The Group recognises that it cannot run its business in isolation. The business model is underpinned by a series of relationships with stakeholders at local, national and international level, which contribute to its long-term success.
Most copper and molybdenum sales are made under annual contracts or longer-term framework agreements, with sales volumes agreed for the coming year. The majority of sales are to industrial customers who refine or further process the copper – smelters in the case of copper concentrate production and copper fabricators in the case of cathode production.
The Group’s in-house marketing team seeks to build long-term relationships with these core customers, while maintaining relationships with trading companies that participate in shorter-term sales. Approximately 75% of Group sales go to customers located in Asia. Metals sales pricing is generally based on prevailing market prices.
The Group’s sales contracts typically set out the annual volumes to be supplied and the main terms for the sale of each payable metal, with the pricing of the contained copper in line with LME prices.
In the case of concentrate, a deduction is made from LME prices to reflect Treatment Charges and Refining Charges ("TC/RC") – the smelting and refining costs necessary to process the concentrate into copper cathodes. These TC/RCs are typically determined annually and in line with terms negotiated across the concentrate market. A significant proportion of the Group’s copper cathode sales are made under annual contracts, priced in line with LME prices.
In copper cathode transactions, a premium (or in some cases a discount) on the LME price is negotiated to reflect differences in quality, logistics and financing compared with the metal exchanges’ standard copper contract specifications. Similarly, the Group’s molybdenum contracts are made under long-term framework agreements, with pricing usually based on Platts’ average prices.
Across the industry neither copper producers nor consumers tend to make annual commitments for 100% of their respective production or needs. Therefore, producers normally retain a portion to be sold on the spot market throughout the year. The prices realised by the Group during a specific period will differ from the average market price for that period. This is because, in line with industry practice, sales agreements generally provide for provisional pricing at the time of shipment, with final pricing based on the average market price for the month in which settlement takes place.
For copper concentrate, sales remain open until settlement occurs, on average three to four months from the shipment date. Settlement for the gold and silver content in copper concentrate sales occurs approximately one month from shipment. Copper cathode sales remain open for an average of one month from shipment. Settlement for copper in concentrate sales is later than for copper cathode sales since further refinement of copper in concentrate is needed before sale.
Molybdenum sales generally remain open for two or three months from shipment.
Suppliers play a critical role in the Group’s ability to operate, supplying a large range of products and services from sulphuric acid to haulage truck fleet maintenance. The Group currently conducts business with over 4,400 suppliers.
The Group may develop long-term partnerships with some suppliers, while others are managed with a more short-term focus based on market competition. The Group has an open-door policy that encourages suppliers to raise any issues or concerns. Suppliers are audited regularly to ensure compliance with the law and company standards, particularly concerning health and safety and the environment.
The Group employs approximately 6,500 people, who work alongside approximately 20,000 contractors at its corporate offices, operations and projects. Mining is inherently risky. Ensuring the health and safety of every employee is an absolute priority: it is an ethical obligation and forms the core of the Group’s strategic objectives.
Skilled employees remain in short supply throughout the mining sector in Chile, and the Group’s efforts and initiatives over the last few years to secure and develop talent and bring young professionals into the industry have been notably successful. Relationships with trade unions are based on mutual respect and transparency. This helps the Group retain employees and avoid labour disputes, contributing to the productivity and efficiency of its business.
The Group undertakes an annual survey to assess employee satisfaction. Based on the results, action is taken to improve the work environment.
The number of contractors working for Antofagasta varies according to business needs and the level of construction activity. Contractors are vitally important to mining operations and the Group aims to build long-term relationships with contractor companies based on the highest standards. Health and safety targets are included in performance contracts and compliance with safety, human rights and labour regulations is assessed by internal and external audits. The minimum wage paid by Antofagasta to contractor employees is 70% higher than that required by Chilean law, and contractor staff have access to the same facilities as the Group’s own employees at the mine camps.
Also see our Group sites, accessible via the drop-down menu in the top right corner of the page, for more detail on how we manage relationships with local communities near our mines.
It is crucial to have strong relationships built on trust with local communities in the areas where the Group operates: it is not possible to run a mine successfully without their co-operation and agreement. Having clear social policies and regular contact with community members helps to manage potential conflicts and maintains the Group’s social licence to operate. During 2014, Los Pelambres adopted a new approach to engagement with communities. The initiative is called “Somos Choapas” (“We are from Choapa”, the region in which Los Pelambres is located).
Positive relationships with all local stakeholders near the Group’s operations and projects are fundamental to the smooth operation of the business and its future growth. All of the Group’s operations appoint a manager to oversee relationships with external stakeholders such as the local authorities, local media and others.