2017 FY Results Presentation

Transcription

1 2017 FY Results Presentation 13 th March 2018 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 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 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 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. 2

3 Agenda Overview 2017 Financial Results Market & Growth Opportunities Guidance 3

4 Overview 4

5 2017 highlights Robust operating platform Strong financial performance in 2017 Shareholders return and disciplined growth Zero fatalities 54.5% EBITDA margin (1, 2) 9.6 ppts 50.9 cps total dividend 177% 11c/lb productivity gains additional to last year $2,495m operating cash flow (1) 71.2% Encuentro Oxides completed under budget 5.0% $1.25/lb net cash costs 4.2% Net Debt/EBITDA 0.18x 0.48x Expansion projects Los Pelambres Centinela 1. From continuing and discontinued operations 2. Calculated as EBITDA/Group revenue. If Associates and JVs revenue is included EBITDA margin was 50.1% in 2017 and increased by 9.0 ppts 5

6 Capital allocation drives decision making 2017 Operating Cash Flow $2,157m (1) Decision factors Sustaining Capex & Mine Development $623m Copper price Free cash flow Stress test forecasts at various copper prices Future free cash flow generation Cash buffer Committed Dividends 35% payout policy Capex Upcoming capital expenditure Approved vs. non-approved Growth Capex $276m Excess Cash Dividend 67% total payout Balance sheet Debt structure Potential acquisitions 2017 Dividend of $502 million representing 67% payout 1. Operating cash flow after income tax paid 6

7 2018 priorities Value and profitable growth over volume Zero fatalities Continue to deliver on guidance, with 3% copper production growth Preparing for grade improvement in 2019 Capture an additional $100 million of cost savings ($525 million ) Successfully complete final labour negotiation of the year Decide to advance profitable growth at Los Pelambres Advance highest return Centinela expansion alternative to next stage Return excess cash to shareholders 7

8 2017 Financial Results 8

9 2017 a year of solid progress Los Pelambres Centinela Antucoya Zaldívar Sustained high mine and plant reliability Compliance programme agreed with environmental regulator Encuentro Oxides completed below budget Evaluated expansion alternatives Labour agreements standardised across three unions First year of full production Cost improvements Project finance completion test achieved Labour negotiation successfully completed Continued primary sulphide leaching studies Cu Production 343,800t Cu Production 228,300t Cu Production 80,500t Cu Production (1) 51,700t Net cash costs $1.02/lb Net cash costs $1.36/lb Cash costs $1.68/lb Cash costs $1.62/lb 1. Group s 50% share 9

10 Revenue benefiting from improving copper price Revenue (1) 2016 vs 2017 ($m) Copper price ($/lb) $3.18/lb $1,127m $2.50/lb $2.80/lb $4,749 $2.21/lb 1.8 Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Gold price ($/oz) 1,400 $1,331/oz 1,300 1,200 $1,248/oz $1,258/oz $3,622 1,100 $1,160/oz 1,000 Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Molybdenum price ($/lb) 12.0 $11.9/lb $8.2/lb $6.7/lb $6.5/lb 2016 Copper price Copper sales By-products Transport Excludes Zaldívar (JV). 2.0 Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Average market price 10

11 Unit cash costs Cash costs before by-product credits and C1 Costs ($/lb) - by operation $0.06/lb $1.54/lb (0.00) $1.60/lb $1.25/lb (0.35) Gross Costs 2016 Los Pelambres Centinela Other Operations Gross Costs 2017 (1) By product credits Net Costs 2017 Cash costs before by-product credits and C1 Costs ($/lb) - by cost type $0.06/lb $1.54/lb (0.11) (0.02) $1.60/lb (0.35) $1.25/lb Gross Costs 2016 (2) CCP Savings Production FX & Inflation Input Prices TC/RC Gross Costs 2017 (3) By product credits Net Costs 2017 Controllable Non-controllable 1. Antucoya and Zaldívar 2. Cost and Competitiveness Programme 3. Energy, diesel and acid 11

12 Continued focus on productivity Cost and Competitiveness Programme Cumulative mine site savings of $525 million 13% unit cost reduction, despite head grade decline of 16% ( ) Embedded cost culture across operations $166m of cost savings and productivity improvements achieved during 2017 Target of $100m for 2018 $m cash cost curve st Quartile $1.05/lb 2nd $1.28/lb 3rd $1.57/lb Quartile Quartile $0.11/lb 4th Quartile 100 Group Group 50 Proforma cash costs $1.25/lb (1) $1.36/lb 0 0% 25% 50% 75% 100% -50 Source: Wood Mackenzie as of Q As if no Cost and Competitiveness Programme savings had been achieved 12

13 Strong increase in EBITDA and EBITDA Margin EBITDA (1) 2016 vs 2017 ($m) 44.9% 54.5% +9.6 ppts Margin (2) Margin (2) +$960m 1,128 (206) (25) (9) $2,587m $1,626m FY 2016 Revenue Mining costs Exploration & Evaluation Corporate costs & other non operating expenses Associates & JVs Transport FY 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 EBITDA margin was 50.1% in 2017 and increased by 9.0 ppts 13

14 Capital expenditure Capital expenditure ($m) $1,646m ,086 $1,049m $1,000m $899m $795m Others Mine Development Sustaining Sustaining capex ratio E Development $ $566/tCu $433/tCu $270/tCu $338/tCu $536/tCu /tcu (1) $431/tCu Attributable Zaldívar capital expenditure $57m in 2016, $51m in 2017 and $60m in 2018 Note: Figures are based on cash flow and exclude Zaldívar (2016, 2017 & 2018) 1. Target established in

15 Cash flow Cash flow in period ($m) 2, $203m (338) (899) (45) $2,049m (487) (320) (252) 102 $2,252m (1) Cash at 1 Jan 2017 EBITDA from subsidiaries Working capital Tax Capex Net interest Debt Repayment Div. to Subsidiaries' Minorities Div. to plc shareholders Others (1) Cash at 31 Dec Including liquid investments 15

16 Debt reduction from strong free cash flow Net debt - gross basis ($m) (456) Net debt - attributable basis ($m) (42) (500) (1,072) -$458m -$616m Net debt/ebitda 0.48pts 0.66x 0.18x

17 Value and profitable growth over volume Highquality assets Cost control Capital discipline Cash generation Strong and growing production Large resource base Low cost and longlife assets World-class mining districts in a very low risk jurisdiction Cost and Competitiveness Programme Innovation Improving productivity Disciplined capital allocation Strong and flexible balance sheet Low net debt levels Consistent dividend policy Creating value for shareholders 17

18 Market & Growth Opportunities 18

19 Copper market fundamentals Growing demand Synchronised growth of major economies with emerging risk of trade disruptions China transition to sustainable growth - Growing personal incomes - Increasing rate of urbanisation (65% by 2020) Copper is key in a low carbon emission world - EVs need 80-85kg of Cu compared to 20-25kg in ICEs - EV sales expected to increase tenfold by 2030 to 30 million units a year - Renewable energy generation more Cu intensive Constrained supply Global grade decline Limited pipeline of projects Environmental restrictions on scrap Potential labour disruptions Mt Possible Projects Probable Projects Base Case Production Capability Primary Demand Source: CEIC, NBS and Citi Research 19

20 Labour relations 2018 mining labour negotiations in Chile 32 scheduled labour negotiations Negotiating framework set out in law Potentially affects a significant portion of world production Status of Antofagasta s labour negotiations Zaldivar successfully completed in Q Centinela completed early in Q Los Pelambres plant union negotiation completed-early in February 2018 Los Pelambres mine union negotiations in mediation 20

21 Investing through the cycle Mining assets Encuentro Oxides Cu: 50ktpa Phase 1 Cu: +55ktpa Los Pelambres Incremental Expansion Phase 2 Cu: +35ktpa Zaldívar Acquisition Cu: 50ktpa Antucoya Cu: 85ktpa Moly Plant Mo: 2,400tpa Centinela Expansion Alternatives EITHER: Second Concentrator OR: Existing concentrator Twin Metals USA Sale of water division Sale of power assets Sale of non-core assets. Power & water Non-mining assets 21

22 Los Pelambres expansion Los Pelambres Incremental Expansion Phase 1 (190ktpd throughput) Includes desalination plant EIA approved in February 2018 Increasing copper production by 55ktpa from 2021 Revised capex $1.3 billion - $780 million for plant expansion - $520 million for desalination plant - Ancillary permits applications Phase 2 (205ktpd throughput) Further EIA required Additional 35ktpa copper production Increase tailings and waste dump capacities LOM extension by 15 years 22

23 Centinela expansion Centinela expansion alternatives Mirador Oxides Either: Second concentrator 90ktpd throughput Feasibility study underway Increasing production by 180ktpa CuEq Ore from the Esperanza Sur and Encuentro pits LOM extension to 30+ years Design considers a further expansion to 150ktpd Or: Expansion of existing concentrator Scoping study completed Pre-feasibility study underway Brownfield project Lower capex Lower construction risk Lower project execution risk Tesoro Mirador Sulfuros Esperanza Esperanza Sur Encuentro Sulfuros Penacho Blanco Polo Sur Paleo Canal / Llano Encuentro Oxides 23

24 Guidance 24

25 2018 guidance Cu Au Mo C Guidance (t) 2018 Guidance (oz) 2018 Guidance (t) 2018 Guidance ($/lb) 705, , , ,000 11,500-12,

26 2018 priorities Value and profitable growth over volume Zero fatalities Continue to deliver on guidance, with 3% copper production growth Preparing for grade improvement in 2019 Capture an additional $100 million of cost savings ($525 million ) Successfully complete final labour negotiation of the year Decide to advance profitable growth at Los Pelambres Advance highest return Centinela expansion alternative to next stage Return excess cash to shareholders 26

27 Appendix 27

28 Antofagasta at a glance Group o65% owned by Luksic Group, 35% free float omarket cap: $12.2 billion (9 th March 2018) oftse 100 Mining division (1) ocopper production: 704,300 tonnes ogold production: 212,400 oz omolybdenum production: 10,500 tonnes onet cash costs $1.25/lb oall operations in Chile, one of the world s most developed and stable mining locations otop 10 copper producer ohigh quality assets with significant potential production growth Santiago Antucoya o 70% owned o Copper production (1) : 80,500 t o Remaining mine life (2) : 19 years o Reserves (3) : 697 million 0.33% Cu Centinela o 70% owned o Copper production (1) : 228,300 t o Remaining mine life (2) : 41 years o Reserves (3) : 2.0 billion 0.44% Cu Zaldívar o 50% owned, operator o Copper production (1) : 103,400 t (100%) o Remaining mine life (2) : 12 years o Reserves (3) : 461 million 0.51% Cu Transport division (1) ototal tonnage transported: 6.3 million tonnes otransport division provides rail and road cargo services in Chile s Antofagasta Region From 31 December As of 31 December 2016 on 100% basis Los Pelambres o 60% owned o Copper production (1) : 343,800 t o Remaining mine life (2) : 20 years o Reserves (3) : 1.3 billion 0.61% Cu, 0.020% Mo & 0.05g/t Au 28

29 Chile: Context Antucoya Centinela Zaldívar Los Pelambres Santiago Key Indicators GDP * : $247.0bn Population: 17.9 million Per Capita GDP (PPP): 1970: $2,300 ; 2016: $24,000 Mining: 8.1% of national GDP Poverty rate: 1989: 47%; 2015: 11.7% Principal Export Markets * : China 28%, USA 14%, Japan 8% Trade: 27 FTAs with 61 markets Inflation (CPI): 2.3% (2017) Largest copper endowment in the world Copper key contributor to the economy History of stability with robust institutions OECD country Solid public finances with low national debt Copper in Numbers * 28% of global copper production 29% of global copper reserves 50% of national exports *As at December 2016 Challenges Moving from middle income to high income economy Dealing with greater social expectations and demands on companies Aiming to decrease income inequality Source: Central Bank of Chile ; Ministerio de Desarrollo Social (Encuesta Casen 2015); WoodMackenzie; Cochilco; World Bank 29

30 Net earnings almost doubled Net Earnings (1) 2016 vs 2017 ($m) +$371m (320) (226) (38) $751m $380m 2016 EBITDA from Subsidiaries Depreciation & Amortisation Associates & JVs Net Finance costs Tax Non-controlling Interest Profit from discontinued operations From continuing operations and discontinuing and before exceptional items 30

31 EBITDA contribution by operation Los Pelambres and Centinela account for 85% of EBITDA EBITDA Margin (1) 70% 60% 50% 40% Los Pelambres Centinela Transport Zaldivar Antucoya Group (2) : 50.1% 30% 20% 10% 0% 0 1,000 2,000 3,000 4,000 5,000 Revenue ($m) 1. Calculated as EBITDA/Revenue. 2. Calculated as EBITDA/Group revenue. Group revenue from Associates and JVs is included 31

32 Cash Cost breakdown 2017 Cash costs 8% 14% 2% 3% Energy Diesel 15% 5% 31% 33% 4% 15% Acid Mill balls 3% 4% 3% Explosives 2% 5% Others 3% 14% Labour Consumables Spare parts Services Overheads 14% 33% 14% 31% 8% 32

33 Production and metal prices Group production E (1) Copper ('000 tonnes) Los Pelambres Centinela Concentrates Centinela Cathodes Michilla Antucoya (2) Zaldívar (3) Group total Metal prices Copper ($/lb) Realised LME E Gold ('000 ounces) Los Pelambres Centinela Group total Gold ($/oz) Realised 1,261 1,155 1,256 1,280 Market 1,266 1,160 1,248 1, E Molybdenum ('000 tonnes) Los Pelambres Centinela 1.5 Group total Molybdenum ($/lb) Realised Market Guidance January Assumptions: $1,250/oz for gold, $8.0/lb for molybdenum and CLP 660 per $1. 2. Ramp-up commenced in Q Attributable production from the beginning of December

34 Unit cash costs E (3) Group cash costs ($/lb) Los Pelambres Centinela Concentrates Centinela Cathodes Michilla Antucoya (1) Zaldívar (2) Cash costs before by-product credits By-product credits (0.31) (0.34) (0.35) (0.30) Net cash costs E Los Pelambres cash costs ($/lb) Cash costs before by-product credits By-product credits (0.27) (0.30) (0.42) (0.40) Net cash costs E Centinela cash costs ($/lb) Cash costs before by-product credits By-product credits (0.42) (0.56) (0.45) (0.40) Net cash costs Antucoya cash costs from start of commercial production on 1 April Zaldívar s cash costs have been included in the Group s 2016 and 2017 cash costs 3. Guidance January Assumptions: $1,250/oz for gold, $8.0/lb for molybdenum and CLP 660 per $1 34

35 $ / oz $ / lb Market data recent trends Exchange rate CLP/USD inverted axis Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 WTI oil price ($/barrel) Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Sulphuric acid ($/tonne CIF ) Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Source: Central Bank of Chile, Bloomberg, Argus, Platts and LMBA By-product prices 1,600 1,400 1,200 1, Gold price ($/oz) Moly Price ($/lb) 0 0 Jan 2015 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec

36 Antofagasta contacts Andrew Lindsay Andres Vergara Director, London Office Tel: Investor Relations Manager Tel: