CHILE-JAPAN BUSINESS COMMITTEE CHILEAN COPPER MINING · PDF fileCopyrights © 2014 CODELCO-CHILE. ... CHILE-JAPAN BUSINESS COMMITTEE CHILEAN COPPER MINING AND CODELCO CHALLENGES December

Copyrights © 2014 CODELCO-CHILE. Todos los Derechos Reservados. | Copyrights © 2014 by CODELCO-CHILE. All Rights Reserved.

CHILE-JAPAN BUSINESS COMMITTEECHILEAN COPPER MINING AND CODELCO CHALLENGES

December 2nd, 2014

Nelson Pizarro C.CEO


Chile: An attractive mining districtYear 2013

Source: Cochilco, Codelco, USGS.

SHARE IN GLOBAL PRODUCTION SHARE IN GLOBAL RESERVES

Copper32%

68%

Chile

Others28%

72%

Chile

Others

Molybdenum

15%

85%

Chile

Others

21%

79%

Chile

Others

Global Ranking: 1

Global Ranking: 3

Natural Nitrates100%

Chile

100%

Chile

Global Ranking: 1

Lithium Carbonate39%

61%

Chile

Others

Chile

OthersGlobal Ranking: 158%

42%


Codelco has a great future

CODELCO: WORLD LEADER IN COPPER RESERVES

Leadership in copper reserves

Codelco9%

Others Chile19%

Australia13%

Peru10%USA

6%Mexico

6%

Russia4%

China4%

Others29%

Estimated mineral resources

Source: U.S. Geological Survey, January 2014.

Our mineral resources let us expect more than 70 years of exploitation

Mineral

(million

tonnes)

Copper

grade

(%)

Copper

content

(million

tonnes)

Share

(%)

Chuquicamata 2,147 0.70 15.1 11.6

Radomiro Tomic 3,671 0.46 16.8 12.9

MH 936 0.95 8.9 6.8

Salvador 1,678 0.46 7.7 5.9

Andina 6,017 0.75 45.1 34.7

El Teniente 4,195 0.83 34.8 26.7

Gabriela Mistral 491 0.36 1.8 1.4

Codelco 19,136 0.68 130.2 100.0

*: Mineral resources include mineral stocks and broken material.


250

275

300

325

350

375

400

425

450

475

500

0

100

200

300

400

500

600

700

800

900

1,000

Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014

Although, copper prices has shown a downward trend since 2011 …

Copper Pricec/lb

Stocks in Metal Exchanges ** ‘000 tonnes

Stocks in Metal Exchanges

*: Year 2014: copper price and stocks until November 19th. **: LME, COMEX and SHFE.

Copper Price


100

150

200

250

300

350

400

2002 2006 2009 2011 2013

CRU Wood Mackenzie (Brook Hunt)

Structural Fiscal Budget Barclays

Macquarie

Price prospects remain auspicious in the long-termLong-term copper price forecasts, c/lb, 2015 currency

FORECASTS EVOLUTION: BANKS AND ANALYSTS LATEST PROJECTIONS

305305301

253269269279281285

299299304304305

317318320328339345345

334355

0 100 200 300 400

Average without extremesAnalysts, Banks & Others average

Banks & Others averageNumis

Wilson HTMInvestec

RBC Capital MarketsDeutsche Bank

CitigroupUBS

MacquarieCredit Suisse

Goldman SachsCommonwealth Bank

Morgan StanleyCIMB Group

Barclays CapitalBoA Merrill Lynch

IHS EconomicsJ.P. Morgan

Analysts averageCRU

Wood Mackenzie

Note: Structural Budget price is the average in the next ten years after the year of forecast.

Correlation between spot and long term forecast: 0.67


44

20

26 5 6 8 8

1 3

12

21

29

24 16

14 7 6

11 11 6 6

11

15

-

10

20

30

40

50

60

70

PossibleMore probable

Sources: Codelco and Wood Mackenzie (September 2014).*: Includes CAPEX of projects under construction, highly probable, probable and possible.

WORLD TOTAL: US$ 292 billion

US$ billion, 2014 currency

65

49

27

22

1412 12 11 11

8 8 7 7

13

27

Despite the trend towards more discipline in capital use and delays in projects, important investments are projected in the coming years

Total Latin America: US$ 165 billion Total Rest of the World: US$ 127 billion

EXPECTED INVESTMENT IN COPPER PROJECTS* WITH STARTUP DURING THE PERIOD 2014-2023


Sources: Codelco, SNL and Wood Mackenzie (3rd quarter 2014), companies’ reports and press releases.*: The list includes highly probable and probable projects. Average production of copper content in the first 10 years operating at capacity. **: CAPEX according to companies’ reports orother sources. ***: Currently under revision, as the company withdrew its EIA's in November 7, 2014.

Major copper projects in Chile* with startup between 2014 and 2023(without Codelco)

REVISAR

Name Owner Status Startup year Production‘000 tonnes

Investment**US$ million

Caserones Pan Pacific Copper On commissioning 2014 174 4,080

Sierra Gorda KGHM On commissioning 2014 190 4,240

Antucoya Antofagasta Under construction 2015 76 1,900

Escondida OGP1 (Organic Growth Project 1)

BHP Billiton/ Rio Tinto

Under construction 2015 107 4,199

Encuentro Oxides Antofagasta On feasibility 2016 45 760

Los Pelambres Expansion Antofagasta On prefeasibility 2020 95 7,000

Lomas Bayas Sulphides Glencore On prefeasibility 2020 97 1,600

El Morro Goldcorp On prefeasibility 2021 127 3,900***

Quebrada Blanca Hypogene Teck Resources On feasibility 2021 205 5,590

Santo Domingo Sur Iris Capstone Mining On feasibility 2021 87 1,700

El Abra Mill Freeport On feasibility 2022 198 5,000

Relincho Teck Resources On feasibility 2022 174 4,500

Collahuasi Phase 3Anglo American/

GlencoreOn prefeasibility 2023 294 6,500


Codelco’s target: around 2.5 million tonnes of annual copper production by 2025

Feasibility completed and early worksUnder construction On feasibility

Note: Projects production corresponds to the average of the first 10 years operating at design capacity.

On commissioning On prefeasibility

MINING STRUCTURAL PROJECTS

2019El Teniente New Mine Level432,000 tpy

2023AndinaExpansion343,000 tpy

2019ChuquicamataUnderground367,000 tpy

2018-2019Radomiro Tomic Sulphides Phase II354,000 tpy

2014Ministro Hales176,000 tpy

2019Salvador Inca Open Pit196,000 tpy

2019AndinaTransfer161,000 tpy

Investment Program: history and future (PND* 2014)

US$ million, 2014 currency

Codelco faces an unprecedented investment challenge

*: PND: Business and Development Plan.


Production contribution of all the Structural Projects, PND 2014 (under construction and pending approval)

‘00

0 t

on

ne

s o

f co

pp

er

New Mine Level Teniente Chuquicamata Underground Inca Pit El Salvador

New Andina Phase II Other Projects Andina Plan with Projects Plan without Projects

Ministro Hales Sulphides R. Tomic – P. II

Primary Crushing System Andina

3,000

2,500

2,000

1,500

1,000

500

Note: Ministro Hales project commissioned included in production of Codelco with and without Projects. PND: Business and Development Plan of Codelco (with projects)

Ministro Hales, Radomiro Tomic Sulphides Phase II, Chuquicamata Underground, El Teniente New Mine Level,

Salvador Inca Open Pit, Andina Transfer, Andina Expansion


*: It doesn’t include Codelco’s stake in El Abra and Anglo American Sur.

Codelco: the challenge of maintaining production in the short and medium term, despite the sharp drop in ore grades

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

0

45,000

90,000

135,000

180,000

225,000

270,000

315,000

360,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

GRADE AND TREATED MINERAL**

(‘000 fmt)

COPPER PRODUCTION*

‘000 dmtTreated mineral Copper ore grade

%

**: Until year 2010, treated ore grade. From year 2010 to date, mined ore grade.


Projected production PND* 2014 and critical success factors

• Robust mine plans.

• Optimize the use of treatment capacity,reaching design capabilities.

• Increase concentrator recovery andsmelter yield.

• Higher rates of operational continuity.

• Increased own and third partiesproductivity.

• Management alignment and leadershipin the administration of assets andproduction processes.

• Commitment of employees and theentire organization.

Production‘000 fmt

Note: It doesn’t include Codelco’s stake in El Abra and Anglo American Sur. *: PND stands for Business and Development Plan.

Treated ore grade (%)

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2014 2015 2016 2017 2018


Business and Development Plan (PND): 2014-2018Investments (on cash base) and Financing

2014-2018 Annual average Share %

Total investment 23,542 4,708

Projects 20,190 4,038 86%

Deferred expenditure (mines development) 2,789 558 12%

Contributions to societies 563 113 2%

Financing 23,542 4,708

Internal 14,116 2,823 60%

Net debt 5,426 1,085 23%

Capitalization 4,000 800 17%

Projects by objective** 20,190 4,038

Structural Projects 12,265 2,453 61%

Sustainability 2,735 547 14%

Development projects 2,712 542 13%

Equipment replacement and facilities repairs 1,403 281 7%

Information 1,075 215 5%

Structural Projects 12,265 2,453

RT Sulphides Phase II 3,480 696 28%

Chuquicamata Underground 3,265 653 27%

El Teniente New Mine Level 2,881 576 23%

Transfer 975 195 8%

Andina Expansion 777 155 6%

Salvador Inca Open Pit 571 114 5%

Ministro Hales 317 63 3%

US$ million, currency of the year*

*: OO.CC. 2014, November 2013. **: Estimated based on accrued investment.


Codelco’s Investment: 2015PRELIMINARY FIGURES*

*: 2015, preliminary budget.

US$ million

NORTH DISTRICT 1,707

CENTER SOUTH DISTRICT 1,782

PROJECTS INVESTMENT 3,489

MINE DEVELOPMENT AND DEFERRED EXPENSES

800

CONTRIBUTIONS TO SOCIETIES 113

GRAND TOTAL ACCRUED 4,402

INVESTMENTS BY DISTRICT

STRUCTURAL PROJECTS 1,364

SUSTAINABILITY 847

OTHER DEVELOPMENT PROJECTS 684

ENGINEERING STUDIES, GEOLOGICAL EXPLORATION AND RESEARCH

362

EQUIPMENT REPLACEMENT AND FACILITY REFURBISHMENT

233

PROJECTS INVESTMENT 3,489

PROJECTS INVESTMENT BY OBJECTIVES

US$ million


Structural mining projects: major milestones 2014 - 2015

• Andina Expansion:– Continue advancing for environmental approval in 2015.

• RT Sulphides Phase II:– Environmental approval.– Submit the First Stage of investment request.

• Chuquicamata Underground:– Taking investment decision and start construction, beyond the early works.

• El Teniente New Mine Level:– Further progress in the development and construction of mining works.

Cross challenge: detailed engineering of change in management models of the projects

• Salvador Inca Open Pit:– Completion of pre-feasibility study.


0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

The increase in costs has been a widespread trend in the industry

Source: Wood Mackenzie and Codelco.

INDUSTRY AVERAGE COSTS

Total Cathode Cost

Net Cathode Cost

Cash Cost (C1)

c/lb, currency of the year


0

20

40

60

80

100

120

140

160

180

200

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

After several years, during 2013, Codelco broke the upward trend in costs standing at the second quartile cut of the industry cost

DIRECT CASH COST (C1), CODELCO AND INDUSTRY QUARTILES

3rd quartile cut

2nd quartile cut

1st quartile cut

Source: Wood Mackenzie and Codelco.

c/lb, currency of the year

CODELCO


Since 2013, Codelco is engaged in a systematic effort to increase productivity and reduce costs

Maximize copper production through: • Identify opportunities that provide fine copper, other than those defined in budget • Visibility and closing the gaps of bottlenecks • Project of Breaks in Management

Promote initiatives to improve productivity:• Project of Third Party Service Productivity (PPST) • FTE and Productivity Measurement • Relationship with APRIMIN, CCHC, AGEMA and Mining Council • Management model based on KPI and Back Office (PGST)

Optimize budget management corporately:• Salaries • Energy, supplies, materials and equipment • Energy efficiency • Contracts, services and strategic supplies• Third Party Services

Through savings on discretionary items, install a transverse message of cost containment, including:• Vehicles• Consultancies • Service commissions• Cellphones

Co

mm

un

ication

plan

and

transfer o

f goo

d p

ractices

Optimize performance

in critical path

Services productivity

Budget Optimization

Hygienic Factors

PRODUCTIVITY

COSTS

STRUCTURAL PROJECT OF PRODUCTIVITY AND COSTS (PEPC) MODEL:DETAIL BY LEVER


Our challenge: to eradicate fatalitiesNumber of Fatalities and Rate, 2000 – 2014*

Number of fatalities Fatalities per million of hours-worked

*: Year 2014 up to November 7.

0.079

0.076

0.104

0.084

0.038

0.039

0.054

0.085

0.042

0.023

0.053

0.033

0.013

0.024

0.017

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

FAT own workers FAT contractors FAT total rate


• Zero serious and very serious environmental incidents.

• Zero serious or very serious sanctions of EnvironmentSuperintendence.

• Zero community conflicts with impact on business continuity orin projects execution.

• Environmental and social approval of the Structural Projects.0

10

20

30

40

50

2008 2009 2010 2011 2012 2013 2014*

Environment and communities: PND 2014 goals and key success factors

SERIOUS AND VERY SERIOUS ENVIRONMENTAL INCIDENTS

GOALS

2011 2014

Total 92 40

More critical 55 14

ENVIRONMENTAL VULNERABILITIES• Closing gaps associated with the most critical environmental

vulnerabilities.

• Ensuring RCAs commitments.

• Environmental Risk System integrated to the operation.

• Application of standards and tools for community management:close linkage with more critical localities.

• Commitment of employees and the entire organization.

KEY SUCCESS FACTORS*: Year 2014 up to November 12.


CHILE-JAPAN BUSINESS COMMITTEECHILEAN COPPER MINING AND CODELCO CHALLENGES

December 2nd, 2014

Nelson Pizarro C.CEO

Documents

CHILE-JAPAN BUSINESS COMMITTEE CHILEAN COPPER MINING · PDF fileCopyrights © 2014 CODELCO-CHILE. ... CHILE-JAPAN BUSINESS COMMITTEE CHILEAN COPPER MINING AND CODELCO CHALLENGES December