2023 Half Year Financial Report
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2023
EARNINGS PER SHARE INCREASE BY 27%
Antofagasta plc CEO Iván Arriagada said:
“The first half of the year delivered another strong safety performance across all our operations. We continue to operate fatality free, and both leading and lagging indicators of safety are at a level ahead of last year.
“Our financial metrics over the period were also strong; revenue was 14.3% higher due to higher copper, gold and molybdenum sales volumes and higher realised by-product prices, partially offset by a 3.4% decline in copper prices.
“We are focused on cost control through our Cost and Competitiveness Programme, which so far this year has delivered $60 million in savings and productivity improvements (equivalent of 9c/lb), achieving our goal of $60 million of savings for the full year. EBITDA was 7.5% higher and profit before tax was 12.5% higher than last year. Earnings per share came in at 33.5 cents, which is an increase of 26.9% compared to last year.
“Looking ahead to the second half of the year, we expect the desalination plant will continue to ramp-up to its design capacity, which will allow increased throughput at Los Pelambres, supporting the delivery of our production and cost guidance.
“Copper is the metal of electrification and therefore an integral part of the energy transition. We believe the long-term fundamentals for copper are very strong as demand is forecast to continue to grow over the coming years, and as incremental supply remains challenged. Our focus remains on growing production through our pipeline of projects safely and competitively, which will generate value for all our stakeholders.
“Consistent with our practice of paying 35% of interim net earnings as a dividend, the Board has declared an interim dividend of 11.7 cents per share.”
- Revenue for the first half of 2023 was $2,890 million, 14.3% higherthan in the same period in 2022, mainly because of higher copper and by-product sales volumes and higher realised by-product prices.
- EBITDA(1) was $1,331 million, 7.5% higher than in the same period last year on higher revenue, partially offset by operating costs that increased by 14.8%, mainly due to higher sales volumes, inflation and a stronger Chilean peso.
- EBITDA margin(2) was 46.1%, compared with 49.0% in H1 2022.
- The Cost and Competitiveness Programme generated savings and productivity improvements of $60 million in the first half of 2023, equivalent to 9c/lb of unit cash costs, achieving our full year target of $60 million.
- Profit before tax was $765 million, 12.5% higherthan the same period in 2022.
- Continuing strong balance sheet with a net debt to EBITDA ratio at the end of the period of 0.27 times. The Company’s cash, cash equivalents and liquid investments balance as at 30 June 2023 was $2,350 million, almost unchanged from the balance of $2,391 million as at the end of 2022.
- Cash flow from operations was $1,296 million, down from$1,683 million in the first half of 2022, due to a significant positive working capital variance in H1 2022, which was not repeated in H1 2023.
- Capital expenditure of $1,022 million, which is 54% of full year guidance.
- Earnings per share of 33.5 cents, 7.1 cents higher than the same period in 2022.
- Interim dividend of 11.7 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 19 July 2023)
- Copper production in H1 2023 of 295,500 tonnes, 10.0% higher year-on-year (H1 2022: 268,600 tonnes), principally reflecting a 23.9% increase in throughput at Los Pelambres.
- Cash costs before by-product credits in H1 2023 were $2.48/lb, a year-on-year increase of 4.6% due to higher input costs and the appreciation of the Chilean peso.
- Net cash costs were $1.75/lb for the first half of the year, compared to $1.82/lb in the first half of 2022, reflecting the increase in cash costs before by-product credits being more than offset by higher by-product credits.
2023 Guidance (as previously announced)
- Guidance has been updated to 640-670,000 tonnes (previously 670-710,000 tonnes), because of the rescheduling of completion activities at the desalination plant and concentrator expansion at Los Pelambres and the reduced availability of water in H1 2023. The expectation is that output will increase quarter-on-quarter in H2 2023 as both projects near completion of commissioning.
- The impact of the updated production guidance is partly offset by strong cost control across the Company’s operations with full year cash costs before by-product credits now expected to be $2.30/lb (previously $2.20/lb).
- Guidance for cash costs after by-products remains unchanged at $1.65/lb, assuming no significant changes in current by-product prices and the Chilean peso exchange rate.
- Capital expenditure guidance is also unchanged at $1.9 billion assuming no further appreciation of the Chilean peso. Opportunities to accelerate the execution of selected development projects will continue to be evaluated, considering the return profiles of the individual options.
- The Group has now achieved its full year Cost and Competitiveness Programme savings and productivity improvement target of at least $60 million.
Growth projects (as previously announced)
- The desalination plant for Los Pelambres is nearing the end of its commissioning phase. The plant achieved an average production rate of 160 litres per second of desalinated water in June 2023, and is expected to continue to ramp-up production during H2 2023.
- At the concentrator expansion project at Los Pelambres, pre-operational testing work started during Q2 2023, alongside the commissioning of some ancillary sections of the project and the connection of the main facilities to the national grid. Commissioning is expected to be completed in H2 2023.
- An updated study into the development of the Centinela Second Concentrator project is expected to be submitted to the Board for consideration by the end of the year.
- The expansion at Centinela would increase production by an average of 170,000 tonnes per annum of copper equivalent, taking advantage of the large resource base in the Centinela district. This expansion is expected to move Centinela into the first quartile of the net of by-products cost curve.
- There were no fatalities in H1 2023 (FY 2022: zero), and safety indicators remain strong, with a year-to-date lost time injury frequency rate (“LTIFR”) of 0.58 (FY 2022: 0.84).
- As previously reported, the Company (as well as other named defendants) submitted a response contradicting the allegations made by the Consejo de Defensa del Estado (“CDE”), an independent governmental agency that represents the interests of the Chilean state, who previously filed a claim against Minera Escondida, Albemarle and Zaldívar, alleging that their extraction of water from the Monturaqui-Negrillar-Tilopozo aquifer over the years has impacted the underground water level. The litigation remains outstanding as well as conversations among the parties regarding a potential settlement.
- Currently, Zaldívar is permitted to extract water and mine until 2025 and 2024 respectively. To ensure the continuity of this operation, in March 2023 Zaldívar submitted a Declaration of Environmental Impact (“DIA”), a more limited scope and simplified procedure than an Environmental Impact Assessment (“EIA”). The DIA submitted requests that the mining permit be extended from 2024 to 2025, to expire at the same date as the current water permit. After this, and after withdrawing an earlier EIA application filed in 2018 which remained unresolved, in June 2023 Zaldívar submitted an EIA application to extend its mining and water environmental permits through to 2051. This EIA includes a proposal to develop the primary sulphide ore deposit, extending the current life of mine and requiring estimated investments over the mine life of $1.2 billion, and a conversion of the water source for Zaldívar to either seawater or water from third parties, following a transition period during which the current continental water extraction permit is extended from 2025 to 2028.
- With the continuing drought in central Chile and changes in the Water Code in 2022, discussions were held with stakeholders in the Choapa Valley about water distribution arrangements in the area and an agreement has been reached with local communities. The relevant water authority is now in the process of reviewing this proposal. This ongoing process involves no material change to the current availability of continental water at Los Pelambres.
- In May 2023, both the Chilean Senate and lower house of Congress approved the proposed revision to Chile’s mining royalty bill, with Presidential approval confirmed in August 2023. The terms include a 1% ad valorem royalty on copper sales, and a royalty ranging from 8% to 26% on operating profits depending on each mining operation’s level of profitability, combined with a provision establishing that total taxation (including corporate income, the new royalty tax and tax on dividends) should not exceed 46.5% of profitability. This new law will come into effect at the beginning of 2024. Since Centinela and Antucoya have tax stability agreements, the new royalty rates will only apply from 2030. There will be a one-off non-cash adjustment to the deferred tax balances of each of the Group’s mining operations reflecting the impact of the change in the 31 December 2023 results.
- The process to approve a new constitution in Chile continues. In May 2023, the members of the Constitutional Council that will draft the revised constitution were elected. The Council is expected to agree a final draft of the revised constitution in Q4 2023, before it is presented for approval in a national referendum on 17 December 2023.
- As previously announced, following confirmation by the Australian Tax Office that the proceeds from the sale of the Group’s interest in Reko Diq ($945 million) were not taxable, the funds were distributed to the Company during H1 2023. The Company will apply its capital allocation model to determine the final use of the proceeds.
- On 20 July 2023, the Company released its second annual Tax Payments Report. The report provides detailed information about the nature of the taxes paid by the Company and the amounts paid and can be found on the Company’s website.
- The Company also released its second Social Value Report in July 2023, in which the Company reviews its involvement in the social and economic development of the areas where it operates.
A recording and copy of the 2023 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
Rosario Orchard firstname.lastname@example.org
Robert Simmons email@example.com
Telephone +44 20 7808 0988
Media – London
Carole Cable firstname.lastname@example.org
Telephone +44 20 7404 5959
Media – Santiago
Pablo Orozco email@example.com
Carolina Pica firstname.lastname@example.org
Telephone +56 2 2798 7000Download PDF (1MB)