REG - Antofagasta PLC - Q1 2022 PRODUCTION REPORT

AntofagastaAnnouncement

21/04/2022 07:00

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RNS Number : 8179I  Antofagasta PLC  21 April 2022

NEWS RELEASE, 21 APRIL 2022

Q1 2022 PRODUCTION REPORT

PRODUCTION AND COSTS IN LINE WITH GUIDANCE

 

Antofagasta plc CEO, Iván Arriagada said: "Antofagasta´s copper production
of 138,800 tonnes and net cash costs of $1.75/lb in the first quarter was in
line with plan for the period and is consistent with annual guidance as copper
production is expected to increase quarter-on-quarter during the year.
Production reflected the impact of the ongoing drought at Los Pelambres and
the expected lower grades at Centinela Concentrates.

"The copper, gold and molybdenum markets have been strong throughout the
quarter, and we expect this to continue as structural supply and demand
dynamics support a tight physical market. In the meantime, we maintain our
focus on the safety and health of our employees and contractors, and on cost
control and disciplined capital allocation.

"With completion of the Los Pelambres desalination plant expected in H2 2022
and no precipitation until the rainy season, full year guidance is retained at
660-690,000 tonnes of copper at a net cash cost of $1.55/lb. Following the
completion of the review of the Los Pelambres Expansion project, total capital
expenditure for the full year is expected to be $1.9 billion, at the top end
of the previously guided range of $1.7-1.9 billion."

 

HIGHLIGHTS

PRODUCTION

·    Copper production in Q1 2022 at 138,800 tonnes was in line with
guidance and is expected to increase quarter-on-quarter during the year.
Production was 24.2% lower than in the same quarter in 2021 and 22.4% lower
than in Q4 2021 mainly due to the expected temporary reduction in throughput
at Los Pelambres because of the drought and lower grades at Centinela
Concentrates. Throughput at Los Pelambres was 39.9% lower than in Q1 2021 and
27.7% lower than in Q4 2021, and the grades at Centinela Concentrates were
26.7% and 25.4% lower respectively

·    Gold production was 38,400 ounces in Q1 2022, 35.0% lower than in the
same period in 2021 and 40.8% lower than in 4Q 2021, mainly due to expected
lower grades at Centinela

·    Molybdenum production in the quarter was 2,000 tonnes, a decrease of
1,000 tonnes compared to the same period in 2021 due to lower grades and
throughput at Los Pelambres, and 100 tonnes lower than in Q4 2021

CASH COSTS

·    Cash costs before by-product credits in Q1 2022 were $2.34/lb, in
line with expectations and 66c/lb higher than in the same period last year
mainly due to the temporary decrease in production. Higher input prices,
particularly for diesel and sulphuric acid, and general inflation were largely
offset by the weaker Chilean peso. Compared to the previous quarter, costs
increased by 21.9% on lower copper production due to lower grades and
throughput

·    Net cash costs were $1.75/lb in Q1 2022, compared to $1.16/lb in Q1
2021 and $1.35/lb in the previous quarter, reflecting the increase in cash
costs before by-product credits, slightly offset by higher by-product credits

 

GUIDANCE 2022

·    Guidance
(https://www.antofagasta.co.uk/media/4241/aplc21q4prodreport-vf.pdf) for the
year is unchanged. Group copper production for the full year is expected to be
660-690,000 tonnes, reflecting lower expected grades at Centinela Concentrates
and the temporarily reduced throughput at Los Pelambres. Guidance assumes
there is no precipitation until the rainy season and the desalination plant at
Los Pelambres starts operating in H2 2022. As previously announced, copper
production during the year is expected to be lowest  in Q1 and to increase
quarter-on-quarter thereafter

·    The drought has continued at Los Pelambres with no precipitation
during the quarter. Strict water management protocols are in place to optimise
water usage and mitigate the impact of low water availability

·    Cash cost guidance before and after by-product credits is also
unchanged at $2.00/lb and $1.55/lb respectively

·    The review of the Los Pelambres Expansion project has been completed
and Group capital expenditure for the year is expected to be $1.9 billion.
This is at the top end of the original guidance range of $1.7-1.9 billion

GROWTH PROJECTS UPDATE

·    The Company is making progress on unlocking the embedded growth
options in its portfolio with identified key brownfield developments and
incremental growth within its asset portfolio

·    The Los Pelambres Expansion project was 73% complete as at the end of
the quarter

·    A detailed review of the project schedule and costs has recently been
completed. The revised capital cost estimate resulting from the review is $2.2
billion (up from $1.7 billion). Of this increase, approximately $220 million
is related to the impact of COVID-19 on costs and the construction schedule,
$170 million to general inflation, including increased input prices, wages,
labour incentives and logistics costs, with the balance reflecting other
adjustments to implementation plans and an updated contingency provision

·    The completion schedule remains unchanged with the desalination plant
expected to be completed in H2 2022 and the expanded concentrator plant in
early 2023

·    The Zaldívar Chloride Leach project was completed in January 2022,
on schedule and on budget and is now being commissioned

OTHER

·    As announced
(https://www.antofagasta.co.uk/media/4265/anto-rd-announcement-mar2022.pdf) on
20 March, the Company, Barrick Gold and the Governments of Pakistan and
Balochistan have reached an agreement in principle on a framework that
provides for the reconstitution of the Reko Diq project, and a pathway for the
Company to exit the Project. If definitive agreements are executed and the
conditions to closing are satisfied, the project will be reconstituted under
Tethyan Copper Company Pty Limited ("TCC"), a joint venture held equally by
the Company and Barrick, and a consortium comprising various Pakistani
state-owned enterprises will acquire shares in TCC's subsidiary, which will
hold the project, for a consideration of approximately $900 million and the
proceeds will be distributed to the Company in return for its exit from the
TCC holding structure. If the conditions to closing are satisfied during 2022,
the Company would expect to receive those proceeds during 2023

·    Sales volumes during the quarter were affected by poor weather
conditions at the loading ports at the period end, which delayed shipments
into early April

·    The Company has been informed that the Consejo de Defensa del Estado
(CDE), an independent governmental agency responsible for the defence of the
interests of the State of Chile, has filed a claim against Minera Escondida,
the lithium producer Albermarle and Zaldívar, alleging that their extraction
of water from the Monturaqui-Negrillar-Tilopozo aquifer over the years has
impacted the underground water level. The Company is currently reviewing the
claim

·    The Constitutional Convention is currently debating the proposed
clauses for the new constitution and the final constitution must be completed
by 4 July. The new constitution will then be voted on in a national referendum
on 4 September

·    The draft mining royalty bill is being reviewed by the Finance
Committee of the Senate. However, the new Government is developing a proposal
for broader tax reform and this may impact or supersede the progress of the
royalty bill

 

 GROUP PRODUCTION AND CASH COSTS                               Year to Date          Q1     Q4
                                                               2022   2021   %       2022   2021   %
 Copper production                           kt                138.8  183.0  (24.2)  138.8  178.9  (22.4)
 Copper sales                                kt                115.9  182.8  (36.6)  115.9  197.2  (41.2)
 Gold production                             koz               38.4   59.1   (35.0)  38.4   64.9   (40.8)
 Molybdenum production                       kt                2.0    3.0    (33.3)  2.0    2.1    (4.8)
 Cash costs before by-product credits ((1))  $/lb              2.34   1.68   39.3    2.34   1.92   21.9
 Net cash costs ((1))                        $/lb              1.75   1.16   50.9    1.75   1.35   29.6

(1) Cash cost is a non-GAAP measure used by the mining industry to express the
cost of production in US dollars per pound of copper produced.

 

There will be a Q&A video conference call today at 2:00 pm (BST) hosted by
Iván Arriagada - Chief Executive Officer, Mauricio Ortiz - Chief Financial
Officer and René Aguilar - Vice President of Corporate Affairs and
Sustainability. Participants can register for the conference call here
(https://us02web.zoom.us/webinar/register/WN_Sj79lw7vSHGaG1xDhKCW9Q) .

 

 

 

 Investors - London                                                                  Media - London
 Andrew Lindsay      alindsay@antofagasta.co.uk (mailto:alindsay@antofagasta.co.uk)  Carole Cable      antofagasta@brunswickgroup.com (mailto:antofagasta@brunswickgroup.com)
 Telephone           +44 20 7808 0988                                                Telephone         +44 20 7404 5959
 Rosario Orchard     rorchard@antofagasta.co.uk (mailto:rorchard@antofagasta.co.uk)
 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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MINING OPERATIONS

Los Pelambres

As expected, Los Pelambres produced 54,100 tonnes of copper in Q1 2022, 36.3%
lower than in the same quarter last year and 27.2% lower than the previous
quarter, mainly driven by the reduced throughput, which was down 39.9%
compared with prior year and 27.7% with the previous quarter due to water
restrictions arising from the drought. Major maintenance was completed during
the quarter and mine movement and development has remained in line with
capacity which will allow added feed flexibility as throughput recovers with
increased water availability following the start-up of the desalination plant.

Molybdenum production in Q1 2022 decreased to 1,400 tonnes from 2,600 in Q1
2021, due to lower throughput and molybdenum grades.

Gold production for the quarter was 8,600 ounces, 5,700 ounces lower than in
the same period last year.

Cash costs before by-product credits in Q1 2022 at $1.98/lb were 35.6% higher
than in the same quarter in 2021 due to the decrease in production and higher
input prices, mainly energy and diesel. Compared to the previous quarter,
costs increased by 13.8%, also due to the decrease in production and higher
input prices.

Net cash costs in Q1 2022 increased by 43c/lb to $1.27/lb compared to Q1 2021
reflecting higher cash costs before by-product credits partially offset by
by-product credits increasing from 62c/lb to 71c/lb on higher molybdenum
realised prices partially offset by lower production. Compared to the previous
quarter net cash costs increased by 13.4%.

The Los Pelambres Expansion project was 73% complete (engineering, procurement
and construction) as at the end of the quarter.

 LOS PELAMBRES                                        Year to Date          Q1     Q4
                                                      2022   2021   %       2022   2021   %
 Daily ore throughput                        kt       98.8   164.5  (39.9)  98.8   136.6  (27.7)
 Copper grade                                %        0.68   0.67   1.5     0.68   0.67   1.5
 Copper recovery                             %        92.3   89.1   3.6     92.3   91.8   0.5
 Copper production                           kt       54.1   84.9   (36.3)  54.1   74.3   (27.2)
 Copper sales                                kt       41.9   80.7   (48.1)  41.9   89.9   (53.4)
 Molybdenum grade                            %        0.016  0.021  (23.8)  0.016  0.018  (11.1)
 Molybdenum recovery                         %        86.5   85.3   1.4     86.5   85.1   1.6
 Molybdenum production                       kt       1.4    2.6    (46.2)  1.4    1.8    (22.2)
 Molybdenum sales                            kt       1.2    2.6    (53.8)  1.2    2.2    (45.5)
 Gold grade                                  g/t      0.044  0.048  (8.3)   0.044  0.043  2.3
 Gold recovery                               %        73.5   68.1   7.9     73.5   74.5   (1.3)
 Gold production                             koz      8.6    14.3   (39.9)  8.6    11.8   (27.1)
 Gold sales                                  koz      6.4    12.9   (50.4)  6.4    14.2   (54.9)
 Cash costs before by-product credits ((1))  $/lb     1.98   1.46   35.6    1.98   1.74   13.8
 Net cash costs ((1))                        $/lb     1.27   0.84   51.2    1.27   1.12   13.4

(1) Includes tolling charges of $0.16/lb in Q1 2022, $0.15/lb in Q4 2021, and
$0.14/lb Q1 2021

 

 

Centinela

Total copper production in Q1 2022 at Centinela was 55,800 tonnes, 16.5% lower
than in the same quarter in 2021. Compared to the previous quarter, copper
production decreased by 21.8% on expected lower grades at Centinela
Concentrates and lower throughput at both Centinela Concentrates and Centinela
Cathodes.

Major maintenance was completed at Centinela Concentrates during the quarter.

Copper in concentrates production was 32,900 tonnes in Q1 2022, 27.4% lower
than in Q1 2021 and 30.6% lower than in the previous quarter. This decrease
was mainly due to expected lower copper grades of 0.44% compared to 0.60% in
Q1 2021, and slightly lower throughput.

Production of copper in cathodes rose 6.5% compared to Q1 2021. This was
primarily due to expected higher grades and recoveries, partially offset by
lower throughput.

Gold production was 29,800 ounces in Q1 2022, 33.6% lower than in the same
period last year and 43.9% lower than in Q4 2021 as grades, which are
correlated to copper grades, and recoveries decreased.

Cash costs before by-product credits in Q1 2022 were $2.70/lb, 51.7% higher
than in Q1 2021 primarily due to lower production and higher input costs,
particularly for diesel and sulphuric acid. Compared to the previous quarter
costs increased by 35.0% also due to lower production.

Net cash costs in Q1 2022 were $1.93/lb, 81c/lb higher than in the same
quarter last year reflecting the increase in cash costs before by-product
credits, partly offset by higher by-product credits of 11c/lb related to
increased moly production and higher realised prices. Compared to the previous
quarter net cash costs increased by 56.9% with by-product credits unchanged.

 

 CENTINELA                                          Year to Date          Q1     Q4
                                                    2022   2021   %       2022   2021   %
 CONCENTRATES
 Daily ore throughput                        kt     104.0  106.4  (2.3)   104.0  110.8  (6.1)
 Copper grade                                %      0.44   0.60   (26.7)  0.44   0.59   (25.4)
 Copper recovery                             %      81.4   84.2   (3.3)   81.4   84.9   (4.1)
 Copper production                           kt     32.9   45.3   (27.4)  32.9   47.4   (30.6)
 Copper sales                                kt     22.5   45.1   (50.1)  22.5   50.6   (55.5)
 Molybdenum grade                            %      0.013  0.010  30.0    0.013  0.010  30.0
 Molybdenum recovery                         %      59.7   39.5   51.1    59.7   46.2   29.2
 Molybdenum production                       kt     0.6    0.4    50.0    0.6    0.4    50.0
 Molybdenum sales                            kt     0.4    0.4    0.0     0.4    0.2    100.0
 Gold grade                                  g/t    0.15   0.22   (31.8)  0.15   0.25   (40.0)
 Gold recovery                               %      66.7   71.9   (7.2)   66.7   70.4   (5.3)
 Gold production                             koz    29.8   44.9   (33.6)  29.8   53.1   (43.9)
 Gold sales                                  koz    22.2   42.6   (47.9)  22.2   54.2   (59.0)
 CATHODES
 Daily ore throughput                        kt     55.4   56.9   (2.6)   55.4   57.8   (4.2)
 Copper grade                                %      0.65   0.59   10.2    0.65   0.64   1.6
 Copper recovery                             %      67.8   66.4   2.1     67.8   67.4   0.6
 Copper production - heap leach              kt     22.1   20.4   8.3     22.1   23.3   (5.2)
 Copper production - total ((1))             kt     22.9   21.5   6.5     22.9   24.0   (4.6)
 Copper sales                                kt     22.6   21.8   3.7     22.6   24.8   (8.9)
 Total copper production                     kt     55.8   66.8   (16.5)  55.8   71.4   (21.8)
 Cash costs before by-product credits ((2))  $/lb   2.70   1.78   51.7    2.70   2.00   35.0
 Net cash costs ((2))                        $/lb   1.93   1.12   72.3    1.93   1.23   56.9

(1) Includes production from ROM material

(2) Includes tolling charges of $0.14/lb in Q1 2022, $0.13/lb in Q4 2021, and
$0.12/lb Q1 2021

 

 

Antucoya

Antucoya produced 17,400 tonnes of copper in Q1 2022, 13.9% lower than in the
same quarter last year on expected lower grades, partially offset by higher
throughput. Production decreased by 16.7% compared to Q4 2021 on lower grades
and throughput, due to lower plant run time related to maintenance.

During the quarter, the cash costs were $2.40/lb, a 22.4% increase compared to
the $1.96/lb in Q1 2021. This was mainly due to lower production and increased
input costs, particularly for sulphuric acid, diesel and explosives. This was
partially offset by lower energy prices as the operation has been solely using
renewable power since the beginning of the year.

 ANTUCOYA                     Year to Date          Q1    Q4
                              2022   2021   %       2022  2021  %
 Daily ore throughput  kt     82.2   80.6   2.0     82.2  91.1  (9.8)
 Copper grade          %      0.31   0.35   (11.4)  0.31  0.35  (11.4)
 Copper recovery       %      69.4   69.1   0.4     69.4  71.3  (2.7)
 Copper production     kt     17.4   20.2   (13.9)  17.4  20.9  (16.7)
 Copper sales          kt     17.4   22.9   (24.0)  17.4  19.9  (12.6)
 Cash costs            $/lb   2.40   1.96   22.4    2.40  2.02  18.8

 

Zaldívar

Copper production at Zaldívar was 11,500 tonnes in Q1 2022, a 3.6% increase
compared with the same period last year on higher recoveries. Production
decreased by 7.3% compared to Q4 2021 due to lower throughput partially offset
by higher grades and recoveries.

Cash costs at $2.10/lb in Q1 2022 fell by 8.7% compared to Q1 2021 primarily
due to maintenance activities scheduled for Q1 postponed for Q2. Compared to
the previous quarter costs decreased by 21c/lb.

 ZALDÍVAR                                     Year to Date         Q1    Q4
                                              2022   2021   %      2022  2021  %
 Daily ore throughput                  kt     39.5   42.2   (6.4)  39.5  48.6  (18.7)
 Copper grade                          %      0.84   0.88   (4.5)  0.84  0.77  9.1
 Copper recovery ((1))                 %      56.5   48.8   15.8   56.4  53.5  5.4
 Copper production - heap leach ((2))  kt     8.2    9.0    (8.9)  8.2   9.1   (9.9)
 Copper production - total ((2,3))     kt     11.5   11.1   3.6    11.5  12.4  (7.3)
 Copper sales ((2))                    kt     11.6   12.4   (6.5)  11.6  12.0  (3.3)
 Cash costs                            $/lb   2.10   2.30   (8.7)  2.10  2.31  (9.1)

(1) Restated from average over full leach cycle to 12-month rolling recoveries

(2) Group's 50% share

(3) Includes production from secondary leaching

 

Transport Division

Total transport volumes in Q1 2022 were 1.7 million tonnes, 12.7% higher than
in the same quarter last year mainly as new rail transport contracts were in
place for the full quarter. Total transport volumes decreased by 2.3% compared
to Q4 2021 mainly due to customers' lower production and poor weather
conditions.

 TRANSPORT                         Year to Date         Q1     Q4
                                   2022   2021   %      2022   2021   %
 Rail                       kt     1,310  1,216  7.7    1,310  1,338  (2.1)
 Road                       kt     410    309    32.7   410    422    (2.8)
 Total tonnage transported  kt     1,720  1,526  12.7   1,720  1,760  (2.3)

 

Commodity prices and exchange rates

                        Year to Date         Q1     Q4
                        2022   2021   %      2022   2021   %
 Copper
 Market price    $/lb   4.53   3.85   17.7   4.53   4.40   3.0
 Realised price  $/lb   5.05   4.26   18.5   5.05   4.65   8.6
 Gold
 Market price    $/oz   1,877  1,800  4.3    1,877  1,795  4.6
 Realised price  $/oz   2,021  1,708  18.3   2,021  1,812  11.5
 Molybdenum
 Market price    $/lb   19.1   11.3   69.0   19.1   18.9   1.1
 Realised price  $/lb   19.9   13.3   49.6   19.9   18.1   9.9
 Exchange rates
 Chilean peso    per $  808    724    11.6   808    826    (2.2)

 

Spot commodity prices for copper, gold and molybdenum as at 31 March 2022 were
$4.69/lb, $1,933/oz and $19.3/lb respectively, compared with $4.40/lb,
$1,820/oz and $18.7/lb as at 31 December 2021 and $4.01/lb, $1,688/oz and
$11.1/lb as at 31 March 2021.

The provisional pricing adjustments for copper, gold and molybdenum for the
quarter were positive $105.9 million, positive $5.8 million and positive $0.9
million respectively.

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