Annual Report 2003 - Antofagasta plc

Chairman’s ReviewCopper MiningANTOFAGASTA PLC Annual Report and Financial Statements 20038have resulted in premiums of over US$100 pertonne for about a fifth of El Tesoro’s first quarterproduction. The company intends to apply forregistration of its MET brand on the Comex andexpects approval for this during 2004.During 2003, El Tesoro purchased a second-handP&H 56 cu.yd. mining shovel and four 240 tonneCaterpillar haul trucks, which will enable the mineto improve its operations. As a result, mining costswill be reduced through economies of scale bythe movement of more than 40 million tonnes ofmaterial in 2004. Cash costs however, are expectedto increase due to a higher waste to ore ratio,higher sulphuric acid prices and a stronger Chileanpeso. Further improvements to the disposal systemallowed higher stacking levels and increased thestability and capacity of the spent-ore dump.During 2003, El Tesoro and the University ofAntofagasta jointly formulated a developmentprogramme to improve the skills and efficiencyof all employees throughout the operationsand this programme will be extended to includeall supervisory staff in 2004. El Tesoro continuesto give full consideration to matters of health,safety and the environment at its facilities.Minera Michilla (74.2 per cent)During 2003, Michilla produced a record 52,700tonnes of Grade A cathodes. Total revenuesincreased by 15 per cent to US$95.6 million andMichilla, which continues to be strongly cashpositive with a low total debt level of US$2.2 millionand low future capital expenditure requirements,made a net cash distribution to shareholders ofUS$5 million in February 2004. A further distributionwill be considered in December.Two crushers and a third agglomeration drumwere incorporated into the crushing system whichboosted the nominal capacity by 10 per cent –to 6 million tonnes of ore per year. Althoughincreased throughput will mitigate the expectedlower ore grades in the open pit, cash costs in2004 are expected to increase from 69.8 centsper pound to around the 75 cents per pound level.Again, this is due to a combination of factors,including the peso/dollar rate, the higher costof sulphuric acid, which has increased fromaround US$45 per tonne to around US$55 pertonne and may well increase further, and lowerore grades at the open pit.Successful exploration has extended mine life to2011, mainly due to the discovery of additional oreat the Estefania underground mine and in thearea adjacent to the old Susana mine. Michilla isnow considering the advantages of treating oxideand sulphide ores separately in its two SX-EWplants which should improve copper recoveriesof the sulphide ores by 10 per cent.