REG - Antofagasta PLC - CENTINELA SECOND CONCENTRATOR PROJECT APPROVED

AntofagastaAnnouncement

20/12/2023 07:00

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RNS Number : 4393X  Antofagasta PLC  20 December 2023

NEWS RELEASE, 20 DECEMBER 2023

 

CENTINELA SECOND CONCENTRATOR PROJECT APPROVED FOR DEVELOPMENT

ADDING 170,000 COPPER EQUIVALENT TONNES PER YEAR(1)

Antofagasta plc ("Antofagasta" or the "Company"), a global leader in the
copper mining industry, is pleased to announce that after an extensive review,
the construction of the Centinela Second Concentrator Project has been
approved. Critical path works will begin immediately with full construction
expected to commence after definitive project finance documents have been
executed during Q1 2024.

Antofagasta's CEO, Iván Arriagada said: "The Centinela Second Concentrator
Project is a key element of our profitable growth strategy as it will add a
further 170,000 copper equivalent tonnes per year of production(1), with first
copper expected in 2027, significantly progressing us towards our long-term
ambition of 900,000 tonnes of profitable copper production. Importantly, it
will also reduce net cash costs and unlock significant value in the Centinela
District's two billion tonne ore reserve. This brownfield expansion project is
expected to deliver attractive returns in excess of our cost of capital at a
wide range of commodity prices. We are leveraging more than 20-years of
operational experience and understanding of Centinela's ores, utilising
existing infrastructure and building on long-established relationships within
our local communities.

"We are a company focused on profitable growth and financial discipline, and
this project will elevate Centinela to become one of the top 15 copper mines
in the world by output and we will become one of the leading gold producers in
Chile. At the same time, this project will create significant financial and
non-financial value for all stakeholders while remaining consistent in our
approach to disciplined capital allocation.

"Our view on the medium to long-term outlook is that the world is facing a
significant shortage of copper, with electrification and the energy transition
driving rising demand. The Second Concentrator Project is a clear opportunity
to provide additional copper from our existing resource base, using 100%
renewable electricity and raw sea water to reduce our environmental footprint,
and as a project, represents a demonstration of our purpose of developing
mining for a better future."

KEY HIGHLIGHTS

·    Growth: Centinela Second Concentrator to produce an additional
170,000 tonnes of copper equivalent tonnes per annum, comprising of 144,000
tonnes of copper production, 130,000 ounces of gold production and 3,500
tonnes of molybdenum production 1 , with a 36-year mine life based on
Centinela's substantial ore reserve of two billion tonnes.

·    Lower net cash costs: Moving to first quartile C1 cost of production
at Centinela through an increased focus on concentrator capacity that
incorporates modern technologies, increased by-products and greater economies
of scale. Net cash costs in the Centinela district are expected to be in the
first quartile of the industry cost curve following the expansion.

·    Capital investment: Project cost of $4.4 billion, including a new
95ktpd concentrator plant incorporating high pressure grinding rolls ("HPGRs")
to reduce energy consumption, the expansion of the existing raw seawater
pumping and transport system, a new tailings storage facility, capacity growth
in energy and other input supply infrastructure, the expansion of outbound
logistics networks such as the concentrate transport system and critical port
infrastructure, additional loading equipment, autonomous hauling equipment and
a truck-shop for the mine expansion at Esperanza Sur. Also included are camps,
and ancillary civil infrastructure, which have been designed to fully
integrate into the existing Centinela operation, to avoid any redundancy. This
updated and approved capital cost estimate (previously $3.7 billion -
announced in August 2022) is based on advanced detailed engineering and
includes escalation for inflation during construction, a stronger local
currency estimate, updates to local labour regulations and additional
contingency provisions. The phasing of the project's capex is expected to be
weighted towards 2025, with similar expenditures in adjacent years.

·    Mining plan: The second concentrator will source ore initially from
the recently opened Esperanza Sur pit and later from the Encuentro pit. The
sulphide ore in the Encuentro pit lies under the Encuentro Oxides reserves,
which are expected to be depleted by 2026. Fully exposing the sulphide ore in
the optimal sequence required to initiate feed to the second concentrator from
the Encuentro Pit is expected to require separate investments in
infrastructure, mining equipment and mine development activities, which will
materially commence half-way through the construction phase of the second
concentrator and will span a period of 3-4 years. The combined investment in
mine development and sustaining capital for the expansion of the Encuentro pit
is estimated to be approximately $1 billion. This expansion in mining
activities will further enable Centinela to achieve the development potential
of its extensive mineral resource base.

·    Financing: Project to be financed by Centinela through a combination
of direct funding from Centinela's shareholders (Antofagasta plc and Marubeni
Corporation, representing approximately 40% of total funding), and project
finance provided by lenders. Definitive project finance documents are expected
to be executed during Q1 2024.

·    Water infrastructure: Detailed terms and conditions have been
substantially completed for the option to provide water for Centinela's
current and future operations by a third party acquiring the existing water
supply system and building the new water pipeline expansion. The planned
outsourcing of the water supply will only proceed if it improves the net
present value of the project, with closure of this process scheduled to be
made alongside the execution of definitive project finance documents during Q1
2024. If it goes ahead as planned, an estimated amount of $600 million in cash
will be received for the divestment of the existing water infrastructure and
the project cost will reduce by approximately $400 million, considering that
the investment required to expand the existing water system to supply the
Second Concentrator will be undertaken by a third party.

·    Project permitting: The Centinela Second Concentrator Project has all
the relevant permits approved by the authorities in Chile for the project to
proceed into the construction phase.

·    Timeline: Three-year construction schedule, with critical path works
commencing immediately. First production is expected in 2027.

Further details are provided in a presentation on the Company's website,
available at www.antofagasta.co.uk (http://www.antofagasta.co.uk) .

Management Presentation and Q&A

There will be a virtual presentation and Q&A that will be hosted today at
10:00am (UK time) by Iván Arriagada - Chief Executive Officer and Mauricio
Ortiz - Chief Financial Officer, with the following details for accessing the
meeting:

Date                            Wednesday 20
December 2023

Time                           10:00am (UK time)

Online link               Please click here to
(https://antofagasta-creating-a-tier-1-mining-district.open-exchange.net/)
(https://antofagasta-creating-a-tier-1-mining-district.open-exchange.net/)
join the conference online
(https://antofagasta-creating-a-tier-1-mining-district.open-exchange.net/) (or
copy the URL shown below into your browser).

 
https://antofagasta-creating-a-tier-1-mining-district.open-exchange.net/
(https://antofagasta-creating-a-tier-1-mining-district.open-exchange.net/)

 

For those investors who are not able to join the conference by video, you can
join by telephone using the dial-in details provided via the link shown above,
where participants will be able to hear the presentation, the Q&A, and ask
questions. Note, however, that if you choose the dial-in option, when
registering please add the telephone number that you intend to use to access
the call. Unregistered numbers may be removed from the call.

Video and telephone participants are encouraged to register in advance of the
call commencing, to avoid delays in accessing the meeting.

 

 Investors - London                                                                   Media - London
 Rosario Orchard      rorchard@antofagasta.co.uk (mailto:rorchard@antofagasta.co.uk)  Carole Cable   antofagasta@brunswickgroup.com (mailto:antofagasta@brunswickgroup.com)
 Robert Simmons       rsimmons@antofagasta.co.uk (mailto:rsimmons@antofagasta.co.uk)  Telephone      +44 20 7404 5959
 Telephone            +44 20 7808 0988

                                                                                      Media - Santiago
                                                                                      Pablo Orozco   porozco@aminerals.cl (mailto:porozco@aminerals.cl)
                                                                                      Carolina Pica  cpica@aminerals.cl (mailto:cpica@aminerals.cl)
                                                                                      Telephone      +56 2 2798 7000

 

 

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(https://www.antofagasta.co.uk/investors/news/email-alerts/)

   LinkedIn (https://www.linkedin.com/company/antofagasta-plc)

 

 1  Figures represent the average over an initial 10-year period.

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