Annual Report 2007 - Antofagasta plc

CHAIRMAN’S REVIEWChairman’s Review continuedTransportationRailway operationsThe rail businesses in Chile and Bolivia producedanother strong operational performance and carried arecord tonnage in 2007 of 5.0 million tons comparedwith 4.5 million tons in 2006.Chile: Antofagasta Railway Company plc – FCAB(100 per cent owned)FCAB’s main business continues to be the transport ofcopper cathodes and sulphuric acid and it depends onproduction from new mines and expansion of existingmines for any substantial increase in freight over itsnetworks.mine, which will be supplied from Mejillones andChuquicamata. FCAB’s road transport subsidiary,Train Ltda., has a contract to deliver one milliontonnes of sulphuric acid from the terminal to theGaby mine annually.The 2007 maintenance programme concentratedon replacing 65 and 75 pound rail with 85 and95 pound rail to counter the damage to the trackcaused by increased axle loads. Track upgradingis now centred on the Augusta Victoria–Socompasection so as to improve services to Escondidaand on the Calama-Ollague section, where trafficfrom San Cristóbal is expected to increasesignificantly.As expected, copper and sulphuric acid shipmentsfrom and to the El Abra, Escondida, Zaldivar, LomasBayas, El Tesoro and Codelco mines were maintainedor increased, and increased tonnage came from thecontinued ramp-up of BHP Billiton’s Spence mine.FCAB carried a combined total of 370,000 tons ofcopper and sulphuric acid under a 12 year contractwith Spence which is located 190 kms fromAntofagasta.After some delays, shipments of silver, zinc and leadconcentrates started in August from Apex Silver’sSan Cristóbal mine located near Uyuni in southwesternBolivia. Production problems at the mineresulted in lower than expected tonnages whichare expected to improve in 2008.FCAB’s main source of new business in 2008 willcome from the Codelco-owned Gabriela Mistral mine(“Gaby”), where annual production is expected toreach 150,000 tonnes of cathodes, starting in July.The mine will also require more than one milliontonnes of sulphuric acid annually.The FCAB is building an acid transfer terminalat Baquedano, located 135 kms from the GabyBolivia: Andino network – FCA (50 per cent owned)The Andino, which is controlled by FCAB andpartly owned by Bolivian pension funds, increasedits tonnage carried and reported its highest profitssince 2004, due to increased revenue fromSan Cristóbal and its traditional mining customers.During the first half of 2007, FCA converted76 flat cars to carry specialised containers forconcentrates and re-conditioned two locomotivesto move the increased tonnages expected overthe next 17 years of the contract. The San Cristóbalproject has re-vitalised the Uyuni-Ollague sectionwhich connects with the Chilean network at Ollague.Road transportTrain Ltda. (100 per cent owned)Train Ltda. increased its operating profit byconcentrating on regional business with bettermargins and reducing its long-haul business toSantiago and southern Chile which had becomeunprofitable. As a result road tonnages were1.3 million tons compared with 1.5 milliontons in 2006. Train’s main business continuesto be the transport of sulphuric acid from transferterminals operated by FCAB. Shipments of acidincreased in 2007 and are projected to increase16Antofagasta plc Annual Report and Financial Statements 2007