Last checked at 4 Aug 2010 10:00
Antofagasta plc
4 August, 2010
Quarterly Production Report - Q2 2010
Highlights
·; Group copper production was 135,200 tonnes in Q2, compared with 117,700 tonnes in Q1. The increase in Q2 was mainly due to increased production at Los Pelambres, reflecting higher throughput as a result of the plant expansion which reached design capacity of 175,000 tonnes per day of ore throughput at the end of Q1. Production in the first half of 2010 was 252,900 tonnes, in line with expectations and 15.9% above the comparable period of 2009.
·; Molybdenum production at Los Pelambres was 2,700 tonnes in Q2 and 4,400 tonnes in the first half of the year, higher than Q1 2010 and H1 2009 respectively. The increase was due to the higher plant throughput, as well as improved ore grades and metallurgical recoveries in Q2 2010.
·; Group cash costs were 88.7 cents per pound in Q2 compared with 94.7 cents per pound in Q1. This decrease was mainly due to lower on site and shipping costs at Los Pelambres, partly offset by increased costs at El Tesoro and Michilla. Costs excluding by-product credits were 124.5 cents per pound in Q2 compared with 128.8 cents per pound in Q1.
·; Group cash costs in the first six months of 2010 were 91.5 cents compared with 97.5 cents per pound in the first half of 2009, as improved by-product credits offset higher costs at the three mining operations.
Group Total | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
| Total production of payable copper ('000 tonnes) | 117.7 | 135.2 |
|
|
| 252.9 |
| 218.2 |
| 442.5 |
| Total production of payable moly ('000 tonnes) | 1.8 | 2.7 |
|
|
| 4.4 |
| 3.7 |
| 7.8 |
| Weighted average cash costs before by-product credits (cents per pound) | 128.8 | 124.5 |
|
|
| 126.5 |
| 116.0 |
| 120.3 |
| Weighted average cash costs (cents per pound) | 94.7 | 88.7 |
|
|
| 91.5 |
| 97.5 |
| 96.3 |
Mining operations
Los Pelambres
Los Pelambres produced 102,500 tonnes of payable copper in Q2 and 186,100 tonnes in the first half of 2010, 18.2% above the first half of 2009, mainly due to higher plant throughput as a result of the plant expansion. The commissioning of the plant expansion has now been completed with ore throughput in Q2 averaging 174,300 tonnes per day. Shipments of payable copper in the first half of 2010 were 162,400 tonnes, 23,700 tonnes lower than production due to a delay in programmed shipments at the end of June due to adverse weather conditions. The accumulated inventory of filtered concentrate at the port was shipped in July.
Molybdenum production was 2,700 tonnes in Q2 and 4,400 tonnes in the first half of the year, 18.9% above the first half of 2009. The higher production was mainly due to the higher plant throughput, as well as improved ore grades and metallurgical recoveries in Q2.
Cash costs were 63.3 cents per pound in Q2 compared with 74.1 cents per pound in the previous quarter. The higher costs in Q1 were mainly due to a mill relining and major maintenance work that quarter.
Cash costs for the first half of 2010 were 68.1 cents per pound, compared with 84.7 cents per pound in the 2009 H1. The decrease in net costs was mainly due to the increase in by-product credits as a result of higher molybdenum market prices and a decrease in tolling charges, partly offset by an increase in on-site and shipping costs in 2010 H1. The increase in on-site and shipping costs was mainly due to higher energy costs and a stronger Chilean peso compared to the weaker economic environment in the first half of 2009.
El Tesoro
Copper production at El Tesoro was 22,900 tonnes in Q2 and 47,300 during the first half of the year, 18.0% above the first half of 2009. This reflects the impact of production from the fully operational Esperanza Run-of-Mine ("ROM") oxide leaching project which contributed 7,100 tonnes of cathode production in H1.
Cash costs for Q2 of 159.8 cents per pound were below budget, although higher compared with 134.3 cents per pound in the previous quarter. This increase was due to the impact of inventory movements on costs, an increase in the costs of inputs and the effect of lower production compared with Q1.
Cash costs in the first half of the year were 146.6 cents per pound, a 23.8 cents per pound increase on the 2009 H1 cash costs. This increase is mainly due to the stronger Chilean peso, higher fuel costs, the impact of inventory movements on costs and inclusion of costs for Tesoro North-East and the Run-of-Mine processes. These factors were partly offset by lower sulphuric acid prices.
Michilla
Michilla produced 9,700 tonnes of copper in Q2, achieving 19,500 tonnes during the first half of the year, which was ahead of budget, although slightly below the first half of 2009, mainly due to lower throughput and metallurgical recoveries.
Cash costs for Q2 were 188.6 cents per pound compared with 172.3 cents per pound in the previous quarter. This increase was mainly due to the decision to process additional lower-grade ore to utilise spare capacity at the plant, as well as the impact of mining from the higher cost Lince open pit, including the resulting increased earth movement in Q2 compared with Q1.
Cash costs were 180.4 cents per pound in the first half of the year, a 33.9 cents per pound increase on the 2009 H1 cash costs. The increase was due to the reopening of the Lince open pit, a stronger Chilean peso and the higher cost of ore purchased from ENAMI partly offset by the lower sulphuric acid cost.
Projects and exploration
Esperanza remains on track to commence operations during the fourth quarter of 2010. Overall construction was 85% complete at the end of June and pre-stripping was completed during July. The total development cost (including working capital, financing and exchange impacts) is estimated to be $2.5 billion reflecting exchange effects and monthly cost revisions including the impact of the earthquake earlier in the year on construction activities.
In May, the Group's mining division, Antofagasta Minerals S.A., approved further expenditure of approximately US$70 million on growth options in the Sierra Gorda district for the period to the end of 2011, covering further exploration, the preparation of a prefeasibility study for the district and for infill drilling, geotechnical and metallurgical studies to support eventual feasibility studies at Caracoles and Telegrafo.
At Reko Diq, work on the feasibility study and the related environmental and social impact assessment study is in its final stages. Discussions for agreements with the relevant authorities are continuing.
On 21 July 2010, the Group signed a definitive Participation and Limited Liability Agreement with Duluth Metals Limited ("Duluth"), a company listed on the Toronto Stock Exchange, to become a partner in Duluth's Nokomis copper-nickel-platinum group metal deposit ("Nokomis"), located in north-eastern Minnesota, USA. Subject to all applicable government and regulatory approvals, the Group will acquire a 40% stake in the project company, Twin Metals Minnesota LLC by providing US$130 million of funding over a three year period to advance the project to a bankable feasibility study. The Group also has the option to acquire an additional 25% interest under certain conditions including completion of a bankable feasibility study.
After evaluation of the results of the exploration activities to date, the Group decided not to proceed further with the partnership with TEAL Exploration & Mining in Zambia, and accordingly withdrew from the agreement in May. The Group's strategy for seeking long-term opportunities for growth through earn-in agreements and joint ventures remains unchanged.
Commodity prices and exchange rates
The LME copper price in 2010 H1 averaged 323.4 cents per pound, compared with 183.5 cents per pound in 2009 H1 and 234.2 cents per pound in the 2009 full year. The LME spot copper price at 30 June 2010 was 295.5 cents per pound (31 December 2009 - 333.2 cents per pound; 31 March 2010 - 355.2 cents per pound).
The market molybdenum price in 2010 H1 averaged US$16.1 per pound, compared with US$9.1 per pound in 2009 H1 and US$11.1 per pound in the 2009 full year. The average market molybdenum price in June 2010 was US$14.6 per pound (December 2009 - US$11.2 per pound; March 2010 - US$17.4 per pound).
The realised copper and molybdenum prices which the Group will recognise for its sales in the first half will differ from the average market prices shown above because, in line with industry practice, sales agreements generally provide for provisional pricing at the time of shipment with final pricing based on the average market price for the month in which settlement takes place. The typical period for which sales remain open until settlement occurs for copper concentrate sales is approximately three months from shipment date, for copper cathode sales approximately one month from shipment, and for molybdenum sales approximately two months from shipment. Additionally, under IFRS open sales are marked to market at the end of each period through adjustments to turnover in the income statements using forward prices in the case of copper concentrate and copper cathode sales and period-end prices for molybdenum sales. In accordance with normal practice, these adjustments will be reported for the first half when the Group reports its half yearly financial report on 24 August 2010.
The Chilean peso / US dollar exchange rate averaged Ch$524.5 / US$1 in H1 2010, compared with Ch$587.6 / US$1 in H1 2009. The average exchange rate for the 2009 full year was Ch$559.5 / US$1. The exchange rate at 30 June 2010 was Ch$547.2 / US$1.
Transport
The transport division had a solid operational performance during the first half of the year. There was a marginal decrease in total rail tonnages compared to H1 2009 due to the net effect of changes in volumes from various customers, but a 38.6% increase in road tonnages.
Water
The water business performed well in the first half of the year. Volumes sold during this period increased by 3.1% in comparison with H1 2009, reaching 22.7 million cubic metres. This was principally due to a 5.7% increase in demand from domestic clients which offset a 2.7% decrease in demand from industrial customers.
The totals in the tables below may include some small apparent differences as the specific individual figures have not been rounded.
Los Pelambres | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
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| Production statistics |
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| Daily average ore treated ('000 tonnes) | 137.9 | 174.3 |
|
|
| 156.2 |
| 132.0 |
| 129.2 |
| Average ore grade (%) | 0.78 | 0.76 |
|
|
| 0.77 |
| 0.74 |
| 0.74 |
| Average recovery (%) | 89.5 | 90.2 |
|
|
| 89.9 |
| 92.6 |
| 92.1 |
| Concentrate produced ('000 tonnes) | 244.6 | 322.0 |
|
|
| 566.6 |
| 492.4 |
| 951.1 |
| Average concentrate grade (%) | 35.3 | 33.8 |
|
|
| 34.5 |
| 33.4 |
| 33.9 |
| Fine copper in concentrate ('000 tonnes) | 86.4 | 106.1 |
|
|
| 192.5 |
| 163.1 |
| 322.6 |
| Payable copper in concentrate ('000 tonnes) | 83.5 | 102.5 |
|
|
| 186.1 |
| 157.5 |
| 311.6 |
|
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| Average moly ore grade (%) | 0.019 | 0.021 |
|
|
| 0.020 |
| 0.019 |
| 0.020 |
| Average moly recovery (%) | 76.7 | 84.3 |
|
|
| 81.2 |
| 81.5 |
| 81.1 |
| Payable moly ('000 tonnes) | 1.8 | 2.7 |
|
|
| 4.4 |
| 3.7 |
| 7.8 |
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| Cash costs statistics |
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| On-site and shipping costs (cents per pound) | 103.9 | 93.8 |
|
|
| 98.4 |
| 90.8 |
| 95.3 |
| Tolling charges for concentrates (cents per pound) | 18.2 | 16.7 |
|
|
| 17.4 |
| 19.4 |
| 19.2 |
| By - product credits (cents per pound) (1) | (48.1) | (47.2) |
|
|
| (47.6) |
| (25.6) |
| (34.1) |
| Cash costs (cents per pound) | 74.1 | 63.3 |
|
|
| 68.1 |
| 84.7 |
| 80.4 |
(1) By-products credits do not include any costs attributable to the production of molybdenum concentrate. By-product calculations also do not take into account unrealised mark-to-market gains at the beginning or end of each period.
El Tesoro | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
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| Daily average ore treated (2) ('000 tonnes) | 24.2 | 25.9 |
|
|
| 25.1 |
| 27.9 |
| 26.2 |
| Average ore grade (2) (%) | 1.24 | 1.15 |
|
|
| 1.20 |
| 1.10 |
| 1.25 |
| Average recovery (2) (%) | 78.8 | 69.7 |
|
|
| 74.2 |
| 72.5 |
| 73.0 |
| Copper cathodes from El Tesoro and Tesoro North-East open pits (2) ('000 tonnes) | 21.1 | 19.1 |
|
|
| 40.2 |
| 40.1 |
| 87.4 |
| Copper cathodes from ROM ('000 tonnes) | 3.3 | 3.8 |
|
|
| 7.1 |
| - |
| 2.8 |
| Total copper cathodes ('000 tonnes) | 24.4 | 22.9 |
|
|
| 47.3 |
| 40.1 |
| 90.2 |
| Cash costs (cents per pound) | 134.3 | 159.8 |
|
|
| 146.6 |
| 122.8 |
| 123.4 |
(2) The average daily throughput, ore grade and recovery figures shown above, relate to the Tesoro and Tesoro North-East open pits and do not include amounts relating to the ROM material.
Michilla | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
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| Daily average ore treated ('000 tonnes) | 13.3 | 15.0 |
|
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| 14.1 |
| 14.8 |
| 15.1 |
| Average ore grade (%) | 1.04 | 0.94 |
|
|
| 0.99 |
| 0.99 |
| 0.96 |
| Average recovery (%) | 77.9 | 75.6 |
|
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| 76.8 |
| 78.3 |
| 77.5 |
| Copper cathodes ('000 tonnes) | 9.8 | 9.7 |
|
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| 19.5 |
| 20.6 |
| 40.6 |
| Cash costs (cents per pound) | 172.3 | 188.6 |
|
|
| 180.4 |
| 146.5 |
| 157.6 |
Transport | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
| Rail tonnage transported ('000 tons) (3) | 1,505 | 1,537 |
|
|
| 3,042 |
| 3,093 |
| 6,335 |
| Road tonnage transported ('000 tons) (3) | 492 | 490 |
|
|
| 981 |
| 708 |
| 1,505 |
(3) Rail tonnages are the aggregate of the volumes of the FCAB rail network in Chile and the Andino rail network in Bolivia. Shipments from customers which are carried on both networks are included in both the FCAB and Andino volumes which are combined to calculate the total rail tonnages shown above. Similarly, shipments which are carried by rail and by road are included in both the rail and road volumes shown above.
Water | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
| Acc 2010 |
| Acc 2009 |
| Full Year 2009 |
| Water volume sold - potable and untreated ('000 m3) (4) | 11,349 | 11,397 |
|
|
| 22,746 |
| 22,058 |
| 43,736 |
(4) Water volumes include water transportation of 185,000 m3 in Q1 and 253,000 m3 in Q2 (343,000 m3 in Q1 2009 and 302,000 m3 in Q2 2009).
|
Enquiries - investor relations: | |
|
Desmond O'Conor doconor@antofagasta.co.uk |
London: (44) 20 7808 0988 |
|
Hussein Barma hbarma@antofagasta.co.uk |
London: (44) 20 7808 0988 |
|
Eduardo Tagleetagle@aminerals.cl |
Santiago: (56-2) 798 7145 |
|
Luis Eduardo Bravo lbravo@aminerals.cl |
Santiago: (56-2) 798 7073 |
| Enquiries - media: |
|
| Oliver Winters, Bankside Consultants oliver.winters@bankside.com |
London: (44) 20 7367 8874 |