Antofagasta : 2021 Half Year Financial Report

Antofagasta plc

NEWS RELEASE, 19 AUGUST 2021

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2021

Strong Financial Performance

Antofagasta plc CEO Iván Arriagada said: "We have seen strong copper demand and prices at multi-year highs over the first half of this year which has contributed to the robust financial performance of the Group, generating revenues of $3.6 billion and increasing EBITDA by 133% to a record $2.4 billion and our EBITDA margin to 66%.

"The half year was not without challenges as we continued to manage our operations and projects under COVID-19 conditions, although the resilience and agility of the Group has resulted in costs below guidance. COVID-19 continues to impact our communities as well, which is why we have extended our community COVID Fund into 2021, totalling now $12 million since the outbreak of the pandemic.

"The weather in central Chile during H1 saw unprecedentedly dry conditions, with almost no rainfall. We have now had 12 years of drought, and the precipitation in 2021 has so far been less than in 2019, which itself was one of the driest years on record. As a result, assuming there is only minimal precipitation during the rest of H2, we are adjusting our full year copper production guidance to 710-740,000 tonnes as the winter rainy season is now coming to an end. However, we are maintaining net cost guidance at $1.25/lb.

"Following our strong performance in H1, the Board has declared an interim dividend of 23.6 cents per share, in line with our normal pay-out ratio for interims of 35% of net earnings.

"Our key growth projects are on track and we remain focused on operating discipline and cost control, while producing copper responsibly and sustainably for all our stakeholders."

HIGHLIGHTS

Safety

• Sadly, after 33 months without a fatality a contractor suffered a fatal accident at Los Pelambres in July. Our condolences go to the family of our colleague, and a full investigation is underway, following which actions identified during the review will be implemented under the direct oversight of senior management. Safety remains the Group's top priority

Financial performance

• Revenue for the first half of 2021 was $3,591 million, 67.9% higher than the same period in 2020 mainly as a result of higher realised copper prices, partially offset by a decrease in the volume of copper sales
• EBITDA(1) was a record $2,357 million, 132.7% higher than in the same period last year on higher revenue partially offset by higher operating costs due to the stronger Chilean peso, and higher energy and diesel prices
• EBITDA margin(2) was 65.6%, compared to 47.4% in H1 2020 and 53.4% for the full year 2020
• The Cost and Competitiveness Programme generated savings of $43 million in the first half of 2021, equivalent to 5c/lb of unit cash costs
• Profit before tax was $1,784 million, a $1,396 million increase on the same period in 2020
• Strong balance sheet with net cash of $701 million at 30 June, an improvement of $783 million from the net debt position at the end of 2020. Cash flow from operations was $2,461 million compared with $907 million in the first half of 2020
• Capital expenditure of $782 million was 49% of full year guidance

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• Earnings per share of 67.5 cents, 53.8 cents higher than the same period in 2020
• Interim dividend of 23.6 cents per share, an increase of 280.6% on last year's interim. Dividends for both periods were equivalent to a payout ratio of 35% of underlying net earnings

Production and cost performance (as previously announced)

• Group copper production in the first six months of the year was 361,500 tonnes, in line with expectations and 2.8% lower than in the same period last year mainly because of lower grades
• Cash costs before by-product credits for the first half of the year were $1.73/lb, 14.6% higher than in the same period last year primarily because of the stronger Chilean peso (11%), higher energy and diesel prices, and the lower copper production
• Net cash costs were $1.14/lb for the first half of the year, 1.8% higher than in the first half of 2020. This was mainly due to higher cash costs before by-productcredits, offset by higher by-productcredits on higher realised prices

2021 Guidance

• This year has been the driest of a 12-year drought in Chile. Since the Company released its Quarterly Production Report on 21 July there has been no precipitation at Los Pelambres and temperatures have been unseasonably high. Given the traditional rainy season runs from June to September, it is looking increasingly likely that the low levels of precipitation will continue until at least the Southern Hemisphere winter next year. As water is essential to the operation of Los Pelambres's concentrator plant, if there is only minimal precipitation during the balance of winter full year Group copper production would be impacted. Guidance has therefore been revised from 730-760,000 tonnes to 710-740,000 tonnes
• Net cash cost guidance for the full year is maintained at $1.25/lb, assuming by-product prices and the Chilean Peso exchange rate remain at similar levels as in the first half of the year
• Next year's mine plans are being prepared and Group production guidance will be released, as usual, in the Q3 Production Report. Different weather and associated operating scenarios are being evaluated. However, if there is no precipitation until the next rainy season and when the desalination plant comes into operation in H2 2022, preliminary estimates are that up to approximately 50,000 tonnes of production could be at risk at Los Pelambres in 2022
• Capital expenditure during H1 was in line with annual guidance of $1.6 billion. As COVID-19 infection rates continue to fall in Chile, opportunities to accelerate the execution of selected capital expenditure programmes are being considered

Growth projects in execution

• As previously announced, at the end of H1 the Los Pelambres Expansion project was 52% complete and is expected to be completed in H2 2022 in line with guidance
• The desalination plant and related marine works have been minimally impacted by COVID-19
• At the concentrator expansion site, managing health risks and higher absenteeism during the recent peak of infections in the neighbouring communities has required adjustments to manpower numbers and shift patterns. However, these are returning to normal with more than 70% of the project workforce fully vaccinated and the number of cases in local communities decreasing
• On completion of the desalination plant, the Group's exposure to water scarcity risk will be very substantially removed. An application to further expand the plant is underway
• At Zaldívar construction of the Chloride Leach project at the end of H1 was 76% complete and is expected to be completed in H1 2022 in line with guidance

Sustainability

• In line with the UN Sustainable Development Goals and after a voluntary evaluation process, Centinela obtained the international Copper Mark in July. The Copper Mark certifies that the company's operations comply with strict internationally recognised sustainable production standards

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• Having achieved the Company's first targeted reduction of 300,000 tonnes of CO2e in 2020, the Company announced a new target to further reduce its direct (Scope 1) and indirect (Scope 2) GHG emissions by 30%, or 730,000 tonnes of CO2e by 2025, relative to 2020

Other

• On track to achieve savings target of $100 million for the full year
• The proposed new mining royalty is currently being considered by the Senate. A revision to the proposed draft is expected to be presented to the Senate in the coming weeks

UNAUDITED RESULTS SIX MONTHS ENDED 30 JUNE		2021	2020	%
Revenue	$m	3,591.0	2,138.8	67.9
EBITDA(1)	$m	2,357.1	1,012.8	132.7
EBITDA margin(1, 2)	%	65.6	47.4	38.5
Underlying earnings per share(1)	cents	67.5	17.8	279.2
Earnings per share	cents	67.5	13.7	392.7
Dividend per share	cents	23.6	6.2	280.6
Cash flow from operations	$m	2,460.5	906.9	171.3
Capital expenditure(3)	$m	781.9	548.6	42.5
Net (cash)/debt at period end	$m	(701.3)	319.5	-
Realised copper price	$/lb	4.42	2.46	79.5
Copper sales(4)	kt	325.1	346.8	(6.3)
Gold sales	koz	103.7	108.4	(4.3)
Molybdenum sales	kt	5.7	4.7	20.6
Cash costs before by-product credits(1)	$/lb	1.73	1.51	14.6
Net cash costs(1)	$/lb	1.14	1.12	1.8

Note: The financial results are for continuing operations and are prepared in accordance with IFRS unless otherwise noted below.

1. Non-IFRSmeasures. Refer to the alternative performance measures section on page 59 in the half-year financial report below.
2. Calculated as EBITDA/Revenue. If Associates and JVs' revenue is included EBITDA Margin was 62.1% in HY 2021 and 44.1% in HY 2020.
3. On a cash basis.
4. Does not include 21,100 tonnes of sales by Zaldívar in HY 2021 and 27,400 tonnes in HY 2020, as it is equity accounted.

A recording and copy of the 2021 Half Year Results presentation is available for download from the Company's website www.antofagasta.co.uk.

There will be a Q&A video conference call on 19 August 2021 at 1:00pm BST hosted by Iván Arriagada-Chief Executive Officer, Mauricio Ortiz-Chief Financial Officer and René Aguilar, Vice President-Corporate Affairs and Sustainability. Participants can join the conference call here.

Investors - London		Media - London
Andrew Lindsay	[e-mail]	Carole Cable	[e-mail]
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Rosario Orchard	[e-mail]
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		Media - Santiago
		Pablo Orozco	[e-mail]
		Carolina Pica	[e-mail]
		Telephone	[phone]

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DIRECTORS' COMMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

FINANCIAL HIGHLIGHTS

Group revenue was $3,591.0 million, 67.9% higher than in the same period last year as the realised copper price increased by 79.5%, and as by-product revenues increased by 45.0%, mainly due to higher molybdenum prices. These increases were partially offset by copper sales volumes falling by 6.3% or 21,700 tonnes of which some 15,000 tonnes was due to shipments delayed over the period end by adverse weather conditions.

EBITDA during the first six months was a record $2,357.1 million, 132.7% higher than in the same period in 2020, reflecting higher revenue partially offset by higher cost of sales.

Cash flow from operations was $2,460.5 million, a 171.3% increase compared to the same period last year reflecting the Group's higher EBITDA.

The Board has declared an interim ordinary interim dividend of 23.6 cents per share, an increase of 280.6% compared with last year's interim.

PRODUCTION AND CASH COSTS

Group copper production in the first half of 2021 was 361,500 tonnes, 2.8% lower than in the same period last year, mainly because of lower grades.

Group gold production for the first six months increased by 8.5% to 120,500 ounces.

Molybdenum production was 5,800 tonnes, 5.5% higher than in the same period last year.

Group cash costs before by-product credits in the first half of 2021 were $1.73/lb, 22c/lb higher than last year, a result of the stronger Chilean peso, higher energy and diesel prices, and the lower copper production.

Net cash costs for the first half of 2021 were $1.14/lb, 2c/lb higher than in the same period last year reflecting the higher cash costs before by-product credits, offset by higher by-product credits.

COST AND COMPETITIVENESS PROGRAMME

During the first half of the year, the Cost and Competitiveness Programme achieved savings of $43 million, equivalent to 5 c/lb. Even though cost pressures have risen throughout the industry, the Group has managed to build a portfolio of initiatives focused on reducing cash expenditure by optimising and negotiating third party services and increasing productivity in terms of greater throughputs and recoveries. The benefit of the initiatives is weighted to the second half of the year and is on track to achieve the savings target for the year of $100 million.

More generally, the inflationary pressure on costs has to date been moderate and mainly arisen from higher commodity prices, such as for diesel, acid and energy, and the strengthening of the Chilean peso, but there is no evidence of wage inflation or other permanent price effects on local goods and services.

EXPLORATION AND EVALUATION COSTS

Exploration and evaluation costs increased by $8.1 million to $52.3 million, mainly as a result of a higher level of activity.

TAXATION

The effective tax rate for the period was 37.1%, which compares with 34.6% before exceptional items and 36.7% after exceptional items during the same period in 2020.

CAPITAL EXPENDITURE AND DEPRECIATION & AMORTISATION

Group capital expenditure on a cash basis was $781.9 million during the period of which $235.6 million was on mine development, $131.6 million was on sustaining (mining) and $398.2 million was on development, of

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which $239.2 million was on the Los Pelambres Expansion project. The balance was at the Transport Division and at the corporate centre. Expected capital expenditure for the full year is in line with original guidance at $1.6 billion, although as COVID-19 infection rates continue to fall in Chile, opportunities to accelerate the execution of selected capital expenditure programmes will continue to be evaluated.

Depreciation and amortisation for the first half of 2021 was $482.5 million, a decrease of $12.8 million compared to same period in 2020 as amortisation of capitalised stripping decreased at Centinela. Depreciation and amortisation for the full year is expected to be approximately $1 billion.

NET DEBT

Net cash was $701.3 million at the end of the period, $783.4 million higher than at the end of 2020 as a result of the higher EBITDA. Cash flow from operations was $2,460.5 million compared with $906.9 million in the first half of 2020.

DIVIDENDS

The Board has declared an interim dividend of 23.6 cents per share, equivalent to $232.7 million and a payout ratio of 35%, consistent with the Company's policy and previous interim dividends. Any distribution of excess cash for the year, as defined under the policy, will be made as part of the final dividend.

LABOUR AGREEMENTS

Labour negotiations were successfully concluded at Los Pelambres during the period and no further negotiations are scheduled in the Mining division until next year.

PROPOSED MINING ROYALTY

Having been approved by the lower house of Congress in May, the proposed new mining royalty is now being debated in the Senate. The Senate is not restricted to the specific terms of the proposal presented by the lower house and has received evidence from a much broader base of interested parties including academics and mining industry representatives. It is now assessing these representations before proposing amendments to the draft legislation.

SUSTAINABILITY

Safety and health

Sadly, after 33 months without a fatality, a contractor suffered a fatal accident at Los Pelambres in July. Our condolences go to the family of our colleague, and we continue to investigate the accident to ensure zero fatalities in the future. Continuous improvement in safety risk management remains central to the Group's culture and activities.

For the first six months of the year, with the increased amount of project construction activity, the Group's Mining division's Lost Time Injury Frequency Rate (LTIFR) increased to 1.05 from 0.73 in the full year 2020, and the Transport division's LTIFR increased to 4.33 from 2.37. The Group's LTIFR for the half year was 1.28.

The Group also measures its safety performance through the number of High Potential Incidents (HPIs) which are a useful indicator of potentially fatal risks. For the first half of 2021 the number of HPIs in the Group was 29 compared with 43 in the first half of 2020 following a significant improvement in light vehicle incidents.

COVID-19

The second wave of COVID-19 cases in Chile, which began in late February, fell back to pre-wave levels by the end of the half year period and has continued to decline since then. The impact on the Company was mainly limited to the work on the concentrator plant expansion at Los Pelambres, resulting in project activity delays and, in addition, some scheduled maintenance at the operations has been delayed until later in the year.

The COVID-19 restrictions introduced last year are still in force and are expected to continue for the rest of the year.

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