Antofagasta Plc · LSE:ANTO
Antofagasta — H1 2006 Earnings Presentation
39 slides from Antofagasta's earnings presentation, Aug 29, 2006
Slide 1: Results Presentation First Half 2006
Results Presentation First Half 2006 29 August 2006
Slide 2: Important notice
Antofagasta plc Important notice Statements in this presentation include "forward-looking statements" that express expectations of future events or results. All statements based on future expectations rather than on historical facts are forward-looking statements that involve a number of risks and u
Slide 3: Highlights 2006 H1 - Comparatives vs 2005 H1
Highlights 2006 H1 - Comparatives vs 2005 H1 • Results Net earnings up 78% to US$653 million • Dividends Total interim dividend up 63% to 5.2 cents per share (ordinary of 3.2 cents and special of 2.0 cents) • Commodity prices Average LME copper price up 82% to 275 c/lb Average molybdenum price down
Slide 4: Financial analysis
ANTOFAGASTA @ PLC Financial analysis
Slide 5: Financial highlights
Financial highlights 2006 H1 2005 H1 % Change Realised copper price (*) (c/lb) 353.4 159.1 Ç 122% Realised moly price (*) (US$/lb) 22.7 36.0 È 37% US$m US$m Revenues (**) 1,847 1,124 Ç 64% EBITDA 1,375 807 Ç 71% Profit before tax 1,325 740 Ç 79% EPS (cents) 66 37 Ç 78% Dividend (cents) – including s
Slide 6: Net profit - Variances 2006 H1 vs 2005 H1
Net profit - Variances 2006 H1 vs 2005 H1 US$m 937 6 128 63 9 4 16 196 123 653 178 368 2005 H1 Copper Moly price Copper Moly Costs Gold and Transport Others Tax Minority 2006 H1 price volume volume silver and Water interest sales EBITDA 6
Slide 7: Cash flow 2006 H1
Cash flow 2006 H1 US$m 1,045 20 49 185 204 166 1,317 1,238 274 265 Initial cash Cash flow Net interest Loan Group Minority Tethyan Net capex Tax paid Final cash (31 Dec 05) from repayments dividends dividends (30 Jun 06) operations • Total debt at 30 June 2006 of US$417m (31 December 2005 US$465m) 7
Slide 8: 2006 H1 review and FY outlook by operation
2006 H1 review and FY outlook by operation 8
Slide 9: Los Pelambres – 2006 H1 Operational review
Los Pelambres – 2006 H1 Operational review 126 128 120 113 105 111 • Copper grades up 5% (vs 2005 H1), partially 93 offsetting lower throughput (due to downtime to enable plant expansion and higher 1.05% proportion of primary ore) 0.98% 0.91% 0.91% 0.88% 0.80% 0.82% • Moly production decreased to 4,
Slide 10: Los Pelambres – 2006 H1 Financial review
Los Pelambres – 2006 H1 Financial review • EBITDA of US$ 1,130.5m (up 72% from 2005 H1) • Cost increases mainly attributable to market conditions 565.3 3.2 1,130.5 52.7 9.8 5.7 25.2 655.4 EBITDA Increase in Copper Moly Exchange Fuel, Other cost EBITDA 2005 H1 turnover (*) TC/RC Roasting and Inflatio
Slide 11: Los Pelambres – 2006 Outlook and targets
Los Pelambres – 2006 Outlook and targets • Production and costs 2006 – Copper: 320 thousand tonnes (first stage of plant expansion to be operational in 2006 H2) – Moly: 10 thousand tonnes (higher grades in the second half) – Cash cost of 23 c/lb (based on an average moly price of US$24/lb) • Plant e
Slide 12: El Tesoro – 2006 H1 Operational review
El Tesoro – 2006 H1 Operational review 97.8 98.1 92.4 92.0 84.3 • Throughput level increased 18% after completion 79.7 of plant expansion to 10.5 Mtpy 66.1 (Total mine movement of 70 Mtpy) Mtpy) 52.4 42.5 40.8 42.4 1.50% • Copper production affected by: 1.46% 1.35% 1.23% 1.08% – Expected copper grad
Slide 13: El Tesoro – 2006 H1 Financial Review
El Tesoro – 2006 H1 Financial Review • EBITDA of US$ 168.2m, up 52% • Cash cost affected by both operational and market factors 68.6 168.2 3.4 3.8 2.8 1.2 110.8 EBITDA Net increase in Exchange rate Fuel, energy Stripping ratio Other EBITDA 2005 H1 turnover (*) and Inflation and other input and other
Slide 14: El Tesoro – 2006 Outlook and targets
El Tesoro – 2006 Outlook and targets • Production and costs – Volumes target of 92,000 tonnes (higher grades during the second half) – Cash costs of 79 c/lb • Operational efficiencies – Capex programme (US$3m) to deal with higher carbonate content to improve metallurgical recoveries – Run of mine te
Slide 15: Michilla – 2006 H1 review
Michilla – 2006 H1 review 51.8 52.7 50.0 46.4 43.0 • Copper production up 5% (vs 2005 H1) – Copper grades increased 6% 118.8 122.0 – Successful optimisation through separate 23.8 treatment of sulphide and oxide ores 85.6 69.8 61.4 • Cash costs marginally up, but lower than 2005 1.39% 1.25% H2 1.11%
Slide 16: Michilla – 2006 Outlook and targets
Michilla – 2006 Outlook and targets • 2006: At least 43,000 tonnes at 128 c/lb cash cost • Mine plan update to be complete by 2006 Q4 – may result in a reduced but sustainable copper production level • Next labour agreement to be negotiated in November 2007 • Development of Antucoya – Buey Muerto de
Slide 17: Railway and other transport
Railway and other transport Northern Chile Chile’s second region • Rail volumes of 2.1 million tons (2.2 million tons in 2005 H1) • Road volumes of 750,000 tons El Abra (728,000 ton in 2005 H1) Conchi Chuquicamata El Salvador Michilla Calama • Total revenues up 9% to US$48.8 million (*) Sierra Gorda
Slide 18: Aguas de Antofagasta
Aguas de Antofagasta Chile’s second region Northern Chile • Strong operational performance in 2005 H1 – Revenues up 25% to US$25.8 million – EBITDA up 27% to US$21.7 million Tocopilla – Water volumes sold increase 12% to 18.5 million m3 (mainly due to higher domestic consumption and the construction
Slide 19: Business development
ANTOFAGASTA @ PLC Business development 19
Slide 20: Esperanza Project
Esperanza Project • Feasibility study assigned to Aker Kvaerner due in April 2007 – Environmental base line completed; EIA to be presented following feasibility completion in 2007 Q2 – 2.3 km exploration decline completed in June – Bidding process for mining equipment initiated in May 2006 – Bidding
Slide 21: Tethyan update
Tethyan update • Acquisition of 100% completed in May, at a cost of U$230m (*) • Negotiations for a 50/50 Joint Venture agreement with Barrick Gold in progress • 18-month exploration and pre-feasibility programme underway (US$27m) • Strong support from federal and local authorities • “Mineral agreem
Slide 22: Equatorial Mining Acquisition
Equatorial Mining Acquisition • Key assets of Equatorial Mining – 39% of El Tesoro – US$97m in cash by 30 June – Exploration and water rights near El Tesoro • Rationale of the acquisition – Increase attributable cathode production – Consolidation of Sierra Gorda district – Synergies with Esperanza p
Slide 23: Other exploration targets
Other exploration targets • Joint Venture with AngloGold Ashanti in Colombia – AngloGold will contribute its mineral interests in southern Colombia – Antofagasta to fund US$1.3m in exploration over 1 year – Further US$6.7m exploration funding over 4 years to earn a 50% interest in the JV • Los Pelam
Slide 24: Market outlook
ANTOFAGASTA @ PLC Market outlook 24
Slide 25: Copper Market Outlook
Copper Market Outlook Copper Price and inventories • Copper market fundamentals are the 350 20 strongest in decades 300 250 15 – 5th consecutive year of deficit 200 – Stocks at historical low in relative 10 150 terms 100 5 50 0 0 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 Market Balance (‘000
Slide 26: Copper Market Outlook
Copper Market Outlook Demand • Copper consumption in 2006 has remained solid – growing at rates close to 5% • Chinese consumption appears to be slowing down – However a de-stocking process is affecting statistics – similar process occurred in Europe and USA during 2005 • Incoming years demand is exp
Slide 27: Copper Market Outlook: Positive outlook for copper prices
Copper Market Outlook • Consensus on deficit for 2006 • Most analysts are now revising earlier forecasts for 2007 into lower a surplus or even a deficit Market Balance (´000 tonnes) 2005a 2006e 2007f (Bloomsbury July 06) (265) (184) (14) (Brook Hunt July 06) (220) (123) 290 (CRU July 06) (333) (34)
Slide 28: Copper Concentrates Market Outlook
Copper Concentrates Market Outlook 435 • The copper concentrates market has continued improving in favour of the 246 miners as stocks are consumed 158 3 • Current supply-demand deficit is expected -50 to remain during 2007 and 2008 • High risk of additional supply disruptions -382 throughout 2006 -5
Slide 29: Molybdenum Market Outlook
Molybdenum Market Outlook • Molybdenum prices have consolidated at historically high levels – Supported by a combination of strong demand, low inventories and supply constrains and disruptions • Demand continuing to grow at a rate of 4% or more – Strong performance of the stainless steel and special
Slide 30: Backup
ANTOFAGASTA @ PLC Backup 30
Slide 31: Group operations
Group operations Transport Mining Water El Tesoro – 61% owned Los Pelambres – 60% owned Michilla – 74% owned • Listed on the London Stock Exchange (Free float of 35%) – FTSE 100 since March 2004 – Market capitalisation (Aug 25, 2006): US$ 8 billion FCAB (Chile) – 100% owned Aguas de Antofagasta FCA
Slide 32: Brief history
Brief history • 1888 Antofagasta Railway incorporated and listed in London • 1979 Luksic Group acquires controlling interest and begins investing in mining, financial and industrial sectors in Chile • 1996 Financial and industrial interests exchanged for 33.6% interest in Quiñenco • 1997 Development
Slide 33: Geographical location of operations and projects in Chile
Geographical location of operations and projects in Chile Northern Chile El Tesoro Esperanza • 92,000 tonnes of copper cathodes • 786 Mt@0.53% copper + gold and molybdenum • 8% increase in plant capacity completed in • Feasibility stage 2005 Michilla • 43,000 tonnes of copper cathodes Transport • An
Slide 34: Mining – production, cost and reserves
Mining – production, cost and reserves Antofagasta payable copper and cash cost 498 461 472 467 455 445 55.4 351 44.4 39.2 38.8 38.9 36.4 24.3 61 13.9 1999 2000 2001 2002 2003 2004 2005 2006E Copper production (000 tonnes) Cash costs (c/lb) Reserves and additional resources at existing operations (a
Slide 35: Mining data
Mining data 2006 H1 2005 H1 % change Los Pelambres Copper sales (000 tonnes) 145.4 150.6 È 3% Realised price (c/lb) 376.8 159.8 Ç 136% Moly sales (000 tonnes) 4.4 4.3 Ç 2% Realised price (US$/lb) 22.7 36.0 Ç 37% Cash cost (c/lb) 24.4 -48.1 Ç n.m (including by-product credits) El Tesoro Copper sales
Slide 36: Cash cost analysis 2006 H1
Cash cost analysis 2006 H1 – 2006 H1 Los Pelambres: Cash Cost 2005 H1 (48.1) Increase in TC/RC's 13.8 Increase in freight costs 1.6 Exchange rate and local inflation 3.0 Increase in energy, oil and others 1.3 Other cost increases* 5.7 Lower by-product credits 47.0 Los Pelambres: Cash Costs 2006 H1 2
Slide 37: Copper Market Data (Consumption)
Copper Market Data (Consumption) World Copper Consumption 1999 2000 2001 2002 2003 2004 2005 ('000 tonnes) North America 3,599 3,604 2,951 3,088 2,862 3,141 3042 0% -18% 5% -7% 10% -3% of which US 2,878 2,856 2,296 2,426 2,218 2,392 2,293 -1% -20% 6% -9% 8% -4% South & Central America 489 527 536 41
Slide 38: Copper Market Data (Production)
Copper Market Data (Production) Copper mine production ('000 tonnes) 2000 2001 2002 2003 2004 2005 South & central America 5,398 5,746 5,670 5,994 6,784 6,910 Chile 4,665 4,798 4,600 4,942 5,477 5,537 Peru 552 719 833 824 1,025 1,004 North America 2,414 2,324 2,004 1,960 2,134 2,250 USA 1,467 1,359
Slide 39: Antofagasta Contacts
Antofagasta Contacts London Santiago de Chile (Antofagasta plc) (Antofagasta Minerals S.A.) Desmond O’Conor Head of UK Alejandro Rivera Chief Financial Officer Hussein Barma Chief Financial Officer (UK) Sebastian Gil Manager – Corporate Finance and Development Tel: +44 20 7808 0988 Tel: +562 377 514