Antofagasta Plc · LSE:ANTO
Antofagasta — H1 2003 Earnings Presentation
37 slides from Antofagasta's earnings presentation, Sep 2, 2003
Slide 1: Results Presentation First Half 2003
Results Presentation First Half 2003 2 September 2003
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 First half 2003
Highlights First half 2003 • Group copper production increased 7% to 225.1 k tonnes (2002 H1: 210.9 k tonnes) • Average cash cost reduced 4% to 37.6 c/lb (2002 H1: 39.2 c/lb) • Los Pelambres record low cash cost of 31.5 c/lb • El Tesoro LME grade A certification obtained in July • Michilla significa
Slide 4: Financial highlights First half 2003
Financial highlights First half 2003 2003 H1 2002 H1 LME copper price 74.9 c/lb 71.9 c/lb + 4% Realised copper price 77.5 c/lb 74.4 c/lb + 4% US$m US$m Revenues 471.9 418.7 + 13% EBITDA 218.6 175.6 + 24% ROCE (annualised) 12.4% 9.2% + 35% cents cents EPS 34.0 26.6 + 28% Interim dividend 11.0 10.0 +
Slide 5: Group Update and Outlook
Group Update and Outlook First Half 2003 5
Slide 6: Los Pelambres Operational performance
Los Pelambres Operational performance Copper production and cash cost 180 155 145 • Cash costs reduced to 31.5 c/lb – Treatment and refining charges of 12.6 c/lb 35.4 34.4 – By product credits of 12.9 c/lb 31.5 – Increased availability and utilisation rates at the concentrator plant 2002 H1 2002 H2
Slide 7: Los Pelambres Financial update
Los Pelambres Financial update • EBITDA of US$ 159.6m (27% above 2002 H1) 2003 H1 2002 H1 Sales volume (000 tonnes) 160.8 144.6 Realised price (c/lb) 77.6 74.8 LME price (c/lb) 74.9 71.9 Cash cost (c/lb) 31.5 35.4 • Project debt reduced by US$ 43.7m to US$ 660.4m - Total repayments of US$ 285.6m sin
Slide 8: Los Pelambres Outlook and targets
Los Pelambres Outlook and targets Production and costs 2003 • Copper production of 325,000 tonnes (payable) • Moly production of 7,500 tonnes • Cash costs below 35 c/lb Plant upgrade • Permanent pebble crusher fully operational by Q4, reaching a processing level of 120 ktpd Growth prospects • Obtain
Slide 9: El Tesoro Operational performance
El Tesoro Operational performance Copper production (000 tonnes) 23.4 22.8 22.1 target level 21.2 20.9 19.3 21,250 tonnes per quarter equivalent to 85,000 tonnes per year Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 • Target production rate (85,000 tonnes per year) exceeded since Q4 2002 • Copper recoveries
Slide 10: El Tesoro Financial update
El Tesoro Financial update • EBITDA of US$ 36m (18% above 2002 H1) 2003 H1 2002 H1 Sales volume (000 tonnes) 45.3 40.9 Realised price (c/lb) 76.9 73.6 LME price (c/lb) 74.9 71.9 • Principal repayments – US$ 12.3m in February 2003 – US$ 15.8m in August 2003 (bank senior debt reduced to US$ 156.6m) •
Slide 11: El Tesoro Outlook and targets
El Tesoro Outlook and targets Copper production (000 tonnes) + 7% 90.0 84.3 34.0 2001 2002 2003 E • New production target of 90,000 tonnes for 2003 • Cash costs around 41 c/lb • Optimisation of mine extraction using large size electric shovel from January 2004 11
Slide 12: Michilla First half 2003 update
Michilla First half 2003 update 13.1 13.2 13.2 13.5 12.5 73.1 10.9 67.4 63.5 61.5 61.3 59.0 2002 Q1 2002 Q2 2002 Q3 2002 Q4 2003 Q1 2003 Q2 Production (000 tonnes) Cash cost (c/lb) • Production and cash costs reduced to planned levels in May (cash costs of 65 c/lb in May and June) • Copper recoverie
Slide 13: Michilla Outlook and targets
Michilla Outlook and targets New mine plan under review • Total reserves Current mine plan: 25.6 million tonnes of 1.4% copper New (preliminary estimate): 44.9 million tonnes of 1.25% copper • Engineering studies expected to be completed in 2004 H1 • Life of mine could be extended up to 2012 (curren
Slide 14: Exploration in Chile
Exploration in Chile Northern Chile: Sierra Gorda - Esperanza Chile Michilla • Targets Port of Mejillones – Sulphide ores to complement Port of Esperanza project Antofagasta Tesoro – Oxide ores and leachable sulphides Esperanza • Drilling programme on track – 28,246 metres (US$ 1.5m) in 2003 H1 Port
Slide 15: Exploration in Peru
Exploration in Peru Cordillera de las Minas • 50-50 joint venture with CVRD • 3-year timeframe Peru • Target area of 60,000 sq kms • Exploration started in August 2002 Lima • Current progress Cuzco – Aero-magnetic flights completed – 7 targets to be drilled this year – 5 targets already drilled – Id
Slide 16: Railway and other transport First half 2003 update
Railway and other transport First half 2003 update • Rail tonnages maintained (2.1 million tonnes) • Road transport volumes also at similar levels • Total revenues of US$ 35.7 million • Currently participating in the bidding process for ESSAN (water utility company of the Antofagasta Region) 16
Slide 17: Financial analysis
ANTOFAGASTA @ PLC Financial analysis 17
Slide 18: Profit after tax and minorities - Variances 2003 H1 vs 2002 H1
Financial analysis Profit after tax and minorities - Variances 2003 H1 vs 2002 H1 US$m 120 5.8 100 8.2 32.4 3.1 80 13.2 67.2 60 15.4 52.5 40 20 0 2002 H1 Mining Railway Net interest Dividend Tax Minority 2003 H1 income interest 18
Slide 19: Cash flow first half 2003
Financial analysis Cash flow first half 2003 US$m 600 500 218.6 12.4 15.1 400 42.6 302.4 300 60.0 252.4 36.4 2.1 200 100 0 Initial Cash EBITDA Working Net interest Net capex Net debt Group Other Final cash Capital paid repaid dividends 19
Slide 20: Group net debt
Financial analysis Group net debt US$m Consolidated net debt Attributable net debt US$m 1,000 1,000 906.3 800 800 603.9 600 600 302.4 532.9 400 400 279.8 200 253.1 200 0 0 Total loans Total cash Net debt Attrib. loans Attrib. cash Attrib. net debt H1 03 H1 02 H1 03 H1 02 Net Debt Net Debt Equity + M
Slide 21: Distribution of Andsberg shares: Proposed Quiñenco demerger
Distribution of Andsberg shares Proposed Quiñenco demerger 21
Slide 22: Proposed Quiñenco demerger Background
Proposed Quiñenco demerger Background Quiñenco • Diversified industrial and financial group based in Chile • Listed in Santiago and in ADR form in New York (NYSE – LQ) Antofagasta’s 33.6% investment • Acquired in 1996 through merger of industrial and financial assets • Held through Andsberg, a wholl
Slide 23: Proposed Quiñenco demerger Background: book and market value
Proposed Quiñenco demerger Background Book value Investment in Quiñenco US$180m Andsberg other assets US$1m Antofagasta total assets US$2,486m Market value Low historical correlation between Antofagasta and 33.6% investment in Quiñenco 2,500 2,000 Antofagasta (Market (Market value) value) 1,500 US$
Slide 24: Proposed Quiñenco demerger Transaction terms
Proposed Quiñenco demerger Transaction terms Dividend in specie of shares in Andsberg • One share in Andsberg for every ordinary share held in Antofagasta Right to redeem Andsberg share (until 30 Oct) • Fixed price of US$1.11 per Andsberg share • Represents an underlying value of US$ 6.00 per Quiñen
Slide 25: Proposed Quiñenco demerger Group structure
Proposed Quiñenco demerger Group structure Before After Shareholders Shareholders Shareholders OR Redemption Right Antofagasta Antofagasta Andsberg plc plc Limited Transport Mining Andsberg Transport Mining 33.6% Quiñenco 33.6% Quiñenco 25
Slide 26: Proposed Quiñenco demerger Reasons
Proposed Quiñenco demerger Reasons Demerger strategy • Consistent with strategy to focus on mining and transportation • Quiñenco investment no longer relevant to Antofagasta’s activities or valuation • Demerger enhances value for all Antofagasta shareholders Demerger structure • Create choice for sh
Slide 27: Proposed Quiñenco demerger Timetable
Proposed Quiñenco demerger Timetable • Announcement and issue of circular 2 Sep • Extraordinary Shareholders Meeting 1 Oct • Return of redemption forms 30 Oct • Payment date for redemption 6 Nov 27
Slide 28: Conclusion Next steps
ANTOFAGASTA @ PLC Conclusion Next steps 28
Slide 29: Summary
Summary • Focus on operational performance at mines and railway • Continue exploration in potential areas in Chile and Peru • Take next steps for potential expansion at Los Pelambres • Complete demerger of Quiñenco 29
Slide 30: Results Presentation First Half 2003
Results Presentation First Half 2003 2 September 2003
Slide 31: Group operations Overview
Group operations Overview Copper mining Los Pelambres (60%) : 325,000 tpy in concentrates El Tesoro (61%) : 90,000 tpy of cathodes Michilla (74%) : 52,000 tpy of cathodes Exploration programmes in Chile and Peru Transport Chile (FCAB-100%) and Bolivia (FCA-50%) 4.1 million tons in 2002 31
Slide 32: Group operations Overview
Group operations Overview Northern Chile Peru Michilla El Tesoro Lima Port of Cuzco Antofagasta Esperanza Cordillera de las Minas CVRD joint venture Port for Los Pelambres Los Pelambres 32
Slide 33: Process & Costs: Los Pelambres
Process & Costs: Los Pelambres all numbers refer to year 2002 Mining & Crushing Milling, Flotation & Treatment & Refining (open pit) Shipping (91% recovery) (Abroad) Crushed Ore Copper Concentrate Copper Cathode (avg 0.9% copper) (avg 44% copper) (99.999% copper) plus Moly concent. plus gold and sil
Slide 34: Process & Costs: El Tesoro
Process & Costs: El Tesoro all numbers refer to year 2002 Agglomeration / Heap leaching Mining / Crushing Solvent Extraction / Electrowinning (open pit) (74% recovery) Crushed Ore Copper Cathode (avg 1.5% copper) (99.999% Cu) 50 30.3 40.8 Cash Cost (cents/lb) 40 9.4 12.9 32% 30 20 20.9 10.5 68% 27.9
Slide 35: Process & Costs: Michilla
Process & Costs: Michilla all numbers refer to year 2002 Agglomeration / Heap leaching Mining / Crushing Solvent Extraction / Electrowinning (open pit/underground) (76% recovery) Crushed Ore Copper Cathode (avg 1.4% copper) (99.999% Cu) 70.0 35.2 61.4 60.0 Cash cost (cents/lb) 13.0 50.0 34.5 55% 40.
Slide 36: Provisional pricing mechanism
Provisional pricing mechanism applicable to Los Pelambres 4-month period (from shipping to final settlement) Shipping day 31 Dec Final settlement -Provisional invoice -Mark to market - Final price -Price = Shipping month average (only if price is lower) - Balance is paid -90% of provisional invoice
Slide 37: Antofagasta contacts
Antofagasta contacts London Santiago de Chile (Antofagasta plc) (Antofagasta Minerals S.A.) Philip Adeane Managing Director Jean-Paul Luksic Chief Executive Officer Hussein Barma Chief Financial Officer Alejandro Rivera Chief Financial Officer Sebastian Gil Head of Investor Relations Tel: +44 20 738