Earnings Transcript for ANTO.L - Q2 Fiscal Year 2021

Operator: It is now 1

Andrew Lindsay: Good morning or good afternoon, anywhere you are, and welcome to our half year question-and-answer call. We have with us today Iván Arriagada, our Chief Executive; Mauricio Ortiz, our CFO; and René Aguilar, our Vice President, Corporate Affairs and Sustainability. [Operator Instructions] With that, I'll hand over to Iván, who will just do a short introduction before the Q&A starts.

Iván Arriagada: Thank you, Andrew, and hello to everyone and a warm welcome, and thank you for joining us as we announce our midyear results for this year 2021. Before we speak about our results, I must tell you that sadly, after three years without an accident, we had a fatality in July at Pelambres. So our condolences go to the family and friends of Fernando Silva who worked for Pelambres' contractor company Besalco. I would like now to talk about our results and the key highlights of the midyear. I think we are reporting a strong set of financial results with a record EBITDA of $2.4 billion and an EBITDA margin, which is close to 66%. This has allowed us to continue to strengthen our balance sheet. We have a strong financial position and we have a net cash position of just over $700 million at the close of midyear. Turning to our production, as we released in our quarter two production report, group copper production for the first six months of the year was 361,500 tons, and this was in line with our expectations, programs and guidance. In terms of cost performance, we've had a strong cost performance during the first part of the year and achieved a unit cost in a net cash cost of $1.14 per pound, which was ahead of guidance. So we continue to perform very well on the cost side, and this, we think will carry on for the balance of the year. We remain committed to delivering shareholder returns. And therefore, have increased our interim dividend to $0.36 per share, equivalent to a pay ratio of 35%, which is fully in line with our dividend policy. And this represents an increase of around 280% compared on last year's interim as a result of the increase in net earning -- the net earnings base. We have continued to progress our projects and most importantly, the project at Pelambres, which involves the expansion of the plant, but most critical the construction of a desalination plant and a water system to Pelambres, which is now 52% complete, and we expect to be able to finish in the second half of 2022. We have, as in conjunction with the release of our results, introduced a revision to production guidance based on potential water availability restrictions at Pelambres. As you will know so far this year, precipitation at Los Pelambres has been significantly less than in 2019. And we do quote this year because '19 was up until now one of the driest years in the 12 drought period that we are experiencing. And during the first part of this year, we've seen unprecedentedly high dry conditions with almost no rainfall. As a result of this, and if there is only minimal precipitation in the balance of the year, we do expect to have an impact on production at Pelambres, and therefore, our production guidance has been adjusted to a range between 710,000 and 740,000 tons as the winter rainy season is now coming to an end. And this is important, the winter season comes to an end in September -- in mid-September, which is when we expect rain to be prevalent, and that is now coming to a close. However, we have maintained despite this change in our cost guidance at $1.25 per pound. Looking into 2022, we've also are running different scenarios ahead of the water system being available and finished as part of the Inco project. And therefore, we've estimated that if there is no rainfall continuing until that date, that around 50,000 tons of production at Pelambres could potentially be a risk in that worst-case scenario. So we've also noted that in our guidance commentary. And finally, I would like to mention that we continue to make significant progress on our sustainability strategy. We announced earlier this year a revised emission reduction target by a further 30% to be accomplished by 2025, as we had achieved our earlier target earlier than anticipated. And this comes along also a target of carbon neutrality by 2050, which is the same or in line with what the Chilean government has set for the country. And therefore, we are working with the government in the different technology and policy elements of being able to achieve that target, developing a pathway for that purpose. If technology and regulations allow, we will bring that forward. And we've also -- and I'm glad to share recently obtained international Copper Mark certification or validation for Centinela, and we are progressing the same for all our other sites, which is good news, and we expect to get it very closely for -- shortly for and then the other companies. So in summary, we continue to make progress on our sustainability strategy. By the end of the year, we should be 100% renewable power, and our desalination plant will be completed and that's in the second half of 2022, and that will be one step closer to having 90% of the group water requirements being CO recycled water. We ended the half year in a position of financial strength with a record EBIT of $2.4 billion, up by 133% and a net cash position of $700 million. And we have also made good progress in advancing our growth projects. So I think that's the sort of summary and highlights I wanted to share with you ahead of beginning the Q&A as we sort of release our results today.

Operator: Thank you for that summary. And we're now going to move on to the Q&A section of the webinar and conference call. If I could just remind people that questions will be from the webinar will be video. [Operator Instructions] Now, we have our first question from Jason Fairclough from Bank of America. Jason, you've being promoted to panelist. Please unmute yourself and turn on your video.

Jason Fairclough: Okay. I think I'm in. Okay. Look, just a follow-up on the water issue. How acute, how serious is it right now in the Central region? Are you really worried? Or are you just being conservative? And I guess as we look out to next year, is it possible for your desalination plant to fully supply the needs of Los Pelambres once it's up and running? And last question on water. Are we going to see any further evolution in the government's approach to water use permits?

Iván Arriagada: Okay. Thank you. Jason, so let me address the -- how significant is the water issue. I mean I think we have been observing the evolution of certainly rainfall and weather conditions this year. And they are quite significantly dry. And I would say we've had a quite unseasonably high temperature as well. So the situation, I think, is quite significant from the point of view of this being a very dry year compared even to 2019. Now having said that, we're actually in the course of this week going through some rain for the first time, as we sort of finished the winter. So there is a slight improvement in the course of this week. How significant it might be, it still remains somewhat unclear. But I think the general trend undoubtedly is that we are traveling into much more of a drier year and therefore, this is an issue. Now in our estimates, I think we have been prudent in the sense of looking at scenarios in which we have little, minimal or very small rainfalls. So there predicated on that basis, and therefore, our catering for that extreme case, both this year and next. Now once we have the plant in place and operating, and we expect that to be in the second half of next year, as I've mentioned, we are making good progress in the construction, which is most -- more than half -- more than 50% complete. Yes, we would expect basically to be able to have addressed the water requirements at Zaldívar, which made the shortfall, considering that the water balance is a blend of other sources as well. So by then, we expect to be in a safe territory from the point of view of water supply. In terms of government policy, I think what we've seen is that there's been recently a bill to amend the water rights situation in Chile. I think that's still in process. So it's still being developed. But in the case of diesel water, there is no impact. I mean the diesel water that we are providing are constructing for the purposes of supplying Pelambres is, in fact, a very good climate change response or adaptation to the condition, but also from a legal point of view, it does remove any risk of these changes in law having an impact. So from that point of view, we feel we're well protected from any changes in that aspect.

Operator: Jason, thank you for your question, that's there. We're going to promote our next question from Daniel Major. Daniel, promoting you to panelists. Please turn on your camera. Please turn on your camera and unmute yourself.

Daniel Major: Yes, I guess question just follow on from Jason's around risks to 2022 in terms of water. If I look at the revised guidance for Los Pelambres about 320 to 330 for this year, when you talk about the 50,000 ton risk, is that 50,000 tons lower than this year? Or would you have been expecting some incremental production uplift in 2022 on the basis of either grow or completion of the expansion? So is that a risk to the downside or risk to what you previously had anticipated? That's the first question.

Iván Arriagada: Yes. So in the case of Pelambres, remember that we were not expecting to get an upside on the Inco project in 2022 because it's expected to be finalized towards the end. And therefore, we were not expecting from that point of view a specific improvement because of extra capacity. Now what will drive there for production for Pelambres next year is essentially great with existing capacity. And now with the limitation of water, if that were to eventuate in the worst-case scenario, then that would be the outcome of production at Pelambres. So we're not expecting, as I say, to have extra capacity available from Inco until very late in 2022, and therefore, would not be a factor next year. So we were, from that point of view, not expecting extra capacity, just a great performance. And what we're thinking for next year in rates the grade for Pelambres will be similar to what we've seen this year, slightly lower maybe, but in that sort of range.

Daniel Major: Got it. So in the worst-case scenario, it's 50,000 less year-on-year. Okay. And then the second question around projects. And I noticed the planned Board approval for the Centinela expansion now 2022, not first half of 2022. Can you give us a bit more detail on that? Is that associated with or dependent on the outcome of the review of taxation? Is any delays to the approval of that project associated with perhaps waiting for some very high input costs we're seeing at the moment to moderate and further the economics of the project? And is there any early steer you can give on where the original $2.7 billion CapEx number might be shaping up at?

Iván Arriagada: Yes. So on the DMC, I think we've continued just to be clear to work on on the sort of detailed engineering. We've been awarded on a limited or conditional basis some of the key contracts. We got a key contractor working for us on this. So we are working on the readiness to be able to undertake the project at the time that we make the decision or choice to do so. So that's on the preparatory phase. So work has not stopped and we continue to work on the design, which derisks the execution. Now I think the key thing is we want to get from a project point of view to a level in which we have at least 65% of detail engineering complete, and that will be achieved early in half two. On the other hand, we've said we want to sequence our construction efforts in a way that we have most of Pelambres built when we undertake DMC, and that will happen now in the course of 2022. So the sequencing also has, from that point of view, moved things slightly back. And then obviously, there is a lot happening in terms of royalty discussion and the constitutional assembly work. And I think it's prudent also from a point of view of understanding the landscape for a long tenure project like this one in terms of both aspects taxation and any potential changes to mining regulations. So because that work is due to be completed during the first half of 2022, then by the time this is taking for a decision, all of those aspects will essentially be dealt with. And therefore, we will have a full set of information to allow us to make a decision on a more informed basis on those aspects. So, all of that comes into play. Now in terms of capital estimate, I think we have worked on updating our capital estimate and the number is still similar to what you've quoted. So even though pieces may have changed, we are essentially in a number, which is not too different than the number that you mentioned. And on top of that, as we've also mentioned, we have been making progress and work on looking at the way of eventually divesting of the seawater system as a way of reducing the front-end capital. And we are now in the process of actually bidding for a potential interested party to take that contract or that possibility. We will assess whether it's attractive once we get the bids, but that will, on the back of a similar figure that you mentioned, reduce also the front end capital spend if we manage to divest the water system. So that structural approach to the project, it's capital estimate have not significantly changed to the numbers that we've talked in the past. And we believe early, probably in the second half of next year, it's a good time to look at the project for a decision because a lot of this information that I referred to would be clearer for a choice of investment at that time.

Daniel Major: Just very final one. Based on that information, I guess, it's fair to assume you won't spend really any CapEx associated with the Centinela expansion next year if you're only planning to move it to approval back half of the year. Is that fair?

Iván Arriagada: No. I think there will be some, but not significant, but there will be some. I mean we are spending some capital in the way of advancing the detailed engineering already. So we're not posting in the sense that the work in terms of being able to get ready for a good execution of the project is still progressing. So we are spending some capital. But obviously, that will increase significantly only after the approval. And therefore, we would expect that a much heavier year spend would be 2023 if the project gets improved. So some capital expenditure next year, but most significantly after that if the project is approved.

Operator: Our next question is going to be coming from Ioannis Masvoulas from Morgan Stanley. Just promoting you to panelist at the moment. Ioannis, if you can please unmute yourself and turn on your camera. Many thanks.

Ioannis Masvoulas: A couple of more questions from me on the water situation. The first on the production risks of up to 50,000 tons that you flagged for 2022. You don't seem to be factoring in any mitigation strategies such as high-grading the mine for a few quarters or using any third-party water source. Could you verify if that's the case? And is that something that could possibly mitigate the risk if you were to consider that?

Iván Arriagada: Okay. Yes, I think the assumption is that the -- in quoting that number, is that there is no rainfall, and therefore, that it is a sort of worst case scenario. Now in terms of mitigation, we are doing and implementing is improving and stretching as much as is technically possible the efficiency at which we recycle water. And I think because we've worked on that over the last couple of years, I think the scope for that is more limited because we are probably recycling as much water as you can and are at the higher copper end of performance in that aspect compared to other mining companies, both in Chile and globally. Now in terms of adjusting the mine plan, yes, that is not factored in. So there will be probably somewhere that scenario to come into place, there will be some changes in the mine plan, which could probably provide some change in grade. However, we like to think of the mine development as we develop our mines in the long term, and therefore, we would not compromise in any way the way that we develop the mine, which is really planned on a long-term basis. And I think that's extremely important to stress that. I mean we see this as a short-term situation. We've been working on the permanent solution to water since 2016 when we first filed the permit for the seawater system. And we want to take a long-term view in how we address this shortage if we have an impact. So some changes in the margin, but I would not expect that we would go and make significant changes. Certainly, we would not high grade the mine in a way that it would involve any sort of long-term compromise. That's not the way that we would do it. And in terms of third-party water, I mean that's limited. We work within our community. And obviously, this is something which is impacting us and the community. And therefore, we are jointly working in addressing this challenge. On the one hand, we are ensuring that there is water available for human consumption by means of ensuring that every small town and village has got the water requirements filled, and that's happening. And from an agricultural point of view, we've been working also with the people in ensuring that the water is used efficiency that the wastewater is minimal, that the way that the water is used for agriculture is optimized. So a lot of this is about engaging with the community in that constructive way and facing this jointly. So we're not planning on buying water from other sources. One, because there's limited availability, and certainly, we would not want to do that in a way that it would compromise the ability of others to perform their business like the crops and agriculture. So that's not something that we're contemplating at a scale, which is material or if -- or would make a difference

Ioannis Masvoulas: That's very clear. And maybe a question related to the desalination plant. Is there any visibility on the exact timing because you mentioned second half of next year. But I guess if it's middle of next year that gives you far greater visibility on the production risks if it's towards the end of the year, that 50,000 tons could be even worse. So maybe -- how do you think about the scenarios that you've run around the exact timing of commissioning, and I guess, the ramp-up of the desalination plant?

Iván Arriagada: Yes. We think that the -- so far, I mean, when we say half two, say the midpoint of that is so that we would expect that in quarter three, we would be doing the commissioning of the plant. We expect that the ramp-up would be fairly quickly. This is no known technology and we are expecting that planning so that we can ramp up the plant pretty quickly. Now so that will be the base situation in which we are performing our programs and plans. If there is opportunity to bring some of that forward, we will look at that and I'm looking at those possibilities. But so far at this stage, I would say, it's safe to say that it's quarter three for commissioning.

Ioannis Masvoulas: That's great. And maybe a very last question from me Zaldívar. So you're guiding to a 10 percentage point improvement in grade -- in recoveries that would lead to a 10,000 to 15,000 ton output increase. But at the same time, you are running the process grade significantly above reserve grade. So if we take everything into account, how should we expect finished capital output to develop for the mine over the next two to three years? Will it be up or will it be down relative to the past two or three years?

Iván Arriagada: Do you mean the production?

Ioannis Masvoulas: The production, yes.

Iván Arriagada: Yes. Look, we will provide more detailed guidance on each of our mines in October. But I think that in Zaldívar, what we've experienced is an ore body, which has got into phases where we have low solubility. And as you know, leaching is the process that we use there. So a key is being able to transform the process such that we're able to leach essentially secondary sulfide. And the way of achieving that is through the project, which with the chloride leach. Now that will, therefore, improve recoveries in the way that we've described before. Now I think in terms of going forward, therefore, we should expect to see that build into the production, and therefore, some a net increase. This will, however, change year-on-year because, as we know, rates may change, and therefore, it may change year-on-year. So we will provide detailed guidance in October, but those are the factors at play. And I think we're positive about Zaldívar from the point of view of being able to achieve a step change in recoveries on which we have the project implemented. The project has progressed well. I mean we are close to 80% advance in construction, and therefore, we will be able to have it ready early next year. And then we'll see the benefits of the change to chloride, which I think will be important.

Operator: [Operator Instructions] Our next question is from Jatinder Goel from BNP Paribas. Promoting you to panelist, if you can unmute yourself and also turn on your camera, many thanks.

Jatinder Goel: A couple of questions. First one on Pelambres concentrate pipeline. It's indicated that it's reaching end of its life. So are you able to indicate total CapEx required to replace that pipeline? And what's the time line to replace this because it looks like it's all bundled into the ERA of second desalination plant of Los Pelambres? So does everything including those more enclosures that you need to build need to happen by 2025? And what's the total CapEx we need for this pipeline replacement and those Mauro enclosures? That's the first question, and I'll ask the second one afterwards.

Iván Arriagada: Yes. Okay. So you're right in the sense that it's a key piece of infrastructure. And we expect to be able essentially to build it after we get the permit, which is in process that you referred to. So it will be ready by 2025. So between 2023 and '25, we'll be able to build a replacement pipeline. It's not dependent on the other components. So each of them, the expansion of the diesel plant and the other works required at the somewhat independent, but the permit is sort of it's one. And that's why we've called this the project to adapt operationally, the operation to be basically be able to be ready for the next phase of production. The capital cost, I think the -- and I'm going to give you sort of a range because I think we're working still on the estimates, final estimates, but it's probably around $350 million for the full pipeline. That's, as I say, a preliminary number, and I think we're still working on that final figure. Mauricio may be able to comment on that. But it's an important project, and we think certainly for the life of Pelambres, it's a key piece of infrastructure, which we're going to build. And we're going to also doing it in a layout, which is friendly because it's removed from sectors which are now close to communities, and therefore, it will provide more operational independence as well.

Jatinder Goel: Understood. That's very clear. Second question on water infrastructure tender, you're aiming to conclude it by 2021, while the new concentrator approval doesn't come until second half of next year. So will the tender be contingent on the Company actually going ahead with the project? Or are you happy to outsource the current infrastructure and monetize even if next concentrator were not to be built? Or does it imply that the decision is implicitly made that the Company will go ahead with this one? And related to that, is the water infrastructure, both current and future stays within company's balance sheet, has Centinela got enough debt capacity to fund the project?

Iván Arriagada: Yes. So the -- yes, the bidding, as you say, will probably come to a close sort of this year and then the award will probably happen in the course of the first part of next year, but it's conditional on the project. Now we got to see the offers that we have requested both with and without the project, and therefore, we will look at them in those -- in that way. However, I am of the view that we would have -- we would have a preference to look at this decision as a joint decision associated to the project because what's more attractive probably for an incumbent -- I mean, from an incoming party is to be able to not only take the water system, but actually do an expansion in the water system, which would be associated to the project because you know there is probably the prospect of some extra return there. And on the other hand, for us, the construction of such we can reassign that risk in a different way where we do build it ourselves. So I think it's progressing, but I like to think that in the end, these are decisions that go jointly and therefore, that they will -- that we will make that timing match as we sort of move forward. In terms of debt capacity, I think one of the interesting features is that over the last three years, we've seen a significant improvement in the performance at Centinela. I mean, if you look at every indicator across Centinela, the numbers are performing well. We used to have this issue of the thickening of tailings, which is now very stable. The plant is actually achieving throughput rates, which we have not seen before, over 105,000 ton a day as a sort of we've reported. And the financial numbers come along the same sort of line. If you look at net earnings and profit -- I mean, after tax for Centinela, very significant for the first part of this year. So we have an asset which is now performing very well. We think it does provide, therefore, a good platform to be able to eventually undertake an expansion if the conditions are right. And from a debt capacity point of view, therefore, we think that it's -- Centinela is able to basically undertake the requirements for the project to move ahead, especially if we're thinking of carving out the capital required for the water because we will deal with it in a different fashion.

Jatinder Goel: Excellent. If I could just follow up briefly on that water infrastructure outsourcing then. Is -- do you think you can achieve an NPV-positive outcome? Or will it more be NPV neutral because you'll add up unit cost, but you'll get some upfront cash?

Iván Arriagada: Yes. We think that we would certainly not do this if it's not NPV positive. I'll date it may be marginally positive. But we are looking at the project on a basis of we construct everything. If we have a better case from an economic return point of view, a value point of view, which we can achieve by means of having someone else take over the water system, we would do it. If not, we will build it ourselves. So, it's really a condition that we get value out of this transaction and not only risk shedding or risk mitigation.

Operator: We have our next question from Abhi Agarwal. Now promoting you to panelist. Abhi, if you can just unmute yourself and turn on your camera, many thanks.

Abhi Agarwal: I have a couple of questions related to the Chilean situation. The first one is what's the latest on the royalty discussion? Are you aware of what the proposal in the Senate is -- what the recent proposal in the Senate is? And what the time line around this? And is there a chance that the newbuild could be passed ahead of the presidential elections in November? That's my first question.

Iván Arriagada: Okay. Thanks, Abhi. The -- as you know, that there was -- the original bill, which was passed in the lower chamber of Congress went to the Senate, which is where it now sits, and it's been worked basically through the Senate. There's a special committee there of Mining Committee, which is, therefore, looking at this proposal. Now I think that's been positive in the sense that there is much more -- there's been much more of a balance discussion around the royalty and the ability to have a balance between having the industry contribute somewhat more, but at the same time, being able to continue to promote the industry and its investment as a way of contributing to the country development and progress. So a much more considered discussion that's taking place now in the Senate. And I think that's where it sits today. They've been basically engaging with different parties. We as companies have been able also to be able to go to the Senate and express our views with respect to taxation and the industry. And I think one of the key points is stressing that the value that mining has for the country is much wider than just the payment of taxes. So we have a multiplier affecting in what we do in terms of employment, technology, vendor development, community engagement, that from a value point of view and a social development to interview is much broader. So all of that is now being considered. Now what do I expect on timing? I think there will be an attempt to try to close this before the next president takes office in March next year. So I think there will be an attempt to try to close this before year-end, amongst other things, because there's also legislative changes, and therefore, it's likely that parliament will change in the course of the balance of the year. So the work has been done, I think, as has been stated by some of the members of Congress with the aim of trying to reach some form of change before the end of the year. But I think what's good is that there's much more of a balanced view that the issue of Chile not losing competitiveness in terms of its taxation charge against other jurisdictions is on the table. And therefore, the scope for tax increases is being looked at to be able to contribute more to public finances, but at the same time in a way that the industry continues to develop, and it does not become uncompetitive. Now I also want to add that most mining companies having variability agreements, which span for a few years. And therefore, at least most of them have until 2023. And therefore, these changes will not come into effect until those invariability agreements expire, unless the bill is built in such a way that it includes some incentive for that in variability to be weighed. So that's an added element of protection in the short term. But I expect that this will probably try to run to completion before the year-end. That's what I expect.

Abhi Agarwal: Very good. My second question is the recent protection bill being considered by the government. So are any of your operations at risk? If yes, how do you plan to mitigate that risk, if that bill is passed? Thank you.

Iván Arriagada: Yes. So on the glaciers, there's been a wide range of discussion around the legislation itself. But I think now the builder has been moving forward is, again, a more balanced view on glacier situation. Now we don't have operations which impact or surround white glaciers. And therefore, from that point of view, there is no specific limitation that this bill would impose. Now in terms of what's called rocky glaciers, so those which might be submerged. There may be a few and those run across the end thus and that would simply, I think, impose some limitations in terms of how we sort of develop the infrastructure around the mine. So we don't expect any significant impact in the way that the bill is currently drafted, and therefore, not something which is a center stage for us. And maybe, René, you want to complement there in case there's something to add.

Rene Aguilar: Sure. Thank you, Iván. Yes, Iván was saying, the bill was already discussed the Mining Committee at the Senate. They were doing that for a period of time for some months. So they have agreed in that particular committee that there is, of course, an agreement not affecting directly the white glaciers, as Iván discussed. And also, they have considered what is called the permafrost, which is the area that surrounds the glacier. And if any project, not only but any project, we need to do something in the surrounding area of a glacier, they will need to go through an environmental impact assessment. So that is the way the senators have decided on this particular bill. Now it's on the Environmental Committee where they are, again, discussing the same topics they already agreed on the Mining Committee. And I would say that in Chile, we are expecting for that bill to pass as discussed in the Mining Committee and now discussing in the Environmental Committee, but you shouldn't have an effect on our company as Iván described just now.

Andrew Lindsay: Thank you. We've got no further questions from the web. So we're going to move on to questions from the conference call. [Operator Instructions] Actually, if I could pass across to you for the questions from the conference call.

Operator: Thank you. We'll now take a question from Luke Nelson of JPMorgan. Please go ahead.

Luke Nelson: A couple for me. Firstly, just on projects and CapEx. You mentioned opportunities to accelerate projects. Can you maybe just talk through specifically where those opportunities are you see? What the sort of best case upside scenarios for Zaldívar, Esperanza and Pelambres expansion could be with the best case? And also just what the potential delta in CapEx could be for this year relative to the $1.6 billion that's been guided? That's my first question.

Iván Arriagada: Thank you. Look, I think I'll move to and pass to Mauricio to address this point. Mauricio?

Mauricio Ortiz: Thank you. Well, thank you for the question. Well, as you know, our half year expenditure was in the space of $780 million, mostly explained by our development projects at Centinela, the Esperanza Sur open pit and Los Pelambres, of course, the expansion project that we were talking. And within this 50%, we have some opportunities to accelerate the project. So basically Esperanza Sur development open pit that basically increased our copper production at Centinela in the space to 50 to 10,000 tons per year. We have an option to accelerate that and bring forward some mild movement in order to increase throughput from that open pit to the concentrator. And in Los Pelambres, we are also evaluating how to bring forward the -- mainly the diesel plan as Iván described previously. So overall, these alternatives that we are evaluating represent something like one month expenditure on a basis in the guidance as a base, and that is there for 2021 base.

Iván Arriagada: Thank you, Mauricio. Yes. So I would just add a look at that, as Mauricio mentioned, I mean, when we think of opportunities on our high-return projects from the point of view of both what we can achieve in terms of -- in the case of Esperanza Sur or and in the case of the diesel plant water. And also, I would say that our ability to do this depends obviously partly on the conditions. I mean what we've seen is that we have high vaccination rates. And therefore, we have been able to progressively move to the full manpower establishment at our projects. But there is more absenteeism than we would normally see out of the sanitary condition and also the fact that there is government support for those that don't go to work. And therefore, our ability to do this depends on basically being able to address these issues. As I say, as the vaccination rate has increased, we see more opportunities, therefore, to accomplish this. And if they are, we will pursue them and go after them because we think there is a high return opportunities. But within limitations, obviously, as Mauricio said and sort of estimated.

Luke Nelson: That's very clear. And then maybe if we think about into next year, the sort of building blocks, obviously, growth will be what it will be, but more just in terms of mine sustaining and mine development. I don't want to front run the specific guidance, which you clearly will give. But can you maybe give some direction of travel in terms of those building blocks heading into next year. Obviously, mine sustaining specifically this year is quite below typical levels in prior years. So I'd be interested to get your views on on CapEx as we move into next year.

Iván Arriagada: Yes. Mauricio, do you want to take this again again, please.

Mauricio Ortiz: Thank you. Well, as you mentioned, we traditionally guided in October each year, but directionally, what I can share with you that actually the sustaining mine development, we used to use a range between 300 and 400 each mine development and sustaining CapEx. So next year, the range -- total range, which is 600 to 800, will be in the high end of that range -- closer to the high end of that. So that in terms of the sustaining and mine development. And as you highlight this year, we are running slightly lower than -- in the lower end of that range. So some catch-up we can expect for next year. And in the development, we are finishing the expansion of those Pelambres. And the overall number for the full year 2022 will be not below this year figure.

Luke Nelson: Okay. Great. And then one final question, if I may. Maybe for René, just on the sustainability targets of 30% reduction by 2025. Can you maybe just give a sense of how that's broken out between sort of, I suppose, easy wins in your comments by switching over to renewable PPAs versus sort of actively changing the way you operate, which are likely to be harder to extract? And then also just to what extent is any explicit cost in terms of CapEx or OpEx that we should be factoring in to get to that 2025 target?

Mauricio Ortiz: Sure. Maybe one...

Iván Arriagada: Mauricio.

Mauricio Ortiz: Sure, Iván. Yes, look, you're right. As you rightly pointed out, we have made a lot of improvements since we've, for the first time, announced our reduction target of 300,000 tons between 2018 to 2022, which actually we've achieved early in 2020 by 580,000 tons. Now we have committed ourselves to improve that by 30% by 2025 and looking for carbon neutrality by 2050 or early if technology is available. The first bit of our F was put on Scope 2 emissions basically, that is why we have agreed on changing the grid basically. So we are moving into renewable sources of energy. So therefore, you've got after '22 reduction as well on Scope 2 emissions. And the next step that we are working on right now is basically in Scope 1. So we are working on ways to reduce our emissions, particularly at the mine site, particularly of the old trucks. And for that, we are working on efficiency. But also, we are developing a very robust, I would say, electromobility strategy that looks into getting more electrical power, if you want, into our fleet. And in the future, we are also considering the green hydrogen as a source of energy for those whole trucks. So that is part of the road map that we've got, which again is focusing on Scope 2 and Scope 1. And also, we are going to start working more hardly on Scope 3 emissions as well. So we are going to be working in the whole grid.

Iván Arriagada: Maybe if I can complement, look, the -- I think initially, we've set this target to 2025. And I think initially, it's probably around 2/3 from the change in renewable and 1/3 on efficiency, and that sort of moves from that point to probably for the whole period being half and half. That's what we are expecting. The change in the energy supply is actually a cost benefit for most part. And then on the other components, because we are looking at changing and developing new technology solutions, there's more of a front-end investment in some cases involved. But generally, we look at returns and a business case over the long term as we make our choices and decisions in achieving our reduction targets. As I think we've mentioned hydrogen for us a means of supplying fuel to holding trucks is something that we and others, obviously, in the industry are looking. We are part of several pilot testing that we're doing here, and we're also participating in some the initiative, well, which involves a more broader scope of alternatives to supply holding trucks with energy, with clean energy. So I think we are very -- we want to be very active in this space. But very deliberate as well with respect to the long-term economic impacts of the costs that we -- that are involved in this effort. But we think there is scope for us to continue to improve. And I think we've achieved great results. We set our targets initially in 2018 to be completed in 2022, and we got there in 2020. So that was ahead of time. And that's why we've sort of refreshed at this juncture. And we're very committed to convert our process fully to green energy.

Operator: Okay. We've got one further question from the conference call from Jack O'Brien. Actually, maybe you could put him through. Yes, please go ahead.

Jack O'Brien: Okay. A quick question on -- obviously, you've got a very strong balance sheet. And just wanted to understand if the Board had ever considered increasing the stakes in the mines that you operate? Would that be a good use of capital given where your balance sheet sits today and the prospects ahead?

Iván Arriagada: I think we're -- certainly, we're keen on expanding our exposure to copper. So from that point of view, it certainly would be attractive. But we've got long established relationship with our partners and especially in the case of Pelambres and Centinela and Antucoya, where traditionally, we've built these mines from the very beginning, all of them and with our Japanese partners. And therefore, we think very highly of that relationship, which is for mutual benefit. So we see ourselves as continuing to develop these assets alongside our partners and value greatly the relationship that we have with them. So while, as I say, we would like to certainly get more exposure to copper, we understand that this is something that we're a journey that we started with our partners with a long-term view, and we both benefited from that, and therefore, see no significant scope for changing that.

Jack O'Brien: Okay. That's very clear. And just one follow-up, if I may. Obviously, the sort of precedent suggests that you always pay out the 35% at the interim, so no surprise there. But was there any some discussion at Board level whether to maybe increase the power at the interim this time around, just given again where your balance sheet lies and the strong first half?

Iván Arriagada: I think it was all around the consistency of the 35% payout. So essentially, we -- this is a policy, as you've mentioned that it's been applied very consistently in the past, and we believe in that consistency being a strength. So it was a confirmation of that.

Operator: We've got one further question from webinar from Danielle Chigumira.

Danielle Chigumira: I have two questions, one on safety and the other on emissions. So on safety, it's good to see the high potential incidents going down. But year-to-date, the injuries and the fatalities are going in the wrong direction. So how should we think about that discrepancy? Is it COVID specific? Or is it to do something else? And just on stope three, René mentioned targeting -- reducing your state three emissions, but do you have a time line to disclose them to the market?

Iván Arriagada: Yes. So let me introduce this, and I'll probably ask René to complement. But safety is certainly our top priority. And as we've said, we focus a lot on high-potential incidents, which are tracking well. So however, the total injury rate has increased. And the way that we've looked at this and our reading is that because we're doing a lot of construction work, so there's a lot of project work that has been added to what we normally do in terms of operations, is that a lot of this increment has to do with small incidents, hands, fingers and the like in construction work. And therefore, that's the area of focus where we're working to be able to bring those numbers down. It's not a big concern from the point of view of the type of injury that happens, which is small. However, we want to address that heads on, and that's why we've identified that it's associated to the construction working projects where we've moved north of 3,000 people to site to be able to do, as I say, civil construction work. So that's the reading that we have, and we will -- I mean, we monitor all these indices quite closely. And therefore, it's very key for us that we bring this down by addressing that specific aspect or space in which we've had some increased. In terms of emissions, I think certainly, we've been looking at emissions three and reporting, in fact, Scope 3 emissions in our sustainability report for several years. So this is not something that we're looking at from completely new. I think where we found a challenge, and I think that's been common across the industries to be able to set a target in terms of reducing Scope 3. But Scope 3 is something that we measure and report for almost all of the 15 dimensions in Scope 3 that GRI has and consistently. So we want to now think that certainly by 2025, we would be able to set an emission reduction target or before on Scope 3. We're just working the way to accomplish that in the most effective way. What kind of cooperation or ecosystem do we need to build with our partners upstream and downstream to be able to achieve these reductions in a coordinated way. So we measure, we have been reporting this in almost all of the 15 dimensions. And certainly not later than 2025, I would expect that we would be able to release targets for Scope 3 emission reductions. If earlier, that will be even better. We're working on that. One of the things, by the way, that we're also going to release shortly, as we mentioned, is that we've got the progress report on TCFD. And I think that also addresses our approach to climate change in a much broader sense, including how we look at Scope 3 emissions and the scope there to be able to progress work. And we are expecting to be able to release this in the next 30 days. And it talks much more broadly about how we see our risks and our opportunities in this Scope 3 aspect that you've asked, I don't know, René, if you want to say -- I'm conscious that we probably got two minutes. So do you want to say something brief or...

Rene Aguilar: No, I think I'm fine.

Operator: Yes. Thank you. We have no further questions at the moment. So I'd like to turn the call back to Iván for any closing remarks.

Iván Arriagada: Thank you, Scott. So in closing, I would like to say that I think we've had a good first half of the year. Starting with sustainability as who we're just discussing, I think the fact that we've been able to refresh our emission reduction target that we are very well into working for carbon neutrality with the government and other parties at different levels means that we're making good progress on sustainability. And that includes adapting to climate change in the way of continuing to build the desalination plant at Pelambres, which is now over 50% complete. I think which we started several years ago in anticipation of the sort of risks that we're seeing today. So good from that point of view that we are in that path. Results were solid. We are robust financially. We've achieved a record EBITDA number with EBITDA margins close to 66%. And that has allowed us to strengthen our financial position even beyond what we had before by means of having a net cash position of $700 million, which positions us well for the balance of the year and the close of 2021 as we look at closing that year. And in our growth projects, I think we're making good progress. And certainly, COVID has been something that we've been challenged within our operations and our projects. But I think now with the level of vaccination that we're seeing in Chile, at over 80% and in our sites and operations that we're achieving that sort of rates and higher, we believe that we are in good shape to continue to build our projects and deliver on our growth promises. So with that, I would like to end our remarks and thank you very much for attending the call.

Operator: Thank you. That then concludes our Antofagasta results Q&A. Iván, René and Mauricio, thank you very much for your time. Thank you. Bye.

Iván Arriagada: Thank you.