Antofagasta Regulatory News (ANTO)

30 Apr 2008 10:00

Antofagasta PLC30 April 2008 30 April, 2008 Antofagasta plc Quarterly Production Report - Q1 2008 Highlights • Group copper production in Q1 was 114,600 tonnes, 7.1% above the quarterly average for 2007. • Molybdenum production at Los Pelambres in the first quarter was 1,800 tonnes, below the quarterly average for 2007 but in line with year-to-date forecast. • Group cash costs in Q1 were 72.2 cents per pound compared with 31.6 cents per pound in the 2007 full year, due to lower by-product credits (reflecting lower molybdenum production) and higher on-site costs, partly offset by lower tolling charges. • In addition to the sale of a 30% interest in the Esperanza project and the El Tesoro mine as announced on 24 April as part of the Group's plan for the development of those properties, the Group has also acquired interests in two exploration licences in Zambia and has entered into an agreement to explore for thermal energy resources in Chile. Group Total Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007 Total production ofpayable copper 114.6 114.6 105.9 428.1 ('000 tonnes) Total production ofpayable moly 1.8 1.8 2.1 10.2('000 tonnes) Weighted average cashcosts 72.2 72.2 35.8 31.6(cents per pound) Los Pelambres Los Pelambres produced 79,100 tonnes of payable copper in the first quarter ofthe year, in line with expectations and an increase of 9.2% over the quarterlyaverage for 2007. This was the result of increased plant throughput due to ahigher proportion of softer secondary ore treated, marginally offset by a slightdecrease in the average recovery obtained during the period. Shipments ofpayable copper in Q1 were 65,800 tonnes, 13,300 tonnes lower than production dueto differences in shipping and loading schedules, which were subsequentlyshipped in April. Molybdenum production was 1,800 tonnes in the first quarter of the year, anexpected decrease of 800 tonnes compared with the quarterly average for 2007.This reduction is mainly explained by the lower molybdenum ore grade in thequarter, partly offset by the higher plant throughput. The decrease in ore gradeis in accordance with the mine plan, under which areas with a lower molybdenumgrade are now being mined. Cash costs in Q1 2008 were 37.4 cents per pound, an increase of 48.2 cents perpound compared with negative 10.8 cents per pound in the 2007 full year. Thisresulted from a combination of lower by-product credits and higher on-site andshipping costs, offset by lower tolling charges. By-product credits decreased by 33.5 cents per pound, due to the lowermolybdenum volumes and the impact of the higher copper production on the creditsexpressed in cents per pound of copper produced, partly compensated for by thehigher molybdenum market prices. On-site and shipping costs increased asforecast by 24.1 cents per pound, mainly explained by higher energy costs due tothe new electricity supply contract that took effect from January 2008 and whichreflects the current tight market conditions. Shipping costs have also risen asa consequence of higher fuel prices. El Tesoro Cathode production at El Tesoro in the first quarter of the year was 23,900tonnes, 2.8% above the quarterly average for 2007, and in line with forecast.This increased production was achieved mainly due to the higher level of oretreated, offset by the lower average ore grade. Pre-stripping works have continued in line with plan at the Tesoro North-Eastdeposit, which now forms part of the El Tesoro mine plan. Cash costs in Q1 2008 were 129.4 cents per pound, below year-to-date forecastbut 19.6 cents above the 2007 full year mainly as a result of higher acid andenergy costs. Michilla Michilla produced 11,500 tonnes of copper cathodes in the first quarter of theyear, marginally above the quarterly average for 2007. The higher ore throughputand the higher metallurgical recovery in the quarter more than compensated forthe decline in the ore grade. Cash costs were 191.4 cents per pound in the first quarter of the year, belowthe forecast for the quarter but 47.9 cents above the 2007 full year, reflectinghigher acid and energy costs, as well as higher costs of third party services. Projects The Esperanza project continues to progress on schedule, with first productionexpected by the fourth quarter of 2010. Pre-stripping was initiated in earlyFebruary and the construction of early works (such as camps, access roads andother facilities) has also started with more than 1,000 workers now on site. Thefull environmental approval is expected to be obtained by the third quarter ofthis year, after which the construction of the plant will commence. As announcedon 24 April 2008, project costs (before working capital and any financing costs)are currently estimated at US$1.9 billion, mainly as a result of cost escalationexpected to the completion of the project. On 24 April Antofagasta announced that it had entered into an agreement withMarubeni Corporation under which Marubeni will acquire a 30% interest in theEsperanza project (including the Telegrafo deposit) and the El Tesoro mine(including the Tesoro North-East deposit). At closing Marubeni will pay a cashconsideration of US$1.31 billion plus interest to completion and other closingadjustments and will be responsible for its share of development cost of theEsperanza project. Closing of the transaction is subject to a number ofconditions including receipt of necessary environmental approvals at Esperanza.To facilitate this transaction certain mining properties were acquired throughAntomin Limited. During Q1, feasibility studies were initiated for the Reko Diq project inPakistan and the Antucoya project in Chile's II Region; the purchase of theAntomin properties mentioned above completes the ownership of property necessaryfor the Antucoya project. The Reko Diq project is advancing on schedule tofinish its feasibility study in early 2009. The feasibility contract has beenassigned to SNC Lavanin from Toronto and, following the increase in the resourceestimate at the end of 2007, the company is now carrying out infill drilling. Exploration The Group progressed with its exploration programme both in Chile and in therest of the world in accordance with its plan for the year. As part of its long-term strategy for growth, during April the Group enteredinto an agreement with TEAL Exploration & Mining Incorporated ("TEAL") toacquire an initial 30% interest in two of TEAL's exploration licences on theZambian Copperbelt covering an area of approximately 2,067 sq. km. for aconsideration of US$5 million. The agreement gives the Group the right to earnan additional 20% interest by incurring US$4.5 million of explorationexpenditure (of which US$2 million is committed expenditure) over a period of 4years. TEAL is a company listed on the Toronto Stock Exchange and the JSELimited with exploration and project interests in Africa. As part of the Group's decision to enter the energy exploration business asexplained in its Preliminary Results Announcement of 13 March, during April theGroup signed a memorandum of understanding with Empresa Nacional del Petroleo("ENAP") of Chile for the exploration and exploitation of potential sources ofgeothermal energy. The memorandum of understanding envisages that theseactivities will be carried out through a newly-created entity in which the Groupwill hold a 60% interest and ENAP will hold 40% interest. Commodity prices The LME copper price in 2008 Q1 averaged 352.1 cents per pound, compared with269.5 cents per pound in 2007 Q1 and 323.3 cents per pound in the 2007 fullyear. The market molybdenum price in 2008 Q1 averaged US$33.2 per pound, compared withUS$26.1 in 2007 Q1 and US$30.2 per pound in the 2007 full year. Transport Combined rail and road volumes for the quarter were 5.2% below the average for2007. The outlook for the year remains positive, with volumes for the full yearexpected to be above those achieved in 2007. Water The water business performed strongly in the first quarter of the year. Volumessold increased to 10.7 million cubic metres, a 7.8% increase compared withquarterly average for 2007, due to improved sales to both industrial andregulated clients. Interim Management Statement This report represents the Interim Management Statement for the purposes of theUK Listing Authority's Disclosure and Transparency Rules. Other than as set outabove, there have been no significant changes in the financial position of theGroup in the quarter ended 31 March 2008. Los Pelambres Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007Production statistics Daily average ore treated 138.8 138.8 125.0 126.3('000 tonnes) Average ore grade 0.71 0.71 0.71 0.71(%) Average recovery 91.1 91.1 92.5 92.3(%) Concentrate produced 272.0 272.0 186.5 872.1('000 tonnes) Average concentrate grade 30.2 30.2 39.6 34.5(%) Fine copper in concentrate 82.0 82.0 73.1 300.1('000 tonnes) Payable copper in 79.1 79.1 70.7 289.9concentrate ('000 tonnes) Average moly ore grade 0.019 0.019 0.033 0.030(%) Average moly recovery 73.5 73.5 66.7 74.2(%) Payable moly 1.8 1.8 2.1 10.2('000 tonnes) Cash costs statistics On-site and shipping costs 100.4 100.4 64.7 76.3(cents per pound) Tolling charges forconcentrates 20.3 20.3 25.7 29.6(cents per pound) By - product credits (83.2) (83.2) (86.3) (116.7)(cents per pound) * Cash costs 37.4 37.4 4.2 (10.8)(cents per pound) (*) Note: By-products credits do not include any costs attributable to theproduction of molybdenum concentrate. By-product calculations also do not takeinto account unrealised mark-to-market gains at the beginning or end of eachperiod. El Tesoro Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007 Daily average ore 29.8 29.8 27.8 26.8treated('000 tonnes) Average ore grade 1.16 1.16 1.21 1.23(%) Average recovery 76.8 76.8 77.4 77.8(%) Copper cathodes 23.9 23.9 23.6 93.0('000 tonnes) Cash costs 129.4 129.4 87.4 109.8(cents per pound) Michilla Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007 Daily average ore 16.2 16.2 15.2 14.8treated('000 tonnes) Average ore grade 0.98 0.98 1.04 1.03(%) Average recovery 80.6 80.6 81.2 79.1(%) Copper cathodes 11.5 11.5 11.6 45.1('000 tonnes) Cash costs 191.4 191.4 123.1 143.5(cents per pound) Transport Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007 Rail tonnage 1,224 1,224 1,253 5,008transported('000 tons) Road tonnage 273 273 321 1,313transported('000 tons) Water Q1 Q2 Q3 Q4 Acc Acc Full 2008 2008 2008 2008 2008 2007 Year 2007 Water volume sold -potable 10,743 10,743 10,069 39,858and untreated ('000 m3)** (**) Note: Water volumes include water transportation of 353,000 m3 in Q1 (300,000 m3 in Q1 2007 and total for 2007 of 1,258,000 m3 ). 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