TIDMANTO
RNS Number : 7095N
Antofagasta PLC
20 May 2015
FOR IMMEDIATE RELEASE, 20 MAY 2015
CHAIRMAN'S COMMENTS AT THE 2015 ANNUAL GENERAL MEETING
Antofagasta plc (the "Company") today released the script to be
used by the Chairman, Jean-Paul Luksic at the Company's Annual
General Meeting that commences at 10:30am today.
Thank you for joining us today.
As you can see all of your directors, except for Hugo Dryland
who has an important commitment in the US today, are in attendance,
as well as several members of senior management including our Group
CEO, Diego Hernandez, and the new CEO of our mining division, Ivan
Arriagada.
I would like to take this opportunity to welcome Mr. Jorge Bande
as our latest director who joined our Board in December. Jorge has
extensive experience across the energy, mining, and water sectors
and will be standing for election later during this meeting.
Before we present the resolutions on today's formal agenda, I
would first like to provide you with an overview of Antofagasta's
financial and operational performance during 2014 and the outlook
for the rest of this year.
Antofagasta spent 2014 consolidating the business which we
believe will continue to secure the company's margins while copper
prices remain weak and volatile, and put the company in a stronger
financial position once the market recovers. The last few years
have seen declining commodity prices, heightened geopolitical
tensions and a higher cost of mining around the world, including in
Chile. This macro environment has created an atmosphere of
uncertainty for investors and they have looked for companies with
the lowest risk profile. Our strategy in this environment remains
robust and consistent: we focus on lower risk / higher return
projects such as brownfield expansions while steadily advancing our
greenfield projects as part of our long term growth. We seek only
to invest in projects that we expect to offer strong returns. We
continue to concentrate on what we know best - producing copper,
reducing our costs and building a platform for long-term growth.
When the world economy picks up again and demand growth
accelerates, the supply side response will be constrained by the
lack of development in these past few years which we believe will
ensure that the long-term copper fundamentals remain strong.
Antofagasta is in a strong position to capitalise from that
stronger market environment.
Before saying a few words about our operating performance I
would just like to repeat my comments in the Annual Report about
the fatalities that occurred last year. Despite our continued
efforts five people died during the course of the year. This is
terrible, and the Board and I offer our heartfelt sympathy to their
families. We owe it to their memory, and the memory of the others
lost over the years, to redouble our efforts to achieve our target
of zero fatalities. I know that this is much easier to say than to
do, but I want to make sure that each and every employee knows that
it is our top priority.
In 2014, we produced almost 705,000 tonnes of copper, slightly
lower than the record production levels achieved in 2013.
Whilst the Group has enjoyed a number of years of significant
growth, 2014 was a year of consolidation during which the Group
created a strong base from which to grow over the coming years. We
have focused on increasing our productivity and optimising the use
of our plant and equipment to ensure the highest levels of
efficiency. During the year, we completed the merger of Esperanza
and El Tesoro to form Minera Centinela, which has allowed us to
capture synergies arising from shared operational overheads, the
integration of mine plans and sharing properties and facilities.
The copper price is low at the moment and our strategy when prices
are down is to focus on higher return, lower risk projects such as
brownfield expansions whilst steadily advancing greenfield projects
as part of our long-term development. We seek only to invest in
projects that we expect to offer strong returns.
During 2014, we made good progress advancing the projects under
construction at Antucoya and Centinela, and early works started at
Encuentro Oxides shortly before the completion of its feasibility
study in November. The feasibility study on the Pelambres
Incremental Expansion continued through the year and the
pre-feasibility study on Centinela's Second Concentrator will be
brought to the Board for approval in the coming months, before it
progresses to the feasibility study stage. A pre-feasibility study
was also completed in 2014 on the Twin Metals Minnesota project.
These projects provide a healthy growth pipeline for the Group over
the coming five to ten years.
From a financial perspective, 2014's revenues were impacted by
lower realised commodity prices and slightly lower sales volumes.
Unit operating costs also increased, impacted by lower grades and
one-off signing bonuses paid to mine employees during the year,
partly offset by the weakening of the Chilean peso and lower input
costs. In addition, the Group made some $80 million of cost savings
during the year, which equated to some $0.05/lb. By-product
revenues were also impacted by lower production and a weaker gold
price. This has meant EBITDA decreased by 18% compared with 2013 to
$2.2 billion, however, our EBITDA margin remained resilient at 42%,
which is healthy compared to our peers.
Despite the difficult market conditions, the Group continued to
generate respectable operating cash flows of $2.5 billion during
the year, only some $150 million less than last year. By the end of
the year the Group's attributable net cash was still positive at
$315 million, which will soon be improved by the proceeds arising
from the recent sale of our water division.
The Board has proposed a final dividend of 9.8 cents per share,
which along with the 11.7 cents per share interim dividend, paid in
October 2014, results in a total dividend of 21.5 cents per share
for the year. This represents a total distribution of $212.0
million and a pay-out ratio of 35%.
Antofagasta has a history of returning excess capital to
shareholders, as illustrated last year when we paid down our net
cash position as a dividend with a pay-out ratio of over 140%. The
decision this year to pay a total dividend equal to 35% of net
earnings, excluding the deferred tax provision arising as a result
of the Chilean tax reform, was taken in view of the uncertainty in
the copper market at the start of this year, as well as
uncertainties at Los Pelambres arising from an adverse court
decision and actions by some protestors in February and March of
this year.
These uncertainties came to prominence within days of each other
at the beginning of March this year. One was related to the
scarcity of water in Choapa Valley near Los Pelambres and the other
was related to a court ruling about the flow of water in the Pupio
stream in a neighbouring valley. As these issues have been going on
for some time and have recently received some prominence, I would
like to spend a few moments explaining what happened and what the
current situation is.
There has been below average annual rainfall in the Los
Pelambres region for some years and this year it has been
particularly severe. A small group of protesters from the Choapa
Valley blocked the access road to the mine for ten days in early
March, disrupting normal operations and reducing throughput at the
mine. The protests were triggered by a small group of people
seeking action by Los Pelambres and the local government to help
alleviate the drought. Following a period of negotiation
facilitated by the government, Los Pelambres agreed to contribute
funding for the study of a desalination plant project, which would
be developed under a private-public alliance or public concession
scheme. Los Pelambres also agreed to contribute funds to complete
studies for the construction of a water dam for local use, which if
constructed would be developed under a private-public alliance.
Finally, Los Pelambres agreed that it will use sea water for any
further expansions of its mining operations.
The other uncertainty arose when the Civil Court of Los Vilos
notified Los Pelambres that the plan submitted by it was not
sufficient to address the requirements of the Supreme Court order
on the basis that the proposed works do not allow the natural flow
of the Pupío stream to the town of Caimanes and that as a
consequence Los Pelambres must destroy part, or all, of the
tailings dam wall. Los Pelambres has appealed the decision to the
Appeal Court of La Serena. The dam will continue to operate
normally while the appeal process proceeds, however the parties may
seek interim relief during this period.
I can assure you that Los Pelambres has always complied with all
applicable laws, regulations and controls, but it is likely that we
will continue to have legal and other challenges over the coming
years. We will seek to resolve these challenges and will continue
to engage with the local community as well as considering the
exercise of all available legal measures that may be required to
overturn any adverse court decisions.
Turning to corporate governance - maintaining high standards of
corporate governance is fundamental to the Board's ability to
discharge its duties to shareholders. The Board and I remain
committed to ensuring that the structures and procedures in place
across the Group reflect the best principles of good governance and
take into account the expectations of our stakeholders.
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