Copper, Chile & fas Antofagasta plc Ivan Arriagada Chief Executive Officer Melbourne Mining Club August 3 rd 2017
Cautionary Statement ThispresentationhasbeenpreparedbyAntofagastaplc.Byreviewingand/orattendingthispresentationyouagreetothefollowingconditions: This presentation contains forward-looking statements. All statements other than historical facts are forward-looking statements. Examples of forward-looking statements include thoseregardingtheGroup'sstrategy,plans,objectivesorfutureoperatingorfinancialperformance;reserveandresourceestimates;commoditydemandandtrendsincommodity prices; growth opportunities; and any assumptions underlying or relating to any of the foregoing. Words such as “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believe”, “expect”, “may”, “should”, “will”, “continue” and similar expressions identify forward-looking statements. Forward-looking statements involve known and unknown risks,uncertainties,assumptionsandother factors thatarebeyondthe Group’s control.Giventhese risks,uncertainties andassumptions,actualresultscould differ materially from anyfuture resultsexpressed orimplied bythese forward-lookingstatements, whichspeakonlyasofthe date of thispresentation.Importantfactors that could causeactualresults to differ from those in the forward-looking statements include: global economic conditions; demand, supply and prices for copper; long-term commodity price assumptions, as they materially affect the timing and feasibility of future projects and developments; trends in the copper mining industry and conditions of the international copper markets; the effect of currencyexchange rateson commodity prices andoperating costs; the availabilityandcostsassociated with mininginputsandlabour;operatingortechnicaldifficultiesin connection with mining or development activities; employee relations; litigation; and actions and activities of governmental authorities, including changes in laws, regulations or taxation. Except as required by applicable law, rule or regulation, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whetherasaresultofnewinformation,futureeventsorotherwise. Certain statistical and other information about Antofagasta plc included in this presentation is sourced from publicly available third party sources. Such information presents the viewsofthosethirdpartiesandmaynotnecessarilycorrespondtotheviewsheldbyAntofagastaplc. ThispresentationisforinformationpurposesonlyanddoesnotconstituteanoffertosellorthesolicitationofanoffertobuysharesinAntofagastaplcoranyothersecuritiesinany jurisdiction.FurtheritdoesnotconstitutearecommendationbyAntofagastaplcoranyotherpersontobuyorsellsharesinAntofagastaplcoranyothersecurities. Pastperformancecannotbereliedonasaguidetofutureperformance. 2
Antofagasta at a glance Group Antucoya • Market cap 1 : $10.2 billion • 70% owned • • Strong balance sheet 66,200 ton Cu 2 • C1: $1.83/lb • 65% owned by Luksic Group, 35% free float Centinela • FTSE 100 • 70% owned Mining division • 236,200 ton Cu 2 • C1: $1.19/lb • Top 10 copper producer Santiago • Gold and moly by-products Zaldívar • 50% owned • 4 operations in Chile, one of the world’s most • 103,400 ton Cu 2 developed and stable mining locations • C1: $1.54/lb • Significant potential production growth Los Pelambres Transport division • 60% owned • • Provides rail and road cargo services in Chile’s 355,400 ton Cu 2 • C1: $1.06/lb Antofagasta Region Group in 2016 • 709,400 ton Cu 2 • 1. As of June 30 2017 C1: $1.20/lb 2. Production 2016, 100% basis
Top 10 global copper producer Top-10 global copper producers, based on 2016 consolidated production (‘000t) 1,694 709 Source : SNL 4
2016 Copper demand by region – An emerging market story China 2,391 India 3,755 Asia excl. China and India 10,668 USA 1,816 European Union 3,273 498 Rest of the world Note: Copper demand in 000’s tonnes Source: Wood Mackenzie 5
2016 Global copper demand by sector – Tier 1 commodity 11% Construction 31% 11% Consumer products Electrical and electronic products Industry machines 23% Transport 24% Source: Wood Mackenzie 6
Copper market fundamentals – demand Growing demand • China consumption growth sustained through the transition to a “New Normal” − Demographics – urbanization & higher income levels − Consumption led growth also copper intensive e.g. household appliances • Infrastructure ‒ Domestic grid, rail, road ‒ One belt One road ‒ India and other EM to follow (pace unknown) • Favorable impact of technology disruptions − Early days to fully quantify the impact of clean energy and transport technologies but big implications for the market Demand expected to continue growing @ 1 to +2% p.a. 7
Copper market fundamentals – supply Constrained supply Expected copper supply • Grade decline of existing operations • 30 Brownfield Contribution Technical challenges on brownfields 28 Current operations and highly probable projects • Light pipeline of new projects 26 Estimated demand for mine production 24 • Limited success in new sizable discoveries 22 4 Mt 20 • Recent downturn and prevailing uncertainty Mt Cu 18 drives caution on capital allocation 16 14 − Regional geopolitics 12 − China macro imbalances 10 8 − Risk of protectionism disrupting trade and 6 economic growth 4 2 0 2013 2015 2017 2019 2021 2023 2025 2027 Source: Wood Mackenzie Copper growth expected to be supply constrained 8
Copper price- Outlook positive but expect year-on-year volatility Copper Price & Exchange Inventories • Market deficit possibly earlier than anticipated cents/lb Tonnes before 300 900.000 800.000 • Miners inability to respond quickly support prices 250 700.000 • Rate of supply growth slowing with only few 200 600.000 committed major greenfield project 500.000 150 400.000 • Increased scrap availability, but China concerned 100 300.000 with imports and recycling environmental impacts 200.000 50 • Believe new price floor probably established 100.000 0 0 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 LME Shanghai CMX LME Price Source: Bloomberg 9
Chile offers a supportive mining environment Chile • Copper key contributor to the economy (8% of GDP 1 , 51% of exports) • History of stability and strong institutions – OECD country • Solid public finances with low national debt (21.3% of GDP 1 ) • 29% of global copper production and 30% of world reserves • Moving from middle income to high income economy Challenges • Dealing with greater social expectations and demands on business • Improving labor productivity through better access and quality of education 10
Mining challenges must be addressed Safety Productivity Deterioration of the quality of the Embedding a culture of zero Labour and capital deposits fatalities Lower grades, increased rock hardness and impurities, depth and geographical difficulties Availability of water Increasing demand for energy Resistance to mining activity Drawdown of aquifers, climate Power-intensive processes due to Greater environmental and social change effects, increased declining grade and rock hardness, awareness population, limited permitting use of desalinated water Regulatory and environmental changes Frequent amendments to labour, tax, environmental and other regulation Mining industry must address these issues to maintain competitiveness 11
Responding to the challenges Productivity, People - Attract and retain the best talent in key disciplines. a sustained Organization - Simplification of Support Functions & Clear Accountabilities in Operations . effort Assets – Release latent capacity focusing on maintenance as the key driver. Sharing infrastructure - Internal District synergies & assess opportunities with third parties. Efficient capital Phased project development - Modular growth and sequencing of investment. allocation Focus on core business - Enable third party investment in non-core infrastructure e.g. water, energy, acid. Innovation, as Strategic choices for innovation - Sulphides Leaching, Tailings Management, Mass Material Movement. a competitive Internally sourced innovation - Internal Knowledge Sharing Platform : InnovaMinerals . advantage Externally sourced innovation - Open Innovation Platform - Foundation Chile. Technology Road Map - To steer adoption of and integrate available technology solutions . Prioritize data driven decision making and moving people from remote sites. 12
Productivity improvements embedded in our organization 2016 Group competitiveness improved to the 2 nd cost quartile (1) Cost and Competiveness Programme (CCP) 300 102 128 152 Services Productivity Contractors productivity 250 Operating & maintenance 200 Group management before CCP 150 131c/lb Asset productivity Corporate & Organisational 100 Effectiveness 50 Group Labour productivity 120c/lb 0 Energy Efficiency 0% 25% 50% 75% 100% Consumption efficiency 1. Competitiveness measured in terms of 2016 net cash costs (including by-product credits). Source : Wood Mackenzie Cash costs fell by 15-20% in 2 years despite a 12% decrease in grade 13
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