Antofagasta plc

Hello and welcome to your Antofagasta 2025 half year results call. We will start today's session with a short introduction from Antofagasta to be followed by a question and answer session. If you have a question, we ask that you please use the raise hand function at the bottom of your zoom screen. When it is your turn, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment and once you have been introduced, you may unmute yourself, turn your video on and ask your question. If you have joined us via telephone, please press star 9 to raise your hand to enter the queue. Once your name has been announced, you can ask your question. You may also type a written question in the Q&A box at the bottom of the screen at any time. I'll now hand you over to Rosario Orchard, Director of Antofagasta's London office, to introduce today's speakers.

Good morning, good afternoon, everybody. Welcome to our half-year call for 2025. I'm here today with our Chief Executive, Iván Arriagada, our CFO, Mauricio Ortiz, and our Vice President of Sustainability, Alejandra Villal. In terms of process today, Iván will start with a short introduction and then we'll move straight into Q&A. And we'll aim to wrap up within 45 minutes. Iván, over to you.

Thank you, Rosario, and hello to everyone. It's great to be hosting this call, and thank you for your time. We have today released our set of top one financial results. We have a strong set of financial results. Our revenues are up 29%. EBITDA is up 60%. And our cash flow is also showing a significant increase. And this has been achieved on the back of higher copper production than we compared last year. and also an important increase in gold and moly production. A bidder margin was 58.8%, which is a 25% increase on the prior year. So, by all measures, I would say that our financial performance in the first half was strong. In parallel to that, we continue to make a good progress on our projects. We are executing two important projects, as you know, the expansion at Sentinela, which involves the construction of a new concentrator plant, and also the expansion of the water system at Pelambres and replacing some infrastructure like the concentrate pipeline. I'm pleased to share with you that we've made good progress during this first half. Our projects are tracking according to program. And therefore, by the end, when this is completed, when we expect they will, we should be able to achieve an increase in production, which is in the order of 30%. So good progress in our projects. And then finally, as an introduction, I would say that we have declared a dividend, which is in line with our policy. Our policy, which we have consistently applied is that we have a dividend of 35% of net earnings at the interim or half year. And in line with that, we declared a dividend of 16.6 cents per share. So overall, I think a solid performance for the first half. So with those brief words, I would then like to essentially initiate the Q&A. And so I will pass that on to Rosario.

Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. When it is your turn, you will receive a prompt to be promoted as a panelist. Please accept. Wait a moment. And once you have been introduced, you may unmute yourself, turn your video on and ask your question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app. If you have dialed in by phone, please press star 9 to raise your hand and star 6 to unmute. You may also submit written questions in the Q&A chat function at the bottom of the webinar screen. We will pause a moment to allow questioners to enter the queue. Our first question comes from Eprim Ravi with Citigroup. You may now unmute your audio, turn your video on and ask your question.

uh thank you for the chance to ask the question uh you know congratulations first on on a good set of results um there are two very quick questions from me firstly um you know clearly the capex in the first half is significantly below the 50 percent uh you know mark for the 3.9 billion capex guidance for the year there is in quinn through uh deposit that uh where the construction will start But other than that, can you give a bridge as to what are the incremental items that will kind of require 2.3 billion of CapEx for the second half? I guess Enquentro is probably about 200 million. That still gives a significant delta versus the first half CapEx number. And secondly, in terms of Cupra Clore, you know, clearly Zaldivar mine life extension permits is good news. When is the earliest you would be deploying that at Zaldivar, which I guess is the first place where you would be trying that out? Thank you.

Yeah. Thank you for the questions, Efrem. I would say on capital spend, yeah, we did report 1.6 billion of capital spend for the first half. and we've kept our guidance of 3.9 billion for the full year. And I think the factors that explain that, one is that by plan, the second half was more weighted with respect to the annual capital spent. So we do expect, you know, according to our programs and how the work is performed, that more work, you know, is done in the second half compared to the first one. And I would say that's largely across you know the uh the the main the main projects then in the second half as you've pointed out we have some new projects which have not uh uh recorded spend in the first half and that's uh namely uh the encuentro pit so that uh the encuentro pit project was sanctioned in June and therefore we expect that spend to start to ramp up and none of that was present in the first half. So those are I would say the key elements that explain why we expect the second half to be more loaded on spend. Now I would I want to emphasize that the good news is that we have both projects at Centinela and Pelambres on track. I mean, they are progressing well. We've had a lot of very impressive progress, I would say, at Centinela and at Pelambres, some of which you will be able to see for those who come at the site visit in November. So our projects are doing well, and the fact that we have more phased spend in half two is, as I say, associated to the planned spend, which was loaded to the second half, and also new projects like the Encuentro. So those are the reasons. There's nothing different to that effort on that front. Now, with respect to cuprochlor, you know that this is a technology that we've been working for a long time, and we are expecting now to complete the construction of what we call is an industrial-scale heap at Saldívar. We will be completing that in the course of next year. And as we do that and test that case, we expect to deploy this technology in Saldívar, but not, I would say, before 2028. So there's still some time to go. But obviously, this is an important step. All the tests that we have conducted so far indicate that this is a highly reliable technology for the purposes of recovering copper from a primary ore of the chalcopyrite type. So we're very excited about what we're constructing and how this is moving.

Thank you, Claire.

Our next question comes from Ironis Masvoulas at Morgan Stanley. You may now unmute your audio, turn your video on and ask your question.

Yes, hello. Thank you very much for the presentation. Just two questions from my side. First of all, on the production outlook for the balance of this year and also potentially if you can talk about next year as well. Your guidance has remained unchanged for 2025, and yet you indicated some additional maintenance at Los Palambres that will have some production impact. As we think about the H1 to H2 bridge, Is the volume uplift that is embedded into your guidance fully driven by Los Palambres or are any of the other operations deliver better volumes in the second half and maybe On this topic, if you can comment around how do you see the grade profile at Los Palambres into next year as well? Because I think in the past we were talking about potentially north of 0.6% grade next year. Do you think that's still sort of the base case? And then a second question on Zaldivar. We're talking here about the mine life extension, which looks quite interesting. But at the same time, a water solution, you have two or three different options here. And it is the highest cost asset you have in your business today. Do you think... a fully owned water solution that's going to be fairly capital intensive, it's still one of the preferred solutions, or would you seek alternative options that will be more capital light? And I'll leave it here on my side. Thank you.

Yes, thank you, Ioannis, for the question. I mean, in terms of production, again, we, there is, you know, if you look back, you know, there's been a pattern of, you know, higher production in the second half, especially in quarter four. And that's associated generally to more maintenance work being done in the first half, especially in quarter one. So that remains the case. We have reiterated our guidance and therefore we expect that annual production will be within the range that we have provided. Now, with respect to next year, we will provide guidance, you know, as we usually do in quarter three. But as we've mentioned in the past, we do expect that, you know, that there's a great trend in Pelambres which you know we will start to see next year you know towards grades which are more consistent with sort of historical averages and therefore that will come into play next year and therefore we expect some great increase there but we will provide full guidance you know in in quarter three I think in terms of the mix you know between the different operations For half two, we obviously, you know, expect that our two main operations, you know, will see some increase, Pelambres and Sentinella, and that makes part of the, you know, guidance, you know, for the full year we have provided. Now, on Saldívar, I think that, moving on to that question, I think we're very pleased with the fact that the permit obviously was renewed and there was no discontinuity in the operation. And we have a mine permit which takes us to now 2051. But we need to provide for a water solution beyond 2028 when the current new permit expires. And we are looking at a couple of options. One is to undertake a project ourselves, as you mentioned, but we have an alternative which would be lighter on the capital side because it would rely on essentially water being provided by a third party at a point in which we have to then pick up and transport to Saldívar. We like lighter asset solutions and therefore certainly that's something that we're looking at with a lot of interest. But we need to finish the review that we're doing with respect to the specific risks that that alternative involves. But it's looking good and to the extent that we have an option which is lighter on capital, it will rank ahead. But we are reviewing those studies and completing the review of those alternatives. I think the good news is that we have a long-term solution, and therefore we have the ability to continue to operate Saldívar and monetize over a billion tons of resources that Saldívar has. So I think the extension of the permit, the continuity of the operation, and the fact that we can look now until 2051 is very good news.

Thank you very much. Thank you.

Our next question comes from Matt Green at Goldman Sachs. You may now unmute your audio and ask your question.

Hey, good morning, Yvonne and Tim. Hope you can hear me okay. Yeah, probably just to follow on from Zeldivar, when can we expect a final investment decision on Cupra Quartique? Obviously, you mentioned the industrial scale next year, but perhaps if we just kind of think about, you know, the next over the medium term, what are the sort of the critical parts? around that and and and and to janice's question i guess does a decision around a water solution come before the decision around cubicle t that's my first question i'll follow up with the next thanks yeah uh look i think uh the the you know we are planning uh to complete uh this industrial scale heap uh next year we will

therefore integrate these into the full feasibility studies that, you know, we have to complete. We, as I mentioned before, we don't expect a decision before, you know, 2028. as we sort of progress, you know, our feasibility and review studies. But they're all looking positive. And this is a technology that, in our view, you know, now we've reached a level in which it's been now fully tested. We are looking at the specifics of the ore type at Sandivar, which is important for how we operate it in the long term. Now, with that, having said that, yeah, the sequence likely involves that we will – make a decision on water before we make a decision on, you know, the cupola clod tea. But I think what is important is the current mine life of Saldívar takes us... well beyond, I would say, 2035, and then on the back of that, on top of that, we've got, you know, the primary ore body, and so we will be quite advanced when we make the assessment on which water solution we make with respect to these studies. So, likely to come before, but we will be quite advanced. And as I say, we think this is a quite a reliable solution. The tests that we're performing have more to do with the specifics of the configuration for the type of ore that's mined at Saldívar than with the proof of the technology.

That's helpful, thanks. And if I could just follow up. You mentioned on the previous question that you're open to more CAPEX-like solutions. in relation to that water, and I presume on the go forward lower risk pathways to scaling up cupric loss. And I guess Antofagasta in the past has, you know, you've been vocal about being open to collaborations that present physical I guess, operating synergies around mine planning. And I'm asking this, I guess, through the lens of Zeldivar and Escondida. You know, there's Pinta Verde, a large oxide resource that is essentially an extension of Zeldivar, and obviously Escondida Norte, which could do with a pushback into your land package there and give Escondida some high-grade sulfide. So, Is there not a partnership to be had here between Escondido and Zeldavar just around, you know, all movements and potentially, you know, from your standpoint, a lower risk pathway to scaling up cupric ore if you have access to more oxide material?

Yeah, look, I think certainly Saldívar is adjacent to Escondida, very adjacent in the sense that they almost share the same footprint. And we have a partnership in the sense that we have internship agreements to be able to jointly mine certain common areas. So that coordination at the mine planning and execution level does take place and it's been ongoing. And obviously, we will always be looking and continue to look at opportunities to enhance that. When you have a common wall, as we do have, there are synergies and potential benefits of having a more coordinated mining activity, as you've mentioned, and to the extent that there are opportunities to expand those and amplify those, we will always be available and looking for them. So we will continue to pursue those. We have today, as I say, agreements in place that allow us to, in a coordinated way, mine the areas that are of common interest. So, you know, we will continue to work in this line.

Thanks, Ivan.

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Yeah, good afternoon, gentlemen. I had a couple of questions. First one was to ask about working capital in the second half, what your expectations are there. And then second question just on CapEx. I was just wondering if you could give us a sense of the sensitivity of your CapEx budget to movements in FX, please.

Thanks. Yeah. Look, I think with respect to both of these, I'm going to ask Mauricio to address them. So working capital and CapEx sensitivity. Mauricio, want to take that, please?

Yeah. Well, thank you, Ed. Well, regarding working capital, in the first half we have a negative movement, mainly driven by the increase on receivables. As you may realize, we have higher sales in all our products, so that was translated in higher receivables, and that explained the bulk of the working capital movement, along with a slightly higher copper price and, of course, higher gold price. Going into the second half, what we may expect is that some of that impact will be removed in the second half as our achievement will normalize. But, of course, as the price is moving to the positive area, we may see an increase in payables in the second half as well. And in CapEx, sensitivity, I don't know if you can give me a bit more details of what you are asking specifically to just don't repeat what Evans mentioned at the beginning of the call.

Yeah, it was just to get a sense, I guess, of what FX assumption you're using and the sensitivity of it to movements in the U.S. dollar.

Yeah. Well... As a general assumption, we are using 900 Chilean pesos per U.S. dollar. Rule of thumb is 50% of our capex is peso denominated. That varies quarter on quarter depending on the specific activities that we are doing, but in general terms, 50% is a good proxy. So we have a variance of... We have an exchange rate over the first half in the space of 950, 960 Chilean pesos per dollar, so roughly a 6% positive movement for our CapEx during the first half. In the second half, we see if we remain with a weaker than 900 pesos per dollar, we will also potentially capture the benefit of this exchange rate in our capex in the second half. Perfect.

That's very clear. Thank you.

Thank you. There are no further questions. I therefore hand back to Ivan for closing comments.

Okay. Well, thank you very much all for attending and joining the call. As I've mentioned initially, it's been a good first half with strong financial results. and also operating performance, especially on cost and our project delivery. So we continue on track to execute our strategy. And we will continue, therefore, to focus on the same points during the second half for delivering our annual results. So, again, thank you and have a good day.