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Codelco generates US $ 1,418 million in pre-tax earnings up to third quarter

Between January and September, Codelco produced 1,201,000 tons of fine copper despite a significant drop in the ore grade. Furthermore, costs remained 5% lower than the average in the Chilean mining industry.

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Santiago, November 29, 2018.- Codelco generated US$ 1,418 in surplus for the Chilean treasury, with its own production exceeding 1.2 million tons of fine copper up to September, and almost 1.3 million tons including the participation in Anglo American Sur and El Abra. Chief Executive Nelson Pizzaro stated that "optimized management, in addition to copper and molybdenum prices, partially mitigated the negative impact on earnings as a result of increased price of supplies and 1-time expenditures such as collective bargaining".

Direct costs of the company were 5% lower than the average in the mining industry at 138.9 cents per pound (c/lb). This figure marks an increase over the previous year's numbers during the same quarter of 2017, due to the lower exchange rate, higher supply prices and lower production. The latter is a result of a 5% decline in the head grade from Codelco deposits, compared to the same quarter in 2017, with a consequent drop in fine copper production of 56,000 tons. However, this decrease was partially compensated by an increase in mineral recovery.

Structural projects which seek to extend the life of Chile's copper company for another 50 years, are on course and on budget. Chuquicamata Underground progress is reported at 68.9%, with 123 kilometers of tunnel excavated of a 142 km total. Andina Transfer commenced excavations for the secondary crusher, while civil works continue for the primary crusher and tunnel assembly of the Haulage III belt, with overall progress at 60.5%. Meanwhile, at El Teniente, early works for the Andesita and Diamante projects commenced and the Andes Norte project of the New Mine Level was authorized.
"It is also important to mention the decision to submit studies to the Environmental Impact Assessment Service in order to formalize the Rajo Inca project" emphasized Pizarro "This will allow the Salvador Division to continue operating for another 40 years and increase production by 50% over current levels".

Among the highlights of the period included mutually beneficial agreements reached with 15 unions representing close to 9 thousand workers. Such agreements were established through collective negotiations marked by responsible dialogue, with a time period of 36 months and figures appropriate to business conditions.

Foundry preparation in accordance with Supreme Decree 28

Codelco is investing US$ 1,013 million on six different works to adapt the Chuquicamata smelter, including the construction of two acid plants, given it was not possible to improve the existing ones. "We only had three years to develop the engineering, the tender process and construction for these optimizations, which is very little time to develop a project of this magnitude. As of September, we have reached 72% progress on these works" explained the CEO.

Moreover, in 2014 the continuity of Potrerillos of the Salvador Division was reviewed, "which stalled the engineering of all the projects involved, including those of the smelter, until we had some clarity on the issue of divisional continuity. This is now perfectly clear with the viability of the Rajo Inca Project" added Pizarro. The works for this smelter signify an expenditure of US$ 425 million, reaching 72% progress as of September of this year.

As Codelco previously reported in October, the company shall halt operations of these two smelters at midnight December 12th. Therefore, to ensure compliance with Supreme Decree 28, maintenance scheduled for the 2019/2020 period will be moved ahead to be executed at the beginning of 2019.

The company's top executive also recalled that both smelters will not only be optimized in terms of environmental performance, but also in terms of competitiveness. Chuquicamata will lower its costs by 29%, from 48 c/lb (in 2016) to 34 c/lb (in 2018), while Potrerillos will reduce costs by 21%, from 36.7 c/lb (in 2016) to 29 c/lb.

Meanwhile, the El Teniente Caletones smelter, which will receive an investment of US$ 601 million, will be ready for operation on December 13 in accordance with the requirements of Supreme Decree 28. This, in addition to the investment of US$ 113 million at Ventanas, which has been compliant with regulations since December 2016.

 

THE FIGURES

  • US$ 1.418 million in pre-tax earnings for the development of Chile.
  • 1,201,000 tons of own fine copper production; 1,296,000 tons with the participation in the Anglo American Sur and El Abra affiliates.
  • C1 cost at 138.9 c/lb; surpassing Chile's national copper mining industry average.
  • EBITDA of US$ 3,544 million, with a margin of 33%. The variation with respect to the previous year is primarily a consequence of a rise in the price of inputs and as a result of one-time expenses such as collective bargaining agreements for approximately nine thousand workers over the next 36 months.
  • 68.9% progress at Chuquicamata Underground, which is preparing for its initial caving for mid-2019.

Communications and Public Affairs Department