FTSE 100 Conference for Private Client Fund Managers - LSE - ANTO LN ADR - ANFGY Andrew Lindsay - Director, London Office
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FTSE 100 Conference for Private Client Fund
Managers
LSE – ANTO LN
ADR – ANFGY
Andrew Lindsay – Director, London Office
2 July 2014
1
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.
Company overview
• Four copper mines in Chile
El Tesoro
• Market capitalisation (price £7.74) $12.9 billion
• Copper production 721,200 tonnes (2013) Michilla
Esperanza
• Production growth in the last 5 years 65%
• Low net cash costs $1.36/lb (2013)
• Chilean Luksic family ownership ≈ 65%
• 5 year average payout ratio 78%
1,100km
Los Pelambres
Antofagasta mines
3
Chile
• GDP per capita* $15,452 BOLIVIA
• GDP* $269bn
• GDP from mining** 11% Antofagasta
• Average CPI 2009-2013* 2.4%
CHILE
• Current CPI** 4.0% (May 2014)
• Exports from mining** 57%
• World’s largest copper producer ≈ 35%
Santiago
• OECD member
ARGENTINA
Pacific
Ocean
Atlantic
Ocean
600km
*Source: World Bank, 2013
**Source: Banco Central de Chile, 2013
44
Copper market
Global copper mine production Global refined copper consumption
by country in 2013 by sector market
Other Consumer products
16% 9%
Transport
Chile 13% Construction
Zambia 35% 31%
5%
DR Congo
6%
Russia Industrial
6% machinery
13%
Australia
6% China Electrical &
United States 10% electronic products
8% Peru
34%
8%
Total global copper mine production in 2013: Total global copper consumption in 2013:
18.1m tonnes 20.6m tonnes
Source: Wood Mackenzie Source: Wood Mackenzie
Best priced conductor of electricity and heat in most applications
5
Pricing environment and outlook
• LME copper price averaged $3.14/lb* in 2014 • Supply dependent on greenfield projects –
YTD (2013 H1: $3.42/lb) can be prone to delays
• Concerns over China’s growth and tightening • Exchange stocks are decreasing and
rules on collateral financing forecasts of surpluses are reducing
• Demand still strong in China, with a positive • Fundamentals remain healthy in medium
trend in NA and Europe and long term
• Prices supported by export ban in Indonesia, a • Current broker consensus for average 2014
tight scrap market and SRB purchases copper price is around $3.16/lb
LME copper price vs exchanges’ inventory* Copper supply and demand
400 1,000,000
900,000
380
800,000
360
700,000 tonnes
c/lb
340 600,000
500,000
320
400,000
300
300,000
280 200,000
Mar 2013
Dec 2012
Dec 2013
Jun 2012
Jun 2013
Mar 2014
Jun 2014
Sep 2012
Sep 2013
Exchanges' Inventory Copper price
6 *As at 25 June 2014 Source: Wood Mackenzie
Financial overview
2009 2010 2011 2012 2013
Revenue ($bn) 3.0 4.6 6.1 6.7 6.0
EBITDA ($bn) 1.7 2.8 3.7 3.9 2.7
Net earnings ($bn) 0.7 1.1 1.2 1.0 0.7
EBITDA margin (%) 56.7 60.6 60.3 57.3 45.3
Copper production (kt) 443 521 641 710 721
Gold production (koz) 35 35 197 300 294
Moly production (kt) 7.8 8.8 9.9 12.2 9.0
Net cash costs ($/lb)* 0.96 1.04 1.02 1.03 1.36
Payout ratio 35% 109% 35% 70% 142%
*Weighted average figures
7
Operations overview
Los Pelambres • Concentrate producer
• Large sulphide deposit with extensive resource base
• Flagship mine, 5th largest copper mine in the world
Esperanza
• Concentrate producer
• Sulphide deposit with significant gold by-product
El Tesoro
• Cathode producer
• Oxide deposit
Michilla
• Cathode producer
• Leachable sulphide and oxide deposit
8
Operations overview (cont.)
Copper Gold Moly Gross cash Net cash Mine life
(kt) (koz) (kt) costs ($/lb) costs ($/lb) (years)**
2013 405 57 9 1.52 1.16
Los Pelambres 24
2014 guidance 390 55 7.5 1.55 1.25
2013 175 237 - 2.36 1.43
Esperanza 46
2014 guidance 170 215 - 2.25 1.45
2013 103 - - 1.36 1.36
El Tesoro 9
2014 guidance 95 1.70 1.70
2013 38 - - 3.22 3.22
Michilla 1
2014 guidance 45 - - 2.40 2.40
2013 721 294 9 1.79* 1.36*
Group
2014 guidance 700 270 7.5 1.80* 1.45*
*Weighted average figures
**As at 1 January 2014
9
Production growth
Group Production Profile
(‘000s tonnes)
1,000
900
800
700
600
500
400
2013FY 2014E 2015E 2016E 2017E 2018E
Base Case (Incl. Esperanza 105ktpd) Antucoya
Encuentro Oxides Los Pelambres Expansion
• Antucoya and brownfield expansions provide medium term production growth
• Production of nearly 900,000 tonnes per year in 2018
• Other projects support longevity of production growth beyond 2018
10Focus on operating and project cost control
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
Greenfield Brownfield
Antucoya Encuentro Oxides
85ktpa* 50ktpa*
Capex: $1,900m*** Capex: $760m**
2014 2015 2016 2017 2018
Brownfield Brownfield
Esperanza Expansion
Los Pelambres Expansion
10-12ktpa*
95ktpa*
Capex: $110m*** Key – current stage:
Capex: $1,200m**
Feasibility study
*Average figures
Construction
**Pre-feasibility study figures
11 ***Feasibility study figures ProductionAntucoya
Delivering growth Current status
• 85,000 tonnes per annum of production • 74% overall project progress (design, procurement,
• Commence production first half 2015 construction) and 52% construction progress as at
31 March 2014
• First full year of production 2016
• $650m project financing completed in December
• Synergies with Esperanza water pipeline 2013
• Long-term power agreement signed
12Focus on brownfield expansions
Esperanza
• Debottlenecking project to reach 105ktpd throughput from
97ktpd
• Project completion in 2015
El Tesoro – Encuentro Oxides
• Encuentro Oxides will ensure maximum utilisation of existing SX-
EW facility from 2016
• Maintain production at nearly 100,000 tpa until 2023
• Further oxides deposits in the CMD could provide additional feed
• Acts as a pre-strip for Encuentro Sulphides
Los Pelambres
• Daily throughput expansion to 205ktpd from current 175ktpd
• Utilise existing infrastructure
• Feasibility study to be completed early 2015
13Longer-term growth opportunities beyond 2018
Los Pelambres – long term further Twin Metals, Minnesota
expansion • The Group’s most advanced international
• A world class deposit opportunity
• Current resource base triple the size of the • 2.3 billion tonne resource containing copper,
current 23 year mine plan nickel and PGMs
Centinela Mining District Exploration
• Large mining district • Ongoing exploration and evaluation in Chile
• Esperanza Sur and Encuentro Sulphides to be and internationally to replace and expand
developed first existing resource base
• Pre-feasibility study to be completed at the end • Successful in-house exploration maximises
of 2014 value creation for shareholders
14Investment case
High • Competitive cash costs
quality • Strong production and resource base
assets
Cost • Focus on operating and project cost control
control • Strong operating margins and capital efficiency
Capital • Return of capital to shareholders
discipline • Prioritising brownfield projects
Investing • No change to strategy
through • Production of nearly 900,000 tonnes in 2018
the cycle
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