C HILEAN M INING C OST R EPORT C ASH C OST C OCHILCO F IRST Q UARTER 2019 VS 2018 Public Policies and Studies Department Chilean Copper Commission July 2019
METHODOLOGY • Quarterly follow-up of the Cash Cost Cochilco that considers 21 operations of the Large Copper Mining that represents 91,3% of the accumulated mine production of the first quarter of 2019 . • The methodology considers the modeling of the ma,in elements of Cash Cost (C1) expenditure (electricity, fuels, remuneration, services, by-products credits, etc.). • Public information (CMF, Central Bank, SII, mining companies), specialized databases and information to which Cochilco has access is used. • The results are presented in aggregate form without individualizing operations or mining companies. • Delivery of quarterly (accumulated) results, during the month following the term that companies have for the specific mining tax to send their financial statements to the CMF. Source: Cochilco
MINING OPERATIONS AND REPRESENTATIVENESS Production Production Var Mining operations Main Controller Jan-Mar 2019 Jan-Mar 2018 2019 / 2018 (kmt Cu content) % (kmt Cu content) (kmt Cu content) Escondida BHP 275 20,4% 323 -48 Collahuasi Anglo American plc y Glencore 130 9,7% 138 -7 Anglo American Sur Anglo American plc 104 7,7% 94 10 El Teniente Codelco 94 7,0% 114 -20 Los Pelambres Antofagasta Minerals 92 6,8% 84 8 Chuquicamata Codelco 84 6,2% 70 14 Centinela Antofagasta Minerals 69 5,1% 47 22 Radomiro Tomic Codelco 60 4,4% 96 -36 Spence BHP 49 3,6% 53 -4 Andina Codelco 45 3,4% 50 -5 Ministro Hales Codelco 33 2,4% 48 -15 Caserones SCM Minera Lumina Copper Chile 30 2,2% 34 -4 Sierra Gorda KGHM International Ltd 28 2,1% 23 5 Zaldívar Barrick Gold/ Antofagasta Minerals 25 1,9% 22 4 Candelaria LundinMining 24 1,8% 25 -1 Mantos Copper Audley Capital Advisors LLP 20 1,5% 19 1 Gaby Codelco 19 1,4% 25 -6 Cerro Colorado BHP 18 1,4% 14 5 El Abra Freeport McM 17 1,3% 23 -5 Salvador Codelco 8 0,6% 14 -6 Quebrada Blanca Teck 6 0,4% 6 -1 Total (21 mining operations) 1.229 91% 1.319 -91 Others 117 8,7% 98 19 Country 1.346 100% 1.417 -72 Representativeness 91,3% Source: Cochilco
CASH COST COCHILCO (¢US$/LB) 1st quarter (2019 vs 2018) 2019 T1 138,0 Cash Cost 2017 136,1 (¢US$/lb) 2018 T1 136,1 + 5,1 Management • COSTS KEEP CONTROLLED (+1.9 ¢ US / lb ) even though in the same period the average price of Cu fell 35.1 ¢ US / lb. Positive Market -12,5 Factors • Management: Negative effect attributable to lower production due to the impact of summer rains in the Negative Market + 9,3 northern area, falling ore grades and operational Factors problems. Cash Cost 2018 138,0 • Market factors: Positive effect attributable to the (¢US$/lb) higher value of the exchange rate and lower treatment and refining charges. On the other hand, the increase + 1,9 ¢US$/lb of electric power and sulfuric acid prices negatively impacted costs. Notes: - Possible differences in the sum arise from the rounding of decimals. - Differences with cash cost, published in previous periods, is explained by the information update Source: Cochilco
CASH COST COCHILCO (C1) 1st quarter (2019 vs 2018) 574 ktmf C1 costs of 13 C1 costs of 8 47% mining mining operations operations 655 ktmf decreased increased 53% Cash Cost Cochilco (¢US$/lb) Number of Average 2018 2019 operations Variation Jan-Mar Jan-Mar Mining operations that increase costs 8 121,9 145,3 + 23,3 Mining operations that decreased costs 13 154,3 129,3 -25,0 136,1 138,0 1,9 Total 21 Source: Cochilco
COST CURVE Cash Cost Cochilco (C1) - 1st quarter (2019 vs 2018) Cash Cost 1Q 2018 Cash Cost 1Q 2019 1st quartile 2nd quartile 3rd quartile 4th quartile 450 400 350 Cash Cost Cochilco 300 (¢US$/lb) 250 200 150 100 50 0 0% 25% 50% 75% 100% Accumulated Production (%) There are no variations of consideration along the curve in all quartiles. The biggest differences can be seen over the second quartile. Source: Cochilco
COCHILCO CASH COST VARIATION (¢US$/lb) 1st quarter (2019 vs 2018) Lower cost associated with services contracts. Cash Cost Cochilco (¢US$/lb) 2018 Jan-Mar 136,1 Drop in treatment and Services and Other expenses -3,0 refining charges (Tc-Rc). TC/RC -0,6 Labour -0,8 Labour costs positively Diesel -0,1 impacted by the higher value of the exchange rate By-product credits 0,0 Freight 0,7 Increase (+ 5%) in electric Power 1,5 power price of free client Consumables 1,7 contracts. Sulfuric acid 2,6 2019 Jan-Mar 138,0 Unit cost of consumables impacted by higher price and Variation (¢US$/lb) 1,9 lower copper production. 70% increase in the price of sulfuric acid. Source: Cochilco
COCHILCO CASH COST VARIATION (¢US$/lb) 1st quarter (2019 vs 2018) Average dollar price increased $ 65 (11%). Positively impacts costs in national currency. Cash Cost Cochilco (¢US$/lb) Lower consumption of 2018 Jan-Mar 136,1 inputs and materials CPI, exchange rate and PPI USA Effect -5,7 attributed to lower copper Quantity Effect (Mining supplies, personnel, diesel, etc.) -1,8 production. Price Effect (Mining supplies, remuneration, diesel, etc.) -0,2 Lower production 9,6 Different behavior in the 2019 Jan-Mar 138,0 prices of the different elements has no major Variation (¢US$/lb) 1,9 effect on costs. Production decreases (6.9%) due to “ Invierno Altiplánico ” effects, falling ore grades and operational problems. Source: Cochilco
C HILEAN M INING C OST R EPORT C ASH C OST C OCHILCO F IRST Q UARTER 2019 VS 2018 Public Policies and Studies Department Chilean Copper Commission July 2019
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