Thursday , October 28 2021

"I do not believe that the boom that we are starting to see is a case comparable to what we lived 10 years ago"



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This week, especially for Ivan Arriagada, the economist who holds the executive presidency of the mining company of the Luksic Group, Antofagasta Minerals (Amsa).

On Wednesday, from the World Economic Forum in Davos, Switzerland, released the operating results of the mining company in 2018, which launched a record production of the holding company: 725,300 tons of copper.

In Davos, in addition to meeting the main political and economic leaders in the world, such as Shinzo Abe, from Japan; Angela Merkel, from Germany, or Jair Bolsonaro, from Brazil, Arriagada was able to appreciate the investor's feelings about copper in situ, as he presided over the mining and metals panel, attended by the most important executives at global level of industry.

They discussed the global challenges of the sector, such as the fourth industrial revolution, which would promote the use of fleets of totally autonomous vehicles, without human crew. Do you imagine this in Amsa ?, asks POLS to the executive, who responds that "it is not possible to dispense with people, but we will have autonomous trucks for extraction tasks, especially in ours New sites, such as Twin Metals, in the USA, so we will need people with different capacities. "

The topics that led to the discussion at the World Economic Forum were the business relationship between China and the USA, as well as the Brexit process in England. The latter matter is directly related to the Luksic mining arm, as the company transacts its shares on the London Stock Exchange and has offices in the English capital. In any case, Arriagada undermines the situation and explains that "our clients are mainly in Asia and we are not thinking about getting rid of the London Stock Exchange."

Before returning to Santiago to attend the Formula 1 race favored by Antofagasta Minerals, the economist revealed the main plans of the group of mining companies in POLS Sunday.

It is expected that the local mining activity will reactivate after tough years. How do you see the development of new structural projects forward?

-From 2015 to date, the investment in general has had a setback. We are now seeing in the economy a growth in investment and part of it has to do with the mining projects. But I do not think that the boom that we are starting to see is a case comparable to what we lived 10 years ago in the mining sector, because there are no new sites or resources, but we are seeing expansions or enhancement of # 39 ; operations that are changing cycle.

Investments and innovations in the US for this year

What is the detail of the US $ 1,300 million investments they want to make in Los Pelambres?

-We tried the complementary infrastructure in Los Pelambres, which is a project that is already under construction and will deliver its first production in the first half of 2021. Once built, it will contribute 60 thousand additional annual tonnes of production. The project contemplates adding grinding capacity and also constructing a desalination plant to supply the water to this expansion and to be used as a support in cases of prolonged drought. Any subsequent Los Pelambres growth project is still under preliminary study stage and it would be required to obtain environmental permits and we are not at this stage yet.

Will it expand the controversial tranque El Mauro?

– For now, we have not contemplated changes in the tranque of tailings El Mauro.

Will they build a new concentrator in the Sentinel or expand the existing one?

-The best alternative is to build a new concentrator plant and we are in the feasibility stage of this initiative, so we still have no plans to make an investment decision. It is something that we will probably consider next year.

What is the investment range that these enhancements would require in Sentinel?

– Between $ 2,700 million and $ 3,000 million.

What is your capital budget for this 2019?

-US $ 1,200 million. A part of that, some US $ 350 million, will be spent on Los Pelambres expansion. The rest are your own investments to maintain our installed capacity.

How is the progress of its Twin Metals project in the US?

-It is a project that represents a significant mining-geological resource, but requires starting from scratch, so it has a long period of gestation. We are working with a team dedicated to the US preparing all the information that is required to give the authorities the mining plan for the operation, which is the first step before beginning the permit process. The processing of your permits will take about six years, so we are far from a final investment decision.

When will the environmental proceedings be started by Twin Metals?

-The idea is to try to enter the first permit by the end of 2019.

What are the main features of this site?

-It has reserves of the order of one billion tons of mineral, which would be operated underground, and would have a processing plant that would produce copper, nickel and some metals related to the platinum. We hope that it will produce about 85 thousand tonnes of copper equivalent per year.

Positive perspectives on the price of copper

Do you see a possible narrowing of the copper offer for this year?

-If we look at the foundations of copper, it is seen with a positive expectation. This will be given in the short term rather by a limited offer. There have not been significant additions to capacity. On the other hand, demand for emerging countries continues to grow – at smaller rates -, despite the global volatility of the economy.

China's demand base stays and there are new sources of demand that are being incorporated, mainly thanks to the electromobility. However, there is a more negative macroeconomic sentiment with respect to world growth, mainly due to the trade war between China and the US. I do not think that this will substantially change the condition of copper, because it is a metal that is basically exported to To be used in China, we estimate that it will grow between 6% and 6.5% this year.

How much does the demand for copper projected?

-It will continue to grow between 1% and 2%, which is a lower rate, but on a very large consumption base. This will be a year of balance and towards the end of this exercise you will probably see signs of a small deficit, therefore, the tendency of the price of copper would go up. Cochilco projects the price for this year at $ 3.05 per pound, which is higher than what we see today, and I think that in these ranges it will move.

Produce more with less

What were the main reasons that pushed record production of the company in 2018?

-It was a very solid year. This is due to a very good performance of Minera Los Pelambres and Minera Sentinella. At first we had a very consistent performance throughout the year, a product that achieved a high treatment in our plants, which operate with high reliability, and also had a slightly softer mineral.

In the case of Sentinel, we had made an investment to increase the capacity of treatment and this year we managed to reach this design capacity. In addition, we kept our discipline in terms of costs and ended up with a net unit cost of US $ 1.29 per pound, below what we had anticipated.

Your cost goal for this year is $ 1.3 per pound, what factors will they trigger when you can not get off that rank?

-We hope we have an increase in production, which helps with costs, we have seen that some critical inputs, such as acid, have had an increase in price. By 2019 our goal is to achieve a cost reduction equivalent to US $ 100 million.

What has been the key to lowering costs?

– Do more with less. Using all the latent capacity of our facilities, achieving high levels of efficiency. We also advance in the reduction of energy costs in a progressive, not complete way, for some of our jobs through the renegotiation of some of our energy contracts.

We look forward to further deepening the negotiations for some other work contracts this year. The third factor is that we have sought efficiencies by reducing our contractor allocation, where we have found an opportunity to combine or merge contracts, or to rethink some of our activities so that they require less contracting. Finally, we have sought greater efficiency in the use of some of our critical entries, such as acid.

"It is important that tax reform simplifies and promotes investment"

-As well as talking about the mining business, Arriagada shares his vision regarding the aspects that surround the extractive operation and that directly affect the industrial activity: the changes that are driving the # 39; current government in tax and environmental matters. He also comments on the conversations of his key energy contracts.

What did you think of the government's exercise in its first year?

-In the mining sector there have been no legislative changes. The government has a portfolio of projects that involves reforming the environmental assessment system and also the tax system.

We hope these projects are progressing, given that they are oriented in the right way, inspired to promote greater efficiency and generate a space so that investments and economic growth have the priority they must have, because it is the source of welfare generation.

Are you agreeing to lower the tax on businesses and get people up?

-The two things that I think are essential of the tax reform is that it simplifies the system and promotes savings and investment spaces. The rest of the issues do not pronounce me.

What is your position with regard to the environmental crime bill that is being promoted by the government and would include criminal liability for companies and fines of up to $ 50 million?

-I'm not going to say, because it is something that is developing. It is important that we have clear regulations and be developed with requirements that are consistent with environmental standards that exist here and in other parts of the world.

In the environmental field, one of the difficulties that our sector has is the long process and evaluation period for the projects

. It is important to move forward in updating the legislation, by making the permitting process more effective, so that investors can know in advance whether it is susceptible to make an investment before committing resources that can be lost if the investment can not be made, and that there be, once the permits are approved, legal certainty will not be reversed.

What renegotiations of energy contracts will this year have?

-We are in the process of renegotiating contracts in some of our important jobs, but I can not detail what they are. The focus in this case is not in Los Pelambres. I hope that the first semester will take shape.

Are you looking for only contracts with non-conventional renewable energy sources?

-The clean energies are what we are interested in, because they are the ones that help reduce our carbon footprint and improve climate change, but they are also the ones that mark the most competitive prices today. We do not want to be investors in the field of energy.

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