Annual Report 2003 - Antofagasta plc

y an amount equivalent to 16.3 cents perpound, compared to a reduction equivalent to11.0 cents per pound in 2002. Molybdenumprices have further strengthened since the yearend and are now nearly four times the averageprice levels over the last decade. It is unlikely,however, that these price levels can be sustainedindefinitely although strong demand growthfor steel in China continues, since copperproducers with molybdenum as a by-productwill be encouraged to re-enter the market.In March 2004, the Regional Commissionfor the Environment for Chile’s Fourth Regionapproved the new Environmental ImpactAssessment (EIA), which had been submittedby Los Pelambres in May 2003. The approvalwill effectively extend the mine life by twentyyears at current processing levels – to 2052.The EIA sought approval on four main issues:■■to increase mineable ore reserves to2.1 billion tonnes;to build the Mauro tailings dam insteadof the alternative Quebrada Seca andLas Lajas tailings dams;Engineering studies and the permitting for accessto the Pupio site will be completed during 2004and the expansion of the Concentrator could beginin 2005, with completion targeted for early 2008.Los Pelambres remains committed to ensuring thatthe design and construction of the new installationswill meet the highest industry standards, both asto safety and to possible environmental impact,as was the case with the original mine construction.Accident rates at Los Pelambres have remained verylow as a result of the mine’s attention to healthand safety issues. This concern for its workforce willcontinue, as will the company’s efforts to ensurethat outside contractors adhere to the Group’s highsafety standards and procedures.Minera El Tesoro (61 per cent)El Tesoro is a low cost copper cathode producerlocated 200 kilometres north-east of Antofagasta.The mine has total reserves of 183 million tonneswith a grade of 0.78 per cent copper and uses astandard heap-leach SX-EW process. During 2003,El Tesoro produced 92,400 tonnes of cathodeswhich was 23 per cent above initial design capacityat an average cash cost of 42.4 cents per pound.The mine plan is being reviewed in order tomaintain this high production level.■■to build a new waste dump and increasethe capacity of two existing dumps; andto increase capacity at the Concentratorby approximately 45 per cent up to175,000 tpd.The next step would be to build the Maurotailings dam, which will provide storagecapacity for the 2.1 billion tonnes approvedin the EIA, at a cost of approximately US$450million. The Mauro dam will be sited at alower altitude than the alternative locationsand in an isolated area in the Pupio Valleyand will be located more than 10 kilometresfrom the nearest community.Net cash generated during the year was US$27.8million, from which a cash distribution of US$17.0million was made to Antofagasta Minerals andAMP Life Limited and a further cash distributionof US$24.0 million was made in March 2004.In July 2003, El Tesoro obtained LME certificationfor its cathodes as a standard Grade A qualitycommodity. Its MET brand cathodes can nowbe transferred between buyers as a commodityand are deliverable to LME warehouses worldwide.Following LME registration, El Tesoro obtainssimilar premiums for its cathodes to other majorLME registered producers. High copper pricesin 2004 and a market deficit of refined copperANTOFAGASTA PLC Annual Report and Financial Statements 20037