Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Antofagasta PLC (ANFGF, Financial) reported strong financial performance with increased revenues and EBITDA for the first half of 2024.
- The company maintained a healthy EBITDA margin of 47%, showcasing effective cost control and operational efficiency.
- Antofagasta PLC (ANFGF) declared an interim dividend representing 35% of net earnings, consistent with its dividend policy.
- The company has commenced full construction at Centinela, which is expected to add 170,000 tonnes of copper equivalent production by 2027.
- Antofagasta PLC (ANFGF) has made significant progress in sustainability, including the publication of its first climate action plan and improvements in water management.
Negative Points
- The company expects to be at the lower end of its full-year copper production guidance range.
- Higher depreciation and taxation impacted underlying earnings due to the completion of the Los Pelambres Phase 1 expansion project and the new mining royalty regime.
- Lower grades at Pelambres and Centinela balanced the impact of higher throughput, affecting overall production.
- The company saw a $227 million increase in net debt due to higher CapEx, dividends, and taxes.
- Despite strong financial performance, the concentrate inventory build-up at Los Pelambres could pose challenges in the short term.
Q & A Highlights
Q: Can you provide more details on the financial performance for the first half of 2024?
A: Mauricio Ortiz, Chief Financial Officer, highlighted that the main drivers for the half-year financial results were strong realized pricing for copper and gold, and the completion of the Los Pelambres Phase 1 expansion project. Despite inventory build-up, resolute cost control and competitiveness programs helped increase EBITDA and protect margins. The company declared an interim dividend representing 35% of net earnings, in line with its dividend policy.
Q: What are the key projects currently underway at Centinela and Los Pelambres?
A: Ivan Arriagada Herrera, Chief Executive Officer, mentioned that at Centinela, full construction of the second concentrator project commenced in April, with more than 2,000 contractors mobilized to the site. This project will add 170,000 tonnes of copper equivalent production starting in 2027. At Los Pelambres, two key projects are underway: ramping up production at the desalination plant and doubling its capacity, and replacing the existing concentrate pipeline.
Q: How is Antofagasta addressing sustainability and community relations?
A: Alejandra Vial, Vice President of Sustainability, discussed several initiatives, including the publication of the first climate action plan, progress towards diversity goals, and water management improvements. Community programs in Central Chile focus on supporting local heritage and building stronger neighborhood organizations, while initiatives in Northern Chile work with indigenous communities and provide scholarships to local children.
Q: What is the outlook for copper demand and supply?
A: Ivan Arriagada Herrera emphasized the fundamental value of copper in the energy transition, with constraints on supply expected to lag behind rising demand. Key drivers of this demand include electrification, renewables, and electric vehicles. The company believes that the world will need the equivalent of another Chile in terms of new mines and brownfield growth over the next decade.
Q: Can you elaborate on the company's capital allocation framework?
A: Mauricio Ortiz explained that the capital allocation framework is underpinned by stable operating cash flows, allowing for sustaining CapEx and consistent shareholder returns. The framework balances growth CapEx and additional distributions, ensuring profitable growth throughout the cycle. The company's strong balance sheet supports both growth and shareholder returns.
Q: What are the future plans for Los Pelambres beyond 2035?
A: Ivan Arriagada Herrera stated that the current projects at Los Pelambres are expected to provide a platform for extending the mine life to 2051. The company plans to submit an environmental impact assessment in the second half of the year, with an option to extend and grow Los Pelambres beyond 2035. This extension may involve direct investments of around $2 billion after 2030, subject to board approval.
Q: How is the company managing its water resources, especially in water-stressed regions like Chile?
A: Alejandra Vial highlighted the completion of the desalination plant at Los Pelambres, which has increased the use of seawater to 64% of total water withdrawal. This is part of the company's broader water management strategy to ensure sustainable operations in water-stressed regions.
Q: What are the key factors behind the company's strong EBITDA margins?
A: Mauricio Ortiz attributed the strong EBITDA margins to improved pricing, cost control measures, and productivity improvements. The company's competitiveness program, which targets $200 million in savings for 2024, has already achieved $130 million through cost savings and productivity enhancements.
Q: How does Antofagasta plan to address the challenges of lower ore grades?
A: Mauricio Ortiz mentioned that the successful delivery of the Los Pelambres Phase 1 expansion project has helped increase throughput, balancing the impact of lower grades. The company is also drawing down concentrate inventory at Los Pelambres, which will provide a tailwind to results in the second half of the year.
Q: What are the company's plans for future copper production growth?
A: Ivan Arriagada Herrera outlined the company's organic growth pipeline, including major brownfield projects at Centinela and Los Pelambres. These projects are expected to add profitable copper production, demonstrating the company's commitment to shareholder value. The company is also exploring long-term development options across the Americas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
