REG - Antofagasta PLC - Q1 2015 PRODUCTION REPORT <Origin Href="QuoteRef">ANTO.L</Origin>

AntofagastaAnnouncement

15/07/2015 15:09

RNS Number : 6124L
Antofagasta PLC
29 April 2015
NEWS RELEASE, 29 APRIL, 2015
Q1 2015 PRODUCTION REPORT
NORMAL OPERATIONS RESUMED AFTER Q1 DISRUPTIONS
Antofagasta plc CEO, Diego Hernndez, said: "As we have previously announced, the first quarter of this year has been affected by water issues of very different kinds at both Los Pelambres and at Centinela. At Los Pelambres protests by members of the local community concerned about the shortage of water in the region blocked access to the mine impacting production; while in the north of Chile our operations were disrupted by unprecedented heavy rains. 
"After reaching agreement with the local community at Los Pelambres, normal operations resumed, as have operations at Centinela following the end of the rain storms.
"Although we expect to recover some of the lost production resulting from these disruptions, production for the year will be some 15,000 tonnes of copper lower than we originally forecast. However, we still expect our net cash costs for the year to be around $1.40/lb.
"Despite the disruption we have seen in this first quarter, we remain confident that our existing strategy of reducing costs, engaging with stakeholders to find solutions to long-term issues and investing through the cycle will continue to strengthen the Group."
HIGHLIGHTS
PRODUCTION
 Copper production in Q1 2015 was 146,400 tonnes, a13.6% decrease compared with Q1 2014 and a 21.9% reduction with the previous quarter, reflecting primarily the impact of disruptions at Los Pelambres during the quarter that resulted in lower throughput
 Gold production was 57,400 ounces in Q1 2015, a 30.3% decrease on Q4 2014 due to lower throughput at Los Pelambres and Centinela and is similar to Q1 2014.
 Molybdenum production at Los Pelambres was 2,100 tonnes in Q1 2015, compared with 2,400 tonnes in Q4 2014 principally due to lower throughput, and 23.5% higher than in Q1 2014 as higher grade material was mined.
CASH COSTS
 Cash costs before by-product credits in Q1 2015 were $1.83/lb, the same as in Q1 2014 and 4.6% higher than in Q4 2014. This increase mainly related to lower production
 Net cash costs were $1.43/lb in Q1 2015, a 2.9% increase compared with the previous quarter primarily due to lower production and lower realised gold and molybdenum prices
OTHER
 During the quarter, the Group reached an agreement with the communities in the Choapa Valley to work with them to design a lasting solution to the water issues in the region. The Group has agreed to support the communities affected in the area by committing to use sea water for any future expansions at Los Pelambres. The Group has also committed to funding evaluation studies for a desalination plant and a water dam project for the benefit of the communities and the region.
 Los Pelambres has appealed a ruling by the Civil Court of Los Vilos that the plan submitted by Los Pelambres to the Court was not sufficient to address requirements to allow the natural flow of the Pupo stream to the community of Caimanes. This process is ongoing and there are no further updates since the 2014 Preliminary Results announcement made on 17 March.
 In March 2015, the Atacama Desert experienced unusually heavy rainfall which led to the temporary suspension of activities at Centinela, Michilla and Antucoya.
 In April, the Group announced the sale of its water division for approximately $960 million, before taxes and transaction costs, to Empresas Pblicas de Medelln. The sale is subject to certain standard conditions and approvals and is expected to be completed by the end of May 2015.
GROUP PRODUCTION AND CASH COSTS
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
Copper production
kt
146.4
187.5
(21.9)
146.4
169.4
(13.6)
Gold production
koz
57.4
82.3
(30.3)
57.4
56.8
1.1
Molybdenum production
kt
2.1
2.4
(12.5)
2.1
1.7
23.5
Cash costs before by-product credits
$/lb
1.83
1.75
4.6
1.83
1.83
0.0
Net cash costs
$/lb
1.43
1.39
2.9
1.43
1.46
(2.1)
MINING OPERATIONS
Los Pelambres
Los Pelambres produced 78,800 tonnes of copper in Q1 2015 compared with 95,700 tonnes in 1Q 2014 and 99,700 tonnes in the previous quarter. This decrease is mainly due to actions of protesters and lower grades. The protesters blocked the access road to the mine for ten consecutive days in early March, disrupting normal operations and reducing throughput during the quarter to 151,800 tonnes per day, some 6.6% less than in Q1 2014 and 13.7% lower than in the previous quarter. The protests were triggered by a small group of people seeking action by Los Pelambres and the local government to help alleviate the current drought conditions in the region.
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.
Molybdenum production decreased to 2,100 tonnes in Q1 2015, from 2,400 tonnes in the previous quarter, primarily due to the lower throughput explained above, partly offset by higher grades. In comparison with Q1 2014, molybdenum production rose by 23.5% mainly due to higher grades.
Cash costs before by-product credits in Q1 2015 were $1.60/lb, compared with $1.52/lb in the previous quarter. This was principally due to the lower production in the first quarter of this year as a result of the road blockages mentioned above, partly offset by the weakening of the peso and lower input costs. Compared with Q1 2014, cash costs before by-product credits were 2.4% lower in Q1 2015, primarily due to the 'one-off' signing bonuses paid to employees following the conclusion of labour negotiations in Q1 2014 and lower energy and input costs during the first quarter of 2015, partly offset by higher TC/RCs.
Net cash costs in Q1 2015 were $0.02/lb higher than in the previous quarter at $1.27/lb primarily reflecting lower molybdenum production and lower realised molybdenum prices. Net cash costs in Q1 2015 were 3.1% lower than in the same period last year primarily reflecting the increase in molybdenum production.
LOS PELAMBRES
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
Daily ore throughput
Kt
151.8
175.8
(13.7)
151.8
162.6
(6.6)
Copper grade
%
0.69
0.72
(4.2)
0.69
0.73
(5.5)
Copper recovery
%
87.0
87.8
(0.9)
87.0
91.7
(5.1)
Copper production
Kt
78.8
99.7
(21.0)
78.8
95.7
(17.7)
Copper sales
Kt
79.9
106.1
(24.7)
79.9
95.8
(16.6)
Molybdenum grade
%
0.019
0.017
11.8
0.019
0.014
35.7
Molybdenum recovery
%
81.3
86.0
(5.5)
81.3
86.6
(6.1)
Molybdenum production
Kt
2.1
2.4
(12.5)
2.1
1.7
23.5
Molybdenum sales
kt
1.9
2.4
(20.8)
1.9
1.5
26.7
Gold production
Koz
11.3
15.9
(28.9)
11.3
15.5
(27.1)
Gold sales
Koz
12.4
17.0
(27.1)
12.4
15.5
(20.0)
Cash costs before by-product credits*
$/lb
1.60
1.52
5.3
1.60
1.64
(2.4)
Net cash costs
$/lb
1.27
1.25
1.6
1.27
1.31
(3.1)
* Includes tolling charges of $0.24/lb in Q1 2015, $0.21/lb in Q4 2014 and $0.20/lb in Q1 2014 
Centinela
Total copper production at Centinela was 60,400 tonnes in Q1 2015, 14,400 tonnes lower than in the previous quarter and 4.0% lower than the same period last year mainly due a temporary shutdown at the operation during the unprecedented heavy rains in the Atacama Desert in March.
Production of copper in concentrates was 38,400 tonnes in Q1 2015, compared with 49,100 tonnes in the previous quarter, primarily due to lower throughput as result of scheduled maintenance and the shutdown following the heavy rains. Copper in concentrate production was 2.0% lower compared with the same period last year reflecting lower throughput in Q1 2015 as explained above, offset by higher grades.
Cathode production in Q1 2015 was 21,900 tonnes, a 14.8% decrease on the 25,700 tonnes produced in Q4 2014 largely as a result of anticipated lower grades and lower throughput. Compared with Q1 2014, cathode production was 7.6% lower primarily as a result of lower grades.
Gold production was 46,100 ounces in Q1 2015, 20,200 ounces lower than in the prior quarter primarily due to lower throughput as explained above and lower grades. Gold production was 11.6% higher compared with the same period last year due to higher grades and recoveries, partly offset by lower throughput.
Cash costs before by-product credits were $2.06/lb in Q1 2015 compared with $1.95/lb in the previous quarter. This increase in costs was due to the lower production explained above, partly offset by the 'one-off' signing bonuses paid to employees following the conclusion of labour negotiations in Q4 2014. Cash costs before by-product credits were 3.0% higher compared with Q1 2014, again mainly as a result of lower production in Q1 2015.
Net cash costs were 10.5% higher than in the previous quarter at $1.58/lb in Q1 2015 due to the increase in cash costs before by-product credits explained above and lower gold production. Net cash costs were 3.3% higher compared with the same period last year primarily reflecting lower realised gold prices.
CENTINELA
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
CONCENTRATES
Daily ore throughput
kt
74.7
88.0
(15.1)
74.7
82.1
(9.0)
Copper grade
%
0.71
0.71
0.0
0.71
0.64
10.9
Copper recovery
%
88.0
88.4
(0.5)
88.0
87.6
0.5
Copper production
kt
38.4
49.1
(21.8)
38.4
39.2
(2.0)
Copper sales
kt
37.8
54.6
(30.8)
37.8
39.0
(3.1)
Gold grade
g/t
0.30
0.32
(6.3)
0.30
0.26
15.4
Gold recovery
%
78.8
80.0
(1.5)
78.8
70.6
11.6
Gold production
koz
46.1
66.3
(30.5)
46.1
41.3
11.6
Gold sales
koz
46.9
68.5
(31.5)
46.9
41.6
12.7
CATHODES
Daily ore throughput
kt
25.4
26.6
(4.5)
25.4
25.8
(1.6)
Copper grade
%
1.17
1.41
(17.0)
1.17
1.28
(8.6)
Copper recovery
%
70.6
67.6
4.4
70.6
73.8
(4.3)
Copper production - heap leach
kt
19.2
23.1
(16.9)
19.4
21.2
(9.4)
Copper production - total (1)
kt
21.9
25.7
(14.8)
21.9
23.7
(7.6)
Copper sales
kt
21.8
25.5
(14.5)
21.8
23.1
(5.6)
Total copper production
kt
60.4
74.8
(19.3)
60.4
62.9
(4.0)
Cash costs before by-product credits(2)
$/lb
2.06
1.95
5.6
2.06
2.00
3.0
Net cash costs(2)
$/lb
1.58
1.43
10.5
1.58
1.53
3.3
1 Includes production from ROM material
2 Includes tolling charges for copper in concentrates of $0.28/lb in Q1 2015 and $0.24/lb in Q4 2014 and Q1 2014

Michilla
Copper production at Michilla was 7,300 tonnes in Q1 2015, 43.4% lower than in Q4 last year and 32.4% lower than in the same period last year which, as had been anticipated, is the result of mining activities winding down in advance of the planned mine closure in December 2015. Since January 2015 Michilla has begun the process of reducing the number of onsite staff and contractors.
Cash costs increased to $2.48/lb in Q1 2014 compared with $2.31/lb in the previous quarter primarily due to reduced mining activities partially offset by lower input costs. Cash costs were almost unchanged compared to Q1 2014.

MICHILLA
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
Daily ore throughput
kt
6.8
12.9
(47.3)
6.8
12.0
(43.3)
Copper grade
%
1.00
1.19
(16.0)
1.00
1.08
(7.4)
Copper recovery
%
78.1
78.5
(0.5)
78.1
80.0
(2.4)
Copper production - heap leach
kt
1.8
10.9
(83.5)
1.8
9.4
(80.9)
Copper production - total
kt
7.3
12.9
(43.4)
7.3
10.8
(32.4)
Copper sales
kt
8.4
12.9
(34.9)
8.4
10.4
(19.2)
Cash costs
$/lb
2.48
2.31
7.4
2.48
2.49
(0.4)

Antucoya
Despite the heavy rains in the north of Chile, the construction of Antucoya is progressing according to plan with 99.8% total progress (including design, engineering, procurement and construction) and 99.7% construction progress as at 31 March 2015. Construction is expected to complete in Q2 2015 followed by ramp-up achieving full production by the beginning of 2016. 

Transport and water
As previously announced on 23 April 2015, the Group has agreed the sale of its water division for approximately $960 million, before taxes and transaction costs, to Empresas Pblicas de Medelln, an electricity, gas, water and sanitation provider owned by the city of Medelln that delivers these services to over 20 million people in Colombia, El Salvador, Guatemala, Mexico and Chile.
The sale is subject to certain standard conditions and the approval of Empresa Concesionaria de Servicios Sanitarios S.A (ECONSSA), the grantor of the water concession, and is expected to be completed by the end of May 2015.
Total volumes transported by the transport division were 1.7 million tonnes in Q1 2015, 8.4% lower than in the previous quarter, and a 0.9% decrease on the same period last year.
The water division sold 12.7 million cubic metres in Q1 2015, 3.1% less than in the previous quarter, and 1.6% lower than in the same period last year.
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
Total tonnage transported
kt
1,714
1,871
(8.4)
1,714
1,729
(0.9)
Water volumes sold
mil m
12.7
13.1
(3.1)
12.7
12.9
(1.6)

Commodity prices and exchange rates
Q1
Q4
Year to Date
2015
2014
%
2015
2014
%
Copper
Market price
$/lb
2.64
3.00
(12.0)
2.64
3.19
(17.2)
Realised price
$/lb
2.45
2.85
(14.0)
2.45
2.87
(14.6)
Gold
Market price
$/oz
1,220
1,200
1.6
1,220
1,293
(5.6)
Realised price
$/oz
1,252
1,198
4.5
1,252
1,403
(10.8)
Molybdenum
Market price
$/lb
8.5
9.3
(8.6)
8.5
10.0
(15.0)
Realised price
$/lb
7.6
5.9
28.8
7.6
10.5
(28.6)
Exchange rates
Chilean peso
per $
624
599
4.2
624
551
13.2
The spot commodity prices for copper, gold and molybdenum as at 31 March 2015 were $2.74/lb, $1,186/oz and $8.4/lb respectively compared with $2.88/lb, $1,206/oz and $9.0/lb as at 31 December 2014 and $3.01/lb, $1,292/oz and $10.6/lb as at 31 March 2014. 
The provisional pricing adjustments for the quarter for copper, gold and molybdenum were negative $66.3 million, positive $0.6 million and negative $4.8 million respectively.
Los Pelambres - Mauro tailings dam
Since the Mauro tailings dam began operating in 2008, there have been a series of legal claims by some members of the Caimanes community who live in the area. These claims have been through various courts and stages of appeal, but Los Pelambres has always complied with all applicable laws, regulations and controls. 
Two of these claims are currently ongoing and Los Pelambres is continuing to take necessary steps to protect its position. 
The most recent developments in relation to the first of these claims were announced on 9 March 2015 and in the 2014 Preliminary Results announcement on 17 March 2015. As explained in these announcements, Los Pelambres has appealed to the Appeal Court of La Serena the decision of the Civil Court of Los Vilos (the "Civil Court") that Los Pelambres must demolish part, or all, of the tailings dam wall. The dam will continue to operate normally while the appeal process proceeds, however there may be further appeals by the parties during this period. Los Pelambres continues to consider the exercise of all available legal measures that may be required to overturn this decision and address its potential consequences.
In a second claim, as previously reported in the 2014 Preliminary Results announced on 17 March 2015, the plaintiffs are seeking demolition of the dam on the basis of the risk that its collapse would pose to the community. The Civil Court issued a decision in May 2014 denying the demolition request, but ordering Los Pelambres to undertake some additional measures to ensure protection of the community in the event of a major earthquake or similar natural event.
The decision of the Civil Court was appealed by both the plaintiffs and Los Pelambres and in April 2015 the Appeal Court of La Serena upheld Los Pelambres's appeal, overturning the decision of the Civil Court and rejecting completely the plaintiff's claim. The plaintiffs may appeal this ruling to the Supreme Court and further updates will be provided in due course.
  
Investors - London   Media (Brunswick)
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
Investors - Santiago  
Alfredo Atucha   aatucha@aminerals.cl
Telephone   +56 2 2798 7000
  

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