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Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
CHILE-JAPAN BUSINESS COMMITTEECHILEAN COPPER MINING AND CODELCO CHALLENGES
December 2nd, 2014
Nelson Pizarro C.CEO
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Chile: An attractive mining districtYear 2013
Source: Cochilco, Codelco, USGS.
SHARE IN GLOBAL PRODUCTION SHARE IN GLOBAL RESERVES
Copper32%
68%
Chile
Others28%
72%
Chile
Others
Molybdenum
15%
85%
Chile
Others
21%
79%
Chile
Others
Global Ranking: 1
Global Ranking: 3
Natural Nitrates100%
Chile
100%
Chile
Global Ranking: 1
Lithium Carbonate39%
61%
Chile
Others
Chile
OthersGlobal Ranking: 158%
42%
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Codelco has a great future
CODELCO: WORLD LEADER IN COPPER RESERVES
Leadership in copper reserves
Codelco9%
Others Chile19%
Australia13%
Peru10%USA
6%Mexico
6%
Russia4%
China4%
Others29%
Estimated mineral resources
Source: U.S. Geological Survey, January 2014.
Our mineral resources let us expect more than 70 years of exploitation
Mineral
(million
tonnes)
Copper
grade
(%)
Copper
content
(million
tonnes)
Share
(%)
Chuquicamata 2,147 0.70 15.1 11.6
Radomiro Tomic 3,671 0.46 16.8 12.9
MH 936 0.95 8.9 6.8
Salvador 1,678 0.46 7.7 5.9
Andina 6,017 0.75 45.1 34.7
El Teniente 4,195 0.83 34.8 26.7
Gabriela Mistral 491 0.36 1.8 1.4
Codelco 19,136 0.68 130.2 100.0
*: Mineral resources include mineral stocks and broken material.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
250
275
300
325
350
375
400
425
450
475
500
0
100
200
300
400
500
600
700
800
900
1,000
Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014
Although, copper prices has shown a downward trend since 2011 …
Copper Pricec/lb
Stocks in Metal Exchanges ** ‘000 tonnes
Stocks in Metal Exchanges
*: Year 2014: copper price and stocks until November 19th. **: LME, COMEX and SHFE.
Copper Price
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
100
150
200
250
300
350
400
2002 2006 2009 2011 2013
CRU Wood Mackenzie (Brook Hunt)
Structural Fiscal Budget Barclays
Macquarie
Price prospects remain auspicious in the long-termLong-term copper price forecasts, c/lb, 2015 currency
FORECASTS EVOLUTION: BANKS AND ANALYSTS LATEST PROJECTIONS
305305301
253269269279281285
299299304304305
317318320328339345345
334355
0 100 200 300 400
Average without extremesAnalysts, Banks & Others average
Banks & Others averageNumis
Wilson HTMInvestec
RBC Capital MarketsDeutsche Bank
CitigroupUBS
MacquarieCredit Suisse
Goldman SachsCommonwealth Bank
Morgan StanleyCIMB Group
Barclays CapitalBoA Merrill Lynch
IHS EconomicsJ.P. Morgan
Analysts averageCRU
Wood Mackenzie
Note: Structural Budget price is the average in the next ten years after the year of forecast.
Correlation between spot and long term forecast: 0.67
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
44
20
26 5 6 8 8
1 3
12
21
29
24 16
14 7 6
11 11 6 6
11
15
-
10
20
30
40
50
60
70
PossibleMore probable
Sources: Codelco and Wood Mackenzie (September 2014).*: Includes CAPEX of projects under construction, highly probable, probable and possible.
WORLD TOTAL: US$ 292 billion
US$ billion, 2014 currency
65
49
27
22
1412 12 11 11
8 8 7 7
13
27
Despite the trend towards more discipline in capital use and delays in projects, important investments are projected in the coming years
Total Latin America: US$ 165 billion Total Rest of the World: US$ 127 billion
EXPECTED INVESTMENT IN COPPER PROJECTS* WITH STARTUP DURING THE PERIOD 2014-2023
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Sources: Codelco, SNL and Wood Mackenzie (3rd quarter 2014), companies’ reports and press releases.*: The list includes highly probable and probable projects. Average production of copper content in the first 10 years operating at capacity. **: CAPEX according to companies’ reports orother sources. ***: Currently under revision, as the company withdrew its EIA's in November 7, 2014.
Major copper projects in Chile* with startup between 2014 and 2023(without Codelco)
REVISAR
Name Owner Status Startup year Production‘000 tonnes
Investment**US$ million
Caserones Pan Pacific Copper On commissioning 2014 174 4,080
Sierra Gorda KGHM On commissioning 2014 190 4,240
Antucoya Antofagasta Under construction 2015 76 1,900
Escondida OGP1 (Organic Growth Project 1)
BHP Billiton/ Rio Tinto
Under construction 2015 107 4,199
Encuentro Oxides Antofagasta On feasibility 2016 45 760
Los Pelambres Expansion Antofagasta On prefeasibility 2020 95 7,000
Lomas Bayas Sulphides Glencore On prefeasibility 2020 97 1,600
El Morro Goldcorp On prefeasibility 2021 127 3,900***
Quebrada Blanca Hypogene Teck Resources On feasibility 2021 205 5,590
Santo Domingo Sur Iris Capstone Mining On feasibility 2021 87 1,700
El Abra Mill Freeport On feasibility 2022 198 5,000
Relincho Teck Resources On feasibility 2022 174 4,500
Collahuasi Phase 3Anglo American/
GlencoreOn prefeasibility 2023 294 6,500
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Codelco’s target: around 2.5 million tonnes of annual copper production by 2025
Feasibility completed and early worksUnder construction On feasibility
Note: Projects production corresponds to the average of the first 10 years operating at design capacity.
On commissioning On prefeasibility
MINING STRUCTURAL PROJECTS
2019El Teniente New Mine Level432,000 tpy
2023AndinaExpansion343,000 tpy
2019ChuquicamataUnderground367,000 tpy
2018-2019Radomiro Tomic Sulphides Phase II354,000 tpy
2014Ministro Hales176,000 tpy
2019Salvador Inca Open Pit196,000 tpy
2019AndinaTransfer161,000 tpy
Investment Program: history and future (PND* 2014)
US$ million, 2014 currency
Codelco faces an unprecedented investment challenge
*: PND: Business and Development Plan.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Production contribution of all the Structural Projects, PND 2014 (under construction and pending approval)
‘00
0 t
on
ne
s o
f co
pp
er
New Mine Level Teniente Chuquicamata Underground Inca Pit El Salvador
New Andina Phase II Other Projects Andina Plan with Projects Plan without Projects
Ministro Hales Sulphides R. Tomic – P. II
Primary Crushing System Andina
3,000
2,500
2,000
1,500
1,000
500
Note: Ministro Hales project commissioned included in production of Codelco with and without Projects. PND: Business and Development Plan of Codelco (with projects)
Ministro Hales, Radomiro Tomic Sulphides Phase II, Chuquicamata Underground, El Teniente New Mine Level,
Salvador Inca Open Pit, Andina Transfer, Andina Expansion
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
*: It doesn’t include Codelco’s stake in El Abra and Anglo American Sur.
Codelco: the challenge of maintaining production in the short and medium term, despite the sharp drop in ore grades
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
0
45,000
90,000
135,000
180,000
225,000
270,000
315,000
360,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
GRADE AND TREATED MINERAL**
(‘000 fmt)
COPPER PRODUCTION*
‘000 dmtTreated mineral Copper ore grade
%
**: Until year 2010, treated ore grade. From year 2010 to date, mined ore grade.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Projected production PND* 2014 and critical success factors
• Robust mine plans.
• Optimize the use of treatment capacity,reaching design capabilities.
• Increase concentrator recovery andsmelter yield.
• Higher rates of operational continuity.
• Increased own and third partiesproductivity.
• Management alignment and leadershipin the administration of assets andproduction processes.
• Commitment of employees and theentire organization.
Production‘000 fmt
Note: It doesn’t include Codelco’s stake in El Abra and Anglo American Sur. *: PND stands for Business and Development Plan.
Treated ore grade (%)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2014 2015 2016 2017 2018
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Business and Development Plan (PND): 2014-2018Investments (on cash base) and Financing
2014-2018 Annual average Share %
Total investment 23,542 4,708
Projects 20,190 4,038 86%
Deferred expenditure (mines development) 2,789 558 12%
Contributions to societies 563 113 2%
Financing 23,542 4,708
Internal 14,116 2,823 60%
Net debt 5,426 1,085 23%
Capitalization 4,000 800 17%
Projects by objective** 20,190 4,038
Structural Projects 12,265 2,453 61%
Sustainability 2,735 547 14%
Development projects 2,712 542 13%
Equipment replacement and facilities repairs 1,403 281 7%
Information 1,075 215 5%
Structural Projects 12,265 2,453
RT Sulphides Phase II 3,480 696 28%
Chuquicamata Underground 3,265 653 27%
El Teniente New Mine Level 2,881 576 23%
Transfer 975 195 8%
Andina Expansion 777 155 6%
Salvador Inca Open Pit 571 114 5%
Ministro Hales 317 63 3%
US$ million, currency of the year*
*: OO.CC. 2014, November 2013. **: Estimated based on accrued investment.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Codelco’s Investment: 2015PRELIMINARY FIGURES*
*: 2015, preliminary budget.
US$ million
NORTH DISTRICT 1,707
CENTER SOUTH DISTRICT 1,782
PROJECTS INVESTMENT 3,489
MINE DEVELOPMENT AND DEFERRED EXPENSES
800
CONTRIBUTIONS TO SOCIETIES 113
GRAND TOTAL ACCRUED 4,402
INVESTMENTS BY DISTRICT
STRUCTURAL PROJECTS 1,364
SUSTAINABILITY 847
OTHER DEVELOPMENT PROJECTS 684
ENGINEERING STUDIES, GEOLOGICAL EXPLORATION AND RESEARCH
362
EQUIPMENT REPLACEMENT AND FACILITY REFURBISHMENT
233
PROJECTS INVESTMENT 3,489
PROJECTS INVESTMENT BY OBJECTIVES
US$ million
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Structural mining projects: major milestones 2014 - 2015
• Andina Expansion:– Continue advancing for environmental approval in 2015.
• RT Sulphides Phase II:– Environmental approval.– Submit the First Stage of investment request.
• Chuquicamata Underground:– Taking investment decision and start construction, beyond the early works.
• El Teniente New Mine Level:– Further progress in the development and construction of mining works.
Cross challenge: detailed engineering of change in management models of the projects
• Salvador Inca Open Pit:– Completion of pre-feasibility study.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
The increase in costs has been a widespread trend in the industry
Source: Wood Mackenzie and Codelco.
INDUSTRY AVERAGE COSTS
Total Cathode Cost
Net Cathode Cost
Cash Cost (C1)
c/lb, currency of the year
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
0
20
40
60
80
100
120
140
160
180
200
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
After several years, during 2013, Codelco broke the upward trend in costs standing at the second quartile cut of the industry cost
DIRECT CASH COST (C1), CODELCO AND INDUSTRY QUARTILES
3rd quartile cut
2nd quartile cut
1st quartile cut
Source: Wood Mackenzie and Codelco.
c/lb, currency of the year
CODELCO
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Since 2013, Codelco is engaged in a systematic effort to increase productivity and reduce costs
Maximize copper production through: • Identify opportunities that provide fine copper, other than those defined in budget • Visibility and closing the gaps of bottlenecks • Project of Breaks in Management
Promote initiatives to improve productivity:• Project of Third Party Service Productivity (PPST) • FTE and Productivity Measurement • Relationship with APRIMIN, CCHC, AGEMA and Mining Council • Management model based on KPI and Back Office (PGST)
Optimize budget management corporately:• Salaries • Energy, supplies, materials and equipment • Energy efficiency • Contracts, services and strategic supplies• Third Party Services
Through savings on discretionary items, install a transverse message of cost containment, including:• Vehicles• Consultancies • Service commissions• Cellphones
Co
mm
un
ication
plan
and
transfer o
f goo
d p
ractices
Optimize performance
in critical path
Services productivity
Budget Optimization
Hygienic Factors
PRODUCTIVITY
COSTS
STRUCTURAL PROJECT OF PRODUCTIVITY AND COSTS (PEPC) MODEL:DETAIL BY LEVER
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
Our challenge: to eradicate fatalitiesNumber of Fatalities and Rate, 2000 – 2014*
Number of fatalities Fatalities per million of hours-worked
*: Year 2014 up to November 7.
0.079
0.076
0.104
0.084
0.038
0.039
0.054
0.085
0.042
0.023
0.053
0.033
0.013
0.024
0.017
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
FAT own workers FAT contractors FAT total rate
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
• Zero serious and very serious environmental incidents.
• Zero serious or very serious sanctions of EnvironmentSuperintendence.
• Zero community conflicts with impact on business continuity orin projects execution.
• Environmental and social approval of the Structural Projects.0
10
20
30
40
50
2008 2009 2010 2011 2012 2013 2014*
Environment and communities: PND 2014 goals and key success factors
SERIOUS AND VERY SERIOUS ENVIRONMENTAL INCIDENTS
GOALS
2011 2014
Total 92 40
More critical 55 14
ENVIRONMENTAL VULNERABILITIES• Closing gaps associated with the most critical environmental
vulnerabilities.
• Ensuring RCAs commitments.
• Environmental Risk System integrated to the operation.
• Application of standards and tools for community management:close linkage with more critical localities.
• Commitment of employees and the entire organization.
KEY SUCCESS FACTORS*: Year 2014 up to November 12.
Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.
CHILE-JAPAN BUSINESS COMMITTEECHILEAN COPPER MINING AND CODELCO CHALLENGES
December 2nd, 2014
Nelson Pizarro C.CEO
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