Volcan Compañía Minera A : Annual Audited Financial Statements 2023

Volcan Compañía Minera S.A.A. and Subsidiaries

Independent Auditors' Report

Consolidated Financial Statements For the Years Ended

December 31, 2023 and 2022

(Free translation of a report originally issued in Spanish)

VOLCAN COMPAÑÍA MINERA S.A.A. AND SUBSIDIARIES
TABLE OF CONTENTS
Pages
INDEPENDENT AUDITORS' REPORT	1-5
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2023 AND 2022:
Consolidated Statements of Financial Position	6
Consolidated Statements of Profit or Loss and Other Comprehensive Income	7-8
Consolidated Statements of Changes in Equity	9
Consolidated Statements of Cash Flows	10
Notes to the Consolidated Financial Statements	11-96

Velásquez, Loli y Asociados S. Civil de R.L. RUC 20106910791

Las Begonias 441, Piso 6

San Isidro, Lima 27 Perú

Tel: [phone]

Fax: [phone]www.deloitte.com/pe

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Directors of

Volcan Compañía Minera S.A.A. and Subsidiaries

Opinion on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Volcan Compañía Minera S.A.A. and Subsidiaries (hereinafter, "the Group"), which comprise the consolidated statements of financial position as of December 31, 2023, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the consolidated financial statements, as well as a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements, present fairly, in all material respects, the financial position of the Group as of December 31, 2023, the results of operations and cash flows for the year then ended, in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) approved by the Junta de Decanos de los Colegios de Contadores Públicos del Perú (Board of Deans of the Peruvian Professional Associations of Certified Public Accountants). Our responsibilities under those standards are further described in the Auditor's Responsibilities section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), together with the ethical requirements relevant for our audit of the financial statements in Peru, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1. Impairment of long-term assets

Description of the key audit matter

As indicated in Notes 13, 14 and 15 to the consolidated financial statements, as of December 31, 2023, the Company and Subsidiaries have long-term assets for a net depreciation and impairment value of US$1,440 million. In this regard, in 2023, the Group recorded an impairment of US$125 million and recovery of US$89 million as a result of its assessment of the recoverable value of those

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assets. To this effect, Management made significant estimates regarding different factors, such as future mineral prices, proven and probable reserves and inferred resources that determine the net production value, head grades, operating costs, capital expenditures and discount rate. Due to the uncertainty in the estimate, we have identified this matter as a key audit matter.

Audit response to the key audit matter

• - We obtained an understanding of the relevant method, judgments and assumptions used by Management, including the involvement of its specialists for the measurement of reserves and resources, discount rate, and others, and evaluated whether there were relevant changes compared to 2022.

• - We tested the design and implementation of Management's relevant review control about the estimate of the value in use and used assumptions and judgments.

• - We involved our specialists in valuations and our mining specialists to challenge the method to calculate the projected cash flows, the assumptions and information sources used by Management including the sensitivity of those assumptions, in particular, regarding the projected selling prices for minerals, estimate of reserves and resources and net production value, recovery and mineral conversion rates in the production process, head grades and discount rate used to determine the value in use.

• - We evaluated the appropriateness of the disclosures related to the key assumptions used.

2. Going concern

Description of the key audit matter

As indicated in Note 3 to the consolidated financial statements, Management prepares the consolidated financial statements under the going concern principle based on the judgment that there are no events or conditions that can contribute material uncertainties about the Company's capacity to continue as a going concern. We have identified this matter as a key audit matter since Management's judgment is based on the forecast of income and cash flows that depend on significant assumptions, such as the selling price of the mineral and production costs, within a period of no less than the next 12 months.

Audit response to the key audit matter

• - We reviewed the forecast of cash flows prepared by Management.

• - We evaluated the expected compliance with the financial commitments of the Company and Subsidiaries.

• - We reviewed the availability of credit lines with financial entities.

• - We evaluated the appropriateness of the disclosures in the consolidated financial statements.

• 3. Liability for asset disposal and mine closure

Description of the key audit matter

As indicated in Note 33 to the consolidated financial statements, the Group has a provision for US$263 million to restore and rehabilitate the environment affected by its operations and for the disposal of assets. This provision is governed by a combination of legislative requirements and policies of the Company and includes significant estimates such as: i) costs for rehabilitation and dismantling activities of assets, ii) the period of time to make future related disbursements, and iii) discount rate.

Audit response to the key audit matter

• - We obtained an understanding of how the Group determines the calculation method, identifies the relevant assumptions and data sources, and the need of changes in them.

• - We evaluated whether the judgments, significant assumptions, and data to develop the estimate are consistent with the guidelines of the local regulatory entity, and whether the inflation rate and discount rate used in the calculation are aligned with the market.

• - We examined the competence, capacity, objectivity, and nature of the work of the internal expert who assisted the Group in the preparation of the estimate.

• - We evaluated the appropriateness of the disclosures in the consolidated financial statements.

Other information

Management is responsible for the other information. The other information comprises the information included in the report but does not include the consolidated financial statements and our auditor's report thereon. We expect to have the other information after the date of this audit report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance of the Company.

Responsibilities of Management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, and for such internal control as Management determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, Management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's consolidated financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered materialif, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• - Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than a material misstatement resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

• - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.

• - Conclude on the appropriateness of Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• - Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• - Obtain sufficient and appropriate audit evidence regarding the financial information of the companies or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the Group's audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance of the Group regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during the audit.

We also provide those charged with governance of the Group with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance of the Group, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other matters

The translation of this report has been made solely for the convenience of English-speaking readers and has been derived from the consolidated financial statements originally issued in Spanish.

Countersigned by:

_____________________ (Partner) Marco Roca Peña

CPC Registration No. 33204

February 26, 2024

VOLCAN COMPAÑÍA MINERA S.A.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2023 AND 2022

(In thousands of U.S. dollars (US$000))

Notes

2023 US$000

ASSETS CURRENT ASSETS:

Cash and cash equivalents Trade accounts receivable (net) Other accounts receivable (net) Inventories (net)

Other financial assets

Total current assetsNON-CURRENT ASSETS:

Other accounts receivable (net) Investment in associate Financial investments Inventories (net)

Property, plant and equipment (net) Right-of-use assets (net)

Mining concessions, exploration and development costs and other assets (net)

Total non-current assets

6

61,642

9

20,316

10

77,038

12

48,305

11

655

207,956 224,668

10

35,970 34,262

7

148,118 147,801

8

37,158 38,704

12

5,619 6,218

13

771,778 812,912

14 15

17,926 11,385

650,650 699,938

1,667,219 1,751,220

TOTAL

1,875,175 1,975,888

The accompanying notes are an integral part of these consolidated financial statements.

2022 US$000

73,600

28,586

65,389

57,093 -

LIABILITIES AND EQUITY CURRENT LIABILITIES:

Bank overdrafts Financial obligations Trade accounts payable Other accounts payable Deferred income

Total current liabilities

NON-CURRENT LIABILITIES: Financial obligations Other accounts payable Provisions

Deferred income tax Deferred income

Total non-current liabilities

Total liabilities

EQUITY:

Issued capital stock

Higher value in acquisition of treasury shares Treasury shares

Legal reserve

Accumulated other comprehensive income Accumulated losses

Notes

2023 US$000

2022 US$000

16 17 18

1,046 136,326

198 34,697

242,213 259,859

60,495 66,249

21

-440,101 361,003

16 18 19 28 (a)

667,543 776,771

- 3,200

323,474 323,284

78,857 136,277

602

-1,070,476 1,239,532

1,510,577 1,600,535

• 20 (a)

  906,680 1,134,300

• 20 (b)

  (173,234) (173,234)

• 20 (c)

  (60,934) (60,934)

• 20 (d)

  10,416

  10,695

• 20 (e)

(10,208) (9,436)

(308,122) (526,038)

TOTAL

Total equity

364,598 1,875,175

375,353 1,975,888

-6-

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 (In thousands of U.S. dollars (US$000))

Notes	2023	2022
US$000	US$000
Net sales	21	883,086	951,266
Cost of sales	22	(725,507)	(762,743)
Gross profit	157,579	188,523
Administrative expenses	23	(55,157)	(69,346)
Selling expenses	24	(30,563)	(24,852)
Other income	25	63,429	60,068
Other expenses	25	(78,507)	(87,465)
Impairment loss of long-term assets	26	(36,200)	(126,069)
Operating profit (loss)	20,581	(59,141)
Financial income	27	5,793	14,751
Financial expenses	27	(70,526)	(57,124)
Loss before income tax	(44,152)	(101,514)
Income tax	28	34,169	20,132
Net loss for the year	(9,983)	(81,382)
Weighted average of the number of outstanding shares (in thousands)	29	3,857,594	3,857,594
Basic and diluted loss per share	29	(0.003)	(0.021)
The accompanying notes are an integral part of these consolidated financial statements.
-7-

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(In thousands of U.S. dollars (US$000))

2023 US$000

2022 US$000

Net loss for the yearOTHER COMPREHENSIVE INCOME:

Items that will not be reclassified to profit or loss: Unrealized (loss) profit of investments in equity instruments Deferred income tax

Items that can be subsequently reclassified to profit or loss:

Unrealized profit of derivative financial instruments Deferred income tax

Total other comprehensive income that can be subsequently reclassified to profit or loss

Total comprehensive income, net of income tax

The accompanying notes are an integral part of these consolidated financial statements.

(9,983)

(81,382)

(1,269) 96

374 (28)

(895) 68

173 (51)

122

(10,755)

- -

-

(81,314)