Letter from the CEO

"Our strong financial performance in 2023 demonstrated the resilience and strength of our portfolio of operations."


Dear shareholders

At Antofagasta, we are building a strong foundation for growth and delivering on our purpose of developing mining for a better future.

In 2023, we made progress on safety, production and cost control, which enabled us to deliver a robust set of financial results. We have completed the construction of the first phase of the Los Pelambres Expansion Project, a $2 billion investment that will not only provide operational stability and increased processing capacity, but will help us advance towards our medium-term target of achieving 90% of our water use from sea water or recirculated water sources. In addition, we recently announced the approval of the Centinela Second Concentrator Project, which will move us significantly towards our ambition of 900,000 tonnes of profitable copper production and push the Centinela District as a whole towards the first quartile of the global cost curve. At the peak of construction, this $4.4 billion investment will create nearly 13,000 jobs in Chile and will generate significant social and economic benefits for the country.

More information on these two key growth projects can be found on pages 15 and 29 of this report.

These landmark projects are significant steps along our path to creating value for all our stakeholders – including our workforce, local communities and investors – and along with our strong operational performance, set the stage for our next phase of growth.

Health and safety

Most importantly, we registered our strongest performance ever in terms of safety; the culmination of many years of developing and implementing policies to promote a safety-first mindset across our workforce. Over the course of the last ten years, our injury frequency rates have consistently decreased, and our performance is now ahead of many of our global peers in the wider mining industry.

People and communities

It is also vital that we have the right culture and working environment. We are confident that our talent management programme, training initiatives and diversity and inclusion efforts will ensure that we enter our next chapter of growth with the best team to deliver our goals. We are also proud to reflect on several three-year labour agreements signed during the year. In a number of cases, we reached those agreements before the previous contracts expired, underscoring our proactive engagement with our workforce.

We continue to expand our diversity initiatives, increasing female representation in our workforce to 23.6% (2022: 20.4%), and moving us closer to our goal of 30% female representation by 2025. Furthermore, gender diversity on our Board of Directors has increased to 45% as of February 2024 thanks to new appointments in the past 12 months, broadening the Board’s skill set at a critical time of growth for the business.

By recruiting the right people and building dedicated project teams, we are successfully ramping up both our desalination plant and fourth concentrator line for Los Pelambres. Looking forward, we are now well positioned to begin work on our portfolio of future projects, at both Los Pelambres and Centinela.

In our engagement with local communities, we continued to develop social programmes that support families living near our operations in 2023. In the Central region of Chile, close to Los Pelambres, we are focused on water, healthcare and education projects. One programme, Somos Choapa, helps to promote effective community engagement, while another, Confluye, focuses on responsible water use, as this is a key topic after more than 12 years of drought in the area. In the north of Chile, our focus continues to be on preserving the traditions and cultures of indigenous peoples, while also supporting local schools. In 2023, we undertook formal assessments of 18 of our social programmes and the results confirmed that all yielded a positive social return for our communities. It is important to local stakeholders that we support businesses and provide jobs in our local communities. We are committed to providing opportunities for local stakeholders, and we continue to maintain high levels of employment in the regions where we operate, with the majority of our personnel based either in the Antofagasta or Coquimbo regions of Chile.

In addition, we were proud to be a lead sponsor of the Pan American and Parapan American Games in 2023, which were held in Santiago for the first time, helping to promote Chile on a global stage and providing the copper that sits in the heart of all the medals.

As part of our broader reporting, during the year we published a series of standalone reports on our tax contribution, social value creation and strategy to address climate change, in addition to the Sustainability Report that was published alongside this Annual Report.

Tailings management and external accreditation

Ensuring the stability and safety of our tailings storage facilities is crucial. In August 2023, we announced full compliance with the Global Industry Standard on Tailings Management (GISTM) at our main storage facilities. The process was completed at El Mauro (Los Pelambres) and Centinela in 2023, while Los Quillayes (Los Pelambres) and Zaldívar are expected to be fully compliant by the deadline of August 2025. Antucoya does not have a tailings facility, since it is a SX-EW operation, and therefore does not have a requirement to comply with the GISTM.

As part of the process associated with The Copper Mark, a framework to promote responsible practices at mining operations and across value chains, both Antucoya and Los Pelambres received accreditation in 2023 for the implementation of their action plans. This accreditation lasts until 2025 and reaffirms our approach to producing copper in accordance with United Nations Sustainable Development Goals (SDGs). All companies in our Mining division hold this certification.

Responsible water use

In line with our purpose of developing mining for a better future, we are focused on ensuring that we have a sustainable business model. That means active community engagement, responsible water sourcing, ambitious emissions reduction targets and the protection of habitats and biodiversity.

The successful completion of our desalination plant in 2023 has enabled Los Pelambres to reduce the use of continental water sources, which have been impacted through the ongoing drought. Group-level water extraction from sea water sources increased in 2023, with water from our new desalination plant already representing a third of Los Pelambres’ water supply, despite only commencing its ramp up in the middle of the year. Both Centinela and Antucoya in the north of Chile operate on 100% sea water or recirculated water, following the closure of the Calama wells in 2022. At Zaldívar, with the submission of an Environmental Impact Assessment (EIA) in 2023, we plan to convert this operation to sea water (or water from third parties), after an extension of the water permit for a transitional period between 2025 and 2028, which will allow us to extend the mine life of this operation to 2051, with a long-term water solution to replace the current extraction of continental water. In early 2024, approval was received from the authorities for the separate DIA (Declaration of Environmental Impact) to extend the mining permit and, therefore, align the water and mining permits at Zaldívar.

The initiatives mentioned previously, driven by our plan to double the capacity of our existing desalination plant at Los Pelambres, are helping us move towards our medium-term ambition of achieving 90% of our water from sea water or recirculated water sources.

Climate change: updated targets set

We continue to make progress in reducing our Scope 1 and 2 emissions. Having achieved our previous targets in 2022, we have focused on developing updated goals for our decarbonisation programme. As a result, we were proud to announce in early 2024 our updated emissions reduction targets, including a 50% target to reduce Scope 1 and 2 emissions by 2035, based on absolute tonnes of emissions and taking into account our planned increase in production during this time. We have also taken the important step of publishing our first Scope 3 target, with the goal of achieving a 10% reduction in emissions by 2030.

A key part of achieving our Scope 1 and 2 emissions reduction targets will be to reduce diesel consumption in our haul trucks, which represents approximately 60% of our Scope 1 emissions. To do this, we are focused on the continuing search for replacement fuel alternatives, in combination with the competitive electrification of our mining haulage fleet, which contemplates the potential use of trolley-assist technology, with initial pilot tests to be implemented at selected sites. Following this, we anticipate supplementing this technology with battery electric vehicles, as this particular technology develops over time and becomes more widely available and cost effective. In parallel, we are implementing a range of modern technologies across our portfolio, such as fleet automation at our mines, which will serve to further enable electrification and decarbonisation in the future. Regarding Scope 3, over 50% of these emissions come from our suppliers of goods and services. Through positive engagement with our suppliers via our Suppliers for a Better Future Programme, which was launched in December 2022, we aim to achieve our goal of a 10% reduction in Scope 3 emissions by 2030.

Operating results We recorded a strong year of operational results in 2023, with our Mining division producing 660,600 tonnes of copper, representing a 2% increase year-on-year. Performance improved at our largest mine, Los Pelambres, with ore processing rates increasing by 11% and our newly completed desalination plant helping to ensure a greater degree of water availability. At Centinela, we registered another year of consistent concentrate and cathodes plant performance, with production and costs broadly in line year-on-year despite industrywide cost inflation. At Antucoya, our continued discipline has helped manage costs, with this operation demonstrating effectiveness in low-grade copper mining. At Zaldívar, costs increased year-on-year in 2023, and the Company is continuing to implement its strategy of increasing throughput to ensure that this operation performs at its design capacity, with an appropriate cost base.

Our Transport division continued to deliver robust performance, with a second successive year of shipments in excess of 7 million tonnes, marginally beating the record set in 2022. Amid rising forecasts for copper and lithium production from the northern region of Chile in the coming years, we have a positive outlook for this segment of our business.

Net cash costs in 2023 were $1.61/lb, in line with the prior year, as increasing production of copper and by-products helped maintain our position on the global cost curve.

With industry-wide inflation in 2023 and perennial challenges related to grade decline and ore hardness, effective cost control is essential for modern copper producers to remain competitive. Our cost and competitiveness programme drives our efforts to control costs, delivering a total of $135 million of savings and productivity improvements in 2023. This was substantially above our internal target of at least $42 million for the year and in light of this progress, our ambition for cost savings in 2024 has increased significantly to $200 million.

Financial performance

Our strong financial performance in 2023 demonstrated the resilience and strength of our portfolio of operations. We recorded an 8% increase in revenues and a 5% increase EBITDA. Through consistent investment throughout the cycle, we have maintained our EBITDA margins at 49% in 2023 (2022: 50%).

Following the decision in 2022 to exit from our participation in the Reko Diq exploration project, proceeds of $946 million were received during the year, in line with expectations. Finally in our financial position – through our robust margins and conservative balance sheet management, we have maintained our net debt to EBITDA at a low level of 0.38, providing a platform on which to enter the next phase of development.

Growth and innovation

We are at an important juncture as we conclude one phase of profitable growth and investment, and prepare for the next one. Following completion of the first stage of the expansion at Los Pelambres, we can look forward to consistent operating performance and higher throughput rates. Furthermore, in late 2023, we received approval from the environmental authority to double the desalination plant at Los Pelambres (to reach 800 litres per second) and develop future critical infrastructure. It includes a new concentrate pipeline to replace the existing one, following a route that runs along a less populated route, and reduce the risk of unplanned downtime with the existing pipeline which as now been in operations for more than 20 years. Once this expansion of the desalination plant is complete, the Company will approach its target of at least 90% of water use coming from either the sea or recirculated water, helping to release water previously obtained from continental sources, in line with our environmental and social commitments.

At Centinela, we announced approval of the Second Concentrator, which will add 170,000 tonnes of copper-equivalent production to our portfolio. Through this $4.4 billion investment, we will significantly expand our utilisation of modern technologies and output of byproducts – helping the Centinela District move towards the first quartile on the industry cost curve.

At our leaching operations, we continue to innovate and work towards a solution to leaching primary sulphides. Cuprochlor®-T, our in-house, patented technology, delivered positive progress in 2023, a successful heap heating pilot was conducted at Zaldívar, enhancing its operational readiness. We are now evaluating an expansion of this programme to incorporate other mining operations, including third parties.

In 2023, we made progress with the Cachorro exploration project, where exploration work has continued in the central and main zones of the deposit, with this project having a mineral resource estimate of 250 million tonnes with a copper grade of 1.27%. Through exploration projects like Cachorro, we are working hard to ensure the future availability of new mining resources.

During the year, we also announced agreements to acquire 19% of Compañía de Minas Buenaventura S.A.A. (Buenaventura), Peru’s largest publicly traded precious and base metals company with a pipeline of potential copper projects. This investment is consistent with our strategy of prioritising investment in the Americas. We look forward to developing this relationship, looking to identify opportunities to deliver value for all stakeholders.

On innovation, we continue to implement our digital roadmap, increasing the use of artificial intelligence and advanced analytics in areas such as the leaching of ore at our SX-EW operations, while increasing the efficiency of fleet management at Centinela. We also inaugurated our Integrated Remote Operations Centre (IROC) for Los Pelambres in 2023, alongside Centinela’s IROC, which opened in 2021, we are rolling out additional remote-operated equipment at both operations to improve both safety and productivity.

Outlook for 2024

We believe that the strong performance we have achieved and the strategic investments we have made over the past year has put the Company on a solid platform for the next phase of growth.

The completion of the first phase of expansion at Los Pelambres and the start of construction at the Centinela Second Concentrator project are significant milestones. But they are only part of the story. Our exploration programme in Chile is advancing as we develop further copper resources, and we are building a footprint in Peru. In addition, we have updated our emissions reduction targets, setting ambitious goals for the next decade while working closely with suppliers and customers to tackle the rising threat of climate change. We are also optimistic that we have moved into a more stable environment in Chile.

These decisions mean we are strongly positioned to supply the much needed copper that plays an integral role in the world’s transition to a low-carbon economy. We endeavour to meet that demand in a responsible and sustainable way, ensuring that we create value not just for our shareholders, but also for our employees, our communities, our partners, and our planet as a whole.