Iván Arriagada, CEO Antofagasta Minerals. Producer Challenges

Transcription

1 Iván Arriagada, CEO Antofagasta Minerals Producer Challenges

2 Cautionary statement This presentation has been prepared by Antofagasta plc. By reviewing and/or attending this presentation, you agree to the following conditions: This presentation contains forward-looking statements. All statements other than historical facts are forward-looking statements. Examples of forward-looking statements include those regarding the Group's strategy, plans, objectives or future operating or financial performance; reserve and resource estimates; commodity demand and trends in commodity prices; growth opportunities; and any assumptions underlying or relating to any of the foregoing. Words such as intend, aim, project, anticipate, estimate, plan, believe, expect, may, should, will, continue and similar expressions identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that are beyond the Group s control. Given these risks, uncertainties and assumptions, actual results could differ materially from any future results expressed or implied by these forward-looking statements, which speak only as of the date of this presentation. Important factors that could cause actual results to differ from those in the forward-looking statements include: global economic conditions; demand, supply and prices for copper; long-term commodity price assumptions, as they materially affect the timing and feasibility of future projects and developments; trends in the copper mining industry and conditions of the international copper markets; the effect of currency exchange rates on commodity prices and operating costs; the availability and costs associated with mining inputs and labour; operating or technical difficulties in connection with mining or development activities; employee relations; litigation; and actions and activities of governmental authorities, including changes in laws, regulations or taxation. Except as required by applicable law, rule or regulation, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Certain statistical and other information about Antofagasta plc included in this presentation is sourced from publicly available third party sources. Such information presents the views of those third parties and may not necessarily correspond to the views held by Antofagasta plc. This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Antofagasta plc or any other securities in any jurisdiction. Further it does not constitute a recommendation by Antofagasta plc or any other person to buy or sell shares in Antofagasta plc or any other securities. Past performance cannot be relied on as a guide to future performance.

3 Agenda Overview of Antofagasta Minerals Producer Challenges Productivity and cost Energy and water Communities Innovation Conclusions

4 The Group LUKSIC GROUP 65% ANTOFAGASTA PLC FREE FLOAT 35% FTSE 100 since March 2004 Market Capitalization (09 November 2015): US$ 7.7 bn MINING 97% 1 Operating assets (Chile) Los Pelambres Centinela Michilla - Antucoya 704,800 tonnes 2 of copper in concentrate and cathodes 270,900 ounces 2 of gold in concentrate 7,900 tonnes 2 of molybdenum in concentrate Exploration and evaluation studies in Chile and the United States Earn-in agreements in Europe, Africa, the Americas and Australia TRANSPORT 3% 1 FCAB Combined rail and road tonnages of approx. 7.3 million tonnes 2 per year 1 Percentages are contributions to Group s EBITDA without considering the water division actual figures 4 4

5 Overview High quality assets Strong production, large resource base and long-life assets Focus on two world-class mining districts Competitive cash costs Cost control Focus on operating and project cost control Strong operating margins and capital efficiency Capital discipline Recycling capital to mining from water division Prioritising brownfield projects Investing through the cycle Advancing projects to preserve options for future development Amongst the cyclical commodities, copper has stronger fundamentals

6 Our operations Antucoya 1 Cu production: 85 ktpa Life of Mine: 2034 Ownership: 70% Michilla 2 Cu production: 47 kt Life of Mine: 2015 Ownership: 99.9% Centinela 2 Cu production: 267 kt Life of Mine: 2065 Ownership: 70% Zaldívar 2,3 Cu production: 101 kt Ownership: 50% Los Pelambres 2 Cu production: 391 kt Life of Mine: 2037 Ownership: 60% 1 Feasibility study figures/ actual figures / 3 Acquisition expected to be completed by end of

7 Producer challenges Productivity and costs Energy and water Communities Innovation 7

8 Producer challenges Productivity and costs Energy and water Communities Innovation 8

9 Productivity and cost Between 1990 and 2004, Chilean copper production increased significantly. However, since 2004 the industry has experienced productivity decline Chilean copper production and productivity 1 18% Market share of Chile s copper production 2 37% 31% 000 tonnes Cu production Productivity Growing labor productivity Declining labor productivity t Cu / worker Growing Production Maintaining Production Growing Production? Cu production growth CAGR 9.2% 0.7% Investment 3 US$bn Labor productivity variation % 101% -41% 1 Source: Cochilco and Foreign Investment Committee / 2 Source : Cochilco 3 Amounts are shown in 2015 dollars. First period, from 1990 to 2004, includes the investment in 2004 and second period, from 2004 to 2014 does not include investment in

10 Understanding productivity loss Increase in the labor force at both mine and plant resulted in a decline of productivity in each stage of the production process Labor productivity at open pit mines 1 ktonnes rock mined / workforce Linear trend Average distance 2010: 4.03 Km Average distance 2013: 4.40 Km Variation : 8.45% Labor productivity at concentrator plants 1 ktonnes ore processed / workforce 80 Linear trend Focus on production vs productivity Shortage of qualified labor: - Required the incorporation of operators, who lacked training and experience - Industry, universities and authorities have to work together to strengthen technical training to face future growth without impacting productivity Review working practices to reduce labor downtime Foster technological innovation Review and update operating standards Source: ENCARE 10

11 Understanding productivity loss Declining grades forced to mine more tonnes and increase processing capacity to maintain copper production levels. Nevertheless, workforce increased to a much greater extent. Production, rock mined, ore processed and workforce in the Chilean mining 1 Production Rock mined 2 Ore Processed 2 Ore grade Workforce Ore grade Production Rock mined Ore processed Workforce % Variation % 7% 49% 32% 74% 1 Source: Cochilco, ENCARE. 2 Rock mined and ore processed for the chilean copper industry are estimates based on copper operations covering 80% of the Chile s copper production 11

12 Productivity and cost improvement at Antofagasta Minerals Maintenance Productivity of workers + contractors Organizational effectiveness Energy Efficiency Improve performance of critical processes and standardize maintenance Substantial improvement in productivity, costs & quality of contracted services Optimize costs and organizational structure. Clear accountability. More efficient energyintensive processes and secure competitive long term supply conditions. 12

13 Producer challenges Productivity and costs Energy and water Communities Innovation 13

14 $/MWh Energy and water Rising energy costs Energy costs in Chile have risen due to a lack of new low cost fuel energy projects As a result, energy prices have risen at an CAGR of close to 11% since 2000 The use of sea water has resulted in additional pressure on energy costs Energy prices in mining countries Chile Source: CRU Strategies China, Peru, USA, Australia, Zambia, Russia, DRC, Canada, Mexico The geographic characteristics of Chilean mining operations imply higher capital cost to build infrastructure for water transportation and higher energy consumption to pump water from the coast to mining working sites US$/m3 Transport - Opex Transport - Capex Desalination Capex & Opex Deposit altitude (masl) Source: Consejo Minero 14

15 Energy and water Energy efficiency In Antofagasta Minerals we are committed to looking for initiatives to reduce energy consumption Initiatives at Minera Los Pelambres Optimization of mining trucks performance Mine to mill Optimization of SAG Mills Variable-frequency drive Mine to mill Initiatives at Minera Centinela Use of LNG boilers to replace diesel Optimization of truck fill factors Truck engine power reduction Redesign of SAG Mill liners SAG Mill liners 15

16 Energy and water Antofagasta Minerals has invested in energy projects which include innovative solutions allowing to diversify the matrix of the energy source for the operations Solar Thermal Plant (Centinela) Wind Farm El Arrayan Alto Maipo project Reduction of 8,000 ton. CO2 per year Decreases 55% diesel from heaters Save up to US$ 2 million per year in fuel Largest wind farm in Chile years of operating life The park supplies 20% of the required energy at Los Pelambres Antofagasta Minerals acquired 40% of this project Two run-of-river units with installed capacity of 531 MW Return 100% of the water used Could supply up to 100 MW to Los Pelambres 16

17 Producer challenges Productivity and costs Energy and water Communities Innovation 17

18 Communities Territory use Legal certainty of permits and environmental regulatory framework From transactional relations to common development goals through involvement and participation Aspiration to be a partner of choice 18

19 Communities Somos Choapa : private-public partnership A new paradigm of relationship PRINCIPLES VISION Transparency How is it managed? Excellence and sustainability What is managed? (focus) Management of disputes and expectations Dialogue and participation Projects portfolio Participation Mulitistakeholder plataform Antofagasta Minerals / Local governments/ Regional governments/ Community/ ONG / OECD 19

20 Producer challenges Productivity and costs Energy and water Communities Innovation 20

21 Innovation In Antofagasta Minerals we recognize innovation as a key process in the creation of value for the mining business in economic, social and environmental aspects. Antofagasta has been a pioneer in several aspects: o o o o Direct use of sea water in its leaching and flotation processes Application of high density thickeners Leaching of sulfides NCREs Mill Liners change Automation and robotics are necessary to increase efficiency in our processes. Currently, we are studying the implementation of: o o o Mill Liners change Sample Preparation Haul Truck Wheel change Sample Preparation 21

22 Conclusions Responding to New Conditions Volume vs. Protecting Margins - Productivity & Cost o o o Enhancing skills and qualifications of work force Revising work practices Step change innovation Capital discipline and Financial strength a competitive advantage in a cyclical business Ensure enablers for sustainable and competitive position o Communities o Energy and water o Territory 22

23 Iván Arriagada, CEO Antofagasta Minerals Producer Challenges