During the year, as part of a move to strengthen minority
shareholder protection in companies with a controlling shareholder,
such as ours, new Listing Rules came into force that require such
companies to enter into relationship agreements with their
controlling shareholders. The Company has therefore entered into a
new relationship agreement, which includes the mandatory provisions
required by the new Listing Rules that require transactions between
the controlling shareholders and the company to be on arm's length
terms and the controlling shareholder will not take any action that
will prevent the Company from complying with its obligations under
the Listing Rules. The Company and our controlling shareholders
believe that this new agreement further clarifies the relationship
and provides comfort to all shareholders on how the Company
conducts its business. I hope you agree.
Also, as part of the new Listing Rules, all of our independent
Non-Executive Directors are now subject to a dual vote by
shareholders when they stand for re-election today. This means that
each resolution to elect or re-elect an independent Non-Executive
Director must be approved by both a majority vote of all
shareholders and a majority vote of the Company's independent
shareholders.
In September last year I stepped back from the position of
Executive Chairman to become Non-Executive Chairman. At the same
time Diego Hernandez took on the role of Group CEO, having
previously been responsible for the mining division. These changes
reflect the development of the Group and my role is now less
focused on the day-to-day operations and more concerned with the
strategic development of the Group and leading the Board.
Also, I would like to take this opportunity to thank Nelson
Pizarro for the valuable contribution that he made to the Group
during his time as a non-executive director and I wish him well in
his important new position as CEO of Codelco.
Looking ahead - Our three-pillar strategy for growth remains
unchanged. We focus first on optimising our existing operations,
where investment generates good returns quickly. Secondly, we look
for sustainable, organic growth in the areas around our operations.
And thirdly we seek growth beyond our core businesses both in Chile
and abroad.
Chile continues to offer good opportunities for growth. Our
largest current development is our Antucoya project in the north of
Chile where commissioning is underway with ramp-up to full capacity
expected to be completed by the end of this year with the first
year of full production in 2016. Beyond Antucoya, we have a number
of brownfield projects underway. The first of these to come
on-stream is the expansion of the Centinela concentrator. Work
continues to optimise the concentrator and we expect to reach
throughput of 105,000 tonnes per day in late 2015, up from the
86,000 tonnes per day we achieved in 2014.
The next brownfield project in our project pipeline is Encuentro
Oxides which will enable Centinela's SX-EW plant to continue to
produce at full capacity of 100,000 tonnes of cathode per year,
helping to offset a decline in production that we would otherwise
see as a result of falling grades. The feasibility study was
completed in November of last year and full-scale construction
started early this year. Through a number of optimisations of the
project, including mine fleet, pre-stripping and truck shop
optimisations, we have been able to reduce the pre-feasibility
study capital expenditure estimate for the project by more than
$150 million to a feasibility study estimate of $636 million.
Also at Centinela, we have completed the feasibility study on
the construction of a molybdenum plant which would come into
production at the end of 2016 producing some 2,400 tonnes of moly a
year for the first five years, before it increases once the second
concentrator at Centinela is completed to over 6,000 tonnes per
year.
Our last project at Centinela is the construction of a second
concentrator whose pre-feasibility study, as I mentioned earlier,
will be brought to the Board for approval in the coming months.
Work on the Environmental Impact Assessment ("EIA") is well
advanced and is expected to be submitted for approval by the end of
this year with production starting in 2019. The Second Concentrator
is designed to produce approximately 140,000 tonnes of copper per
year, 150,000 ounces of gold and 6,500 tonnes of moly, and capital
expenditure is estimated at $2.7 billion. This will be Phase 1 of
the development and we expect that Phase 2 would start some five
years later increasing throughput by over 60% and metal production
by a further 60,000 tonnes of copper, 20,000 ounces of gold and
3,000 tonnes of moly.
The last of our current brownfield projects is at Los Pelambres.
The feasibility study examining the options for an incremental
expansion to increase daily throughput at Los Pelambres to 205,000
tonnes continued during 2014. An environmental baseline study which
is required as part of the project development has been started and
we expect to submit the EIA in mid-2016. This EIA has been delayed
by the need for additional work following our commitment only to
use sea water for any expansion at Los Pelambres and we hope that
the EIA will be approved by the regulatory authorities in
2017/2018.
Beyond our key brownfield projects, we have a number of
greenfield projects. Our largest longer-term growth projects are a
potential further expansion of Los Pelambres and the development of
Twin Metals.
The pre-feasibility study on Twin Metals, our copper, nickel and
platinum group metals ("PGMs") project based in Minnesota, in the
United States was completed in August last year. In November 2014
the Group entered into an agreement to acquire all of the issued
and outstanding shares of our project partner Duluth Metals
Limited, bringing Antofagasta's ownership in the project to 100%.
The acquisition was completed in early 2015 and we are now
evaluating further optimisations of the prefeasibility study that
was completed in 2014 while also advancing the permitting process.
The project has significant reserves of copper and nickel with a
long mine life, and is a world-class deposit in terms of size and I
expect it to be an important part of the Group in the future.
Finally, we look for growth further afield where considerable
and more diverse opportunities exist, but where we do not have the
benefit of any organic synergies. We have an active early-stage
exploration programme beyond our existing core locations at
Centinela and Los Pelambres with a number of exploration earn-ins
and strategic alliances with junior mining companies around the
world. These are all early stage at the moment, but we hope that
one or more may one day become operating mines.
Each year we strive to improve our environmental and social
performance. Last year we became a member of the International
Council on Mining and Metals (the ICMM) and this required us to
first satisfy their entry requirements for sustainable behaviour
and transparency. We are now working with the ICMM in promoting the
highest principles and standards for sustainable mining and by
fulfilling these standards ourselves.
Today, you will have noticed, we have provided you with a copy
of our latest Sustainability Report. It has only just been issued
and I hope you enjoy reading it and seeing what we have achieved
during the year. This includes the progress in the various
renewable power projects we have invested in, with the El Arrayán
wind farm coming on-line in June 2014 and our commitment to take
power from two new solar projects. I am proud to say that by
mid-2016, 50% of Los Pelambres' power will come from renewable
sources and by the end of 2018 this should increase to 80%
including the Alto Maipo run-of-river power generator - a major
achievement for a mine of its size.
Looking to the years ahead our strategy remains unchanged. We
invest throughout the cycle in projects that generate good returns.
Our core assets form the foundation of our strategy, providing the
cash flow and ability to develop organically and externally. The
success of our operations is the focus of the day-to-day activities
of the Group and it is upon this that we build for the future.
Sustainability and the health and safety of our employees remain
central to our success.
In 2015 we expect to produce 695,000 tonnes of copper at a net
cash cost of $1.40/lb and while we continue to work on reducing
costs during this period of consolidation.
This year will be an important year for Antofagasta as we
complete our current projects, prepare for our next phase of growth
and face the challenges that the current macroeconomic environment
brings.
Whilst the sector faces challenges in the short term, we
continue to invest through the cycle. We have a portfolio of
quality, long-life assets; we are focussed on developing and
expanding our two world-class mining districts and advancing our
portfolio of projects. With our low costs and strong balance sheet
we are well-placed to weather the current market conditions and to
take advantage of the upturn when it occurs.
I would like to take this opportunity to thank all of the
employees and contractors that work across the Group whose
contribution has helped to make Antofagasta what it is today and
also to thank the communities in which we operate for their support
and engagement.
Investors - London Public Relations Advisors - London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Paresh Bhanderi pbhanderi@antofagasta.co.uk Robin Wrench antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
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