Annual Report 2007 - Antofagasta plc

CHAIRMAN’S REVIEWForestryForestal S.A. (100 per cent owned)Forestal planted 351 hectares in 2007 on its Releco-Puñir and Huilo-Huilo properties as part of its 5-yearforestation programme, making a total of 946 hectaresplanted since 2004. The principal species planted thisyear were Oregon and Insigne pine, followed by Raulí,Coigüe and Sequoia which are native plants bestsuited to the natural and environmental conditions ofthe region. Forestal has recently started fertilising thesoil and controlling the diseases which affect youngplantations. Once again, sales of timber from thinningand clearing the forests contributed to the costs ofimproving the roads, repairing bridges and protectingthe boundaries. Forestal’s two properties comprise26,295 hectares of native forest near the Panguipulliand Neltume lakes, in Chile’s X Region.OutlookThe general outlook for 2008 remains sound withmany of the strong features of 2007, especiallyrelating to mining and commodities remaining in place.The pace of global economic activity, however, hasmoderated and there will be continuing cost pressureson the mining industry in Chile.Consensus estimates for copper prices are nowexpected to average around US 340 cents until atleast the end of the year as positive fundamentalscontinue with strong demand from China, India,Russia, other developing countries and from partsof Europe. The feature in 2006 and 2007 of lowinventories of refined copper and concentrates hascontinued into 2008 and LME copper prices haveaveraged US 338.6 cents per pound in the first twomonths of 2008.US$30.0 per pound and may exceed these levelsduring the year.Production of payable copper in 2008 is expected tobe higher than 2007 at around 463,000 tonnes due tohigher ore grades and throughput at Los Pelambres.Global mining costs rose significantly in 2007 andincreased in Chile in five main categories: oil andenergy, steel, sulphuric acid, mining equipment andlabour costs and these cost pressures will continuein 2008.FCAB and ADASA, the transportation and waterentities, will continue to benefit from increasedmining activity in the region. New business for FCABin 2008 will include copper cathodes and substantialshipments of sulphuric acid for Gaby at Baquedanostarting in July, cathodes and acid for Spence atSierra Gorda and increased shipments of concentratesfrom San Cristóbal. ADASA plans to start supplyingre-treated water to mines and industrial users in thearea during the latter part of the year.Antofagasta will develop and expand its miningoperations and exploration activities in Chile, the restof Latin America, Asia and Africa and its increasinglystrong financial position should enable it to acquiremining and energy related assets.Molybdenum prices averaged US$33.1 per poundin the first two months of 2008, reflecting strongdemand from the main consumers in the stainlesssteel and oil and gas industries. Molybdenum pricesshould stay around the historically high levels ofAntofagasta plc Annual Report and Financial Statements 2007 19