REG - Antofagasta PLC - Q2 2022 PRODUCTION REPORT

AntofagastaAnnouncement

20/07/2022 07:00

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RNS Number : 0426T  Antofagasta PLC  20 July 2022

NEWS RELEASE, 20 JULY 2022

Q2 2022 PRODUCTION REPORT

FULL YEAR GUIDANCE REVISED

 

Antofagasta plc CEO, Iván Arriagada said: "In the first half of 2022 we
produced 268,600 tonnes of copper at a net cash cost of $1.82/lb.  Reduced
production levels and higher costs compared to last year reflect the expected
impact of the drought and the temporary closure of the concentrate pipeline at
Los Pelambres in June, as well as lower grades at Centinela Concentrates.

"Looking to the second half of the year, we expect production to increase
quarter-on-quarter as throughput recovers at Los Pelambres with increased
water availability, grades improve at Centinela Concentrates and as the copper
in concentrates, stockpiled at Los Pelambres' concentrator plant, is moved to
the port.

"The significant decline in the copper price since the beginning of June has
reinforced our commitment to control costs, particularly during this period of
higher input prices and general inflation.

"Following the pipeline incident at Los Pelambres, and the continued
uncertainty about water availability, full year copper production is now
expected to be 640-660,000 tonnes. The impact of this and the high current
levels of inflation are partially offset by the weakening of the Chilean peso
and we now estimate full year net cash cost guidance at $1.65/lb."

HIGHLIGHTS

PRODUCTION

·    Group copper production((1)) in Q2 2022 was 129,800 tonnes, a
decrease of 6.5% compared to the previous quarter, mainly due to the
previously announced concentrate pipeline incident at Los Pelambres which
reduced reported production during the period by approximately 23,000 tonnes.
Operation of the pipeline resumed by the end of the period and 12,000 tonnes
of copper in concentrates stockpiled at the concentrator plant will be moved
to the port by October

·    Group copper production((1)) in the first six months of the year was
268,600 tonnes, 25.7% lower than in the same period last year mainly due to
the expected temporary reduction in throughput at Los Pelambres as a result of
the drought and the concentrate pipeline incident, and expected lower grades
at Centinela Concentrates. Throughput at Los Pelambres was 36.2% lower than in
H1 2021, and the grades at Centinela Concentrates were 25.4% lower

·     Gold production for the quarter decreased by 7.8% to 35,400 ounces
compared with Q1 mainly due to the concentrate pipeline incident, and for the
first six months decreased by 38.8% to 73,800 ounces mainly due to expected
lower grades at Centinela

·    Molybdenum production was 2,000 tonnes, the same as the previous
quarter. For the year to date, production was 4,000 tonnes, 31.0% lower than
in the same period last year due to lower throughput and grades at Los
Pelambres

CASH COSTS

·     Cash costs before by-product credits in the quarter were $2.40/lb,
6c/lb higher than in the first quarter and for the first half of the year were
$2.37/lb, 37.0% higher than in the same period last year mainly due to the
temporary decrease in production and higher input prices, particularly for
diesel and sulphuric acid. General inflation was largely offset by the weaker
Chilean peso

·   Net cash costs were $1.90/lb in Q2 2022 and $1.82/lb for the first half
of the year, compared to $1.75/lb in the previous quarter and $1.14/lb in the
first half of 2021, reflecting the increase in cash costs before by-product
credits and slightly lower by-product credits due to lower by-product
production, partially offset by higher realised prices

 

GROWTH PROJECTS UPDATE

·     The Los Pelambres Expansion project was 82% complete as at the end
of the quarter

·     Completion of the desalination plant is expected in Q4 2022 and of
the concentrator plant expansion in early 2023

2022 GUIDANCE

·    Full year copper production for the Group is revised downwards to
640-660,000 tonnes. This revision mainly reflects the impact of the pipeline
incident and the continued uncertainty arising from the water shortage at Los
Pelambres

·    The drought has continued at Los Pelambres during the period although
there has been heavier precipitation in July. The revised guidance range
incorporates a low probability negative outlook for water availability for the
rest of the year. Strict water management protocols remain in place to
optimise water usage and mitigate the impact of low water availability

·  With increases in diesel and other input prices, net cash cost guidance
is increased to $1.65/lb, assuming market consensus estimates of by-product
prices and the Chilean Peso exchange rate are achieved for the rest of the
year

·    As announced in April, Group capital expenditure for the year is
expected to be $1.9 billion

SUSTAINABILITY

·    From April this year all mining operations have been operating solely
using renewable energy significantly reducing the Company's Scope 2 emissions

OTHER

·   As previously announced, there was a leak in the concentrate pipeline
at Los Pelambres on 31 May. This has been repaired and operation of the
pipeline resumed on 26 June. A full assessment of the incident found no
material or irreversible environmental impact and the pipeline was approved
for reopening by the relevant local regulator (Sernageomin). A review is
underway to ensure enhanced safety conditions are incorporated into pipeline
operations ahead of the replacement of the pipeline which is currently being
permitted and is expected to be completed in 2025. Engagement with members of
the local communities concerned about the safety of the pipeline by the
Company together with the local authorities were concluded successfully

·   Copper concentrates stockpiled at the concentrate plant will be
transferred to the port by October using the spare capacity of the pipeline.
It is estimated that the full impact of the disruption will be a loss of
approximately 15,000 tonnes of production over the full year

·    The Constitutional Convention completed the draft of the new
constitution on 4 July. A national referendum to accept or reject the new
constitution will be held on 4 September

·    The government presented a tax reform bill to Congress on 1 July and
a new proposal for the mining royalty on 11 July. This proposal is being
evaluated by the mining industry. The initial view is that it is more onerous
than the proposal made by the Senate Mining and Energy Committee in January,
but less onerous than the original proposal made by the lower house in May
2021. The new draft will now be discussed and approved by the Senate before
being passed to the lower house for its consideration

·    On 11 July the Company released a special report on its tax payments
in respect of 2021. The report provides detailed information about the nature
of the taxes paid by the Company and the amounts paid, and can be found on the
Antofagasta website

 

 

 GROUP PRODUCTION AND CASH COSTS                               Year to Date          Q2     Q1
                                                               2022   2021   %       2022   2022   %
 Copper production((1))                      Kt                268.6  361.5  (25.7)  129.8  138.8  (6.5)
 Copper sales                                Kt                263.0  346.1  (24.0)  147.1  115.9  26.9
 Gold production                             Koz               73.8   120.5  (38.8)  35.4   38.4   (7.8)
 Molybdenum production                       Kt                4.0    5.8    (31.0)  2.0    2.0    0.0
 Cash costs before by-product credits ((2))  $/lb              2.37   1.73   37.0    2.40   2.34   2.6
 Net cash costs ((2))                        $/lb              1.82   1.14   59.6    1.90   1.75   8.6

 

 

(1)   Copper production for copper in concentrates is defined as tonnes of
filtered concentrate at the port of export

(2)  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

 

 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

Los Pelambres produced 44,300 tonnes of copper in Q2 2022, 18.1% lower than in
the previous quarter. This decrease is mainly as a result of the leak in the
concentrate pipeline detected on 31 May and access restrictions implemented by
some members of the local communities concerned about the safety of the
pipeline. The pipeline has now been repaired and engagement with the local
communities successfully concluded. Pipeline operations resumed on 26 June.

During the shutdown approximately 12,000 tonnes of copper in concentrates were
stockpiled at the plant. These will not be reported as production until they
are filtered at the port, which is expected to be completed by October.

In the first six months of 2022, copper production decreased by 41.9% to
98,400 tonnes compared with the same period last year. This decrease includes
the impact of the leak in the concentrate pipeline, but was mainly driven by
the expected reduced throughput, which was down 36.2% compared with the prior
year due to water restrictions arising from the drought.

Molybdenum production was 1,400 tonnes in Q2 2022, the same as the previous
quarter. Production for the first six months of the year decreased to 2,700
tonnes from 5,100 in H1 2021, due to lower throughput and molybdenum grades.

Gold production for the first six months of 2022 was 15,400 ounces, 12,600
ounces lower than in the same period last year due to expected lower
throughput and gold grades.

Cash costs before by-product credits in Q2 2022 were $2.06/lb, 4.0% higher
than Q1, and for the first six months of 2022 were $2.02/lb, 33.8% higher than
the same period last year. This was due to the decrease in production, higher
input prices, mainly diesel and explosives, and general inflation, partially
offset by the weaker Chilean peso.

Net cash costs in Q2 2022 increased by 10c/lb compared to Q1 2022 to $1.37/lb
and for the year to date increased by 59.0% to $1.32/lb. This reflected the
higher cash costs before by-product credits.

Major maintenance was completed at Los Pelambres during the quarter.

As at the end of H1 the Los Pelambres Expansion project was 82% complete
(engineering, procurement and construction).

 

 LOS PELAMBRES                                        Year to Date          Q2     Q1
                                                      2022   2021   %       2022   2022   %
 Daily ore throughput                        kt       104.5  163.9  (36.2)  110.1  98.8   11.4
 Copper grade                                %        0.66   0.66   0.0     0.64   0.68   (5.9)
 Copper recovery                             %        90.7   89.7   1.1     89.3   92.3   (3.3)
 Copper production                           kt       98.4   169.3  (41.9)  44.3   54.1   (18.1)
 Copper sales                                kt       96.3   165.5  (41.8)  54.4   41.9   29.8
 Molybdenum grade                            %        0.017  0.021  (19.0)  0.018  0.016  12.5
 Molybdenum recovery                         %        85.0   84.6   0.5     83.9   86.5   (3.0)
 Molybdenum production                       kt       2.7    5.1    (47.1)  1.4    1.4    0.0
 Molybdenum sales                            kt       2.7    4.9    (44.9)  1.5    1.2    25.0
 Gold grade                                  g/t      0.043  0.048  (10.4)  0.042  0.044  (4.5)
 Gold recovery                               %        72.9   66.5   9.6     72.4   73.5   (1.5)
 Gold production                             koz      15.4   28.0   (45.0)  6.8    8.6    (20.9)
 Gold sales                                  koz      15.2   25.8   (41.1)  8.8    6.4    37.5
 Cash costs before by-product credits ((1))  $/lb     2.02   1.51   33.8    2.06   1.98   4.0
 Net cash costs ((1))                        $/lb     1.32   0.83   59.0    1.37   1.27   7.9

(1) Includes tolling charges of $0.18/lb in Q2 2022, $0.16/lb in Q1 2022,
$0.17/lb YTD 2022 and $0.15/lb YTD 2021

 

 

Centinela

Total copper production in H1 2022 was 111,300 tonnes, 15.7% lower than in H1
2021 due to expected lower ore grades at Centinela Concentrates, slightly
offset by higher grades at Centinela Cathodes. Total copper production in Q2
2022 was 55,600 tonnes in line with the previous quarter.

Production of copper in concentrates was 33,300 tonnes in Q2 2022, 1.2% higher
than the previous quarter and 66,200 tonnes for the half year, 26.8% lower
than in the same period last year, mainly due to expected lower copper grades
which were 0.44% compared to 0.59% in H1 2021. This was partially offset by
increased throughput with the concentrator averaging above design capacity
throughput for the full half year.

Copper cathode production during the quarter was 22,200 tonnes, 3.1% lower
than Q1 2022, and for the first six months it was 45,100 tonnes, 8.2% higher
than in the same period last year primarily due to expected higher grades and
recoveries.

Gold production in Q2 was 28,600 ounces, 4.0% lower than the previous quarter
and in H1 it was 58,400 ounces, 36.9% lower than H1 last year as grades, which
are correlated to copper grades, and recoveries decreased.

Molybdenum production in H1 2022 increased to 1,300 tonnes from 700 tonnes in
H1 2021, due to higher grades.

Cash costs before by-product credits in Q2 were $2.66/lb, 1.5% lower than in
the previous quarter due to major maintenance completed during Q1. Cash costs
before by-product credits for the first six months of 2022 were $2.68/lb,
48.9% higher than the same period in 2021 primarily due to lower production
and higher input costs, particularly for diesel, sulphuric acid and
explosives. General inflation was largely offset by the weaker Chilean peso.

By-product credits decreased from $0.77/lb in Q1 to $0.63/lb in Q2 due to
lower realised prices and lower gold production. For the first six months of
2022, by-product credits were $0.70/lb, 2c/lb lower than in the same period
last year.

Net cash costs in Q2 2022 were $2.03/lb, 5.2% higher than the previous
quarter, and during the first six months of the year net cash costs were
$1.98/lb, 90c/lb higher than in H1 2021 reflecting the increase in cash costs
before by-product credits and the slightly lower by-product credits.

Major maintenance is still scheduled in Q3 2022 and is included in full year
guidance.

 

 CENTINELA                                          Year to Date          Q2     Q1
                                                    2022   2021   %       2022   2022   %
 CONCENTRATES
 Daily ore throughput                        kt     107.3  104.7  2.5     110.6  104.0  6.3
 Copper grade                                %      0.44   0.59   (25.4)  0.45   0.44   2.3
 Copper recovery                             %      80.0   84.7   (5.5)   78.8   81.4   (3.2)
 Copper production                           kt     66.2   90.4   (26.8)  33.3   32.9   1.2
 Copper sales                                kt     64.5   80.8   (20.2)  42.0   22.5   86.7
 Molybdenum grade                            %      0.013  0.009  44.4    0.013  0.013  0.0
 Molybdenum recovery                         %      60.7   46.2   31.4    61.7   59.7   3.4
 Molybdenum production                       kt     1.3    0.7    85.7    0.6    0.6    0.0
 Molybdenum sales                            kt     1.2    0.8    50.0    0.7    0.4    75.0
 Gold grade                                  g/t    0.15   0.22   (31.8)  0.15   0.15   0.0
 Gold recovery                               %      65.3   72.4   (9.8)   64.0   66.7   (4.0)
 Gold production                             koz    58.4   92.5   (36.9)  28.6   29.8   (4.0)
 Gold sales                                  koz    58.3   77.9   (25.2)  36.1   22.2   62.6
 CATHODES
 Daily ore throughput                        kt     56.3   56.3   0.0     57.3   55.4   3.4
 Copper grade                                %      0.64   0.60   6.7     0.62   0.65   (4.6)
 Copper recovery                             %      66.1   65.1   1.5     64.5   67.8   (4.9)
 Copper production - heap leach              kt     43.4   39.8   9.0     21.3   22.1   (3.6)
 Copper production - total ((1))             kt     45.1   41.7   8.2     22.2   22.9   (3.1)
 Copper sales                                kt     42.5   38.6   10.1    20.0   22.6   (11.5)
 Total copper production                     kt     111.3  132.1  (15.7)  55.6   55.8   (0.4)
 Cash costs before by-product credits ((2))  $/lb   2.68   1.80   48.9    2.66   2.70   (1.5)
 Net cash costs ((2))                        $/lb   1.98   1.08   83.3    2.03   1.93   5.2

(1) Includes production from ROM material

(2) Includes tolling charges of $0.14/lb in Q2 2022, $0.14/lb in Q1 2022,
$0.14/lb YTD 2022 and $0.12/lb YTD 2021

 

 

Antucoya

Antucoya produced 18,900 tonnes of copper in Q2 2022, 8.6% higher than in the
previous quarter mainly due to a 12.0% increase in throughput, which was at
its highest level since the mine opened in 2015. Production in the first six
months of 2022 was 36,400 tonnes, 7.8% lower than the same period last year
due to expected lower grades, partially offset by higher throughput.

During the quarter, cash costs were $2.59/lb compared to $2.40/lb in Q1. For
the first six months, cash costs were 22.5% higher than in H1 2021 at $2.50/lb
due to lower production and increased input costs, particularly for sulphuric
acid, diesel and explosives. General inflation was largely offset by the
weaker Chilean peso.

A labour negotiation with the supervisors' union was successfully concluded
during the quarter before the November 2022 deadline. The labour agreement
with the workers' union expires at the end of September.

 ANTUCOYA                     Year to Date         Q2    Q1
                              2022   2021   %      2022  2022  %
 Daily ore throughput  kt     87.2   84.0   3.8    92.1  82.2  12.0
 Copper grade          %      0.32   0.35   (8.6)  0.32  0.31  3.2
 Copper recovery       %      69.0   68.4   0.9    68.6  69.4  (1.2)
 Copper production     kt     36.4   39.5   (7.8)  18.9  17.4  8.6
 Copper sales          kt     37.1   40.1   (7.5)  19.7  17.4  13.2
 Cash costs            $/lb   2.50   2.04   22.5   2.59  2.40  7.9

 

Zaldívar

Copper production at Zaldívar in Q2 2022 was 11,000 tonnes, 4.3% lower than
in the previous quarter due to lower grades and throughput, partially offset
by higher recoveries. Production for the year to date was 22,500 tonnes, 9.2%
higher compared with the same period last year due to higher copper grades and
recoveries.

Following completion of the Chloride Leach project, recoveries are projected
to increase as the project ramps up. The methodology of reporting recoveries
has been changed to be consistent with other operations and now reflect
recoveries in the period rather than over a 12-month period.

Cash costs during Q2 were $2.18/lb, 3.8% higher than in Q1 2022, and for the
first six months of 2022 were $2.14/lb compared with $2.46/lb in the same
period in 2021, mainly due to higher production partially offset by higher
input prices.

 ZALDÍVAR                                     Year to Date          Q2    Q1
                                              2022   2021   %       2022  2022  %
 Daily ore throughput                  kt     39.3   40.3   (2.5)   39.0  39.5  (1.3)
 Copper grade                          %      0.81   0.78   3.8     0.78  0.84  (7.1)
 Copper recovery ((1))                 %      53.7   50.6   6.1     54.2  53.2  1.9
 Copper production - heap leach ((2))  kt     15.8   15.2   3.9     7.6   8.2   (7.3)
 Copper production - total ((2,3))     kt     22.5   20.6   9.2     11.0  11.5  (4.3)
 Copper sales ((2))                    kt     22.7   21.1   7.6     11.1  11.6  (4.3)
 Cash costs                            $/lb   2.14   2.46   (13.0)  2.18  2.10  3.8

(1) Metallurgical recoveries during the period. Prior periods have been
restated

(2) Group's 50% share

(3) Includes production from secondary leaching

 

Transport Division

Total transport volumes in Q2 2022 were 1.8 million tonnes, 7.5% higher than
in the previous quarter, mainly due to customers' lower production and poor
weather conditions during Q1.

For the first six months of the year, transport volumes increased by 11.8% as
new rail transport contracts have ramped up during the period.

 TRANSPORT                         Year to Date         Q2     Q1
                                   2022   2021   %      2022   2022   %
 Rail                       kt     2,708  2,514  7.7    1,398  1,310  6.7
 Road                       kt     861    678    27.0   451    410    10.0
 Total tonnage transported  kt     3,570  3,192  11.8   1,849  1,720  7.5

 

Commodity prices and exchange rates

                        Year to Date         Q2     Q1
                        2022   2021   %      2022   2022   %
 Copper
 Market price    $/lb   4.43   4.13   7.3    4.32   4.53   (4.6)
 Realised price  $/lb   4.13   4.42   (6.6)  3.42   5.05   (32.3)
 Gold
 Market price    $/oz   1,873  1,808  3.6    1,873  1,877  (0.2)
 Realised price  $/oz   1,899  1,776  6.9    1,821  2,021  (9.9)
 Molybdenum
 Market price    $/lb   18.7   12.7   47.2   18.4   19.1   (3.7)
 Realised price  $/lb   18.0   16.1   11.8   16.4   19.9   (17.6)
 Exchange rates
 Chilean peso    per $  826    720    14.7   843    808    4.3

 

Spot prices for copper, gold and molybdenum as at 30 June 2022 were $3.74/lb,
$1,815/oz and $17.1/lb respectively, compared with $4.69/lb, $1,933/oz and
$19.3/lb as at 31 March 2022 and $4.26/lb, $1,760/oz and $19.0/lb as at 30
June 2021.

The provisional pricing adjustments for copper, gold and molybdenum for the
quarter were negative $312.7 million, negative $2.0 million and negative $14.1
million respectively.

The provisional pricing adjustments for copper, gold and molybdenum for the
year to date were negative $206.8 million, positive $3.7 million and negative
$13.2 million respectively.

The US$/CHP exchange rate as at 30 June 2022 was 932, compared with 845 as at
31 December 2021.

 

 

 

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