Antofagasta reports 15% increase in quarterly output

Antofagasta PLC (LON:ANTO) had announced its Q3 2024 production report.

Antofagasta plc CEO, Iván Arriagada said: “Copper production increased by 15% in the third quarter, driven by destocking of inventories at Los Pelambres and an increase in copper grades and recoveries at Centinela.

“Following the third quarter, we maintain our expectation to finish 2024 at the lower end of our guidance range of 670-710,000 tonnes of copper production, as destocking of concentrate inventories at Los Pelambres continues in the fourth quarter, as well as Los Pelambres and Centinela both exiting the third quarter with performance in line with expectations. Cash cost guidance for the full-year also remain unchanged, driven by our improving operational performance and robust gold prices.

“Construction across our growth and development projects continued during the quarter as expected, with work at Los Pelambres and Centinela focused on initial groundworks and the deployment of personnel and equipment to each site. This follows the recently completed Phase 1 Expansion Project at Los Pelambres facilitating a 31% year-on-year increase in the ore throughput rate during the first nine months of 2024.

“Looking ahead, our portfolio of operations is expected to produce 660-700,000 tonnes of copper in 2025, with an incremental increase in output expected at Centinela Concentrates.”

(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.

HIGHLIGHTS

PRODUCTION

·    Copper production in Q3 2024 was 179,000 tonnes, 15% higher on a quarter-on-quarter basis, driven by a partial destocking of inventories at Los Pelambres and an increase in copper grades and recoveries at Centinela.

·    Copper production in 9M 2024 was 463,700 tonnes, 1% lower on a year-on-year basis, with rising output at Los Pelambres and Centinela Cathodes serving to offset lower production at Centinela Concentrates.

·    Gold production in Q3 2024 was 51,800 ounces, 54% higher on a quarter-on-quarter basis, following higher gold grades at Centinela Concentrates. For the first nine months of the year, gold production decreased by 17% to 118,700 ounces, reflecting lower grades at Centinela.

·    Molybdenum production in Q3 2024 was 2,700 tonnes, 8% higher than Q2 2024 and in line with Q1 2024. Year to date, molybdenum production was 7,900 tonnes, in line with the same period last year.

CASH COSTS

·    Cash costs before by-product credits in Q3 2024 were $2.33/lb, representing an 11% decrease on a quarter-on-quarter basis, driven by higher production at both Los Pelambres and Centinela Concentrates. Year-to-date cash costs before by-product credits rose by 5% in 9M 2024 to $2.53/lb, reflecting lower production at Centinela Concentrates and lower grades at Los Pelambres.

·    By-product credits in Q3 2024 were 71c/lb (Q2 2024: 69c/lb), with lower molybdenum pricing offset by increases in gold production and gold pricing at Centinela and Los Pelambres. By-product credits year-to-date of 72c/lb were broadly in line with 9M 2023, representing a balance of lower production of molybdenum and gold, in addition to lower molybdenum pricing, offset by higher gold pricing.

·    Net cash costs in Q3 2024 were $1.62/lb, 17% lower than Q2 2024, with this movement primarily resulting from lower underlying cash costs before by-products. Year-to-date net cash costs were 10% higher on a year-on-year basis at $1.81/lb, with this movement also reflective of the underlying movement in cash costs before by-products.

PROJECT DEVELOPMENT UPDATE

·    Centinela Second Concentrator: Full construction commenced in April 2024, with this project expected to deliver 170,000 tonnes per annum of additional copper-equivalent production, with construction expected to complete in 2027. Work during the period focussed on construction activities and the mobilisation of personnel.

·    Los Pelambres: Preliminary construction work continues on schedule at two key projects that are intended to enable future growth at Los Pelambres: (1) Doubling the capacity of the recently completed desalination plant to 800 litres per second, and (2) Replacement of the existing concentrate pipeline. Work on both these projects during the period focused on preparatory groundwork, the deployment of personnel and the awarding of contracts.

GUIDANCE

·    Total production guidance for 2024 is unchanged, with full year output expected to be in the lower end of the Company’s guidance range of 670-710,000 tonnes.

·    Cash cost guidance for 2024, both before and after by-product credits, is unchanged at $2.40/lb and $1.70/lb respectively.

·    Capital expenditure guidance for 2024 is unchanged at $2.7 billion.

·    Total full-year Group copper production in 2025^[1] is expected to be between 660,000 and 700,000 tonnes, with an incremental gain in production at Centinela Concentrates.

·    In line with previous years, the Company will provide its 2025 guidance for cash costs and capital expenditure in the Q4 2024 Production Report, due for release in January 2025.

SAFETY AND SUSTAINABILITY

·    The Company’s strong safety performance was maintained in Q3 2024, with operations continuing to operate fatality free. The Company’s lost time injury frequency rate and total recordable injury frequency rate, which are key lagging indicators of safety, remain in line on a year-on-year basis at 0.75 and 1.71 respectively.

·    As previously announced, a new declaration of severe drought condition was issued at Los Pelambres on 26 July 2024, for a new one-year period. Consequently, the water redistribution agreement approved by the DGA (Chile’s water administration department) in March 2024 took effect again and certain conditions are required to be completed to enable Los Pelambres to extract up to 400 litres per second according to its water rights at that point of extraction. Los Pelambres continues working with the local water council or JVRCH (Junta de Vigilancia Río Choapa) and the DGA to this effect, with additional information and clarifications having been required by the DGA to the JVRCH and with a view to establishing a common understanding for a more expeditious renewal process in the future.

ZALDÍVAR UPDATE

·    In early 2024, approval was received from the authorities for the DIA (Declaration of Environmental Impact) to extend the mining permit and, therefore, align the water and mining permits at Zaldívar. This approval ensures that the operation has rights to mine ore and extract water until May 2025. The mine life after May 2025 is, therefore, subject to the approval of and Environmental Impact Assessment (EIA).

·    With 7 months to the current permit’s expiry date (November 2024-May 2025), the formal process for reviewing the EIA submitted for Zaldívar continues, with responses to the second round of queries raised by various government agencies in Chile currently being prepared by the Company for planned submission in Q4 2024. For reference, the Company had responded to the first round of queries in Q1 2024, and a summary of the EIA submitted and the application process to date was provided in the Company’s Q1 2024 Production Report. The process envisages up to three rounds of comments and responses.

·    Under local environmental regulations if the EIA is not favourably resolved by the current permit expiry date in May 2025, Zaldívar will be required to have in place at that time an approved temporary closure plan.

·    Separate to the above permits, and as previously reported, the Company (as well as other named defendants) submitted a response contradicting the allegations made by the Consejo de Defensa del Estado (CDE), an independent governmental agency that represents the interests of the Chilean state, who previously filed a claim against Minera Escondida, Albemarle and Zaldívar, alleging that their extraction of water from the Monturaqui-Negrillar-Tilopozo aquifer over the years has impacted the underground water level. The evidentiary record is now closed, and a decision from the Court is pending. However, conversations regarding a potential settlement are continuing.

CORPORATE

·    During Q3 2024, Antofagasta added UBS Group AG (UBS) as Corporate Broker.

·    Independent Non-Executive Director Tracey Kerr was appointed to the Audit and Risk Committee, effective as of September 2024.