MINERA ESCONDIDA

MINERA ESCONDIDA
ANALYSTS VISIT
April 24th, 2004
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 2
TOCOPILLA
CALAM A
CHILE
MEJILLONES
ANTOFAGASTA
COLOSO
Cerro Colorado
Collahuasi
Radomiro Tomic
Michilla Lince
Mantos Blancos
Lomas Bayas
El Tesoro
Manto Verde
Quebrada Blanca
Chuquica mata
Spence
Los Bronces
Slide 3
TATAL
Escondida
Zaldivar
El Sa lvador
El Indio
Los Pela mbres
El Soldado
ESCONDIDA
El Abra
La Candelaria
Andacollo
ZALDIVAR
MONTURAQUI
Andina
El Teniente
EL SALVADOR
CHAÑARAL
POTRERILLOS
INCA DE ORO
ARGENTINA
Northern Chile’s Atacama Desert,
160 km South East of Antofagasta
CHUQUICAMATA
BOLIVIA
World’s Premium Copper Region
Zaldivar
Aerial
View
Leach
Padsof MEL
Escondida
Norte
Zaldivar
Pit
Concentrator
Main
Pit
Oxide
Leach Pads
Slide 4
Phase IV
Plant site
Hamburgo
Tails
5 km
N
Facilities Layout
CMZ
Property
Limit
E. Norte
Waste Dump
Limit
Northern
Waste
Dump Limit
E. Norte Pit
Ultimate
Limit
Main Pit
Ultimate
Limit
Phase
IV Plant
site
N
5 km
Slide 5
Hamburgo
Waste Dump
Limit
Coloso Filter & Port
Coloso Filter & Port Facilities
Slide 6
Escondida’s Strategy Builds on its Strengths to Maximize Long
Term Value
Strong
Strong
Credit
Credit
Ratings
Ratings
World
World’
’s
World’s
Largest
Largest
Copper
Copper Mine
Mine
Strong
Strong Cash
Cash
Flow
Flow
Low
Low Cost
Cost
Producer
Producer
Strong
Strong
Sponsors
Sponsors
Diversified
Diversified
Sales
Sales Base
Base
Ability
Ability to
to
Manage
Manage
Expansions
Expansions
Slide 7
Stable
Stable
Country
Country
High
High Quality
Quality
Concentrate
Concentrate
Unequalled
Unequalled
Resource
Resource
World’s Largest Copper Mine
L ead ing C op per M ine Sit es
Lea ding Coppe r P ro ducers C ompa nies
L a gu n a S e ca
E sc on d id a
C ode lc o
P T Free p o rt
In d o n es ia
Lag un a S eca
E scond ida
BH P Billiton
C hu q u ica m a t a
KG HM P o lish
Cu
Ph elps D od ge
R io Tint o
E l T en ie n te
Grupo M exic o
M o re n ci
F-M cM Co ppe r &
Gold
L o s P e la m b re s
An glo Am erica n
plc
Co lla h ua s i
KGH M P olska
Mie dz
Ba t u Hija u
M IM H olding s
Ra d o m iro
To m ic
A nto fag asta plc
B ing h a m
Ca n yo n
S PC C
An d in a
0
-
2 00
40 0
6 00
80 0
1.00 0
C o pp er Pro d uction ( Cu Payable '000 to n nes)
Source:
Slide 8
1 .2 00
500
1.000
1.500
Coppe r P roduct ion ( Cu Pa ya ble '00 0 tonne s)
Brook Hunt & Associates, Estimated year 2003,
Escondida FY03 and Escondida Laguna Seca
Budget 2004
2.000
Sponsored By World’s Premier Metals & Mining Houses
BHP Billiton Limited
100%
BHP Escondida Inc
57.5%
Rio Tinto Plc
100%
Rio Tinto
Escondida Limited
30%
Mitsubishi Corporation 60%
Mitsubishi Materials Corp 20%
Nippon Mining & Metals Co Ltd 20%
Japan Escon dida
Corporation
10%
Owners Council
Minera Escondida Limitada
Slide 9
International Finance
Corporation
2.5%
Unequalled Copper Resource
Ore Head Grade s Against Copper in Concentrate Production
2.100
E scon dida w ith
Ca thod es
Copper in Concentrate ( Payable in Mlbs)
1.900
PT Freep ort
1.700
E sco nd id a
1.500
1.300
1.100
900
Ba tu Hijau
700
500
300
Bingh am Ca nyon
L os P elam b re s
Ca nde laria
And in a
Ok Tedi
High la nd Valley
Alu m brera Cua jone s
Co lla hua si
Los Bronces
100
0,00
0,50
1,00
1,50
Head G rade (% )
2,00
Source: Brook Hunt Data for estimated year 2003.
Escondida FY03.
Slide 10
Total Ore Reserves and Mineral Resources:
Official declaration at June 30, 2003, JORC Competent Person: Dr J M
Gilligan
Ore Reserves
Escondida
Escondida Norte
Mineral Resources
Ore
Tonnes
Grade
Metal
Tonnes
Grade
Metal
Type
(millions)
(%Cu)
(mlbs)
(millions)
(%Cu)
(mlbs)
Sulphide
1,514
1.21
34,293
2,121
1.12
52,550
LG Float
570
0.60
6,026
1,396
0.59
18,254
673
0.43
6,442
LG Leach
Mixed
51
1.04
478
111
0.82
2,013
Oxide
191
0.71
2,617
248
0.65
3,567
Sulphide
502
1.44
13,541
649
1.33
19,014
LG Float
95
0.61
998
642
0.58
8,190
43
0.81
761
Mixed
Oxide
Sub-Totals
TOTAL
Slide 11
105
0.77
1,478
142
0.79
2,476
2,680
1.10
54,859
5,481
0.86
104,449
Mixed
51
1.04
478
154
0.82
2,775
Oxide
296
0.73
4,094
390
0.70
6,043
59,431
6,025
All Sulphide
All Types
3,027
113,266
Copper Production & Head Grade
Material Milled, Headgrade and Copper Production
1,200
Tonnes milled (00 000)
Production (Cu Contained) (kt)
3.50%
Headgrade (%)
3.00%
1,000
2.50%
800
2.00%
600
1.50%
400
1.00%
200
0.50%
0.00%
0
FY91
Slide 12
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
YTD
Concentrate Grade Long Term:
Historic Annual Copper in Concentrate (All Production)
46%
Concentrate Grade (%Tcu)
44%
42%
40%
38%
36%
34%
32%
1992
1993
1994
1995
1996
1997
Fiscal Years
Slide 13
1998
1999
2000
2001
2002
2003
Escondida Schematic Deposit Evolution Profile:
Increasingly complex & variable geological conditions
⇐ ⇐ ⇐ ⇓ variability ⇓ ⇒ ⇒ ⇒
“1991-1997”
“1998-2010”
Cu - Fe Oxides
cc
cc+cv+cp+py
cp + py
py >> cp
Slide 14
“>2010”
Ore-Related Concentrate Grade & Quality Drivers
• Copper Mineralogy
– Chalcocite to chalcopyrite ratios decrease with depth
• Pyrite Content
– Increasing pyrite content over last several years
• Sulfide-Sulfide and Sulfide-Gangue Intergrowths
– Dependent on alteration, lithology, and degree of enrichment
• Trace Element Geochemistry
– Zonation of trace and minor elements within ore deposit
– Elements such as Ag, As, and Cd contained within copper sulfides,
with high recovery
Slide 15
Phase IV Expansion Components
• An additional mine fleet
– (1) 65 yd 3 shovel, (6) 380 st haul trucks, (1) drill
– Support equipment and maintenance shop expansion
• In-pit ore crusher and conveyor to Phase IV concentrator
– Relocation of existing crushers
• 110,000 tpd Concentrator
– 38-ft. SAG mill and (3) 25-ft. Ball mills
– Conventional flotation using large cells, regrind, column cells
• Concentrate handling
– Slurry pipeline to existing concentrator, then on to the port
– Added concentrate filtering and storage capacity
– Modifications to port facility
• Laguna Seca Tailings Facility
– Tailings disposal for life of mine – both mills
– Improved water reclaim to both mills
Slide 16
Phase IV: Laguna Seca Concentrator:
Detailed Site Layout
Slide 17
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 18
Escondida Organisational Structure
President (A)
MEL
Kevin O'Kane
VP
External & Corporate Affairs
Mauro Valdés
VP
Human Resources
Mark Stone
VP
Mine
Larry Hartley
VP
Finance
Alfredo Atucha
VP (A)
Process
Frank Cappelli
VP
Operations Services
Jorge Muñoz
Manager
Health & Safety
Hans Sandoval
Slide 19
Employment
Expatriates
Operators
Antofagasta
2
0
Coloso
0
70
Escondida
11
1.698
Santiago Total Mel
0
13
0
1.768
Technical & Admin.
Professional/Mgrs
21
49
0
17
100
475
0
10
121
551
Total
72
87
2.284
10
2.453
Permanent Contractors
2.135
Capital Projects
1.167
Total Contractors
3.302
•Avg workforce age – 40 years
•Avg length of service – 8 years
•Employee turnover – 0.38%
•Attendance rates – 96,6%+
•Female employees – 3.9%
•Expatriate employees – 0.53%
Note: As at 30 September 2003
Slide 20
Safety – Lost Time Frequency Rate (LTIFR)
5.00
4.54
4.50
3.77
4.00
3.43
LTIFR per mmh
3.50
2.81
3.00
2.50
2.00
1.50
2.00
1.65
1.50
1.00
1.00
0.50
0.00
1998
1999
2000
2001
Fiscal Years
Slide 21
2002
2003
2004 YTDA
2004
YTDB
Dimensions
Now
Final
E-W
2.2km
3.5km
465m
750m
N-S
Minera Escondida
Ltda.
3.2km
4.8km
Depth
Slide 22
Escondida Mine Pit
Escondida Mining Fleet FY-04
• Electric Rope Shovels – Total
- P&H 4100 XPB (73 yd Dipper)
- BE 495HR (67 yd Dipper)
- BE 495 (55 yd Dipper)
- BE 395 (30 yd Dipper)
14
3
1
9
1
• Haul Trucks - Total
- Komatsu 830E (240 mt)
- CAT 793 B&C (240 mt)
- CAT 797 (380 mt)
92
28
48
16
• Front End Loaders – Total
- CAT 994 (23 yd Bucket)
3
3
• Drills – Total
15
- BE 49R R2s (8), IR D MM2s (2), DM45 (2), C M780 (1) & P&H 250XPs (2)
• Auxiliary
Slide 23
Equipment – Total
52
Mine Production – ‘000s TPD Ex-Pit
1000
900
835
'000s Tonnes per Day
800
700
678
681
901
858
814
725
600
500
400
300
200
100
0
1998
1999
2000
2001
Fiscal Years
Slide 24
2002
Histor y
2003
2004
YTD
Los Colorados Concentrator
Slide 25
Laguna Seca Production – ‘000s TPD Milled
100
90
'000s Tonnes per Day
80
70
60
50
95
40
30
51.5
20
10
0
2002
2003
Fiscal Years
Slide 26
2004
Histor y
YTD
Concentrate Grade Ex-Coloso - % Cu Contained
45.0%
40.0%
Concentrate Grade % Cu
35.0%
30.0%
25.0%
20.0%
41.4%
39.8%
39.9%
39.8%
1999
2000
2001
35.6%
37.3%
2002
2003
15.0%
34.7%
10.0%
5.0%
0.0%
1998
Fiscal Years
Slide 27
Histor y
2004
YTD
Coloso Port – ‘000ts Concentrate Shipped
2500
'000s Tonnes Shipped
2000
1500
1000
2,073
2,145
2,105
1,813
2,056
1,682
1,853
500
0
1998
1999
2000
2001
Fiscal Years
Slide 28
2002
Histor y
2003
2004
YTD
Copper Production – ‘000ts Cu Contained in Concentrate
1000
900
'000s Tonnes of Cu Contained
800
700
600
500
400
860
838
845
726
300
755
611
641
200
100
0
1998
1999
2000
2001
Fiscal Years
Slide 29
2002
Histor y
2003
2004
YTD
Oxide Production – ‘000s Tonnes of Cathodes
160
140
'000s Tonnes
120
100
80
150.7
145.1
150.5
60
136.7
113
40
56.4
20
0
1998
1999
2000
2001
Fiscal Years
Slide 30
2002
Histor y
2003
2004
YTD
Copper Production – ‘000ts Cu Contained
1200
996
'000s Tonnes of Cu Contained
1000
860
894
56
800
151
892
871
145
766
137
754
113
151
600
400
860
838
845
726
611
755
641
200
0
1998
1999
2000
2001
Fiscal Years
Slide 31
2002
Concentr ate
2003
Cathodes
2004
Total
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 32
C1 Unit Costs in the 1st Quartile
125
100
75
Esc ondida
C1 Cash Operating Cost (US c/lb)
Estimated 2003 Brook Hunt, Copper Industry C1 Cost Curve
50
25
0
0
5000
10000
15000
20000
Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003,
Escondida FY03
Slide 33
25000
C2 Unit Costs
Estimated 2003 Brook Hunt, Copper Industry C2 Cost Curve
125
100
Es condida
C2 Production Cost (US c/lb)
150
75
50
25
0
0
5000
10000
15000
20000
Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003, Escondida FY03
Slide 34
25000
Only 3 Producers with a Lower C3 Unit Cost
Estimated 2003 Brook Hunt, Copper Industry C3 Cost Curve
150
125
100
Escondida
C3 Production Cost (US c/lb)
175
75
50
25
0
0
5000
10000
15000
Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003, Escondida FY03
Slide 35
20000
25000
STRATEGIC KEY ELEMENT NPV
Optimize Escondida’s Net Present Value
We will optimize NPV by:
– Taking a leadership role within the industry and adopting a flexible
production profile
– Continually focusing on cost reduction
– Leveraging Six Sigma and the Maintenance Improvent Programs
– Using tollgating to improve our Capital Productivity
– Capturing the synergies of both concentrators
– Leveraging leach technologies
– Taking a leadership position in the responsible management of the
use of fossil water; 10% reduction in water requirements
Slide 36
STRATEGIC KEY ELEMENT PEOPLE
Achieve Maximum Potential with Employees
We willl ensure Maximum Alignment Among Employees,
Organizational Structure & Performance Management Systems by:
– Attracting and retaining high quality employees
– Creating a high performance environment
– Focusing on the development of technical and people leaders
– Ensuring that learning and skills development are applied to everyone in
the organization
– Creating a work environment where we have positive, mature, and direct
working relationships
Slide 37
STRATEGIC KEY ELEMENT CUSTOMERS
To Be The Preferred Supplier of Copper in Concentrate & Cathodes
We will achieve our value proposition to customers through:
– Achieving appropriate geographical and market diversification
– Utilizing the BHP Billiton Base Metals Marketing structure
– Reducing the impact of variable concentrate grades
– Emphazising continuous and proactive interaction between the
Operational and Marketing areas
– Maintain status as a quality supplier through producing improved and
predictable levels of Grade A quality cathode
Slide 38
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 39
Sulphide Leach – Project Summary
60-100 Mtpa @ 0.6% TCu
• 1.6 billion t sulphide ore at 0.6%tcu
• Current stockpile 100mt
• Copper recovery by:
– ROM leaching
– Solvent extraction
– Electrowinning
• Expected recovery 36%
raffinate
Air
Solvent Extraction
180-245 ktpa cathode
Electrowinning
• Approx 50% of Cu is chalcopyrite
Crush & Leach + Sulphide/ROM Leach Operations
EW Copper Production
• Initial copper production 180 ktpa
• Increasing to 245 ktpa as ore supply
increases and oxide T/H capacity
becomes available
• Initial capital $ 870M (incl. water supply)
• Operating costs < $0.35/lb Cu
350
300
250
Sulph id e/ROM Leach
Crus h Leach
200
Crush Leach E W Cap acity
150
100
Fiscal Perio d
Slide 40
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
-
2005
50
2004
EW Copper Production - kt
EW Capacit y with ROM Le ach
Bioleaching Technology
• Sulphide leaching requires ferric iron as oxidant
• Conversion of ferrous iron to ferric is catalyzed by bacteria
– Without bacteria, leaching is slow due to lack of ferric iron
• Main bacteria are mesophiles such as thiobacillus ferrooxidans
• Mesophiles occur naturally in ore and thrive in acidic conditions at
temperatures from 20-40C
• Bacteria require oxygen as does the oxidation reactions
– Forced aeration is key for high bacterial activity and fast leaching
• The process is simple and robust
Slide 41
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 42
Diverse Customer Base
COPPER CONCENTRATE SALES BY DESTINATION - 2003
Germ any
8.0%
South Korea
8.9%
Merchants China
7.3%
6.1% India
4.1%
Sw eden
3.4%
Other
14.3%
Chile
22.1%
Brazil
3.3%
Philippines
3.0%
Spain
2.8%
Bulgaria
2.7%
South Africa
1.6%
Iran
0.4%
Japan
25.8%
Slide 43
Finland
0.4%
Diverse Customer Base
CATHODE SALES BY DESTINATION - 2003
Chile
4.2%
Canada
3.6%
Spain UK
3.0% 2.0%
Italy
5.9%
Turkey
0.8%
Intermediaries / BMAG
21.9%
Brazil
6.7%
Germany
12.5%
Japan
8.2%
Taiwan
8.5% South Korea
10.8%
Slide 44
France
11.8%
Presentation Content
• Escondida Overview
• Operations
• Financial Overview
• Business Strategy
• Growth Opportunities
• Marketing
• Current Activities
Slide 45
Water Issue
What caused the water problem between Novembre 2003 and
January 2004:
•Deteriorated water-pulp separation from tailings
•Inability to increase fresh water supply to Laguna Seca
Concentrator to compensate reduced reclaim water return
•Hydraulic restrictions in the tailings transport system did not allow
all tailings to report to the impoundment
Slide 46
Water Issue - How MEL is solving the water problem
1. Secured fresh water to the Laguna Seca Concentrator through an additional
water line
2. Implemented an aggressive maintenance program to restore wells in various
well fields
3. Identified mineral ore types that cause water-pulp separation problems,
allowing the mine to better blend plant feed
4. Identified a flocculant that allows the production of higher underflow density
at lower yield stress and viscosity
5. Will construct a protective wall around the pump barges in the tailings
impoundment
6. Will embark on an engineering program to eliminate hydraulic problems in
the tailings transport system
7. Drilled new wells, allowing MEL to pump up to legal and environmental limits
8. Established a water strategy that will secure future water supply to the
operation
Slide 47
Action Plans – HSEC
• Simplification and streamlining proposal of the HSEC systems under
the BHP Billiton Standards
• Employ the Landmark process to engage the workforce and ensure
their commitment to a zero harm workplace
• Implemention of Cardinal Rules Program
• Development of Drug/Alcohol Policy
• Alignment of HSEC & RDO
• Encourage employee participation in Company sponsored
assistance projects for the community to instill a sense of social
responsibility in Escondida’s employees,
• Adoption of DuPont Job Observation methodology
Slide 48
Action Plans – NPV
• Los Colorados Mill improvement program
• Mine to mill improvement project
• Light dump bodies project
• Develop long term water sourcing plan
• Inventory reduction program
• Flexible production plans
• Develop a program for coordinating plants, crushers, shovels,
pipelines, filters shutdowns
• Development of an integrated production system
Slide 49
Action Plans – PEOPLE
• Implementation of an employee climate survey
• Continuous development of a team based work structure
• To build an integrated Performance Management system which
links competency development, individual performance on the job
and remuneration
• To perform the second teams check-up (HISI)
Slide 50
Action Plans – CUSTOMERS
• Eliminate backlog of concentrate deliveries arising from Apollo cuts
• Complete Sales Book restructuring
– Reduced sales to Merchants
– Increase sales to emerging smelter markets, eg., India and
China
– Initiate spot sales
• Continue to push transition to global market terms for concentrates
• Close cooperation with Escondida Operations to address concentrate
grade reduction and variability issues
Slide 51
Head Grade - % Contained Copper
3.0%
Head Grade % Cu
2.5%
2.0%
1.5%
2.75%
2.22%
1.0%
1.95%
1.89%
1.69%
1.54%
1.37%
0.5%
0.0%
1998
1999
2000
2001
Fiscal Years
Slide 52
2002
History
2003
2004
YT D
Oxide Flowsheet
PRIMARY
CRUSHER
ORE
STOCKPILE
RAFFINATE
CRUSHING &
SCREENING
CONVEYING SYSTEM
PLS
LEACH PAD
EXTRACTION
AGLOMERATION
ORGÁNIC
SOLVENT
EXTRACTION
SULFÚRIC ACID
ORGÁNIC
RECOVERY
WASHING
WATER
COPPER CATHODES
150.000 TPA
STRIPPING
RICH ELECTROLYTE
LEAN ELECTROLYTE
Slide 53
ELECTRO-WINNING