Bank of America Merrill Lynch Global Metals, Mining and Steel Conference

Transcription

1 Bank of America Merrill Lynch Global Metals, Mining and Steel Conference 15 th May 2018 Iván Arriagada Chief Executive 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 Highlights & Priorities Market & Growth Opportunities Investment Case 3

4 Overview 4

5 Sustainability is central in everything we do People Economic Performance Social Development Environment Transparency and Corporate Governance Zero fatalities Safety and Health Model Labour relations Long term approach to the business High quality and long-life assets Value over volume Capital allocation discipline Relationship model: Somos Choapa and Dialogos para el Desarrollo No incidents reported in communities Environmental Management Model Seawater and renewable energy consumption Target for reducing greenhouse gas emissions Ethics Committee Group Values 5

6 Antofagasta at a glance Group o65% owned by Luksic Group, 35% free float omarket cap: $13.8 billion (10 th May 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 Antofagasta Santiago Antucoya o 70% owned o Copper production (1) : 80,500 t o Remaining mine life (2) : 22 years o Reserves (3) : 676 million 0.33% Cu Centinela o 70% owned o Copper production (1) : 228,300 t o Remaining mine life (2) : 50 years o Reserves (3) : 2.1 billion 0.42% Cu Zaldívar o 50% owned, operator o Copper production (1) : 103,400 t (100%) o Remaining mine life (2) : 13 years o Reserves (3) : 429 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 2017 on 100% basis Los Pelambres o 60% owned o Copper production (1) : 343,800 t o Remaining mine life (2) : 21 years o Reserves (3) : 1.2 billion 0.60% Cu, 0.020% Mo & 0.05g/t Au 6

7 Strategy 1 The existing core business Achieve zero fatalities Constant focus on cost management and innovation Delivery on production and cash cost guidance Optimise performance of existing assets Proactive approach with community and other stakeholders Capital discipline and strong balance sheet 2 Organic & sustainable growth of the core business Los Pelambres Incremental Expansion Centinela expansion alternatives Zaldívar primary sulphide leaching 3 Growth beyond the core business Develop the long-term growth pipeline Monitor potential value accretive acquisitions or joint ventures Progress exploration activities in the Americas 7

8 Capital allocation drives decision making Operating Cash Flow Sustaining Capex & Mine Development Committed Dividends Copper price Free cash flow Capex Decision factors Stress test forecasts at various copper prices Future free cash flow generation Cash buffer Upcoming capital expenditure Approved vs. non-approved Growth Capex Excess Cash Dividend Balance sheet Debt structure Potential acquisitions 8

9 Chile Overview History of stability with robust institutions OECD country Solid public finances with low national debt Largest copper endowment in the world Antofagasta Key indicators* GDP growth: 3.3% (4Q17) Per Capita GDP (PPP): $23,300 (2016) Budget deficit: 2.8% of GDP National debt: 23.6% of GDP Mining: 9.9% of GDP Trade: 25 trade agreements with 64 countries Inflation (CPI): 1.9% (Apr 18) * 2017, except where indicated Santiago Sources: Central Bank of Chile, Cochilco; World Bank, Trading Economics 9

10 Highlights & Priorities 10

11 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% Production 704,300 t $1.25/lb net cash costs 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 11

12 2018 priorities People Production People are our first priority Zero fatalities and reducing number and severity of accidents Good labour relations Engagement with communities 153,800 tonnes in Q1. Quarterby-quarter growth as grade improves 2018 Guidance: ,000 tonnes of Cu - Net Cash Costs of $1.35/lb Prepare for higher grades in 2019 Productivity & innovation $100m savings targeted for 2018 Operating Model and Functional Simplification Overcoming mine age-related challenges Innovation key to long term productivity gains Disciplined capital allocation Seek balance between growth and shareholder returns Organic growth from Los Pelambres and Centinela expansions Capital return upside on higher copper price 12

13 Innovation roadmap Strategic Initiatives Focus on: primary sulphide leaching, tailings dam management and large volume material movement Internal Initiatives InnovAminerals Innovation initiatives from employees, contractors and suppliers External Initiatives Open to innovation from other industries and entities Adoption of Technology Encourage technological solutions at the operations Support data-driven decision making 13

14 Market & Growth Opportunities 14

15 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) Constrained supply Global grade decline Limited pipeline of projects Environmental restrictions on scrap Potential labour disruptions Copper is key in a low carbon emission world - EVs need 80-85kg of Cu compared to 20-25kg in ICEs - Annual Cu demand in EV industry expected to increase nearly tenfold to 1.7 million tonnes by Renewable energy generation more Cu intensive Price forecast (1) Spot Broker consensus Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec CRU, CEIC, NBS and Citi Research 15

16 Developing our portfolio in two prime districts Los Pelambres Incremental Expansion Phase 1 Cu: +55ktpa Los Pelambres Incremental Expansion Phase 2 Cu: +35ktpa Centinela Expansion Alternatives EITHER: Second Concentrator OR: Existing concentrator Twin Metals USA 16

17 Los Pelambres expansion Los Pelambres Incremental Expansion Phase 1 (190ktpd throughput) EIA approved in February 2018 Increasing Cu production by 55ktpa from 2021 Capex $1.3 billion - $780 million for plant expansion - $520 million for desalination plant Phase 2 (205ktpd throughput) Another EIA required Additional 35ktpa copper production Increase tailings and waste dump capacities LOM extension by 15 years District potential Over 6 billion tonnes of resources Only 1/3 of resources included in 21-year mine plan Significant scope to expand beyond 205 ktpd Plant expansion New grinding facilities Santiago New flotation facilities Pelambres Santiago 17

18 Centinela expansion Centinela expansion alternatives 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 Centinela district Tesoro Mirador Oxides Mirador Sulfuros Esperanza Antofagasta Or: Expansion of existing concentrator Pre-feasibility study underway Brownfield project Lower capex Lower construction risk Lower project execution risk District potential Nearly 7 billion tonnes of mineral resources Concentrators and oxide plant provide optionality for development of other deposits in district Additional options to leverage infrastructure Encuentro Sulfuros Penacho Blanco Polo Sur Esperanza Sur Paleo Canal Encuentro Oxides Santiago 18

19 Investment Case 19

20 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 20

21 Appendix 21

22 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 22

23 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 23

24 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

25 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% 25

26 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 Q18 Copper ($/lb) Realised LME E Gold ('000 ounces) Los Pelambres Centinela Group total Q18 Gold ($/oz) Realised 1,261 1,155 1,256 1,280 1,348 Market 1,266 1,160 1,248 1,258 1, E Molybdenum ('000 tonnes) Los Pelambres Centinela 1.5 Group total Q18 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

27 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 27

28 Reserves and resources as of 31 December 2017 Tonnage (millions of tonnes) Copper (%) Molybdenum (%) Gold (g/t) Attributable Tonnage (millions of tonnes) Ore reserves Los Pelambres 1, , Centinela Concentrates (Esperanza Sulphides, including Esperanza Sur) 1, , , ,261.6 Centinela Cathodes Centinela Total 2, , , ,394.5 Antucoya Encuentro Total 4, , , ,752.4 Group Joint Ventures Zaldívar Total Group Ore Reserves 4, , , ,982.8 Mineral resources (including ore reserves) Los Pelambres 6, , , ,650.7 Centinela Concentrates (Esperanza Sulphides & Esperanza Sur) 3, , , ,297.5 Centinela Cathodes (El Tesoro) Antucoya 1, , Encuentro 1, , , ,158.4 Polo Sur 1, , , ,514.5 Penacho Blanco Mirador Los Volcanes 1, , Llano-Paleocanal Nickel (%) Total Precious Metals (g/t Au+Pt+Pd) Twin Metals 2, , , ,967.0 Group Joint Ventures Zaldívar Total Group Measured + Indicated 10, , , ,723.5 Inferred 8, , , ,573.5 Total Group Mineral Resources (including ore reserves) 18, , , ,296.7 For full reserves and resources disclosure, see pages 196 to 205 of the 2017 Annual Report and Financial Statements 28

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