Our approach to considered growth means we focus on value, which includes controlling capital costs and optimising production at our existing operations and the development of new mining operations to deliver replacement and new production in the future.

Our approach to considered growth means that we focus on value, which includes controlling capital costs and optimising production at our existing operations and the development of new mining operations to deliver replacement and new production in the future.

We achieve this through careful project management and constant monitoring of the efficiency of our mines, plants and transport infrastructure.

The Zaldívar Chloride Leach project was completed on time and on budget early in the year, pre-stripping of the Esperanza Sur pit was completed in July, the Los Pelambres desalination plant started its pre-commissioning in November and the concentrator expansion at Los Pelambres will be completed by the end of March 2023.

This expansion project is divided into two phases. Phase 1 is expected to be in production in the second quarter of 2023 and Phase 2 by the end of 2025.

Phase 1

This phase is designed to optimise throughput within the limits of the existing operating, environmental and water extraction permits.

As mining progresses at Los Pelambres, ore hardness will increase. The expansion is designed to compensate for this, increasing plant throughput from its current capacity of 175,000 tonnes of ore per day to an average of 190,000 tonnes of ore per day. The expansion is divided into two sub-projects, the construction of a desalination plant and water pipeline from the coast to the El Mauro tailings storage facility, and the expansion of the concentrator plant, which includes the installation of an additional SAG mill and ball mill, and six additional flotation cells.

Annual copper production will be increased by an average of 60,000 tonnes per year over 15 years, starting at approximately 40,000 tonnes per year for the first four to five years and rising to 70,000 tonnes per year for the rest of the period as the hardness of the ore increases and the benefit of the higher milling capacity is fully realised.

In 2020, the decision was made to change the scope of the project and double the planned capacity of the desalination plant from 400 l/s to 800 l/s. However, the additional work on this expansion that can be carried out during Phase 1 is limited by what is allowed under the permits that have already been issued so the remaining work will be treated as a separate project subject to the receipt of the necessary permits. The cost of the additional work is included in the Phase 1 capital cost.

By the end of 2022, the desalination plant and the water pipeline were 95.7% complete and commissioning was under way, with production expected in the second quarter of 2023. At the concentrator plant expansion site, progress was 91.0% with production also expected in the second quarter of 2023.

A detailed review of the project schedule and costs in early 2022 resulted in the capital cost estimate for Phase 1 being increased to $2.2 billion (from $1.7 billion). Of this increase, approximately $220 million was related to the impact of COVID-19 on costs and the construction schedule, and $170 million was related to general inflation, including increased input prices, wages, labour incentives and logistics costs, with the balance reflecting other adjustments to implementation plans and an updated contingency provision. 86 Antofagasta

Phase 2 – Future expansion

Following the decision in 2020 to increase the size of the desalination plant, Phase 2 of the expansion now requires two separate Environmental Impact Assessment (EIA) applications; one for the expansion of the desalination plant and one for the extension of the mine life of Los Pelambres through an increase in the size of the El Mauro tailings storage facility. The latter EIA will also provide the option to further increase the throughput capacity of the concentrator plant.

Desalination plant expansion

This project will protect Los Pelambres from the future impact of climate change and the deteriorating availability of water in the region. The project cost will be reported as part of the Group’s sustaining capital expenditure.

The project includes the expansion of the desalination plant and the construction of a new water pipeline from the El Mauro tailings storage facility to the concentrator plant. In 2021 Los Pelambres submitted the EIA required for this project, which includes the desalination plant expansion and two other sustaining capital infrastructure projects, the replacement of the concentrate pipeline and the construction of certain planned enclosures at the El Mauro tailings storage facility. EIA approval is expected in time for the project to be completed in 2025/26, by which time over 95% of Los Pelambres’s water needs will be fulfilled by desalinated or recirculated water.

Mine life extension

The current mine life of Los Pelambres is 12 years and is limited by the capacity of the El Mauro tailings storage facility. The scope of the second EIA will include increasing the capacity of the tailings storage facility and the mine waste storage. This will extend the mine’s life by a minimum of 15 years, accessing a larger portion of Los Pelambres’s six billion tonnes of mineral resources. The EIA will also provide for the option to increase throughput to 205,000 tonnes of ore per day, increasing copper production by 35,000 tonnes per year.

The capital expenditure to extend the mine life was estimated at approximately $500 million in a 2014 pre-feasibility study, with most of the expenditure on mining equipment and increasing the capacity of the concentrator and the El Mauro tailings facility. Key studies on tailings and waste storage capacity have advanced and community consultation is under way. The environmental and social studies are being prepared and should be submitted to the authorities during 2023/24 as part of the EIA application.

We are currently evaluating the construction of a second concentrator and tailings deposit some 7 km from the existing concentrator, to take place in two phases. The EIA for both phases was approved in 2016. Detailed engineering plans and costings have recently been updated for Phase 1 of the project and key contracts finalised, subject to Board approval of the project. The capacity of the new concentrator will be 95,000 tonnes of ore per day, producing on average approximately 170,000 tonnes of copper equivalent (copper, gold and molybdenum) a year over the first ten years of operation. This will move Centinela into the first cost quartile of global producers.

The Phase 1 capital cost is estimated at $3.7 billion, including the cost of the new water supply system. The increase on the previously quoted 2015 pre-feasibility estimate of $2.7 billion reflects inflation, design improvements, heightened environmental and other regulatory requirements, and the results of advanced engineering and a more detailed execution plan. The estimate includes a concentrator plant, capitalised stripping, mining equipment, a new tailings storage facility, a water pipeline and other infrastructure, pre-commercial production operating costs, and owner’s and other costs.

The decision by the Board on whether to proceed with the project is expected in 2023, with timing dependent on the outcome of ongoing discussions on the tax reform and mining royalty bills and the rewriting of Chile’s constitution. Work on Phase 2 would only start once construction of Phase 1 is completed and it is operating successfully.

The second concentrator and its potential further expansion to 150,000 tonnes of ore per day will source ore initially from the recently opened Esperanza Sur pit and later from the Encuentro pit. The sulphide ore in the Encuentro pit lies under the Encuentro Oxides reserves, which are expected to be depleted by 2026. These expansions will further progress maximising the potential of Centinela's large mineral resource base.

During 2022, the Company continued the tender process inviting third parties to provide water for Centinela's current and future operations by acquiring the existing water supply system and building the new water pipeline. This process is expected to be completed in 2023. The outsourcing of the water supply will only proceed if it improves the net present value of the project.

The Esperanza Sur pit is 4 km south of the Esperanza pit, close to Centinela’s concentrator plant. The deposit contains 1.4 billion tonnes of reserves with a grade of 0.4% copper, 0.13g/t of gold and 0.012% of molybdenum.

Pre-stripping by a contractor was completed in July and Centinela has taken over the operation of the pit using a fleet of 11 autonomous trucks, the first to be used by the Group. Ore from the pit is now being processed at the Centinela concentrator.

The opening of the Esperanza Sur pit improves Centinela’s flexibility in supplying its concentrator and, over the initial years, the higher-grade material from the pit will increase production by some 10–15,000 tonnes of copper per year, compared with production levels if the material was supplied solely from the Esperanza pit. This greater flexibility will allow Centinela to smooth and optimise its year-on-year production profile, which has in the past been variable.

This project is expected to increase copper recoveries by approximately 10 percentage points, with further upside in recoveries possible depending on the type of ore being processed. This will increase copper production at Zaldívar by approximately 10–15,000 tonnes per annum over the remaining life of the mine.

The project was completed in early 2022 at a total capital cost of $190 million. The project included an upgrade of the Solvent Extraction (SX) plant, new reagents facilities and the construction of additional washing ponds for controlling the chlorine levels. Ramp-up is currently underway to achieve the full improvement in recoveries and will extend into 2023.

As the Group equity accounts for its interest in Zaldívar, capital expenditure at the operation is not included in Group total capital expenditure amounts.

Twin Metals Minnesota (Twin Metals) is a wholly owned copper, nickel and platinum group metals (PGM) underground mining project, which holds copper, nickel/cobalt and PGM deposits in north-eastern Minnesota, US. The planned project is over a portion of the total resource and envisages mining and processing 18,000 tonnes of ore per day for 25 years and producing three separate concentrates – copper, nickel/cobalt and PGM.

In 2019, Twin Metals submitted its Mine Plan of Operations (MPO) and Scoping Environmental Assessment Worksheet Data Submittal, to the US Bureau of Land Management (BLM, a bureau in the Department of Interior) and the Minnesota Department of Natural Resources (DNR), respectively. However, over the past two years, while the Twin Metals project was advancing its environmental review, several actions were taken by the federal government that have changed the potential outcomes for the project.

In 2021, the BLM rejected advancing Twin Metals’ preference right lease applications (PRLAs) and prospecting permit applications (PPAs).

In early 2022, the Department of Interior (DOI) took an additional action through a legal opinion issued by the Office of the Solicitor (M-Opinion). This action arbitrarily cancelled Twin Metals’ federal mining leases 1352 and 1353, citing concerns with the reinstatement and renewal process.

Also in early 2022, the BLM stopped its evaluation of Twin Metals’ MPO and an administrative court dismissed Twin Metals’ appeal of that decision.

In August 2022, Twin Metals filed a claim in federal court challenging the administrative actions resulting in the rejection of the PRLAs, the cancellation of its federal leases 1352 and 1353, the rejection of its MPO and the dismissal of the administrative appeal of the MPO rejection. Twin Metals considers the actions of the government to be arbitrary and capricious, contrary to the law and in violation of its rights. This action is pending.

In January 2023, the DOI issued an order effectively banning mining in approximately 225,000 acres of the Superior National Forest for 20 years, subject to valid existing rights. This action alone does not prevent Twin Metals from proceeding with the project since it does not affect its pre-existing rights.

Twin Metals Website

In 2019, the World Bank Group’s International Centre for Settlement of Investment Disputes (“ICSID”) awarded $5.84 billion in damages (compensation and accumulated interest as at the date of the award) to Tethyan Copper Company Pty Limited (“Tethyan”), the joint venture held equally by the Company and Barrick Gold Corporation (“Barrick”), in relation to an arbitration claim filed against the Islamic Republic of Pakistan (“Pakistan”) following the unlawful denial of a mining lease for the Reko Diq project in Pakistan in 2011.

In March 2022, the Company reached an agreement in principle with Barrick and the Governments of Pakistan and Balochistan on a framework that provided for the reconstitution of the Reko Diq project, and a pathway for the Company to exit the Reko Diq project.

In December 2022, the parties entered into definitive agreements under which the project was reconstituted under Tethyan and a consortium of Pakistani state-owned enterprises acquired shares in the Tethyan subsidiary which holds the project, and the ICSID award was resolved.

The proceeds from the acquisition of the shares of Tethyan’s subsidiary will be held by Tethyan until they are distributed to the Company before the end of 2023. An exceptional gain of $945 million has been recognised in 2022 and is subject to final payment during 2023. For more information please see Note 17 to the financial statements.