Since future growth is closely linked to copper mining, Antofagasta has an active exploration programme and puts efforts to develop its most interesting projects and new opportunities.

Esperanza

The Esperanza project continues on schedule with first production expected by the end of 2010.  The project received board approval for its development in June 2007 and an environmental impact assessment was submitted in August of that year.  Pre-stripping and other early works began in early February 2008 following receipt of provisional environmental authorisation at the end of 2007.  The full environmental impact assessment was received in June this year and the main construction works were initiated at the end of July.  A number of key contracts have been assigned, including an engineering, procurement and construction management contract with Aker-Kvaerner for the plant which was signed in June.

Cumulative capital expenditure to the end of June 2008 was US$161.7 million, with approximately 2,000 workers on site.  Total capital costs (before working capital and any financing costs) are currently estimated at approximately US$1.9 billion, with an update of project status expected in the fourth quarter of this year with the preparation of a definitive estimate when the detailed engineering is substantially complete.  Following the inclusion of Marubeni Corporation as a 30% partner in the project as explained above, the Group intends to continue to examine further options for financing.

Esperanza is a sulphide deposit located in Chile’s Antofagasta Region approximately four kilometres south of the Group’s El Tesoro mine.  It will produce copper concentrate containing gold and silver by-product credits through a conventional milling and flotation process, with ore throughput expected to average approximately 97,000 tonnes per day.  In its first ten years of operation, Esperanza is expected to produce approximately 700,000 tonnes of concentrate containing 195,000 tonnes of payable copper, 229,000 ounces of payable gold and 1,556,000 ounces of silver, with molybdenum production expected to start in the fifth year of operation with approximately 2,100 tonnes per year over the following five years. 

Esperanza has at present a 15 year mine life, although the adjacent Telegrafo deposit is ultimately expected to utilise the Esperanza plant and facilities well beyond this period.  The Esperanza deposit includes an oxide resource of 119 million tonnes with an average copper grade of 0.35% mainly forming part of the overburden to be removed through pre-stripping and which as explained above is expected to be processed through the El Tesoro plant.

Reko Diq (Tethyan Copper Company Limited)

The Group holds a 50% interest in Tethyan Copper Company Limited (“Tethyan”), its joint venture with Barrick Gold Corporation established in 2006. Tethyan’s principal assets are a 75% interest in the exploration licence encompassing the Reko Diq prospects in the Chagai Hills region of South-West Pakistan (in which the Government of Balochistan holds the remaining 25%) including the Western Porphyries, and a 100% interest in certain other licences in the region.  The current resource estimate for the Western Porphyries is 4.1 billion tonnes with a copper grade of 0.50% and a gold grade of 0.291 g/t.  In addition, the previous resource estimates at other prospects in Reko Diq, which have not yet been updated, amount to a further 0.8 billion tonnes with a copper grade of 0.45% and a gold grade of 0.22 g/t.

A feasibility study was initiated in February this year for an initial project of 72,000 tonnes per day of ore throughput.  The feasibility contract was assigned to SNC-Lavalin of Toronto as lead engineer and is expected to be completed in the first half of 2009.  An additional 69,000 metres were drilled in the first six months of 2008, which mainly related to infill drilling of the existing resource.  Costs by Tethyan incurred in the first six months of 2008 amounted to US$44.7 million, including initial expenditure on the feasibility study and acquisition of additional surface rights.

Negotiations are in progress with the Federal Government of Pakistan and the Government of Balochistan for a mineral agreement to establish a framework for future investment.  The Group continues to believe that the potential of this investment remains positive.

Antucoya

Antucoya is an oxide deposit located approximately 45 kilometres from Michilla with a resource estimate, following a drilling programme completed at the end of 2007, of 531.4 million tonnes of ore with an average copper grade of 0.39%.  Following the acquisition of certain mining properties held through Antomin Limited as described above, the Antucoya deposit is now wholly owned by the Group.

A feasibility study for the Antucoya project was initiated in February this year, with additional drilling to provide samples for metallurgical testing now underway.  Following a review of project parameters in the course of this study and given the increased prospects for an extension to the mine life of Michilla, Antucoya is now being evaluated under a number of scenarios including as a stand-alone SX-EW project with possible cathode production of approximately 30,000 tonnes per year.  The feasibility study for Antucoya is expected to be completed in the first half of 2009.

Other exploration activities and opportunities

The Group spent US$22.4 million on exploration activities in the first six months of 2008 (2007 half year – US$16.1 million), including US$13.6 million relating to its share of exploration costs at Reko Diq (2007 half year – US$5.7 million).  The balance of US$8.8 million (2007 half year – US$10.4 million) related mainly to the Group’s exploration and evaluation programmes in Chile and the rest of the world.

In Chile, the Group’s primary focus remains the Sierra Gorda district, where El Tesoro and Esperanza are located.

Drilling is being carried out at the Telegrafo deposit which is adjacent to Esperanza and which as explained above could extend the life of Esperanza beyond its current mine plan.  During the first half of 2008, an infill drilling programme of 21,900 metres was carried out at Telegrafo Sur, with further drilling around both Telegrafo Norte and Telegrafo Sur planned for the second half of the year to examine the continuity of these deposits with Esperanza.

Drilling is also in progress at Caracoles, a porphyry copper-gold system approximately 10 kilometres southeast of Esperanza.  The Caracoles deposit is held through a joint venture in which the Group holds 81.5% and Compañia Minera Milpo S.A.A. of Peru holds the remaining 18.5% through Minera Rayrock Limitada.  A 24,500 metre oxide programme was completed in the first half of the year, with further drilling of sulphide targets in progress in the second half of the year.

With current estimated mineral resources (including El Tesoro, Esperanza and Telegrafo) of over 3 billion tonnes, the Sierra Gorda district has good potential for development as a single complex for oxide and sulphide deposits.

At Los Pelambres, a new resource estimate is under preparation to incorporate the results of the two-year drilling programme which was completed at the end of 2007.  The results of this drilling programme, with the aim of identifying additional resources beyond the present 2.9 billion tonnes, were encouraging and the revised resource estimate is expected to be completed by the end of this year.

The Group also progressed with its exploration programme both in Chile and the rest of the world.  As announced in June, the Group signed an agreement with Minera Metallica Resources Chile Limitada, a subsidiary of New Gold Inc., to acquire a 30% interest in Rio Figueroa, an exploration project located in Chile’s Atacama Region, approximately 80 km east of Copiapo city, for a consideration of US$2.6 million payable in instalments.  Under the agreement the Group has the right to increase its interest up to 70% in successive stages over a number of years by first incurring exploration expenditures of US$7 million and subsequently completing a feasibility study and making a further payment of US$5 million to Minera Metallica Resources Chile Limitada.