2018 full year results 19th March 2019 London

Transcription

1 208 full year results 9th March 209 London Iván Arriagada Chief Executive Officer Alfredo Atucha Chief Financial Officer

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 forwardlooking 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 apply 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 orthe solicitation ofan 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. 2

3 Agenda Overview 2 Financial review 3 Copper market and growth opportunities

4 Overview Iván Arriagada Chief Executive Officer

5 208 overview Safety is our top priority After 26 months without a fatality, regrettably a contractor suffered a fatal accident Strong operating performance Improved throughput and $84m of savings Record year of copper production 725,300 tonnes at a net cash cost of $.29/lb High total dividend 65% pay-out ratio plus c$00m of net proceeds from disposal of non-core assets EBITDA of $2,228m and margin of 47% 2 Reflects strong copper sales, and lower grades and copper prices Los Pelambres expansion, Centinela second concentrator, Encuentro Oxides and molybdenum plant Growth projects Originally $00m targeted 2 Calculated as EBITDA/Group revenue. If associates and JVs revenue is included EBITDA margin was 40% 5

6 Safety is our top priority Safety performance Safety and health are at the core of all our decisions Regrettably in 208 after 26 months without a fatality a contractor suffered a fatal accident Fatalities Lost Time Injury Frequency Rate (LTIFR) Figures restated to include contractors in the transport division 6

7 Tailings dams Group operates two major concentrators producing tailings Los Pelambres: El Mauro dam designed for extreme weather and severe earthquakes. Reviewed twice a year by a panel of international experts Centinela: Thickened tailings. Low population, low vegetation location Chile has very strict regulations governing dam construction Prohibits upstream construction method Requires continuous stability analysis Safety measures and emergency plans required for all dams Antofagasta s TSF Active Inactive Northern Chile Central Chile 3 Case study: Programa Tranque 4 Public-private and community initiative promoting transparency Physical and chemical stability monitoring system providing real-time information to mine, communities and authorities Being piloted at El Mauro. Fully implemented end 209 EL MAURO Built using the safest method: downstream 76 instruments monitoring wall stability in real-time In 205, withstood an 8.3 earthquake 00km away (Richter scale) 85% of the water is recirculated and used up to 8 times Tailings Storage Facilities; 2 Centinela and Zaldívar; 3 Los Pelambres; 4 Tailings Programme: Online Monitoring of Tailings Dams 7

8 Capital allocation drives decision making 208 Operating Cash Flow Sustaining Capex & Mine Development Committed Dividends (35% pay-out) Growth Capex Excess Cash Dividend $2,65m 2 Net non-core sale proceeds c$00m 3 $44m $730m $78m $254m Copper Price DECISION FACTORS Balance Sheet Stress test forecasts at various copper prices Free Cash Flow Capex Debt structure Potential acquisitions Future free cash flow generation Cash buffer Upcoming capital expenditure Approved vs. non-approved 208 dividend of $432 million representing 65% pay-out + sale proceeds Operating cash flow before income tax paid 2 Excluding the one-off impact of $265 million VAT refund in January Net of taxes to be paid in 209 8

9 208 - record year of production Los Pelambres Centinela Outperformed both production and cost guidance Confirmed position as a stable and reliable operation Phase expansion approved Cu production 357,800 t Net cash costs $0.9/lb Concentrator plant operating above design capacity in Q4 New Encuentro Oxides plant achieved its design capacity Molybdenum production started Cu production 248,000 t Net cash costs $.5/lb Antucoya Zaldívar Focused on optimising mine and plant operations Improved dust suppression and spent ore disposal Performance strengthened during the year Cu production 72,200 t Net cash costs $.99/lb Copper recoveries improved Focused on throughput and operational reliability Group s 50% share Cu production 47,300 t Net cash costs $.94/lb Group 725,300 tonnes at $.29/lb 9

10 Efficiency driving improved performance Operating Model Cost and Competitiveness Programme and Operating Excellence Innovation Roadmap Improved operating efficiency by: Reducing process variability Using spare capacity (availability, throughput and recoveries) Reducing cost base through cost discipline Reaching full potential of operations through continuous improvement Strategic initiatives focused on: Primary sulphide leaching Tailings dam management Large volume material movement Record production driven by greater throughput in concentrators: Los Pelambres +5% and Centinela +8% compared to 207 Second quartile producer ($.29/lb) Achieved $84m of savings ahead of $00m target Progress on leaching primary sulphides and online tailings dam monitoring project 0

11 Strong delivery through high operating efficiency kt Group daily throughput and copper grade % kt Copper production $/lb 2.4 Cash costs Q 6 Q2 6 Q3 6 Q4 6 Q 7 Q2 7 Q3 7 Q4 7 Q 8 Q2 8 Q3 8 Q Q 6 Q2 6 Q3 6 Q4 6 Q 7 Q2 7 Q3 7 Q4 7 Q 8 Q2 8 Q3 8 Q4 8 Daily throughput (kt) Copper grade (%) Gross cash costs Net cash costs

12 Productivity and efficiency improvements Los Pelambres Mine-to-Mill Multi-disciplinary task force Enhanced communication between disciplines Identifying bottlenecks Reduced ore size by changing blasting parameters Optimised stockpile levels Improved re-cycling of uncrushed material How What Centinela Application of Machine Learning Created SAG mill digital twin Tested hypotheses to identify opportunities Reduced feed granulometry Improved SAG operating parameters (speed, load and solids percentage) Optimised use of stockpile feeders Throughput increased by 5% Result Throughput increased by 8% 2

13 Cost discipline, productivity and efficiency improvements $84 million saved in 208 versus $00 million target 4 $/lb 208 Cash cost curve $.08/lb $.30/lb $.64lb 3 53% Improved productivity, based on greater throughputs and recoveries 2 $0.0/lb 2 47% Through more efficient contract and input negotiations, improved consumption rates and better use of maintenance resources $00 million Target for 209 Wood Mackenzie Q Includes Zaldívar on a 50% basis 3 As if no Cost and Competitiveness Programme savings had been achieved 0 st Quartile 2 nd Quartile 208 FY $.29/lb Proforma 3 $.39/lb 3 rd Quartile - 0% 25% 50% 75% 00% Cumulative production (%) 4 th Quartile 3

14 - Technological novelty + Innovation framework OPERATING Innovation Ensuring the present TRANSFORMING Innovation Building the future DISRUPTIVE INNOVATION Cultural transformation STRATEGIC INNOVATION NEW innovations (co-develop and/or adapt) INCREMENTAL INNOVATION Continuous improvement DIGITAL TRANSFORMATION Digital roadmap EXISTING innovations (acquire and/or adopt) - Business value creation + 4

15 Our priorities for 209 Zero fatalities Continue to deliver on guidance Maintain operating reliability and efficiency Further cost savings Advance Los Pelambres expansion Complete feasibility of Centinela expansion Progress innovation portfolio Returns to shareholders 5

16 Financial review Alfredo Atucha Chief Financial Officer

17 208 financial highlights REVENUE Record sales volumes offset by lower copper price NET CASH COSTS Upward pressure on costs offset by productivity and efficiency improvements, and higher by-product credits 208 FY vs. 207 FY $4,733 million 0% $.29/lb +3% EBITDA Reflects strong copper sales, and lower grades and copper prices $2,228 million (4%) Lower EBITDA, and higher depreciation and amortisation 5.5 /share (32%) UNDERLYING EARNINGS PER SHARE STRONG FINANCIAL POSITION Net debt / EBITDA ratio reduced to 0.5x DIVIDENDS PER SHARE 65% pay-out ratio 3 plus c$00m of net proceeds from disposal of non-core assets reflects positive outlook and a strong balance sheet $33 million 2 27% reduction 43.8 /share (4%) From continuing operations; 2 Excluding the one-off impact of $265 million VAT refund in January 209; 3 As a percentage of earnings per share from continuing operations 7

18 Production and cash costs 2kt Copper Production kt (7) (9) (3) (6) 725 Copper FY 207 Throughput Grade Recovery Inventory variation ROM Encuentro Oxides Copper FY 208 $0.2/lb Cash cost by cost type $/lb (0.0) 0.07 (0.02) (0.02) (0.05) (0.43).29 Pre-credit FY 207 FX & Inflation Input prices TC/RC Lower grades & recoveries Activity Encuentro Oxides CCP savings Other Pre-credit FY 208 Byproducts credits Cash Cost FY 208 Cost and Competitiveness Programme 8

19 EBITDA EBITDA and margin versus 208 $ million and % 54% (7)pp 47% 42 $(359)m $2,587m (60) (37) (23) (29) 7 (47) (2) $2,228m FY 207 EBITDA Sales volumes Realised prices Input prices, FX & inflation Activity level & Encuentro Oxides Exploration & evaluation Corporate cost & non operating expenses Associates & JVs Transport division FY 208 EBITDA Results of continuing operations only and includes EBITDA from Associates and JVs 2 Calculated as EBITDA/Group revenue. If associates and JVs revenue is included EBIDTA margin was 40% in 208 and 50% in 207 9

20 Net earnings Net earnings 207 versus 208 $ million $75m $(207)m 26 $508m 36 $544m (32) 20 (84) (38) (45) FY 207 Net earnings FY 208 EBITDA from Depreciation Associates Net Tax Non-controlling subsidiaries 2 and amortisation and JVs finance costs interests Net earnings continuing operations Profit from discontinued operations FY 208 Net earnings From continuing and discontinued operations 2 Excludes Associates & JVs EBITDA 20

21 Capital expenditure Others $,646 m 97 Development Mine development Sustaining, $,047 m 38 $795 m $899 m $873 m $,200 m E Guidance $ million Sustaining ratio $ /tCu (5 year moving average target) 204 $566/tCu 205 $433/tCu 206 $270/tCu 207 $338/tCu 208 $457/tCu 209E $56/tCu E $45/tCu Figures are based on cash flow and exclude Zaldívar (206, 207 & 208). Attributable Zaldívar capital expenditure was $58m in 206, $5m in 207 and $52m in 208 2

22 Net debt Net debt and ND/EBITDA ratio $ million and times 2,9 $(40)m $25m 0.8x (242) ratio ratio ratio x 0.5x (498) $(456)m (873) (42) Minorities PLC Share holders (467) (587) (7) $(596)m 265 $(33)m Net Debt at Jan 208 EBITDA from subsidiaries Working capital Tax Capex Net interest Dividends Others Net Debt at 3 Dec 208 VAT Refund Net Debt at 3 Dec 208 Proforma $347m net debt repayment Net debt/ebitda ratio 2 Net debt/ebitda ratio Proforma excluding the one-off impact of $265 million VAT refund in January

23 209 guidance Group copper production (kt) E Targeting record copper production Costs similar to Pre-credit costs $.70/lb Net cash costs $.30/lb Capital expenditure of $.2 billion, including Los Pelambres expansion Los Pelambres Centinela Antucoya + Zaldívar 209E based on mid-point of guidance pre-credit costs $.72/lb and net cash cost $.29/lb 23

24 Copper market and growth opportunities Iván Arriagada Chief Executive Officer

25 Thousand tonnes Copper market in deficit Current market position Disconnect between copper price and fundamentals US/China trade negotiations key Fundamentals remain strong deficit 208 & 209 China domestic stimulus partly counteracts uncertainty Copper exchange stocks LME CMX Shanghai, Exchange stocks at very low levels 0 Mar 5 Sep 5 Mar 6 Sep 6 Mar 7 Sep 7 Mar 8 Sep 8 Mar 9 Longer-term factors Demand Supply Urbanisation Renewables Electromobility Grade decline Increasing ESG expectations Lack of viable projects 25

26 Organic and other growth opportunities Organic Growth Moly plant Mo 2.4 ktpa Los Pelambres Expansion Phase Cu +60 ktpa Capex $.3 bn (including $0.5 bn desalination plant) Zaldívar Chloride Leach Cu +2 ktpa Capex $0.7 bn 3 Phase 2 Cu +35 ktpa Capex $0.5 bn 5 year LOM extension Centinela 2 nd concentrator Cu +80 ktpa Capex $2.7 bn 2 Other Growth Transport division Programme to increase fleet s haulage capacity Exploration focusing on the Americas Twin Metals Cu Eq +65 ktpa Prefeasibility study; Prefeasibility study; Feasibility study; Prefeasibility study 26

27 Los Pelambres expansion Los Pelambres Expansion Phase Phase 2 Mine life Daily throughput Copper 2035 Extension of 5 years to kt to 90 kt +5 kt to 205 kt +60 ktpa +35 ktpa Infrastructure Capex Status Additional milling and flotation capacity Water desalination plant and pipeline $.3 bn (incl. $0.5 bn desalination plant) 00% debt finance EIA approved, construction started Additional tailings disposal and milling capacity Repowering ore transport system $0.5 bn (204 PFS) Feasibility study underway Over 6 billion tonnes of resources Only /3 of resources included in 2-year mine plan Scope to expand significantly beyond 205 ktpd 27

28 Centinela and Zaldívar projects Centinela Second Concentrator Second concentrator and tailings deposit Feasibility to be completed in 2020 $2.7 billion capex (205 PFS) Additional 80,000 tonnes of copper equiv. EIA approved in 206 Zaldívar Chloride Leach Improving copper recoveries from secondary sulphides Process based on a proprietary technology developed by the Group called CuproChlor $75 million capex (208 FS) Subject to EIA extension of water rights 00% basis 28

29 Investment case High quality assets Operating efficiency and cost control Capital discipline Robust platform Strong and growing production Large resource base Low cost and long-life assets Four mines in two worldclass districts in Chile Cost and competitiveness programme Continuous productivity improvement Innovation for long term gains Low net debt Disciplined approach to acquisitions and disposals Consistent dividend policy Continuing to optimise mines Protecting margins and profitability Returning cash to shareholders CREATING VALUE FOR SHAREHOLDERS 29

30 208 full year results 9 th March 209 London

31 Appendix 3

32 Antofagasta at a glance Group 65% owned by Luksic Group, 35% free float Market cap: $2.0 billion (March 5 th 209) FTSE 00 Mining division Top 0 copper producer High quality assets with significant potential production growth Copper production: 725,300 tonnes Gold production: 20,00 oz Molybdenum production: 3,600 tonnes Net cash costs: $.29/lb All operations in Chile, one of the world s most developed and stable mining locations Transport division Transport division provides rail and road cargo services in Chile s Antofagasta Region Total tonnage transported: 6. million tonnes Antucoya 70% owned Copper production : 72,200 t Remaining mine life 2 : 2 years Reserves 3 : 64 million 0.34% Cu Centinela 70% owned Copper production : 248,000 t Remaining mine life 2 : 49 years Reserves 3 : 2.2 billion 0.42% Cu Zaldívar 50% owned, operator Copper production : 94,600 t (00%) Remaining mine life 2 : 2 years Reserves 3 : 468 million 0.46% Cu Los Pelambres 60% owned Copper production : 357,800 t Remaining mine life 2 : 20 years Reserves 3 :. billion 0.60% Cu, 0.09% Mo and 0.05g/t Au Santiago From 3 December As of 3 December 208 on 00% basis 32

33 Chile 28% of global copper production 29% of global copper reserves 50% of exports are copper Strengths Challenges Largest copper endowment in the world Copper key contributor to the economy History of stability with robust institutions OECD country Solid public finances and low national debt Moving from middle to high income economy Increasing social expectations and demands on companies To decrease income inequality Antucoya Centinela Zaldívar Los Pelambres Santiago Key Indicators GDP $445 bn (PPP) Population million Per Capita GDP 970: $2, : $24,200 (PPP) Poverty rate 3 989: 47.0% 207: 8.6% Mining 4 0.0% of GDP Principal Markets 5 China 30% USA 7% EU 4% Trade 5 26 FTAs (64 markets) Inflation (CPI) 6 2.6% Source: 207 World Bank; 2 Censo 207 Instituto Nacional de Estadísticas (INE); 3 Ministerio de Desarrollo Social (Encuesta Casen 205); 4 Banco Central de Chile; 5 Dirección General de Relaciones Económicas Internacionales Chile; 6 IPC 208 Instituto Nacional de Estadísticas (INE) 33

34 Revenue unchanged despite lower realised copper price Revenue 207 versus 208 $ million $4,749m (6) $4,733m 88 (279) FY 207 Copper price Copper sales By-products TC/RC Transport division FY 208 Record production offset by lower copper price despite strong molybdenum revenue Excludes Zaldívar (JV) 34

35 Cash flow Cash flow in period $ million 2,9 $(355)m $(90)m (242) (498) 2,252 (873) (42) (347) (20) 5, ,63 (467) Cash at Jan 208 EBITDA from Subsidiaries Working Capital Tax Capex Net Interest Net Debt Repayment Div. to Subsidiaries Div. to PLC Minorities Shareholders Others Cash at 3 Dec 208 VAT Refund Cash at 3 Dec 208 Proforma 35

36 Production and metals prices E Copper ('000 tonnes) Los Pelambres Centinela Concentrates Centinela Cathodes Antucoya Zaldívar Group total E Gold ('000 ounces) Los Pelambres Centinela Group total E Molybdenum ('00 tonnes) Los Pelambres Centinela Group total Guidance January 209 Group production Metal prices Copper ($/lb) Realised LME Gold ($/oz) Realised,55,256,280,256 Market,60,248,258, Molybdenum ($/lb) Realised Market

37 Unit cash costs Group cash costs ($/lb) E Los Pelambres cash costs ($/lb) E Los Pelambres Centinela Antucoya Pre-credit cash costs By-product credits (0.30) (0.42) (0.6) (0.45) Net cash costs Zaldívar Centinela cash costs ($/lb) E Group pre-credit cash costs By-product credits (0.34) (0.35) (0.43) (0.40) Net cash costs Pre-credit cash costs By-product credits (0.56) (0.45) (0.38) (0.50) Net cash costs Guidance January Antucoya cash costs from start of commercial production on April

38 208 production cost breakdown 0.43 $.72/lb 0.27 $.76/lb Spare parts 2% Others 5% Labour 4% (0.24) $.29/lb Other inputs % $2,806m 9% Services Sulphuric acid 4% Fuel 7% 4% 3% Maintenance services Net cash cost FY 208 By-product credits Gross cash cost FY 208 TC/RC & Shipping Mine development & Inventory variation Production cost FY 208 Energy 38

39 Market data 800, Exchange rate CLP/ USD 400 Jan 206 Jul 206 Jan 207 Jul 207 Jan 208 Jul 208 Jan 209, Gold US$/oz Molybdenum US$/lb 0 Jan 206 Jul 206 Jan 207 Jul 207 Jan 208 Jul WTI oil price USD/barrel 0 Jan 206 Jul 206 Jan 207 Jul 207 Jan 208 Jul 208 Jan Sulphuric Acid USD/ton - CIF 0 Jan 206 Jul 206 Jan 207 Jul 207 Jan 208 Jul

40 Reserves and resources as of 3 December 208 Tonnage (millions tonnes) Copper (%) Molybdenum (%) Gold (g/t) Attributable Tonnage (millions tonnes) Ore reserves Los Pelambres,32.2, Centinela Concentrates (Esperanza Sulphides, including Esperanza Sur),845.2, ,29.6,3.4 Centinela Cathodes Centinela Total 2,7.2 2, ,445.4,445.4 Antucoya Encuentro Total 3,944. 4, , ,747. Group Joint Ventures Zaldívar Total Group Ore Reserves 4,4.6 4, ,88.4 2,96.3 Mineral resources (including ore reserves) Los Pelambres 6,3.4 6, , ,64.4 Centinela Concentrates (Esperanza Sulphides & Esperanza Sur) 3, , , ,224.4 Centinela Cathodes (El Tesoro) Antucoya,253.7, Encuentro -, ,7.4 Polo Sur,54.5, ,54.5,54.5 Penacho Blanco Mirador Los Volcanes,904.2, Llano-Paleocanal Brujulina Total precious metals Nickel (%) Sierra (g/t Au+Pt+Pd) Twin Metals 2,509. 2, ,085.0,967.0 Group Joint Ventures Zaldívar Total Group Measured + Indicated 0, , , ,663.9 Inferred 8, , , ,576.0 Total Group Mineral Resources (including ore reserves) 9,93.2 8, , ,239.9 Encuentro and Llano-Paleocanal included in Centinela from

41 Antofagasta contacts Andrew Lindsay Director, London Office Tel: Andrés Vergara Investor Relations Manager Tel:

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