section 2(a)(9) of the Act to control Yanacocha.

    \3\ At the time of Yanacocha's organization, Condesa, Newmont 
Second and SEREM owned 34%, 40% and 26%, respectively, of 
Yanacocha's shares. In 1993, the IFC provided financing to Yanacocha 
in return for a 5% equity interest. In 1994, as a result of a 
restructuring of SEREM, BRGM transferred control of its interest in 
Yanacocha to an Australian mining company.
    \4\ After BRGM's transfer of control of its Yanacocha shares in 
1994, Applicant and Condesa, together with Newmont and Newmont 
Second, filed suit to, among other things, exercise their rights of 
first refusal with respect to those shares. In 1995, the Peruvian 
courts preliminarily ruled in favor of Applicant and the other 
plaintiffs, fixing a provisional aggregate sale price for the 
disputed Yanacocha shares at US$90 million. Condesa and Newmont 
Second together deposited the required funds and Yanacocha shares in 
escrow pending final resolution of the case, including the final 
purchase price of the shares. Not including the disputed shares, 
Applicant (through Condesa) currently has a 32.30% interest in 
Yanacocha.
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    8. Applicant also believes that it controls Yanacocha in fact, for 
purposes of section 2(a)(9), through its power to exercise a 
controlling influence over the management and policies of Yanacocha, 
even though it shares control with Newmont Second. Yanacocha was 
created and is governed by a Peruvian legal document known as its 
estatutos (the ``Estatutos''), which combines the attributes of a U.S. 
corporation's articles of incorporation and by-laws. Pursuant to the 
Peruvian Ley General de Sociedades (``Peruvian Corporations Law'') and 
the Estatutos, the prior consent of Condesa and Newmont Second must be 
obtained before certain major corporate events may occur. Thus, for 
example, Applicant and Newmont Second must jointly approve an increase 
or decrease in Yanacocha's capital; the issuance of any debt; and the 
merger' dissolution or liquidation of Yanacocha.
    9. Pursuant to Yanacocha's Estatutos, its Board of Directors 
consists of six directors: three elected by Condesa and three by 
Newmont Second. A director elected by Newmont Second has been appointed 
Chairman, and Mr. Alberto Benavides has been appointed Vice Chairman, 
of Yanacocha's Board of Directors. The shareholders of Yanacocha also 
participate in an informal ``Technical Committee'' that reviews various 
matters, including the management of Yanacocha and its budgeted 
financial statements. Condesa and Newmont Second have each designated 
two persons on the four-member Technical Committee. Therefore, through 
Condesa's representatives on Yanacocha's Board of Directors and the 
Technical Committee, Applicant exerts significant influence over the 
management and direction of Yanacocha.
    10. Applicant also owns interests in ten other affiliated 
companies.\5\ The activities of these companies principally consist of 
exploiting mining interests in Peru (or holding interests in Peruvian 
mining companies). Except for the affiliated, companies, the majority-
owned subsidiaries previously identified and Yanacocha, Applicant does 
not own any securities of any corporation or other entity. Furthermore, 
Applicant has continued to actively seek and evaluate potential new 
mining concessions throughout Peru. As a result of this exploration 
campaign, Applicant is one of the largest holders of mining rights in 
Peru.

    \5\ Compania Minera Coimolanche S.A. (36.25%), Compania de 
Exploraciones, Desarollo e Inversiones Mineras S.A. (35%), Sociedad 
Minera de Responsabilidad Limitada Chaupiloma Dos De Cajamarca 
(34%), Inversions Colquijirca S.A. (22%), Sociedad Minera El Brocal 
S.A. (11.22%), Compania Minera Caudalosa S.A. (35.85%), Minas Conga 
S.R. Ltda (34%), Minera Paula 49 S.R. Ltda (17.50%), Sociedad Minera 
Coshuro S.A. (35%), and Sociedad Minera Cerro Verde S.A. (9.17%).
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    11. Mr. Alberto Benavides holds a B.S. degree in engineering and an 
M.S. in geology. Most of Applicant's other directors and officers have 
degrees in the same fields. Applicant's directors and senior executive 
officers also have extensive experience in the mining industry. All of 
Applicant's senior executive officers, except its general counsel, 
devote their full time to management of the mining operations of 
Applicant and its majority-owned subsidiaries. None of them has 
experience as an investment manager or adviser, and none of them 
devotes any business time to investment management, apart from 
management of Applicant's cash. Applicant does not employ securities 
analysts and does not engage in the trading of securities for short-
term speculative purposes, investment purposes or otherwise.
    12. Applicant has not previously offered its securities in the 
United States. Applicant now desires, however, to offer its securities 
(or depositary receipts representing such securities) in the United 
States in registered public offerings or in private placements or to 
qualified institutional buyers pursuant to rule 144A under the 
Securities Act of 1933.

Applicant's Legal Analysis

A. Sections 3(b)(2) and 6(c)

    1. Section 3(a)(3) of the Act defines an ``investment company,'' in 
relevant part, as any issuer that engages in the business of investing, 
reinvesting, owning, holding, or trading in securities, and that owns 
``investment securities'' (as that term is defined in section 3(a)(3)) 
having a value in excess of 40% of the value of such issuer's total 
assets (excluding Government securities and cash items) on an 
unconsolidated basis.
    2. Applicant may be deemed to be an investment company under 
section 3(a)(3) because it owns ``investment securities,'' within the 
meaning of section 3(a)(3), that significantly exceed 40% of its 
assets, principally due to the value (calculated in accordance with 
section 2(a)(4)) of its ownership interest in Yanacocha. Applicant does 
not appear to qualify for the exemption provided by rule 3a-1 under the 
Act because it does not meet the 45% asset and income requirements set 
forth in the rule, principally due to its ownership interest in 
Yanacocha. Even though Applicant holds a greater than 25% interest in 
Yanachocha, and thus is presumed to control Yanacocha, Applicant lacks 
the ``primary control'' required by rule 3a-1 because Newmont Second 
holds a larger control position.
    3. As an investment company under section 3(a)(3), section 7(d) of 
the Act would prohibit Applicant from making a public offering of its 
securities in the United States. Applicant might also be prohibited 
from making a private placement of its securities, if, upon completion 
of the offering, more than 100 United States residents were beneficial 
owners of its securities. Accordingly, Applicant requests an order 
under section 3(b)(2) declaring that it is not an investment company 
or, in the alternative, under section 6(c) granting an exemption from 
all the provisions of the Act. As discussed below, Applicant also seeks 
an order under section 45(a) granting confidential treatment with 
respect to the valuation of certain of its assets.
    4. Section 3(b)(2) authorizes the SEC to issue an order excepting 
an issuer from the section 3(a)(3) definition of an investment company 
if it finds the entity to be primarily engaged in a business or 
businesses other than that of investing, reinvesting, owning, holding, 
or trading in securities either directly or (a) through majority-owned 
subsidiaries or (b) through controlled companies conducted similar 
types of businesses. Section 6(c) authorizes the SEC to issue an order 
of exemption from any or all provisions of the Act and the rules 
thereunder if the exemption is appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.
    5. In determining the primary business in which a company is 
engaged for purposes of section 3(b)(2), the SEC traditionally has 
considered the following factors: (a) The company's historical 
development, (b) the company's public representations of policy, (c) 
the activities of the

[[Page 14843]]
company's and directors, (d) the nature of the company's assets, and 
(e) the sources of the company's income.\6\ Applicant submits that a 
review of these factors supports the conclusion that Applicant is 
primarily engaged, directly and through majority-owned subsidiaries and 
a controlled company, in the mining business.

    \6\ See Tonopah Mining Company of Nevada, 26 S.E.C. 426 (1946).
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    a. Historical Development. Since its organization in 1953, 
Applicant has been engaged primarily in the mining business, and has 
engaged in no other business, except for businesses ancillary to its 
mining business. In addition to exploiting existing mining rights, 
Applicant is activity seeking and evaluating potential new mining 
concessions throughout Peru. This exploration campaign demonstrates 
that Applicant is and will be fully committed to the exploration and 
development of mining priorities and the operation and management of 
its operations in the foreseeable future.
    b. Public Representations of Policy. Applicant has always held 
itself out to its shareholders and the public as a mining company and 
has never held itself out as an investment company within, the meaning 
of the Act. This is supported by, among other things, statements in its 
annual reports. In addition, Applicant has been characterized as a 
mining company in numerous newspaper articles and in the reports of 
securities analysts and other publications. Its common shares, for 
example, are listed in the Peruvian newspapers under the heading 
``Mining Companies.''.
    c. Activities of Officers and Directors. Applicant's senior 
executive officers and directors, most of whom hold engineering or 
geology degrees, are actively involved in Applicant's mining business. 
All of Applicant's senior executive officers except its general counsel 
devote their full time to management of the mining operations of 
Applicant and its majority-owned subsidiaries. None of Applicant's 
directors or senior executive officers provides investment advice or 
devotes any business time to investment management, apart from cash 
management. Applicant does not maintain any staff for securities 
investment activities.
    d. Nature of Assets. As of December 31, 1995, the value of 
Applicant's total assets (exclusive of U.S. government securities and 
cash items and calculated in accordance with section 2(a)(41)) was S/
.819,853,000 (US$354,915,000). At the same date, the value (calculated 
in accordance with section 2(a)(41)) of all securities owned by 
Applicant, other than securities of Applicant's majority-owned 
subsidiaries and its controlled company Yanacocha, was S/.75,640,000 
(US$32,745,000) or approximately 9.23% of Applicant's total assets.
    e. Sources of Income. Applicant has never derived any material 
income from selling appreciated securities and its primary source of 
income was and is derived directly and indirectly from its mining and 
mining-related operations. For the 12 months ended December 31, 1995, 
Applicant's net income was S/.41,231,000 (US$17,849,000). For the sasme 
period, Applicant's investments in investment securities represented by 
its affiliated companies (other than its majority-owned subsidiaries 
and Yanacocha) accounted for S/.9,513,000 (US$4,118,000) or a little 
more than 23% of Applicant's net income (about 6.6% of net income not 
including the gain on the sale of shares of another mining company).\7\

    \7\ Applicant sold all of its shares of Empresa Minera Iscaycruz 
S.A. because it determined that it could not exert significant 
influence over its mining operations and did not wish to hold the 
shares solely for investment purposes.
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    6. In the alternative to exemptive relief under section 3(b)(2), 
Applicant submits that an exemption under section 6(c) of the Act is 
warranted under the circumstances here. Applicant was structured for 
valid economic and legal reasons and not with the Act in mind. 
Consequently, Applicant believes that it would be inappropriate and 
detrimental to Applicant and its shareholders to be treated as an 
investment company and made subject to the Act. Furthermore, Applicant 
believes that it is not the type of company and does not engage in the 
activities the Act was designed to regulate. Accordingly, Applicant 
submits that requiring its compliance with the provisions of the Act 
would be inconsistent with the purposes fairly intended by the policy 
and provisions of Act and would neither be necessary or appropriate in 
the public interest nor consistent with the protection of investors.

B. Section 45(a)

    1. Section 45(a) provides that the information contained in any 
application filed with the SEC under the Act shall be made available to 
the public, unless the SEC finds that public disclosure is neither 
necessary nor appropriate in the public interest or for the protection 
of investors. Applicant requests an order granting confidential 
treatment under section 45(a) for information submitted in an exhibit 
to the application pertaining to the value of Applicant's investments 
in Yanacocha and its majority-owned subsidiaries. Applicant also seeks 
confidential treatment of information pertaining to the percentage of 
total assets represented by each of these investments, since that 
information can be used to calculate Applicant's estimate of the value 
of Yanacocha.
    2. Public disclosure of the value of Applicant's investments in 
Yanacocha and its majority-owned subsidiaries is not necessary to 
calculate the value of the total assets represented by Applicant's 
investments in all securities owned by Applicant, excluding, consistent 
with section 3(b)(2), the value of securities representing Applicant's 
investments in majority-owned subsidiaries and Yanacocha. Therefore, 
Applicant believes that public disclosure of this information is not 
necessary in the public interest or for the protection of investors.
    3. Applicant also believes that public disclosure of the value of 
Applicant's investment in Yanacocha could result in harm to the 
shareholders of Applicant because it could influence the procedure set 
up by the Peruvian courts to calculate the value of Yanacocha or 
otherwise be used to the Applicant's detriment. As Applicant's estimate 
in the application under section 2(a)(41) of the Act may not match the 
methodology required for the Peruvian court's evaluation, such 
introduction could be confusing and may make public confidential and 
important competitive information that could materially prejudice 
Applicant's interests. For these reasons, Applicant believes that 
public disclosure of the information is not appropriate in the public 
interest or for the protection of investors.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-8168 Filed 4-2-96; 8:45 am]
BILLING CODE 8010-01-M