Antofagasta Plc · LSE:ANTO
Antofagasta — FY2014 Earnings Presentation
35 slides from Antofagasta's earnings presentation, Mar 17, 2015
Slide 1: 2014 Full Year Results Presentation
2014 Full Year Results Presentation Diego Hernández – CEO Alfredo Atucha – CFO 17 March 2015
Slide 2: Cautionary statement
Cautionary statement This presentation has been prepared by Antofagasta plc. By reviewing and/or attending this presentation you agree to the following conditions. This presentation contains forward-looking statements. All statements other than historical facts are forward-looking statements. Exampl
Slide 3: Agenda
Agenda 2014 Overview Financial Review Growth Opportunities Outlook and Investment Case 3 3
Slide 4: 2014 Overview
2014 Overview • Steady operating performance – in a weaker environment • EBITDA margins – still strong at 42% • Strong balance sheet – $315 million attributable net cash(1) • Operating cash flow resilient – despite low commodity prices • Dividend – 35% pay-out ratio • Focus – producing copper, reduc
Slide 5: Safety – Committed to zero fatalities
Safety – Committed to zero fatalities Safety Performance • Unacceptably, five fatalities occurred during 2014 5 • Re-affirm our commitment to zero fatalities 3.2 2.6 • New safety and occupational health 2.1 2 1.9 model introduced 1 Focus on: o Early identification of high- 0 potential risks 2011 201
Slide 6: 2014 Operating performance
2014 Operating performance Another year of delivering guidance , despite challenging environment Cu Au Mo $/lb 2013 Production 2013 Production 2013 Production 2013 Net Cash Cost 721,200t 294koz 9,000t $1.36/lb Guidance 2014 Production Guidance 2014 Production Guidance 2014 Production Guidance
Slide 7: 2014 Operating performance
2014 Operating performance 2013 2014 • Production and net cash costs COPPER PRODUCTION (kt) beat guidance Los Pelambres 405 391 Centinela 278 267 • Capture of synergies at Centinela Concentrates 175 173 Cathodes 103 94 • Completion of Encuentro Oxides Michilla 38 47 feasibility study Antucoya(1) - -
Slide 8: 2014 Financial overview
2014 Financial overview Revenue and earnings down, but operating performance steady 2013 2014 Change FY FY % actual actual Revenue $m 5,971.6 5,290.4 (11.4) EBITDA $m 2,702.2 2,221.6 (17.8) EBITDA margin % 45.3 42.0 (3.3)(1) Net earnings $m 659.6 459.8(2) (30.3) Dividends $/s 0.95(3) 0.22 (76.8) Cas
Slide 9: Market environment and outlook
Market environment and outlook • LME copper price averaged $3.11/lb in 2014 • Growth of new supply expected to slow (2013: $3.32/lb) • Current broker consensus for average 2015 • China’s growth slower, but still strong copper price is around $2.92/lb • Prices supported by tight scrap market • Cautio
Slide 10: Market environment and outlook
Market environment and outlook Asian Refined Copper Consumption (kt) 2014 China Copper Consumption Consumer and Building/ General Construction 10,000 Products 21% 31% 8,000 6,000 4,000 2,000 Transport Equipment Electrical 0 11% Industrial Network India Taiwan South Japan China Machinery & Infrastruc
Slide 11: Financial Review
Financial Review Alfredo Atucha – CFO Centinela
Slide 12: Challenging market impacting financials
Challenging market impacting financials vs. 2013 2014 % $m • Lower realised copper price Revenue (11.4) 5,290.4 • Lower copper sales volumes • Reduced gold by-product revenues • Decrease in revenue EBITDA (17.8) 2,221.6 • Partly offset by lower operating costs • Decrease in EBITDA Net Earnings (30.3
Slide 13: Weaker commodity price environment
Weaker commodity price environment • Revenue declined by 11.4% o Mainly as a result of lower copper prices (also impacted by lower sales volumes and higher TC/RCs) o Lower gold price and volumes o Higher realised moly price (10% higher), partly offset by lower volumes Revenue 2014 vs 2013 ($m) $(682
Slide 14: Unit cash costs
Unit cash costs Cash costs before by-product credits ($/lb) - by operation +$0.04/lb 2.00 $1.79/lb 0.03 (0.01) 0.06 (0.04) $1.83/lb 1.80 1.60 1.40 1.20 1.00 0.80 0.60 2013FY Los Pelambres Centinela Concentrates Centinela Cathodes Michilla 2014FY Cash costs before by-product credits ($/lb) - by cost
Slide 15: Cost saving initiatives
Cost saving initiatives • Merged Esperanza and El Tesoro • Reducing sustaining capex • Shared mining fleet & waste dumps Centinela Capex • Lower capex estimate for Encuentro • Single vision for district Oxides • Supply managed at corporate centre Central Approach • In-house project design & executio
Slide 16: EBITDA
EBITDA EBITDA 2014 vs 2013 ($m) 45.3% 42.0% EBITDA EBITDA Margin Margin $(480)m $2,702m (439) (127) (11) $2,222m 186 (43) (46) 3 (3) Copper revenues By-product revenues Others $(609)m $(46)m $175m 16 16
Slide 17: Net earnings
Net earnings Net earnings 2014 vs 2013 ($m) $(200)m $660m (481) $460m (2) 350 (221) 47 189 12 (88) 2013FY EBITDA Depreciation & Tax Increase in Non- Finance costs Others 2014FY amortisation deferred tax controlling provision (1) interests • Net earnings reduced by lower EBITDA, a deferred tax provis
Slide 18: Resilient operating cash flow
Resilient operating cash flow Cash flow in period ($m) $(311)m 6,000 1,000 (964) 2,508 (642) (412) 5,000 (29) (1,646) 4,000 $2,685m (126) 3,000 $2,375m 2,000 1,000 - Cash at Cash flow from Tax outflow Net interest Net loans Dividends to Dividends to Capital Other Cash at 1 Jan 14 operations paid dra
Slide 19: Capex
Capex Capex 2014 - 2016 ($m) 1,800 $1,646m 1,600 158 1,400 ~$1,300m Development capex 316 1,200 180 Development capex 38 ~$800m - $950m Development capex 1,000 180 800 735 350 600 450-500 280 400 200 399 310 350-400 0 2014 actual 2015 2016 Sustaining capex Antucoya Encuentro Oxides Centinela Other •
Slide 20: Dividend policy - considerations
Dividend policy - considerations Pay-out ratio Considerations & total dividend • Minimum pay-out ratio of 35% of net Earnings earnings $937m Copper price • Stress test forecasts at various copper prices $971m • Free cash flow generation 142% Free cash flow • Cash buffer $434m $212m 70% 35% 35% • Upc
Slide 21: Leading margins and capital efficiency
Leading margins and capital efficiency EBITDA margin (1) Return on capital employed (ROCE) (2) 70% 40% 64.5% 65% 61.9% 35% 31.1% 60% 57.2% 56.9% 28.9% 30% 55% 25.1% 25% 50% 45.9% 19.7% 45% 42.0% 20% 17.3% 44.7% 20.5% 14.1% 40% 15% 44.7% 16.2% 14.6% 35% 37.1% 10% 30% 33.5% 10.7% 10.0% 32.6% 8.0% 25%
Slide 22: Growth Opportunities
Growth Opportunities Diego Hernández - CEO Centinela
Slide 23: Strategy and 2015 priorities
Strategy and 2015 priorities 1 Existing core business • Constant focus on cost management and compliance • Delivery of production and cash cost guidance • Continue to get the best possible performance from existing assets • Proactive new approach with community and other stakeholders 2 Organic & sus
Slide 24: Growth pipeline
Growth pipeline In periods of lower prices and increasing capital intensity: • Focus remains on cost control and efficiency throughout the operations • Focus on higher return, lower risk brownfield debottlenecking/ expansion projects • Advance greenfield projects steadily for future development Antu
Slide 25: Antucoya – first production Q2 2015
Antucoya – first production Q2 2015 Delivering growth on-time, on-budget • 85,000 tonnes per annum of production • Commence production Q2 2015 • First full year of production 2016 • Synergies with Centinela water pipeline Current status • 99.7% overall project progress (design, procurement, construc
Slide 26: Encuentro Oxides
Encuentro Oxides Provides optionality to Centinela District • Commence production mid-2016 • First full year of production 2017 (8yr mine life) • Provides feed for existing SX-EW plant Oxides • Exposes the sulphides below Remaining oxides – mined • Full production of 50ktpa Cu with Sulphides Sulphid
Slide 27: Encuentro Oxides – reduced capex
Encuentro Oxides – reduced capex Encuentro Oxides capex PFS vs FS ($m) $(156)m $36m relating to water pipeline 900 $792m (96) 800 (156) 700 $636m 79 600 17 500 400 300 200 100 0 Adjusted PFS capex FX impact Optimisations Engineering Omissions and FS capex development underestimates • Sea water pumpi
Slide 28: Centinela Mining District
Centinela Mining District Centinela Debottlenecking • Debottlenecking concentrates plant to increase throughput to 105 ktpd (2014: 86ktpd) • Project completion in late 2015 • Installation of tailing thickeners, crushing equipment, flotation cells and mining equipment • Moly plant feasibility study c
Slide 29: Los Pelambres Mining District
Los Pelambres Mining District Los Pelambres Incremental Expansion • Throughput expansion to 205ktpd from current 175ktpd • Utilise existing infrastructure • Need to prepare EIA baseline • Feasibility study completed once EIA approved • Pre-feasibility capex estimate of $1.2 billion (excluding desali
Slide 30: Los Pelambres Mining District
Los Pelambres Mining District Energy strategy • Anticipated exposure to spot energy prices in 2012 • Executed long term solution by taking interest in: o El Arrayan wind farm o Alto Maipo hydro plant o Two solar plants • 100% of power under long-term PPAs by end 2018 Water challenges • Drought condi
Slide 31: Further growth opportunities beyond 2018
Further growth opportunities beyond 2018 Twin Metals Minnesota Project • 2.3 billion tonne resource containing copper, nickel and PGMs • Optimising pre-feasibility study • Consolidated ownership of project • Advancing permitting process Exploration • Ongoing exploration and evaluation in Chile and i
Slide 32: Outlook and Investment Case
Outlook and Investment Case Centinela
Slide 33: 2015 Outlook
2015 Outlook Challenging start Cu Au Mo $/lb 2014 Production 2014 Production 2014 Production 2014 Net Cash Cost 704,800t 271,000oz 7,900t $1.43/lb 2015 Guidance 2015 Guidance 2015 Guidance 2015 Net Cash Cost 710,000t 250,000oz 9,000t $1.40/lb 33 33
Slide 34: Investment case – steady, stable and secure
Investment case – steady, stable and secure High • Strong production, large resource base and long-life assets quality • Focus on two ‘world-class’ mining districts assets • Competitive cash costs Cost • Focus on operating and project cost control control • Strong operating margins and capital effic
Slide 35: Questions
Questions Centinela