Annual Report 2007 - Antofagasta plc

CHAIRMAN’S REVIEWChairman’s Review continuedChileHead OfficeSantiagoOperations*Los Pelambres(290 k tonnes copperand 10.2 k tonnesmolybdenum)El Tesoro(93 k tonnes copper)Michilla(45 k tonnes copper)FCAB and Aguas deAntofagastaProjects andExplorationEsperanzaAntucoya-BueyMuertoExploration in SierraGorda District andLos Pelambres••United KingdomRegisteredOfficeLondon••PakistanProjects andExplorationJoint venturewith Barrick Goldat Reko Diq*Figures relate to 2007 productionGeographical locations – operations, projects and explorationThe Group also had a successful year in its explorationprogrammes in Chile with encouraging results in boththe Sierra Gorda district and Los Pelambres.The Group’s transport and water divisions bothproduced record results in 2007. The road and railnetworks carried over 6.3 million tons – a combinedincrease of 6.4 per cent – and Aguas de Antofagastaincreased water sales to its domestic customers andindustrial clients and significantly reduced water losses.Economic backgroundThe Chilean economy grew steadily in 2007 but theoutstanding feature was its strong external positionwhich generated a trade surplus of US$24.5 billionresulting from record exports of US$68.3 billion.GDP is estimated to have increased by 5.2 per cent,a lower figure than expected at the start of the year.This slowdown has been attributed partly to a sharprise in consumer prices, which increased by 7.8 percent. Food costs rose and electricity and fuel pricesincreased due to high crude oil prices and a shortfallof gas supplies from Argentina. The peso rose stronglyagainst the US dollar from 532 at the beginning ofthe year to 497 at the end of the year as short-terminterest rates imposed by the Central Bank during2007 attracted short-term capital from abroad.Chile’s external account benefited from continuedstrong manufacturing growth and infrastructureinvestment in China, India and south-east Asia andthe ensuing demand for commodities. Although signsof over-heating, particularly in China, become morediscernible, domestic consumption is expected torise in much of South-East Asia and in a number oflarge emerging economies such as Brazil and Russia,which should partially offset the expected reduction indemand in the United States. Expectations for Chileangrowth in 2008 are therefore still strong at around4.5 per cent.6Antofagasta plc Annual Report and Financial Statements 2007