METHODOLOGY Quarterly follow-up of the Cash Cost Cochilco that - - PowerPoint PPT Presentation

Public Policies and Studies Department Chilean Copper Commission July 2019

CHILEAN MINING COST REPORT CASH COST COCHILCO

FIRST QUARTER 2019 VS 2018

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

• perations 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

Source: Cochilco

Production Jan-Mar 2018 Var 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

91,3% Representativeness Production Jan-Mar 2019 Main Controller Mining operations

CASH COST COCHILCO (¢US$/LB)

1st quarter (2019 vs 2018)

• COSTS KEEP CONTROLLED (+1.9 ¢ US / lb) even

though in the same period the average price of Cu fell 35.1 ¢ US / lb.

• Management: Negative effect attributable to lower

production due to the impact of summer rains in the northern area, falling ore grades and operational problems.

• Market factors: Positive effect attributable to the

higher value of the exchange rate and lower treatment and refining charges. On the other hand, the increase

• f electric power and sulfuric acid prices negatively

impacted costs. Cash Cost 2018 (¢US$/lb)

138,0

Cash Cost 2017 (¢US$/lb)

136,1 Management Positive Market Factors Negative Market Factors

+ 5,1

• 12,5

+ 9,3

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

+ 1,9 ¢US$/lb

Source: Cochilco

136,1 138,0 2018 T1 2019 T1

655 ktmf 53% 574 ktmf 47%

CASH COST COCHILCO (C1) 1st quarter (2019 vs 2018)

C1 costs of 13 mining

• perations

decreased C1 costs of 8 mining

• perations

increased

Source: Cochilco 2018 Jan-Mar 2019 Jan-Mar Variation Mining operations that increase costs 8 121,9 145,3 + 23,3 Mining operations that decreased costs 13 154,3 129,3

• 25,0

Total 21 136,1 138,0 1,9 Cash Cost Cochilco (¢US$/lb) Number of

• perations

Average

50 100 150 200 250 300 350 400 450 0% 25% 50% 75% 100% Cash Cost Cochilco (¢US$/lb) Accumulated Production (%) Cash Cost 1Q 2018 Cash Cost 1Q 2019

COST CURVE

Cash Cost Cochilco (C1) - 1st quarter (2019 vs 2018)

Source: Cochilco

There are no variations of consideration along the curve in all quartiles. The biggest differences can be seen over the second quartile.

1st quartile 2nd quartile 3rd quartile 4th quartile

COCHILCO CASH COST VARIATION (¢US$/lb) 1st quarter (2019 vs 2018)

70% increase in the price of sulfuric acid. Increase (+ 5%) in electric power price of free client contracts. Drop in treatment and refining charges (Tc-Rc). Lower cost associated with services contracts. Source: Cochilco Unit cost of consumables impacted by higher price and lower copper production. Labour costs positively impacted by the higher value

• f the exchange rate

Cash Cost Cochilco (¢US$/lb) 2018 Jan-Mar 136,1 Services and Other expenses

• 3,0

TC/RC

• 0,6

Labour

• 0,8

Diesel

• 0,1

By-product credits 0,0 Freight 0,7 Power 1,5 Consumables 1,7 Sulfuric acid 2,6 2019 Jan-Mar 138,0 Variation (¢US$/lb) 1,9

Different behavior in the prices of the different elements has no major effect on costs. Lower consumption of inputs and materials attributed to lower copper production. Average dollar price increased $ 65 (11%). Positively impacts costs in national currency. Production decreases (6.9%) due to “Invierno Altiplánico” effects, falling ore grades and operational problems.

COCHILCO CASH COST VARIATION (¢US$/lb) 1st quarter (2019 vs 2018)

Source: Cochilco

Cash Cost Cochilco (¢US$/lb) 2018 Jan-Mar 136,1 CPI, exchange rate and PPI USA Effect

• 5,7

Quantity Effect (Mining supplies, personnel, diesel, etc.)

• 1,8

Price Effect (Mining supplies, remuneration, diesel, etc.)

• 0,2

Lower production 9,6 2019 Jan-Mar 138,0 Variation (¢US$/lb) 1,9

Public Policies and Studies Department Chilean Copper Commission July 2019

CHILEAN MINING COST REPORT CASH COST COCHILCO

FIRST QUARTER 2019 VS 2018