TIDMANTO
RNS Number : 0355G
Antofagasta PLC
24 May 2017
NEWS RELEASE, 24 MAY 2017
CHAIRMAN'S COMMENTS AT
THE 2017 ANNUAL GENERAL MEETING
Antofagasta plc (the "Company") today released the script to be
used by the Chairman, Jean-Paul Luksic at the Company's Annual
General Meeting that commences at 10:00am today.
Thank you for joining us today.
As you can see, all of your directors are in attendance, as well
as several members of senior management including our Group CEO
Iván Arriagada, our Vice President of Institutional Relations
Francisco Veloso and Mauricio Ortiz, the General Manager of our
Transport Division. As you know, Ivan succeeded Diego Hernández in
the role of Group CEO in April 2016, having previously served as
the CEO of our mining division, and has led the Group's drive for
increased cost discipline and improved performance of the
operations.
There have also been a number of changes at Board level and I
would like to take this opportunity to welcome Francisca Castro,
who joined the Board as an independent non-executive director in
November last year. Francisca has considerable experience in
mining, energy and finance and has worked in various roles in Chile
and internationally. She has already made significant contributions
to the Board and the Audit and Risk, and the Remuneration and
Talent Management Committees and has been recommended by your Board
for election by shareholders today.
Francisca filled a vacancy created by Hugo Dryland's
resignation. Hugo had been on the Board since 2011 and I would like
to thank him for his valuable insights and guidance on a wide range
of matters and for the significant contribution he has made to the
Company during his time on the Board.
In September, Ollie Oliveira succeeded Bill Hayes as our Senior
Independent Director. Ollie has been a member of the Board since
2011 and Bill will stay on the Board as a Non-Executive Director,
but is no longer designated as independent.
Within the Board Committees there have also been a number of
changes and Ollie is now Chairman of the Audit and Risk Committee,
and Vivianne Blanlot is now Chairman of the Sustainability and
Stakeholder Management Committee.
Before proposing the resolutions set out in the notice of
meeting, I would like to highlight briefly Antofagasta's financial
and operating performance during 2016 and our outlook for the rest
of this year. I will then move onto the formal part of the meeting
before opening the floor to questions.
Over the course of 2016 we saw copper prices stage a recovery
from the lows at the beginning of the year, and this continued into
early 2017. This is undoubtedly good news and is reflected in our
improved results for the year, but as an industry we must be
careful to guard against falling back into complacency. Despite the
considerable efforts made so far - the industry still has further
to go in order to put costs back onto a sustainable footing.
At Antofagasta, our response to these challenges has been to
renew our focus on producing profitable tonnes. This is an
essential part of our strategy to ensure our business will generate
positive free cash flow through the cycle and generate good returns
on the capital we invest.
Before saying a few words about our operating performance, I
would like to take a moment to talk about safety. The safety of our
employees and the communities in which we work is our number one
priority. Unfortunately, I regret to report that during 2016
Antofagasta had two fatalities, one at our Railway division and one
at our newly commissioned Antucoya mine. On behalf of the Board,
the employees of the company - and myself - I would like to express
our sincere condolences to the families of our departed colleagues.
Our target is to achieve zero fatalities at our operations, and
while our business is inherently hazardous, this is a target that
we constantly strive to achieve.
In 2016 with the backdrop of weaker commodity prices we focussed
on optimising our operations to ensure we remain competitive in a
low-price environment. This was not an easy task as we also ramped
up our newly built Antucoya mine, and began operating the Zaldívar
mine which we bought a 50% stake in at the end of 2015.
Centinela also achieved significant milestones during the year
reaching its expanded throughput capacity of 105,000 tonnes per day
and commissioning the new paste thickeners, which have been
operating well. These thickeners will improve our water recovery
and reduce the area needed for tailings storage. This is an
important part of this innovative tailings management system which
is the largest application of this technology in the copper
industry in the world.
During 2016, we produced 709,400 tonnes of copper, 12.5% higher
than in 2015, together with 270,900 ounces of gold. We also
produced just over 7,000 tonnes of molybdenum.
Given the economic uncertainty, LME copper prices fell in
comparison to the prior year and, as you would expect, gold prices
rallied as investors took comfort in the characteristics of that
particular metal. Our average realised copper price of $2.33/lb was
marginally higher than in 2015, while gold was 8.7% higher and
molybdenum rose 19.3%.
Turning to our financials; revenue was 12.3% higher than in 2015
at $3.6 billion mainly as a result of higher sales volumes, but
also the marginally higher realised copper price. Our EBITDA for
the year was $1.6 billion and, more impressively, our EBITDA Margin
rose to just under 45%. This has been achieved by our relentless
focus on reducing our operating costs, and our cash costs per pound
of copper are down some 20% compared to 2015. Our control of
capital expenditure on sustaining capital, deferred stripping and
growth projects has been tight, bringing our expenditure down by
some 24% to $795 million, which was below our original
expectations.
In accordance with our dividend policy, the total dividend for
the year was 18.4 cents per share, or $182 million, which
represents a 53% pay out of our underlying earnings. This pay out
ratio is above our minimum commitment of 35% and reflects our
improved confidence in the position of the company and the outlook,
and our wish to distribute more of the returns to shareholders.
Our approach to allocating capital with an appropriate balance
between investment, growth and dividends, has allowed the Company
to retain a strong position and our financial strength gave us the
capacity to take advantage of opportunities over the year.
Turning to corporate governance - we fully complied with the UK
Corporate Governance Code once again throughout 2016. We also
completed our second externally facilitated Board and Board
Committee effectiveness review, revised and implemented succession
plans at Board and management level and took steps to consolidate
the Group's newest operations, Antucoya and Zaldívar, into the
Group which included site visits by Directors during the year.
As highlighted in the annual report, we are taking steps this
year to implement a cultural reinforcement process in consultation
with employees and key stakeholders and will be implementing a
programme to improve opportunities for female employees and to
ensure that the working environment throughout the Group encourages
the recruitment and retention of female talent.
We have also introduced a new Operating Model as we work to
further improve our operating performance by strengthening key
processes and ensuring we achieve our full production
capabilities.
The Model improves operating reliability and releases spare
capacity resulting in competitive advantage for the Group's mines.
We are achieving this by focusing on operations, maintenance and
planning while seeking operating excellence in all of these areas.
This initiative will lead to long-term and sustainable improvements
in how we operate.
Let me now speak about the future and our plans for growth.
Our three-pillar strategy for growth, remains unchanged.
Firstly, we will focus on optimising our existing operations, where
investment generates good returns quickly. Secondly, we look for
sustainable, organic growth in the areas around our operations. And
finally, we look for special opportunities for growth beyond our
core businesses both in Chile and abroad.
Antucoya is part of this three-pillar strategy for growth and we
commenced commercial production in April last year, achieved
production design capacity in August and will produce some
80-85,000 tonnes of copper this year, having produced 66,000 tonnes
last year.
In the current environment, we are working to get the most out
of our existing operations, lowering our cost base and improving
operating efficiency, while at the same time preserving our
development options for the future and ensuring they are ready to
grow at the right time.
We currently have two development projects underway, Encuentro
Oxides and the new molybdenum plant at Centinela. Both of these
projects were started in early 2015 and are on-schedule to be
completed by the end of this year.
Los Pelambres and Centinela both have very large mineral
resources and will be the source of our organic growth for decades
to come. While the sentiment in the copper market has improved it
is important that we maintain our discipline and our focus. We have
strong growth projects within our portfolio, but we must ensure
that we evaluate these opportunities carefully and proceed with
caution.
At Los Pelambres, our next development project is the
Incremental Expansion project. This is our most advanced project
and we finalised the feasibility study in March this year. We now
expect the capital expenditure to be $1.05 billion, very similar to
the pre-feasibility study estimate, with some $425 million
earmarked for a desalination plant and pipeline that will provide
up to 400 litres per second of water. This will complement the
continental water sources we already have and provide us with water
security. This project also involves construction of a new
concentrator line at Los Pelambres, and when complete will add
55,000 tonnes of copper to our annual production, bringing total
production to over 400,000 tonnes a year.
Our next major project at Centinela is the construction of a
second concentrator. We are currently working on a feasibility
study for the first phase of this expansion and this will add some
140,000 tonnes of copper, 150,000 ounces of gold and 2,800 tonnes
of molybdenum annually to our existing Centinela operations. We are
assessing alternative crushing technologies for this concentrator,
and are also considering ways in which to sequence the development
of the project to optimise the investment, and so that it overlaps
less with the Los Pelambres expansion and reduces the pressure on
our resources.
In the meantime, we continue to look for growth further afield
and where special opportunities may exist we have the financial and
operating capabilities to seize those opportunities.
We have made good progress in improving the sustainable
operation of our assets. During 2016, we made an important step
towards putting our relations with the Caimanes community at Los
Pelambres on a sustainable path and we resolved the outstanding
court cases concerning the Mauro tailings dam. As a result, the
Company is now proceeding with the plans agreed with the community
and courts on future water supply solutions, additional safety
measures, community development projects, and providing access to
benefits for families in the community.
As we work to reduce our cost base we must do so in a way that
reflects our responsibilities to the communities - and the
environment - in which we operate. I am delighted therefore with
the demonstrable progress that Antofagasta has made to strengthen
its community relations during 2016.
We produce copper responsibly and profitably, putting people and
safety first and working closely with our local communities to
ensure that our mines are developed sustainably. Our aim is to work
in partnership with all of our stakeholders to provide jobs,
prosperity and opportunities to not just the local population, but
Chile as a whole.
The Board and I have reinforced our messages on the importance
of safety to senior management. Looking to the remainder of this
year, and for every year, the safety and health of our employees
remains central to our success. The safety of our employees and
contractors will always come first in everything that we do and we
will continue to work hard to achieve our target of zero
fatalities.
We made good progress in 2016, reducing costs and increasing
production as the full impact from the new assets in our portfolio
flowed through. This led to a strong end to the year, which was
boosted by a marked strengthening in copper prices on higher than
expected Chinese demand.
As we look ahead we see a market which is more driven by supply
considerations than demand factors, some of them short term. This
has already resulted in more supply disruptions than were
originally expected and we now expect the year to end in balance,
or possibly in a small deficit.
Although prices and sentiment are better than last year, some of
the challenges we have seen in the market over the last two or
three years are expected to continue over the next 12 months. We
are now seeing the return of inflationary pressures on input prices
and this is one reason we remain committed to our strategy of
controlling costs and putting them on a sustainably lower footing,
producing profitable tonnes and delivering positive free cash flow
through the cycle. With this approach, we will maintain healthy
margins during periods of lower prices and safeguard our financial
strength to the benefit of all of our stakeholders - our employees,
communities, shareholders and the government. This in turn sets us
up well to take full advantage of any upturn in the market.
2017 will be an important year in Chile, as later during the
year we will be heading to the polls to select our next President.
Regardless of the outcome the copper industry in Chile still has a
vital role to play both in the country's development and in the
global markets. While I believe that Chile needs to continue to
diversify its economy as the country raises living standards for
all, we must not lose sight of the very important role that the
copper industry has to play.
The country has 30% of global copper reserves and if managed
properly copper has a long term role to play in Chile's
development. With the right incentives in place and working with
all the stakeholders involved we can develop these reserves safely
and to the benefit of not only today's generation, but also for
future generations of Chileans.
I would also like to take this opportunity to thank all of the
employees and contractors that work across the Group whose
contribution has helped to make Antofagasta what it is today.
_____________
Investors - London Media (Brunswick)
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Paresh Bhanderi pbhanderi@antofagasta.co.uk Will Medvei antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors - Santiago Media - Santiago
Francisco Veloso fveloso@aminerals.cl Pablo Orozco
porozco@aminerals.cl
Telephone +56 2 2798 7000 Carolina Pica cpica@aminerals.cl
Telephone +56 2 2798 7000
______________
This information is provided by RNS
The company news service from the London Stock Exchange
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