Bank of America Merrill Lynch Global Metals, Mining & Steel Conference Iván Arriagada CEO Antofagasta Minerals 12 May 2015
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.
Agenda Overview Operation Overview Cost Management Growth Opportunities Investment Case Questions 3 3
Safety committed to zero fatalities Unacceptably, five fatalities occurred during 2014 Re-affirm our commitment to zero fatalities New safety and occupational health model introduced Focus on: o Early identification of highpotential risks o Reporting high-potential near misses o Safety leadership 6 5 4 3 2 1 0 Safety Performance 5 3.2 2.6 2.1 1.9 2 0 1 2011 2012 2013 2014 Fatalities LTFIR Achieved a 40% reduction in LTFIR 4 4
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 Return of capital to shareholders Prioritising brownfield projects Investing through the cycle Continuing to advance projects Optimistic on copper in the medium to long term 5
2014 overview vs. 2013 (%) 2014 Revenue (11.4) $5,290.4m Lower realised copper price EBITDA margin (3.3) (1) 42.0% Still strong at 42% Net earnings (30.3) $459.8m (2) Increased depreciation at Centinela and Michilla Deferred tax provision from Chilean tax reform Operating cash flow (5.7) $2,507.8m Continue to generate strong operating cash flows Dividend (77.4) 21.5cps High dividend in 2013 Pay-out ratio of 35% (3) Copper production (2.3) 704.8kt Lower grades at Los Pelambres Net cash costs 5.1 $1.43/lb One-off signing bonuses Another year of delivering guidance, despite challenging environment Revenue and earnings down but steady operating performance Focus producing copper, reducing costs and building a platform for long-term growth 1. Percentage points 2. After $142.2m deferred tax provision 3. On net earnings of $602.0m (excluding deferred tax provision) 6 6
Market environment and outlook LME copper price averaged $2.64/lb in Q1 2015 (Q4 2014: $3.00/lb) China s growth slower, but still strong Prices supported by tight scrap market Further SRB purchases possible Growth of new supply expected to slow Current broker consensus for average 2015 copper price is around $2.80/lb Forecast for 2015 shifted from surplus to a more balanced market Cautious in the short term, optimistic in the medium and long term Expect copper price to improve during 2015 Consumer and General Products 2014 China Copper Consumption Building/ Construction 21% 31% Electrical Network Infrastructure Transport Equipment 11% Industrial Machinery & Equipment 10% Source: Credit Suisse, Wood Mackenzie Electrical Network Infrastructure 27% State Grid expected to spend $70bn on electrical infrastructure Housing weakness affecting approximate 20% of consumption 7
Operations overview Los Pelambres
2014 and Q1 2015 operations overview Los Pelambres Solid 2014 production and cash costs, ahead of guidance El Arrayán wind farm and new coal PPA now providing 45% of power Protests in 1Q15 disrupted production Adverse court ruling in 1Q15 appealed Centinela 2014 production beat guidance. 1Q15 impacted by heavy rains 2014 net cash costs impacted by lower gold production and realised gold prices Capture of synergies at Centinela Michilla Operation closing at end of 2015 Strong 2014 production Net cash costs beat guidance with much lower stripping costs Group 2014 production and net cash costs beat guidance Successful negotiation of labour agreements at all operations Ramp-up of Antucoya to full production by the end of 2015 9 9
Cost management Los Pelambres
Cost saving initiatives Merged Esperanza and El Tesoro Shared mining fleet & waste dumps Single vision for district Centinela Capex Reducing sustaining capex Lower capex estimate for Encuentro Oxides In-house project design & execution Prioritising brownfields Approach to projects 2014 $80m achieved 2015 $130m target Working capital Inventory categorisation Drive efficiency in each category Developed bespoke supplier strategy Supply managed at corporate centre Greater purchasing power Standardised procurement Central supply Innovation Pioneered use of untreated sea water Investments in renewable energy 11
Reducing capex Development capex Development capex Development capex Capex 2014-2016 ($m) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 $1,646m 158 316 38 735 ~$1,300m 180 180 350 ~$800m - $950m 450-500 280 399 310 350-400 2014 actual 2015 2016 Sustaining capex Antucoya Encuentro Oxides Centinela Other Building a platform for long-term growth Portfolio optionality through lower risk brownfield projects and greenfield projects Investing through the cycle 12 Note: Capital expenditure refers to additions to PPE during the year as reported in the Cash flow statement 12
Leading margins and capital efficiency EBITDA margin (1) Return on capital employed (ROCE) (2) 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 57.2% 32.6% 64.5% 44.7% 61.9% 44.7% 56.9% 37.1% 45.9% 33.5% 42.0% 28.6% 40% 35% 30% 25% 20% 15% 10% 5% 17.3% 10.7% 25.1% 16.2% 31.1% 20.5% 28.9% 14.6% 19.7% 10.0% 14.1% 8.0% 20% 2009 2010 2011 2012 2013 2014 Antofagasta FTSE 350 Mining 0% 2009 2010 2011 2012 2013 2014 Antofagasta FTSE 350 Mining EBITDA margin remains strong above 40% Continue to deliver high return on capital employed Maintain shareholder value through the cycle Source: Company filings, FTSE350 Mining data from Factset (simple average) March 2015 1. EBITDA margin: EBITDA / revenue 2. ROCE: EBIT / capital employed (total assets current liabilities) 13 13
Growth Opportunities Antucoya
Strategy and 2015 priorities 1 Existing core business Constant focus on cost management and compliance Delivery of production and cash cost guidance Continue to get the best possible performance from existing assets Proactive new approach with community and other stakeholders 2 Organic & sustainable growth of the core business Complete Antucoya on-budget and on-time Complete Centinela 105ktpd expansion Progress Encuentro Oxides and Los Pelambres Incremental Expansion projects Complete Centinela Second Concentrator pre-feasibility study Progress construction of moly plant at Centinela 3 Growth beyond the core business Progress international exploration activities Optimise Twin Metals Minnesota pre-feasibility study 5 15
Growth pipeline In periods of lower prices and increasing capital intensity: Focus remains on cost control and efficiency throughout the operations Focus on higher return, lower risk brownfield debottlenecking/expansion projects Advance greenfield projects steadily for future development Antucoya (2) Cu: 85ktpa (1) Capex: $1,900m Encuentro Oxides (2) Cu: 50ktpa (1) Capex: $636m Centinela Second Concentrator (3) Cu: 140ktpa (1) Capex: $2,700m 2015 2016 2017 2018 2019+ Centinela 105ktpd (2) Cu: 10-12ktpa (1) Capex: $110m 1. Average figure for first 5 years 2. Feasibility study figures 3. Pre-feasibility study figures Los Pelambres Incremental Expansion (3) Cu: 95ktpa (1) Capex: $1,200m (4) Los Pelambres Expansion Key current stage: Feasibility study 16 Construction 16 4. Excluding desalination plant Centinela Moly Plant (2) Mo: 2,400tpa (1) Capex: $125m
Antucoya commissioning underway Overview 85,000 tonnes per annum of production Complete construction Q2 2015 First full year of production 2016 Synergies with Centinela water pipeline Current status Commissioning underway 99.8% overall project progress (design, procurement, construction) (1) 99.7% construction progress (1) 1. As at 31 March 2015 2. Construction, pre-financing, cash flow basis 17
Encuentro Oxides Provides optionality to Centinela district Commence production late 2016 First full year of production 2017 (8-year mine life) Provides feed for existing SX-EW plant Exposes the sulphides below Full production of 50 ktpa Cu Project development Feasibility study completed. Construction underway Capex reduced by $156m to $636m o Chilean peso weakened by approximately 20% o Project optimisations In-house owner s team Pipeline for pregnant solution to Centinela SX-EW plant Extension of water pipeline from Centinela Remaining oxides mined with Sulphides Oxides Sulphides 18 18
Centinela Mining District Centinela debottlenecking Debottlenecking concentrates plant to increase throughput to 105 ktpd (2014: 86 ktpd) Project completion in late 2015 Installation of tailing thickeners, crushing equipment, flotation cells and mining equipment Moly plant construction underway Centinela Second Concentrator Pre-feasibility to be completed in Q2 2015 Planned 2 nd concentrator 7 km away from current facilities o Throughput: 90 ktpd o Annual production: 140 kt Cu, 150 koz gold, 6.5 kt Mo Two phase growth. Phase 1-90ktpd, Phase 2 - +50ktpd District potential Nearly 7 billion tonnes of mineral resources 19 10km Concentrators and oxide plant provide optionality for development of other deposits in district Additional geological options to leverage infrastructure 19
Los Pelambres Mining District Los Pelambres Incremental Expansion Throughput expansion to 205 ktpd from current 175 ktpd Utilise existing infrastructure EIA baseline study underway Feasibility study completed once EIA approved Pre-feasibility capex estimate of $1.2 billion (excluding desalination plant) Desalination plant and pumping system capex of approximately $400 million Additional 90-95 ktpa Cu, net 40-45 ktpa Cu District potential Over 6 billion tonnes of resources Only 1/3 of resources included in 23-year mine plan Significant scope to expand capacity beyond 205 ktpd Leverage existing infrastructure 20 20
Further growth opportunities beyond 2020 Twin Metals Minnesota Project 2.4 billion tonne resource containing copper, nickel and PGMs Optimising pre-feasibility study Consolidated ownership of project Advancing permitting process Exploration Ongoing exploration and evaluation in Chile and internationally to replace and expand existing resource base Successful in-house exploration maximises value creation for shareholders 21 21
Investment case Centinela
Investment case steady, stable and secure 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 Return of capital to shareholders Prioritising brownfield projects Investing through the cycle Continuing to advance projects Optimistic on copper in the medium to long term 23
Questions Centinela