08.03.2011 | Editor: Marcel Dröttboom
City, Country – In its 2010 Preliminary Results announcement Antofagasta reported a record year for the group, achieving record revenues of USD 4.58 billion, a 54.5 per cent increase on 2009.
The Group achieved an excellent performance during 2010 both in terms of its growth plans as well as its operating and financial performance. The Los Pelambres plant expansion was commissioned in the first quarter of 2010, and commissioning of the Esperanza mine commenced in November 2010. Together, they are currently expected to increase the group’s copper production level in 2011 by approximately 60 per cent compared with the pre-expansion 2009 levels. Net earnings increased by 57.5 per cent to USD 1.05 billion compared with USD 667.7 million in 2009, reflecting improved commodity prices and increased production volumes. Cash flows from operations were USD 2.43 billion, compared with USD 1.17 billion in 2009, mainly reflecting the increase in profits. At the end of 2010 the Group had a net cash position of USD 1.35 billion and total cash, cash equivalents and liquid investments of USD 3.54 billion.
The Los Pelambres plant expansion was commissioned in the first quarter of 2010, and commissioning of the Esperanza mine commenced in November 2010. The ramp-up of the Esperanza plant will continue through the first half of 2011, with the current expectation that processing at the full design capacity of 97000 tonnes per day should be achieved during the second quarter of 2011. As previously announced, the initial forecast for 2011 Group copper production is for approximately 715000 tonnes, a 60 per cent increase on the pre-expansion 2009 levels, although this will depend on a number of factors including the precise timing of the completion of the ramp-up at Esperanza. Copper production in 2010 was 521100 tonnes, a 17.8 per cent increase on the 2009 production of 442500 tonnes, mainly due to increased production at Los Pelambres as a result of the completion of its plant expansion in Q1 2010.
As previously announced, the initial forecast for 2011 weighted average cash costs excluding by-product credits is for approximately 140 cents per pound, in line with the 2010 costs of 137.3 cents. Weighted average cash costs net of by-product credits, which are subject to fluctuations in the price of gold and molybdenum, are currently forecast to be approximately 90 cents per pound in 2011, a reduction compared with the 104.0 cents in 2010, reflecting the impact of the additional low cost production from Esperanza. However, costs of key strategic inputs, including energy and fuel, remain susceptible to further macro-economic pressures, particularly in a strong commodity pricing environment. Unit cost figures, stated on the basis of cents per pound of payable copper production, will also depend on the actual copper and by-product production volumes.
Mineral resource estimates were completed in respect of the Telégrafo and Caracoles deposits, increasing the group’s total mineral resources by 3.9 billion tonnes with an average copper grade of 0.38 per cent (along with additional gold and molybdenum credits). This gives total resources for the Sierra Gorda district of 6.1 billion tonnes with an average copper grade of 0.39 per cent (along with additional gold and molybdenum credits). Further expenditure of approximately USD 70 million was approved during 2010 to evaluate growth options in the district. The Telégrafo deposit is part of Esperanza’s existing property, and could be used to extend that mine’s life or increase the size of the operation. Depending on the results of the on-going pre-feasibility study it will be possible to evaluate whether the Caracoles deposit could provide additional feed for the Esperanza plant, or support a stand-alone project. The inclusion of the Mirador oxides into El Tesoro’s mine plan during 2010 at an independent valuation of USD 350 million is an example of value created by the group’s successful exploration in the district. The Mirador deposit was identified by the Group in 2008 through its on-going exploration programme, and will result in reduced costs at El Tesoro while the deposit is mined in the three year period from 2012 to 2014, as well as extending El Tesoro’s mine life to 2022.
Antofagasta sees a high poential for future potential growth through exploration, agreements and evaluation studies. At Los Pelambres a scoping study is examining the key enablers which could allow it to utilise its significant resource base in the longer term, which could potentially lead to a significant increase in the scale of the operation later this decade. The Antucoya project feasibility study is continuing, evaluating the potential for a project producing approximately 80000 tonnes of copper per year, and it is expected that the study should be complete during 2011. An application for a mining lease has been submitted for Reko Diq, which remains subject to satisfactory conclusion of litigation in progress in Pakistan. In July 2010 the group signed a definitive agreement with Duluth Metals Limited to acquire an initial 40 per cent stake in the Nokomis copper-nickel-platinum group metal deposit in Minnesota. The froup has the option to acquire an additional 25 per cent interest in Nokomis under certain conditions including the completion of the feasibility study. The Group has also expanded its portfolio of early-stage international earn-in agreements in 2010 and to date, entering into agreements in respect of projects in Alaska in the United States, in Australia and in Sweden.
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