2022 Half Year Financial Report (+ Presentation + Webcast)
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2022
Antofagasta plc CEO Iván Arriagada said:
“Although we have experienced significant challenges over the half year – a volatile copper price as a result of macro developments, the continued drought in Chile, and an incident with our concentrate pipeline at Los Pelambres – the actions we have taken, coupled with the quality of our assets and balance sheet, have meant that we were able to weather the storm. Sales volumes during the period were lower as were copper prices and this is reflected in the 30% decline in revenue. As we previously announced, with the fall in production and higher input prices, cash costs were higher. And although we have experienced general inflation, the impact was offset by the weak Chilean peso.
“As we continue to decarbonise our business, we successfully moved all our mining operations away from using fossil fuels for energy generation and as of April this year, they are now all using 100% renewable energy.
“We expect the remainder of the year to look very different from the first half - as production improves quarter-on-quarter, we ship and sell the concentrate that was impacted by the concentrate pipeline incident, and the desalination plant at Los Pelambres starts, significantly alleviating the issue of water availability. We remain on track to produce our revised guidance of 640-660,000 tonnes of copper for the full year.
“While the short-term outlook remains uncertain for copper, inflation, global economics and geopolitics, we remain committed to maintaining our operating discipline and cost control, and a strong balance sheet.
“Copper’s critical role in the development of low-carbon technologies is essential for the energy transition and the long-term fundamentals for copper remain favourable. I am confident that Antofagasta’s strategy of developing mining for a better future is the right one and will deliver long-term value for all our stakeholders.
“In line with our normal 35% pay-out ratio for interims, the Board has declared an interim dividend of 9.2 cents per share.”
- Revenue for the first half of 2022 was $2,528 million, 29.6% lower than the same period in 2021 mainly because of lower copper and by-product sales volumes and lower realised copper prices
- EBITDA(1) was $1,238 million, 47.5% lower than in the same period last year on lower revenue and operating costs that increased by 6.9% mainly due to higher input prices
- EBITDA margin(2) was 49.0%, compared with 65.6% in H1 2021 and 64.7% for the full year 2021
- The Cost and Competitiveness Programme generated savings and productivity improvements of $35 million in the first half of 2022, equivalent to 6c/lb of unit cash costs
- Profit before tax was $680 million, a $1,104 million decrease on the same period in 2021
- Continuing strong balance sheet with a net debt to EBITDA ratio at the end of the period of 0.13 times. The cash, cash equivalents and liquid investments balance at 30 June 2022 was $2,878 million, a decrease from $3,713 million at the end of 2021, largely reflecting the $1,172 million payment of the 2021 final dividend
- Cash flow from operations reduced to $1,683 million compared with $2,461 million in the first half of 2021
- Capital expenditure of $831 million was 44% of full year guidance
- Earnings per share of 26.4 cents, 41.1 cents lower than the same period in 2021
- Interim dividend of 9.2 cents per share, equivalent to a pay-out ratio of 35% of underlying net earnings in line with the Company’s capital allocation framework
Production and cost performance (as previously announced on 20 July 2022)
- Group copper production in the first six months of the year was 268,600 tonnes, 25.7% lower than in the same period last year mainly due to the expected temporary reduction in throughput at Los Pelambres as a result of the drought and the concentrate pipeline incident and expected lower grades at Centinela Concentrates. Throughput at Los Pelambres was 36.2% lower than in H1 2021, and the grades at Centinela Concentrates were 25.4% lower
- Cash costs before by-product credits for the first half of the year were $2.37/lb, 37.0% higher than in the same period last year mainly due to the temporary decrease in production and higher input prices, particularly for diesel and sulphuric acid. General inflation was largely offset by the weaker Chilean peso
- Net cash costs were $1.82/lb for the first half of the year, compared with $1.14/lb in the first half of 2021, reflecting the increase in cash costs before by-product credits and slightly lower by-product credits due to lower by-product production, partially offset by higher realised prices
2022 Guidance (as previously announced)
- Full year copper production for the Group is expected to be 640–660,000 tonnes. This includes the impact of the concentrate pipeline incident, and the impact of the water shortage at Los Pelambres due to the drought
- The drought has continued at Los Pelambres during the period although there has been heavier precipitation since then. The revised guidance range incorporates a negative outlook for water availability for the rest of the year, which we consider to be low probability. Strict water management protocols remain in place to optimise water usage and mitigate the impact of low water availability
- With increases in diesel and other input prices, net cash cost guidance is $1.65/lb, assuming market consensus estimates of by-product prices and the Chilean Peso exchange rate for the rest of the year
- As announced in April, expected Group capital expenditure for the year is unchanged at $1.9 billion
- The Group is on track to achieve its Cost and Competitiveness Programme savings target of at least $50 million for the full year
- As previously announced, at the end of H1 the Los Pelambres Expansion project was 82% complete
- Completion of the desalination plant is expected in Q4 2022 and of the concentrator plant expansion in early 2023
- On completion of the desalination plant, the Group’s exposure to water scarcity risk will be substantially reduced. An application to further expand the plant is underway
- As previously announced, the Zaldívar Chloride Leach project was completed in January 2022 on budget
- Since the period end, mining with the Group’s first fleet of autonomous trucks has started at Esperanza Sur and the ore is being processed at the Centinela concentrator
- Following the completion of a detailed review of the Centinela Second Concentrator project, the capital cost estimate has been revised to $3.7 billion (up from $2.7 billion in the 2015 prefeasibility study). This estimate includes a new water system and the increase reflects design changes, inflation, heightened environmental and other regulatory requirements, and the results of advanced engineering and a more detailed execution plan. The decision on whether to proceed with the project is scheduled for early 2023
- The expansion at Centinela will increase production by an average of 170,000 tonnes per annum of copper equivalent and move Centinela into the first cost quartile, and takes advantage of the Group’s large resource base in the Centinela district
- As previously announced, from April this year all mining operations have been operating solely using renewable energy, significantly reducing the Company’s Scope 2 emissions
- The Group’s Sustainability Report was published in April and its first Tax Report was published in July
- In August, Antucoya obtained the Copper Mark, for compliance with this independently verified responsible production standard, joining Centinela and Zaldívar who received it in 2021
- As previously announced, there was a discharge from the concentrate pipeline at Los Pelambres during the period and the pipeline resumed operations on 26 June. There was no material environmental impact and the pipeline was approved for reopening by the relevant local regulator. A review is underway to ensure enhanced safety conditions are incorporated into pipeline operations ahead of the replacement of the pipeline which is currently being permitted and is expected to be completed in 2025. Engagement with members of the local communities concerned about the safety of the pipeline by the Company together with the local authorities were also concluded successfully
- The Constitutional Convention completed the draft of the new constitution on 4 July. A national referendum to accept or reject the new constitution will be held on 4 September
- The government presented a tax reform bill to Congress on 7 July and a new proposal for the mining royalty on 11 July. This proposal is being evaluated by the mining industry. The initial view is that it is more onerous than the proposal made by the Senate Mining and Energy Committee in January, but less onerous than the original proposal made by the lower house in May 2021. The new draft will now be reviewed by the Senate before being passed to the lower house for its consideration
|UNAUDITED RESULTS SIX MONTHS ENDING 30 JUNE||2022||2021||%|
|Profit before tax (including exceptional items)||$m||679.6||1,783.5||(61.9)|
|Earnings per share (continuing and discontinued operations including exceptional items)||cents||26.4||67.5||(60.9)|
|Dividend per share||cents||9.2||23.6||(61.0)|
|Cash flow from operations (continuing and discontinued)
|Net debt/(cash) at period end||$m||491.4||(701.3)||
|Realised copper price||$/lb||4.13||4.42||(6.6)|
|Cash costs before by-product credits(1)||$/lb||2.37||1.73||37.0|
|Net cash costs(1)||$/lb||1.82||1.14||59.6|
Note: The financial results are for continuing operations and are prepared in accordance with IFRS unless otherwise noted below.
(1) Non-IFRS measures. Refer to the alternative performance measures section on page 60 in the half-year financial report below.
(2) Calculated as EBITDA/Revenue. If Associates and JVs’ revenue is included EBITDA Margin was 44.6% in HY 2022 and 61.8% in HY 2021.
(3) On a cash basis.
(4) Does not include 22,700 tonnes of sales by Zaldívar in HY 2022 and 21,100 tonnes in HY 2021, as it is equity accounted.
A recording and copy of the 2022 Half Year Results presentation is available for download from the Company’s website www.antofagasta.co.uk.
There will be a Q&A video conference call at 2:00pm BST today hosted by Iván Arriagada - Chief Executive Officer, Mauricio Ortiz - Chief Financial Officer and René Aguilar, Vice President - Corporate Affairs and Sustainability. Participants can join the conference call here.
Investors – London
Andrew Lindsay email@example.com
Telephone +44 20 7808 0988
Rosario Orchard firstname.lastname@example.org
Telephone +44 20 7808 0988
Media – London
Carole Cable email@example.com
Telephone +44 20 7404 5959
Media – Santiago
Pablo Orozco firstname.lastname@example.org
Carolina Pica email@example.com
Telephone +56 2 2798 7000Download PDF (980KB)