Antofagasta Plc – Q4 Production Report

Q4 2021 PRODUCTION REPORT

FULL YEAR GUIDANCE ACHIEVED

Antofagasta plc CEO, Iván Arriagada said: ” Despite external pressures, such as the ongoing drought in Chile, higher input costs and global supply chain challenges, the Company has successfully achieved its production and cost guidance for the year with copper production at 721,500 tonnes and net cash costs of $1.20/lb.

“In 2022 we expect copper production to be 660-690,000 tonnes at a net cash cost of $1.55/lb as grades decrease at Centinela Concentrates and the drought continues to impact Los Pelambres. However, we have a long-term solution to the water shortage which will come in the second half of the year when our desalination plant is commissioned.

“Our unit costs will be temporarily affected by the decrease in production in 2022 combined with increases in input prices, particularly acid. However, through our Cost and Competitiveness Programme, improving operational effectiveness and innovation we will continue to control costs tightly in the short-, medium- and long-term.

“In the meantime, the demand picture for copper continues to be strong as copper is essential to economic activity and green investment initiatives such as electric vehicles, infrastructure and renewable energy.”

HIGHLIGHTS

PRODUCTION

• Group copper production for the full year was 721,500 tonnes, within the guidance range and 1.7% lower than last year mainly on expected higher grades at Centinela Concentrates, offset by expected lower grades and lower throughput at Los Pelambres
• Group copper production in Q4 2021 was 178,900 tonnes, 1.2% lower than in the previous quarter as lower water availability impacted throughput at Los Pelambres by 13.6%, mainly as a result of the previously advised drought 
• Gold production for the full year was 252,200 ounces, 23.6% higher than in 2020 on higher grades at Centinela. Quarterly production decreased by 2.8% to 64,900 ounces on lower throughput at Los Pelambres
• Molybdenum production in the quarter was 2,100 tonnes, 500 tonnes lower than in the previous quarter on lower throughput at Los Pelambres. For the full year, production was 10,500 tonnes, 16.7% lower than in 2020 on lower grades at Los Pelambres and Centinela

CASH COSTS

• Cash costs before by-product credits in 2021 were $1.79/lb, 14.7% higher than last year due the stronger Chilean peso (4%), higher energy and diesel prices, and lower production
• Cash costs before by-product credits in Q4 2021 were $1.92/lb, 13c/lb higher than in Q3 2021 due to higher input prices and the lower production at Los Pelambres
• Net cash costs for the full year were $1.20/lb, below guidance and 5.3% higher than in 2020 due to higher cash costs before by-product credits partially offset by the 17c/lb increase in by-products credits on increased gold production and realised molybdenum price
• Net cash costs in Q4 2021 were $1.35/lb, 19c/lb higher than in the previous quarter, reflecting the higher cash costs before by-products credits and the decrease in by-products credits

2022 GUIDANCE

• Group production in 2022 is expected to be 660-690,000 tonnes of copper (as previously announced), 170-190,000 ounces of gold and 8,500-10,000 tonnes of molybdenum. The copper and gold production reflect lower expected grades at Centinela Concentrates and the temporarily reduced throughput at Los Pelambres because of the continued drought. It assumes there is no precipitation until the rainy season and the desalination plant starts operating in H2 2022. Copper production is expected to increase quarter on quarter throughout the year
• Group cash costs in 2022 before and after by-product credits are expected to be $2.00/lb and $1.55/lb respectively, reflecting increased input costs, especially sulphuric acid (up 125%) at our cathode operations, and lower production at the Group's two lowest cost operations, namely Los Pelambres and Centinela Concentrates. By-product credits are also expected to decrease as gold and molybdenum production falls
• Capital expenditure in 2022 is expected to be $1.7-1.9 billion, as sustaining and mine development expenditure increase for the year to approximately $1.0 billion, and development expenditure continues on the Los Pelambres Expansion project and at Centinela, including the ongoing study and review work on the second concentrator. The final estimated capital expenditure to complete the Los Pelambres Expansion remains under review due primarily to COVID-19 impacts.  

GROWTH PROJECTS UPDATE

• As at the end of 2021 the Los Pelambres Expansion project was 68% complete (design, procurement and construction). The final estimated project costs are under review, considering the impact of COVID-19, higher input and logistics costs and project workers absenteeism. The completion schedule for the water supply system remains unchanged and is expected in H2 2022. For the concentrator plant expansion, which has the highest number of workers and was most affected by absenteeism, completion is now planned for the beginning of 2023
• At Zaldívar construction of the Chloride Leach project was completed during January 2022 and is now being commissioned

SUSTAINABILITY

• In December, the Company released its inaugural Climate Change Report which set out its progress and plans for fulfilling its Climate Change Strategy. This included its approach to achieving the previously announced emission reduction targets, as well as the Group's adaption initiatives, the evaluation of the physical risks of climate change, transition risks and the management of critical resources such as water and energy, all with full regard of the impact on the Group's stakeholders. Climate change considerations are integrated into the Group's business decision making processes including using an internal carbon price
• The Company also released a Social Management Report in December

OTHER

• A three-year labour agreement was agreed with one of the workers unions at Centinela in December, six months earlier than originally scheduled. During 2022 negotiations are scheduled with the supervisors' unions at Zaldívar (August), Los Pelambres (October) and Antucoya (November), and with the workers' union at Antucoya (September).

(1) Cash cost is a non-GAAP measure used by the mining industry to express the cost of production in US dollars per pound of copper produced.