Antofagasta plc (ANTO) Earnings Call Transcript & Summary

Good afternoon, good morning. I'm Andrew Lindsay, Head of Antofagasta London office. Here is the agenda for our Capital Markets Day. We'll start with 2 hours of presentations, followed by Q&A. Our CEO, Ivan Arriagada, will give you an overview of the company and how we operate. and he'll be followed by presentations by our senior management team and our operations, project development, exploration, sustainability, finance and innovation. We'll also show you an interview about the economic and political situation in Chile today. After the formal presentation, we will then have a Q&A session during which you'll be able to ask senior management questions. [Operator Instructions] The event will end at 5:00 U.K. time. Please now look at our cautionary statement, which you can also read at your leisure as part of the presentation slide pack, which is available on our website. A recording of the full webcast will be added to our website shortly after the end of the event. Welcome to our Capital Markets Day, our first for many years. I hope you find it interesting.

Thank you, Andrew, and welcome, everyone, joining us today. We're delighted to have you with us. Antofagasta is a pure-play copper producer with high-quality assets in Chile, supported by a team that delivers reliably and responsibly through the cycle. Over the next 2 hours, you will hear from our team as we discuss how we mine. And what we're doing to progress the future of mining in a way that is sustainable and delivers value for all our stakeholders. You will also hear about the embedded growth options we have in our business portfolio and the levers we have to unlock that growth for many years to come. We are very excited about copper. It is an essential commodity for our daily lives and place an enteral role in our future given its use in decarbonization and economic progress, especially in emerging economies as they transition to more advanced development phases. It also helps to improve the quality of life for those parts of the world population, which have yet to catch up with developed nations. The trend to a lower carbon economy is expected to boost copper demand via the electrification of energy supply, which already accounts for close to 30% of total copper use as clean energy becomes the dominant source of global power generation over coming decades. Copper used by the transport sector will grow even faster as electric vehicles, which only account for approximately 10% of the total transport market today becomes part of everyday life. As you know, it is used 4x as much copper as internal combustion engine vehicles. On the back of these trends, total copper consumption, which includes primary production from copper mines, as well as recycled scrap is expected to grow by an average of approximately 2.3% per year over the next decade from 23 million tonnes in 2020 to 30 million tonnes in 2030. But notably, a significant share of growth in consumption is estimated to come from regions around the world other than China. The supply story is one of structural constraints as mines age and grades decline. And as permitting new projects becomes more onerous in every region in the world. It currently takes on average about 15 years from discovery to production, which means any significant supply side response to higher prices is not going to be immediate. Supply will grow, however, with increasing scrap usage and as mines like Antofagasta deploy improved technology and innovation to unlock embedded tonnes, and you will hear more about this later. Antofagasta decision to seize the growth in demand. We have the embedded tonnes across our business, the ability to unlock them, and we are a responsible and reliable producer. Above all, we are a company that you can trust to deliver strong shareholder returns through the cycle while delivering value to all stakeholders, including local and national communities, while managing any environmental impact in a responsible way. Before we dive into the details and take a tour of our business. I'd like to spend a moment to revisiting our purpose, developing mining for a better future. This is what drives us and motivates us all at Antofagasta. Everyone at Antofagasta believes that what we do will enable a better world for providing the raw materials for a greener, lower carbon economy and to contribute financially and socially to our host communities where we mine to improve lives and lives. We're making real progress to reduce our impact on the environment and expect 90% of the work we used to either be from the sea or circulated water by 2025, and we're also moving to 100% renewable power. We have resources and technology to grow to ensure we're a sustainable partner and other people and talents who are among the best in the world to deliver reliably and responsibly. Our purpose is underpinned by 5 strategic pillars of people, safety and sustainability, competitiveness, growth and innovation, and you will hear more on each of them in the presentations that follow. Reliability to any company is a vital element of trust. We take the responsibility to be a reliable producer very seriously. And as our shareholders, our communities, our employees, our suppliers and our civil society the mandate. We operate in a way that allows us to deliver on our commitments year-over-year in terms of production, returns and our commitment to the environment and our communities. We are proud of our track record of delivering on what we say we will do. And in terms of costs, we have outperformed guidance consistently. Not only are we a reliable producer, but we have a reliable growth profile that will allow us to produce sustainably into the future. We have a variety of exploration and late-stage projects, which are in different phases of evaluation and will generate organic growth for the company. Excitingly, we have a huge mineral resource base of over 18 billion tonnes, of which some 7 billion tonnes are in the Centinela Mining District and 6 billion tonnes are at Los Pelambres, giving us the options to develop our inventory over a time when copper supply is becoming increasingly constrained. We also have some exciting greenfield exploration projects in Chile. We believe we have very strong organic growth potential. And alongside this, we will continue to remain alert to attractive external opportunities if they present themselves. This map highlights the key prospective geological regions in the Americas for copper, where our exploration team is working. On the map of Chile, you can see our huge mineral resource base that I was mentioning. We are confident that we have a portfolio of growth projects that allows us to remain competitive and develop sustainable operations in the long term. On this slide, we show a 5-year production trend projection, which highlights the growth we have embedded in the business. This is not intended to be a precise forecast, but to show directionally where potential production could come from in the next 5-year period, provided the underlying assumptions and conditions of it. You will hear more from the team today about these projects and how we will unlock the growth to create further value. We think this is an exciting time for Antofagasta. Next year, we expect to start commissioning new processing capacity at Los Pelambres and also to add new copper supply from all mines from the Esperanza Sur pit at Centinela and from chloride leach project at Zaldívar. Regarding the potential supply from the second concentrator at Centinela. It is at a very advanced study and engineering stage but has not yet been approved. If it is, we will have additional cotton, which could potentially take us to approximately 900,000 tonnes of production by the year 2026. However, this is not a target since we will only focus on value-creating production. It is no accident that our financial strength and balance sheet is in great shape to deliver this growth. And our CFO, Mauricio Ortiz, will outline our strategy of allocating capital to maximize return. He will also describe how we allocate capital to mitigate our risks to climate change and how we're now incorporating carbon pricing into our evaluations. Alongside exploration and our growth projects, we also have an amazing team that constantly innovates and it's transforming the way in which we operate, allowing us to unlock value throughout the business. We have developed a patented primary supply leach technology called CuproChlor, which if it is successful, could allow us to bring forward the processing of otherwise scheduled to be mined in many more years, or will allow ore that was previously considered to be an economic to be profitably processed. On top of that, we have been introducing innovative changes that are changing the way in which we operate, such as introducing autonomous trucks at Centinela, establishing a remote operating center, so our employees can work smarter and maintain a good quality of life and setting up a digital academy to upscale all the talent and ideas across our business. This is a key part of Antofagasta's strategy. Before I turn over to the team, I would like to say how pleased we are to have Andrés  Velasco with us today. Professor Velasco is a former Finance Minister of Chile and is now the Dean of the School of Public Policy at the London School of Economics. He will be talking to us about the current economic and political situation in Chile, an interesting time as the political stands are shifting and mining is inevitably being caught up in this. But Antofagasta is in great shape to stand up to change and challenge. Our purpose is to develop mining for a better future by responsibly and sustainably producing a critical metal that plays a significant role in supporting local and global economic and social development, as well as the global transition to a low-carbon economy. We will continue to create value for all our stakeholders. I will now hand over to Hernán Menares, our Vice President of Operations, who will show you how we do that. Over to you, Hernán.

Hello. My name is Hernán Menares, I am the Vice President of Operations. I'm going to say a few words on our strategy and model for our operation and how we execute them to ensure Antofagasta remains a reliable and responsive producers. You will also see how we are able to unlock growth and therefore, value in our operations. But first, I would like to remind those of you who are less familiar with our company or our assets. In Chile, we have 4 mining operations, 3 are in the north, in the Atacama Desert, and the fourth, Los Pelambres, in Central Chile in agriculture region. Our mines primarily produce copper in the form of concentrate and cathodes, as well as molybdenum and gold as by-products. Los Pelambres is our largest operation and Centinela, our second largest, and between them they produce over 80% of our copper. And as you hear from Ivan, we have 18 billion tonnes of mineral resources across our portfolio with 7 billion in Centinela mining district and 6 billion in Los Pelambres. These resources make up a robust foundation to ensure our future growth in production for many years to come. In addition to our copper operations, we also have a transport division, Ferrocarril de Antofagasta a Bolivia, FCAB, which is based in the city of Antofagasta, FCAB provides rail and truck services to mining in the region, including to some of our own operations, and we'll be showing you a short video so you can learn about what is that and what this future looks like. The set our people, contractors and communities remains our #1 priority. Our operations have highest standard for safety, we were able to sustain throughout the COVID-19 pandemic and the associate restriction, enabling us to meet our annual production and cost target in 2020, while continue to improve our safety record. You can see that since 2018, we have a high potential incidents as a leading indicator to our progress on improving safety, and this has steadily improved over this period, much despite this effort after 33 months of the infidelity free, there was a fatal accident at Los Pelambres in this year. A full meterage was completed, following which all the identified earnings were implemented at all our sites. Our current focus in term of safety is to reinforce the key principles of our safety policy as there on this slide. Concentrating on our commitment to achieve 0 fatalities at our operations and continue to reduce the number of high potential incidences, which ultimately will drive last time in season down further. Antofagasta's operation strategy consistent with the company's overall strategy framework seek to position each of our mining operations to achieve excellent and safety environmental production and production efficiency across our value chain, insured asset utilization is maximized, and the operation has a competitive position on the cost curve. We execute our study in 3 key stages. Firstly, to achieve and sustain stable operating conditions at nameplate capacity. Secondly, to seek further optimization through continuous improvement, we now include using that analytics. And lastly, is to capitalize on the success of the first two stages to create a platform for profitable growth, which will further unlock value from our operations. This will not be possible without the people behind our operations and the different skills they bring to the table. Our culture is based on our specific way of doing things and management risk, using share values and our code of ethic to guide us. The key to success is the quality of the people, and we have the best in the industry. Without our culture of continued improvement through our operating model to realize the full potential of our operations, while applying the lean management philosophy. We do this by seeking to reduce process variability and capture latent capacities. And this means we define this team members role and responsibility, so we can reach full potential across our assets and ensure sustainable production. We also believe in the power of innovation to increase our ability to constantly improve, and you'll be hearing more on this later from Alan Muchnik. Let's now look at how we have successfully embedded our operating model across the group. Our main milestones have been create in roles with clearly defining engines, establishing an operational excellent standard so that our teams have a means to look in the value of improvements. Developing a portfolio of new initiatives with identified ways of reducing variability and applying the lean management model. Here, you can see examples that illustrate the success of our model. The first is the Towns of ore stacked on the heap at Antucoya. Where you can see, has improved by 7% over the past 3 years. The other is the effective utilization rate of trucks at Los Pelambres, which has improved by 3 percentage points in 2018. All these improvements are critical and collectively, they keep our cost down and protect our margins. We see this continuous improvement of the release of embedded growth in our operation that we have the levers to unlock. Our commitment to social value remains at the core of our business, and we seek to embed our strong ESG values across the business, including to our day-to-day operations. This approach defines the way we develop and how we manage our risk and also impact how we contribute to the economic and social growth of our neighboring communities, while adhering lower challenge such as climate change. Our constructive and collaborative relationship with our communities invited for our ability to create share value. These relationships are based on the principles of our dialogues, collaboration, traceability, excellence and transparency. We seek to grow together with the communities as well as to conduit to their own trans-social and economic development. At the same time, we take care to prevent, mitigate and compensate for any adverse impact of our activities may cause. Responsibility for social and community management lies with the general manager of each operation. Looking more grossly, the environmental objectives at our operation -- exploration activities and projects will have a sustainability policy and environmental management model. Now the guy as and ensures we meet our objectives. Our objectives are detailed on the slide, and Rene Aguilar will go into more detail later. But from an operational standpoint, we are focused on ensuring compliance with environmental permits and legal requirements and implementing all critical environmental controls, ensuring operational events, designed operational and continuity and development projects from a social environmental perspective, responsibility for environmental matters lies with the general managers of issue mining operation under environmental teams. Together, they are responsible for monitoring and reporting operational events, environmental risk and what is required to adhere to the environmental management model. At each mine, we had clear emissions reduction plans and targets. At Pelambres, we also have water consumption targets. This emissions targets are KPIs for our teams are an integral part of the annual performance bonuses of management and staff. In every aspect of what we do across all our operations, we seek to unlock the better growth in our business through our operating model, while remaining a reliable and responsible producer. [Presentation]

Hello. My name is Paula Aguirre, and I am the deputy leader of our project development team here at Antofagasta. Our team is made up of 200 people working across the project time line from scoping all the way through to construction before we hand over to the operations team. Within our team, we have a core group of professionals, who manage the projects and the engineering contractors appointed to build them. As the project progress, we make sure to rotate members of the team to ensure the transfer of key skills. So that we can build a body of its knowledge across our entire project portfolio. We are currently working on a number of projects. Three of which are in the construction phase for a feasibility study stage and several others in earlier stages of development, and I'll go into this in a bit more detail shortly. First, I'd like to explain our approach to project development at Antofagasta, which is designed to ensure to maintain a balanced portfolio with execution strategies tailored to the specifics of each project. This approach includes a number of different review stages to ensure we properly evaluate the quality and return of each project throughout the process and also identify if any changes of approach or updates are needed. And you can see this stage set out here on this slide. A good example of our approach is Centinela's second concentrator project. So let's look at that now. Independent experts have carried out a series of produce since the early stages of the project to ensure is progressing successfully. These reviews have also identified updates for design optimization resulting from new innovation, which improved the business case of the project. For example, the automation currently being implemented at Centinela, which includes the introduction of autonomous trucks, and the use of a new remote operating center currently being built in Antofagasta. The Centinela second concentrator project is currently in the detailed engineering stage. And the reviews at this state help us as a team reduce the project's overall rig exposure by completing up to 65% of the detailed engineering plan. This increases the accuracy of the capital estimate by defining the construction and equipment cost and include the process of obtaining the key permits. At the end of this stage, the business case assessment and risk profile will be updated, and the project will be presented to the Board to make a decision on the base. As you can see here, we have a pipeline of organic growth projects over the next 4 years and beyond, including those currently under construction as well as those we expect to bring on stream over the coming years. Once completed, the projects currently under construction will contribute 80,000 to 90,000 tonnes to our group production. And if the second concentrator project at Centinela is approved, group production has the potential to grow to approximately 900,000 tonnes. One of the most important aspect to managing the development of project is being resilient and flexible announced to react to unexpected external events, like COVID-19. The pandemic put pressure on how we manage our teams, and we had to change the chief patterns and introduce social distant measures to keep people safe and healthy, while still advancing the project. And the recovery has now put pressure on the liability of our supply chain, but we have adapted and have been able to continue constructing and we will continue to adapt as necessary. Our current plans assume probably restriction will continue for the foreseeable future, but as managed health risk due to high vaccination levels in Chile. The Los Pelambres expansion project has 2 components to it: the expansion of the concentrator and the construction of a desalination plant. These are under separate contracts, and we expect the desalination plant to be commissioned in the second half of 2022 and the concentrate on plant by the year-end 2022. The overall project is 65% complete, with the total cost estimate of $1.7 billion being under final review, given the challenges experienced during this year of higher absent, decent and worker rotation as well as higher logistics costs. At Esperanza Sur, the mining contractor will complete the prestripping in early 2022, and then the operation teams will take over and mobilize the autonomous trucks. At Zaldívar, the chloride leach project is well advanced and is expected to be completed in Q1 2022, when it will start ramping up the rate of copper recoveries as the new leaching process is applied. Our largest project is the second concentrator at Centinela, which I have already referred to, a Board decision on the project is expected during the second half of next year. And if approved, construction will start in 2023, with first production expected about 2.5 to 3 years late. The project includes a High Pressure Grinding Roll for advanced crushing. We use significantly less energy and is lower cost than a traditional grinding mill. It will also need a separate water system to bring rose water from the coast, a concentrator shifted plus the associated infrastructure. The current capital estimate is approximately of $2.7 billion. We have a lot of exciting growth projects in development and in the pipeline, and with our rigorous approach to evaluation, we can deliver successful projects to our operations team reliably and responsibly. Moving further upstream to discuss more growth opportunity for Antofagasta, I would like to hand over to Andrónico Luksic, the Vice President of Development. Andrónico, over to you.

Hello. I'm Andrónico Luksic Antofagasta's Vice President of Development and I'm responsible for the company's exploration strategy. As you have heard from Ivan, we have a strong embedded growth profile with a huge mineral resource base of over 18 billion tonnes. And today, I'm going to talk to you about how our exploration strategy is helping unlock much of that for the company, ensuring the sustainable and long-term growth of Antofagasta. In the 1980s and 1990s, exploration became an increasingly important part of the company's activities and expansion with greenfields exploration extending beyond Chile and into the neighboring countries such as Peru, Argentina and Bolivia. We also explored in Spain at this time. It was during this period that we acquired Los Pelambres, which then was just a small underground operation and the company started to focus wholly on mining. In the following years, we broadened our exploration activities at one stage conducting exploration in 5 continents, as you can see on the slide, in order to continue discovering resources to add to the group's overall research base. . Since 2015, we have tightened our focus to a few careful selected countries in the Americas, including Peru, the U.S., Canada and in particularly Chile. Our exploration strategy is centered on building a portfolio of quite high-quality, long-term copper projects. So we focus on those targets that we believe can deliver at least a minimum of 50,000 tonnes of copper over a mine life of more than 10 years and preferably with byproducts. We concentrate on those growth opportunities in stable and secure countries to reduce our risk exposure. As I just mentioned, the main prospective belts that satisfy this target criteria for us at the moment are in Chile, Peru, the U.S. and Canada, as you can see on the map here. As we explore, our aim is to find those areas that can at least replace the mineral resources that are mined at our operations. We achieved this not just through focused exploration, but through acquisition as well, usually at the asset level, and we are currently looking for M&A opportunities and early-stage copper projects to work on, particularly in South America. Our strategic preference remains, however, to grow through discovery and land or research consolidation. We have had some considerable success with this over the years in Chile with 2 projects we're currently working on. And we will be ready to speak about this in the near future as we continue to consolidate the results from these targets. Importantly, our strategic approach varies depending on the country and the requirements, landscape and infrastructure there. In Chile, our focus is on our predominantly brownfield exploration in the copper belt of the northern central part of the country, particularly, in areas with high prospectivity for porphyry copper as well as Manto and iron ore copper gold type deposits. During 2020, the early-stage programs we have in Chile completed more than 40,000 meters of drilling, which was less than a year before. but this was due to the COVID-19 restrictions in place. Searching for satellite deposits near our existing operations is also a key part of our exploration program. And this approach has worked particularly well near our Centinela operation in the Centinela Mining District. And I'll now go into that case study in more detail shortly. In Peru, the U.S. and Canada, we concentrate on greenfield expirations. We have exploration offices in Santiago and also in Toronto and Lima, and each office manages the exploration programs in the respective areas. In Chile and Peru, we lead our own exploration efforts, but elsewhere, we prefer to enter into joint ventures with partners who hold interesting land positions and are able to bring local knowledge and experience. Exploration strategy has translated into success for us, as you can see here on this slide. Thanks to our successful research development, most of which was the result of our exploration efforts. We have maintained the second highest rate of copper research growth out of the major global copper producers, including in this since 2003, with an annual rate of 9.5% per annum. This success has also translated into tangible growth for Antofagasta as a business. Over this time, the group's total mineral resource have grown from 23 million to 87 million tonnes of copper. And as this slide illustrates, this gain has come primarily from organic growth. I'd like now to focus on our Centinela Mining District, which we believe accurately captures the success of our exploration strategy over time. We built the district over several decades into a multi-deposit mining district, containing nearly 7 billion tonnes of mineral resources. Production started at El Tesoro in 2001. And this production grew with the opening of Esperanza in 2011, followed by the opening of the Encuentro Oxide pit a few years later. Early next year, we will complete the pre-stripping of Esperanza Sur pit, growing this district even further. During this time, we were able to discover and then maintain high levels of copper resources to add to our portfolio. In 2020, we have 24 million tonnes of contained copper and 22 million ounces of gold. In the last year, our focuses have continued to be on identifying new high-quality oxide leach targets in the Centinela district. And due to COVID-19 restrictions in place at our various exploration sites, we concentrated on carrying out more desktop evaluations than in the years before. So that we could generate new land acquisition opportunities to pursue as restrictions eased. These were done either by submitting exploration license applications or by entering into agreements with third parties. In order to maintain our success and efforts in exploration, we have remained committed to reliable expenditure levels, even in low price cycles. The majority of expenditure is concentrated on our exploration work in Chile, with a smaller portion dedicated to exploration in other countries. Exploration expenditure has been similar since 2018, only decreased due to COVID restrictions in 2020, as our activities reduced. Exploration is a long-term activity for us that has played a very important role in Antofagasta's evolution. It has enabled us to grow into the company we are today, and maintain the second highest rate of copper resource growth out of the major global copper producers. And it will be a major component of the company's future as we seek to unlock the wealth of embedded growth we have in our portfolio. I'm incredibly lucky to be supported by the very experienced geology and exploration teams with deep knowledge of our prospecting regions and the ability to break exploration paradigms and to discover new reserves. We will continue to focus on highly prospective regions in the Americas, both through our own efforts and through joint ventures and opportunistic M&A that fit into our strategy and current targets. As I mentioned, we are working on some exciting projects, which we will tell you more about in the coming future. Until then, thank you very much for your time, and I will now hand over to Rene Aguilar and Alejandra Vial to talk to you about the sustainability strategy and how it's embedded in everything we do.

Hello. I am Rene Aguilar, and I am Antofagasta's Vice President of Corporate Affairs and Sustainability. Together with my colleague, Alejandra Vial, we're going to take you through a presentation that focuses on our sustainability approach. As you now have in listened to some of my colleagues already today, our business strategy at Antofagasta is structured around 5 pillars, that focus our purpose around developing mining for a better future. Sustainability is a core theme across our strategy, though in the frame of the 5 pillars, it is particularly important in regard to 2 of them. First, people; and second, safety and sustainability, which itself is a source of value creation and our culture at Antofagasta. So at this point, it's a good idea to take a deeper look at how we consider sustainability at Antofagasta. Our approach is defined around being a reliable and responsible producer. This approach is critical to us and indeed every business decision that we make. And it's set within the context of our full commitment to mitigate the timing change and indeed, for our comprehensive social agenda as well, which, in our view, means that the communities in which we are part will benefit from our activities. So to the detail, for us, there are 5 key focus areas: people, our economic performance, our approach to environmental management, social development and an unlevered commitment to transparency. Let's take a look at each of these in turn. When it comes to people, safety is a priority across our business and for all our people for both our employees and contractors. And indeed, you have heard much about our leadership in this area earlier from Hernán. For us, the well-being and development of our employees and contractors are crucial to our value proposition. As mining becomes an even more sophisticated and technical industry, skill levels are increasing, too, and this presents new opportunities and at times, challenges that we seek to mitigate to ensure the safety of our workforce. We recognize the importance of diversity and opportunity. And so we are continually focused on fostering environments that facilitate collaboration on both the professional and personal development of our workers as individuals and also collectively as teams. During 2020, we made good progress on improving diversity in our workforce, with 50% of all new employees being women. So far this year, we are on track to achieve our goal, which is to double the number of women by 2022 to 17% from 2018. Across our workers, we provide ongoing skills training and also build competencies in new engineering and technological developments as mining evolves for the future. We do this at all levels, though, in my mind, one initiative that stood out for me this year is the introduction of a apprentice level program that will encourage students to consider and prepare for apprentice level opportunities. It's true that pandemic has also allowed us to think in new ways and indeed, that elements of mining in the future will be done from urban centers like our remote operating center in Antofagasta as well as using different shift systems, providing a balance of working from home and site. We are also working to maximize the number of employees recruited locally and that also includes a greater use of local suppliers. Our workforce is predominantly Chile nationals, but looking at our regions. In 2020, the Mining division employed 40% of its workforce from the Antofagasta and Coquimbo regions, where our mining companies are located. In the Transport division, that percentage was higher in 2020 at close to 90%. Our second pillar in our sustainability policy relates to economic performance about which several other presenters are speaking about today. So, suffice it to say that whenever we are talking about sustainability, economic factors are a key consideration. Moving to the third focus area, environmental management, an integral part of the way we do business. We view this in a 3-state approach. First and foremost, prevent; second, when this has not been possible control and of course, third, mitigate. We are constantly working to prevent, control and mitigate our potential impact and always seek to use natural resources efficiently. At this point, I want to hand over to Alejandra Vial, our Environmental Manager so that she can tell you more about we are doing at this level. Alejandra, please.

Thanks, Rene. Let's get straight into the detail. At an operating level, I'd like to consider our approach to environmental management as one of a constant improvement. Our environmental managed model is based on leadership, reportability and risk management. It starts with committed leadership, individual programs that we monitor, manage and report on, which in turn, inform us and allow us to make better decisions, manage our risk and enhance our programs. But it starts, as always, with leadership. Our Board approved a Climate Change Strategy, the aim of which is to address the challenges of climate change with a multidisciplinary approach. We are strengthening the group's capacity to mitigate and adapt to climate change. And to achieve this, we have defined a strategy that includes 5 main areas. The first is development of Climate Change Resilience. We start with climate scenario modeling, gathering and generating the data and information for the evaluation of risk, opportunity and reported under national and international standards. And we use this modeling to adapt and involve our critical infrastructure and processes based on the physical, acute and chronic risk that we have identified. The second and the third are emissions reduction and the efficient use of resources. We are managing our greenhouse gas emission, converting our mine operations to use only renewable power. And I'll go into more detail on this shortly. The fourth is management of the environment and biodiversity. And finally, we recognize that we cannot work alone. We collaborate with other stakeholders to identify adaptation opportunities but while also contributing to and working with others to assess the anticipated impact of climate change and transition plans. Water is a strategic resources we operate as efficiently as possible, minimizing waste and optimizing productivity. Water uses is a particular importance in Chile, and it has always been a priority for us and is becoming increasingly so with climate change. So now we are going to show you a detail about our water management strategy and our effort to increase our water use efficiency. [Presentation]

In 2018, we set a goal of reducing our GHG emissions by 300,000 tonnes of CO2 equivalent by 2022. By the end of 2020, we had achieved the goal with emission reduces by over 580,000 tonnes. So early this year, we create a new target to reduce our Scope 1 and 2 emissions by a further 30% or 730,000 tonnes by 2025. And also in the long term, we have committed to being carbon neutral by 2050 at the latest in line with Chile's own targets. Regarding Scope 3, we will continue to measure and report it, and we are working, setting a reduction target. We are managing the environment and biodiversity near our operations, not only to reduce our impact, but in some areas to enhance it by managing a special nature sanctuaries. Actions speak louder than words. And so I want to show you and this is like 4 example of biodiversity programs that we have established it. At Santa Inés, we are protecting a relict forest of olivillo, which survives due to specific climatic conditions in this semi-desert area. At Monte Aranda, there are Chilean palms, a threatened endemic species. And Lake Conchalí is a coastal wetland with a high diversity of bird species, and is the first private RAMSAR site in the country. And in Quebrada Llau-Llau, there is a sclerophyllous forest, which has a rich biodiversity. Let me now pass you back to Rene.

Thank you, Alejandra, for a detailed look at our sustainability work. Let me take the baton back now as I want to spend the remainder of this presentation on social value and our transparency and governance framework. The social value model that we have developed to generate economic, social and human capital in our direct areas of influence. We initiate effective participatory and transparent dialogue processes with our different stakeholders in the regions where we operate, seeking opportunities to jointly address any issues and generate a shared vision of development. At the center of our strategy is our belief that social investment is meaningful and that we engage with the stakeholders transparently and collaboratively, not just our employees and local communities, but with our suppliers, government and its agencies, too. Earlier, Alejandra mentioned that initiatives that we are involved with and how we align ourselves at the regional and national level. . On this slide, there are many examples of such organizations from our social management perspective, where we are successfully engaging with our communities and other stakeholders seeking positive outcomes for all. We also make investments in communities across a range of projects, covering, for example, education, culture, infrastructure, economic development and health. In 2020, we invested $46 million in social projects. Measuring the impact of our social investment is vital as it's being cognizant of changes in the community's perception over time. We measure this impact to evaluate the contribution to people's well-being and if necessary, we adjust our programs and projects. And finally, before we finish our presentation, I want to touch on our commitment to transparency in what we do here at Antofagasta. We believe in the importance of developing effective, responsible and transparent institutions, and we have guidelines and internal regulations to ensure we conduct our business in a responsible manner and be head in honest, transparent and respectful way with full regard to human rights and to all locks and regulations. We are proud of the external accreditations that we have received, and they are important to us to show that our work is making a difference. This includes the Copper Mark, which both Centinela and Zaldívar have achieved and Los Pelambres and Antucoya have begun the accreditation process. We are aligned with the ICMM principles and UN Sustainable Development Goals, and are reporting against the TCFD recommendations. So we have covered a lot of ground today on our sustainability work and ambitions, providing a fuller appreciation of the extraordinary lengths that we go to a Antofagasta on sustainability and social management issues to ensure we remain reliable and responsible producers at all our operations. Now I invite you to watch a video of our Transport division, where Katharina is going to tell us about its history, challenges and how the railway plays an important role for the mining industry. [Presentation]

Hello. I'm joined here London by Andrés Velasco, a former Minister of Finance and Chile from 2006 to 2010. During his tenure, he was recognized as Latin America Finance Minister of the Year by several international publications. Andrés  is an aclimist. He was a professor NYU, Harvard and Colombia. He's currently Dean at the school of Public Policy at the London School of Economics. So welcome, Dr. Velasco.

Thank you. Pleasure.

So I'm going to start with a big picture question about the political situation in Chile. We've just had the results of the congressional elections, which were held recently, and our presidential elections were held on the same day. And the outcome of that is we've now got 2 candidates and it's a very close race between the far left candidate, Gabriel Boric and the far right candidate Jose Antonio Kast. So what's your take on the political situation?

Chile used to be the country in Latin America with boring politics. We were the outlier in the continent no more. Chile today is having rather rocky politics some of the changes for the better. Some of the change may not be for the better. I think that remains to be seen. But clearly, the situation is evolving very, very quickly. and politics in Chile in the next 5 years will not be like policies in Chile in the past. What's changed? First of all, the political parties, political leaders and the political arrangements at governance for the last 25 or 30 years. Through what I think was a period of prosperity and progress, those people, those parties today are not in fashion to put it mildly. We look at poles police parties, Congress, the government, the core system, business leaders, union leaders, nobody has 10% approval in the post. Second thing that happened is that Chile, which has been a fairly peaceful country, had an explosion of both street unrest and political violence in the last quarter of 2019. And that violence is sort of ended as a result of the pandemic, but it revealed the country that was by fractured where a lot of people were not happy. And we're a minority, but a very active minority was willing to engage in political violence, to attain political change. And that's new. Of course, Chile had a very bloody and nasty dictatorship under General Pinochet in the '70s and '80s. But since the '90s, Chile has been a country where politics has done the peaceful way, not necessarily the violent way. Fortunately, that Street unrest was channel politically into a process of writing a new constitution and a great deal of the sort of change and frustration of that period has been usefully in channel in that respect and the constitution is being written as we speak. I think it's good news in the sense that when you have political institutions, which have lost a great deal of legitimacy, it is not a bad idea to rewrite the script and start again. But of course, it remains to be seen what our institution will bring.

So given it remains to be seen, can you -- and your experience in the political situation, can you give a sense from your judgment about what we might expect to see in the constitution?

I think it is easy to be misled by a lot of the noise and a lot of the symbolism around the first 2 or 3 months of the convention. Naturally, it is the new body. It is a lot of the people who are elected to the convention -- are not conventional. And clearly, in a country, which is mostly centrist, the left is probably all represented at the convention. So the first couple of months of the convention led a lot of people to be worried about exactly what kind of a product will come out. it's bad news. It's also a bit of good news. I think eventually, and it's happening already, a group of people are beginning to think and address the fundamental issue. The fundamental issue is that we've got to rewrite the rules of politics. Chile has 2 or 3 big choices to make. Will it remain a presidential political regime? Or will it move to a parliamentary system like the U.K.? That's sort of one big issue. Secondly, we'll -- we remain a proportional electro system like much of Continental Europe or are we going to move closer to something like the West Master system or the American system of on first pass to post. And last but not least, there's been a very centralized country where one well there a lot of power and the problems it did not. And I think I could be -- I could be accused of being naive here, but I want to be optimistic. I think that a consensus is gradually emerging about sort of building blocks of that. And in that sense, given the current degree of sort of distrust of political institutions in Chile, having a rewriting of that is probably good news. Now what else will the constitution bring that what will be the regime concerning the environment or concerning business or concerning the Central Bank or fiscal rules, the honest answer is, a lot of that is at this point, very much up in the air.

So what's the balance between the importance of the constitutional changes versus the impact of presidential candidate is elected?

In the long run, the real big game being played today is the constitution. The next president will be around for 4 years, maybe even less because one of the things the convention could do is cut short a period and say, we begin with a new system, say, within 2 years. And of course, when you rewrite the rules of a political game, serious countries don't change their constitution every 2 weeks. This constitution will be around 30, 40, maybe 100 years. So I think that is the big show in town.

And what's your sense of timing of when more details of that are going to emerge, given that there's a substantive program?

Actually, the convention was brought into being by constitutional reform. So the timing and procedures are fairly well set out. The convention is supposed to produce a draft within 9 months, but it can offer an extension. So I think it will probably be about a year. So sometime around the middle of next year, maybe earlier, we will have a pretty good sense of what that constitution might look like. Of course, you will have committees within the convention writing draft, then whatever emerges from the committees as to go to the general body and then there's a referendum with a national referendum, which has to say some up or sums down to the text. I think it's pretty likely that whatever comes out of the convention will be approved by the referendum. So the real struggle, if you want to put it that way, the real conversation will be within the convention probably sometime between, say, late February 2022 and the middle of 2022.

So actually, it sounds like a very -- despite the sort of some of the news around, it's a very constructive and detailed process which is underway.

The way by which we got here was anything easy the constitution -- I mean, reform to bring this convention into being was arrived at 3 a.m. in November 2019 when Santiago and the country was being rocked by violent protest. So the process was difficult. But as I say, when you have that degree of discontent, that degree of mobilization, when you have a government that is essentially a spectator because the government lost a legal initiative. The question is, will the outcome be violent, which would have been really terrible. Or will the outcome be institutional? And the good news is that Chile chose the institutional route. The open question is, when you put 155 people, many of whom don't have a lot of political experience in a room and they say, write a new constitution, the outcome could be great or the outcome would be not so good. If you look at countries in Latin America that wrote brand-new constitutions over the last 8 quarters entry. Some countries, Colombia and Brazil, in particular, came up with workable arrangements. They're not perfect. They have a number of shortcomings, but there were workable. Other countries like Bolivia like Ecuador, wrote constitutions that are basically meant to keep the guy who happened to be in power then, in power forever. So those are not particularly, you know, democratic constitution writing exercises. I think the one in Chile is more like Colombia and Brazil, less like clearly Bolivia or Ecuador. But still, you know, the job of writing a Constitution is a tough one. You know, the UK doesn't have one. You know, it's- You know, Britons knows how tough it is, you know, they've stayed away from the job.

I'm going to move on to another piece of drafting, if I may, which is concerning the mining royalty bill. And so in May, the lower house of Congress pass a new mining bill, which with tax mining revenues at a sliding rate linked to the copper price and obviously, at the higher rates at very high levels. And since the Senate's been reviewing it, and is it expected to make some changes to moderate that. So how do you expect this bill to progress? What's your take on sort of the latest news around it? And given that we're in a transition period, how should we be thinking about this?

I think it's pretty likely that whoever becomes President in Chile, beginning in March of next year, we'll want to revisit the issue of mining royalties. Now will the current build become law, I think chances are no, it will not. To understand the current build, as I understand 2 things. First of all, it was put forward by a bunch of members of Congress at the height of the primary season a few months ago. So it is really a political build. And pretty much anybody who knows anything about the subject I understand that from a technical point of view, is not a very sound bill. It is a fairly extreme bill. It is very unlikely to see light of day. Secondly, and this is a point that is not often appreciated outside Chile, the bill is completely unconstitutional because the Chilean constitution in force today gives the executive power, the sole right to introduce bills having to do with taxation. So the only way in which is Bill could, in fact, become the law of the land, is if the government actually sponsored it. And the chances that the current conservative administration would sponsor the bill between now and the 11th of March when it leaves off is are basically 0. So the current bill is very, very unlikely to become the law of the land. But come what may, in March, other bills are likely to be presented. And if Boric becomes the President of Chile, which is -- if you believe poles more likely than cast or even though it's a very close race, it is quite likely that the Boric's team will submit a new bill, which I think will be less extreme than the current bill.

And just to be clear on timing, how soon do you think San bill will be -- come back in some new drafted form?

The installation of a new government is never an easy or quick affair. So the presidential period in Chile begins, as I said, on the 11th of March, I would expect the new administration, particularly if Boric, as President, to send a tax reform to Congress, say, within the first 3 months, not the first day, but not much after that.

And in terms of the impact on the industry, so the expectation is that something will change. And unlikely to be as severe as the currently drafted bill so just to summarize your position?

I have spoken to a number of economists and a number of tax lawyers who are the local experts on the subject. I have yet to meet anyone who thinks that the bill as it makes any sense. The rates are too high. It is completely out of line with international standards. Again, if you look at countries that would be reasonable standard of comparison, whether that country may be Canada or whether a country maybe Peru or Australia, in particular, which is a country that a lot of Chileans look to because of big mining power BHP, which is a big Australian companies in Chile, there are British companies in Chile, the American companies in Chile, Antofagasta, of course, the big player in Chile. So compared to what you see in the international arena, that bill is completely outlined. So that bill as is will probably never really become a law of the land. Will there be a change? Will the issue of royalties be revisited by Congress in the future, I think, particularly of Boric as President, the answer is yes.

Let's look more generally as an economist, you're reading a lot about sort of economic policy incentives to, which have an impact on people's livelihood on their lives. As you look at the industry like the mining sector, how would you understand the impact that the mining it can have to improve livelihoods and indeed has obviously has a significant economic impact, particularly in Chile.

Chile is a mining country. A lot of the national symbolism is all about the country side, but a lot of the GDP and a lot of the employment directly or indirectly is generated by mining. And as a result, mining will remain a very central force in Chilean economic and Chilean politics. And I don't think any government regardless of political preferences would be likely to neglect the mining industry or would be likely to do something that sort of brings it to a house. I mean, that would be really shooting yourself not in the foot but in the head. Having said that, I think the conversation will be, as we mentioned earlier, our environmental standards or taxation standards comparable to those that you might observe in other countries. And clearly, the world has shifted to the left. Chile has shifted to some extent to the left. So what is expected, say, in terms of the environment, given global warning, given big, big issues with pollution of air and water in Chile, clearly, standards will be more demanding. I think that's happening everywhere. It's happening in the world. But that does not mean that I anticipate some sort of a radical regime that would sort of bring the industry or the sector towards creating cost.

So I just want to come back to the question of the sort of congressional makeup. We obviously know what that looks like right now. What's your take about what that means and what it looks like?

The conventional wisdom after the protest after the big March was a Chilean electric had moved radically to the left. But that was more of a conjecture than a real solid finding. And I think the election just a few weeks ago, brought some news. I think it revealed that the electrode is split, and that there's no one overwhelming political force that dominates Congress. That we're going to have a Congress that is, on the one hand, more polarized than any congress before, meaning the center is weaker and parties on the far right, on the far left are stronger. But it is not a makeup that tilts very heavily one way or the other way. In the lower house, which has 155 members of the Cámara de Diputados, if you add up everybody who looks vaguely left is they have a slight majority but not a very large majority. And in addition, that is not 1 block because you have in that general area, Christian Democrats were quite census, Social Democrats, socialist, combines and then an array of leftwing parties, some of which are somewhat centers, some of which are more and more extreme. On the right, you also have a panoply of parties, 2 or 3 larger ones and a bunch smaller ones. But this congress in particular, is unlike the previous ones and they are a lot more independent do, a lot more new parties. And even the old part is going to have a lot of party discipline. So the sort of simple mathematics saying blockade have got so many and lock bees got so many won't quite work. But the basic message is in the lower house a slight majority for the left on the center left. In the Senate, there is a 50-50 split, much like the American Senate. Again, this may not be solid blocks people may break away for one vote or another. The parties don't have a lot of party discipline. But if you do the basic arithmetic, it looks like a 50-50 split.

Great. And let's layer on top the presidential elections. So we'll know the results soon. So it's difficult to ask you, there's a head of the elections, but I'm going to push you. How should we understand the rate at the moment is between 2 fairly extreme candidates on the left and the right. And what are the implications of whoever wins, given that mix you've just described about the sort of slightly sort of mixed political environment in -- on the congressional side?

The first thing to understand is that this is the first time since the return of democracy to Chile in 1990, that the main center left block and the main center right block have not made it to the second round. So this election is unlike any other election. Secondly, whoever wins because of the mathematics we were just describing will not have a congressional majority. So there's been a lot of discussion of what this platform and program says what the other one says, chances are that regardless of who wins, much of that set of proposals will never become low simply because no one really has to conventional majority. Thirdly, if you believe Polls, this remains a completely open election. Chileans law strangely, we may change this in the future. It does not allow for the publication of opinion polls during the last 2 weeks. So the last post came out over the weekend, and they show a candidate Boric, from the far left, slightly ahead, comfortably ahead in some ports, slightly ahead in some others. And the big question, of course, the 2 big questions that make those pools not particularly reliable. I'm not saying necessarily Kast will win far from it. But because the election is unlike other elections, we have no idea how many people will vote. That's the first question. Chile has voluntary voting. And of course, the fact that we have a new variant of the virus circulating may mean we don't know that older voters may stay home, younger voters may come out. It is a summer on the other hand. So it's not quite a scary, maybe everybody will vote. And secondly, it is very unclear what the supporters of some of the other candidates who came in third, fourth and fifth will do. The guy who came in third does not belong to either one of the main political blocks either. He is a strange popular to actually campaign from the U.S. because he has a number of law school spending in Chile. He captured 13% of the vote. And the truth is nobody has an idea where his votes are going. The expectation is that the bulk of the road to the center, right, we'll go to cast the vote -- most of the those of the center left will go to Boric, but even that is an open question. And as a result, the post today are saying that the most likely present with Chile is Boric, but the election remains very, very close.

Just a quick follow-up on that. You mentioned the polls obviously, making prediction. You obviously speak to a lot of people and your former colleagues in sort of political sphere in Chile as well. What are they saying about the vote? How that Intel -- inside intel...

I talk to people all the time, and I'm afraid that all I can report and most people are saying election is too close to call. if most posters had to put their money on anyone, they would probably put the money on board, but they would immediately add well, we're not quite sure, again, because sorry to repeat that, the big parties are not in play. So this is much more volatile. And secondly, because of voluntary voting, you could have 40% regulation voting, 50% or 60%, nobody has any yet. And that means that the composition of the number of people who will go to vote, will they be old, will they be young, Will they be left leaning, right leaning and that remains very much of an open question.

Great. I'm just going to come to a sort of broader question about the sort of investment landscape as a place to invest in Chile at the moment. Just want to get your judgment about some of the risks and opportunities that you see as?

Chile was, again, the boring country in which investment was very safe. Chile is no longer a boring country. So there are many more open questions and many things are changing. Everybody knows that, say, bond yields have gone up, the premium associated with investing in Chile, whether buying a bond or buying a company has gone up. So Chile is a risky country or at least that's a market perception. So I think clearly, the quality of politics in Chile deteriorated over the last decade. There's no question about that. And there for the quality of legislation that is coming through parliament, the ability of incoming governments to turn their programs into law has also declined. Fragmentation of politics is much larger, demos of the right and the left are everywhere in parliament. But again, that's not unique to Chile, right? You see that in the U.S. or the U.K. or Brazil or Mexico or so many other places. The good news, I think, is that this all could have gone terribly wrong if violence have continued and if the outcome had not been institutional. There is some chance, it is not a certainty, but there is a reasonable chance that the constitution will have -- again, it's not clear what the concession will say on economic issues. That remains an open question. will the constitution have reasonable rules of the game regarding politics, political system, electro system, et cetera. We're not sure yet, but there's some consensus beginning to emerge that looks reasonable. If that is so, then maybe in 5 years, we will look back and say, that was a difficult period, that was a very unstable period but we pull through. Am I sure that will happen now, but I think there is a bit of a ray like there.

I mean I'll leave that with a hint of autism. So Dr. Velasco, thank you very much for your interesting conversation today.

Thank you very much. My pleasure.

Hello. I'm Mauricio Ortiz, and I'm the CFO of Antofagasta. I have the pleasure of presenting our financial strategy and how we work to maintain a strong balance sheet and generate liquidity that can support our growth plans, all of which underpin our commitment to long-term sustainable value creation and shareholder returns. Over the years, we have built a consistent track record to create sustainable value and shareholder returns over the long term. We take a business decision with a long-term view, and this is based on 3 fundamental objectives: The first, a rigorous focus on our operating costs. I will speak about costs in further detail later, but I would like to emphasize that this is something that we focus on regardless of the copper price. Secondly, our cost approach targets to manage our EBITDA. Being in a cyclical business like ours, we protect our EBITDA margin in all price environments. Our Cost and Competitiveness Program and our operating excellence are central. Lastly, capital returns, we have a minimum commitment of 35% of underlying net earnings that we payout as a dividend. And any excess of cash that we define in our capital allocation model is allocated either to fund growth and development opportunities or returned to shareholders as dividend in excess of this 35%. At Antofagasta, our business strategy is structured around 5 pillars, each defined with short and medium-term goals that enable us to achieve our purpose of developing mining for a better future. When it comes to competitiveness, our focus is to achieve productivity gains through cost control and streamlining our processes that will enable and deliver efficiencies and savings. It is important to us that our operating model accommodates the variability that is inherent in our production plans. We do this with a strong focus on operating excellence. Our ongoing success in this area is evident with our Cost and Competitiveness Program, our CCP, which continue to generate significant efficiencies and savings. As you have heard from Iván, we have a large copper inventory to fuel future growth. And from my perspective, as CFO, it is my responsibility to ensure that we have the appropriate available capital, at the lowest cost achievable that will facilitate that growth, and allow us to maintain our leadership position for the long term. Let's now take a look in more detail at our cost base. I believe this is the starting point from which we create sustainable value at our operations and projects, and shareholder returns over the long term. Approximately 40% of our cost base is related to input prices. We have intentionally linked our supply prices of steel materials, explosives, fossil fuel-based energy and other inputs, to the respective underlying commodity, to minimize the impact on our margins. However, as part of our CCP, we have been innovative in using competitive advantages with some of our input prices. Energy in Chile is a great example. As we have been negotiating down our energy costs, by putting in place lower cost renewable energy contracts. The next our Chilean peso base cost, which represent 40% to 45% of the total. Examples of this are wages, maintenance and other services. Our technology and organizational effectiveness initiatives are fundamental for the long term. In the short run, inflation associated with this group of costs is mitigated by changes in the Chilean peso exchange rate. The last group of costs are spares and imported materials. Here, we are working to create partnerships with existing and new suppliers. So we can innovate together and improve their products' efficiency. All our cost optimization initiatives converge in our CCP. During the first half of the year, the CCP delivered savings of $43 million, which is equivalent to $0.05 per pound, resulting in a net cash cost of $1.14 per pound, placing us in the second quartile of the industry. I'm pleased to say that in 2021, we will again deliver according to the plan, and we are on track to achieve our target of $100 million savings this year. Our commitment to maintain the production competitive cost through the cycle is paramount. Our Cost and Competitiveness Program is designed to optimize our cost base by ensuring cost discipline and structural savings across our operations. Cumulative savings are now over $900 million, and we continue to seek to make cost savings to fully optimize our margins. Much of the progress we have made in recent years reflects not only our focus on costs, but also, the culture of innovation that Antofagasta is building within the company. Let me share a few examples, so I can bring this to life. In Organizational Effectiveness, a recent example is the simplification of our corporate functions, which produce annual savings of approximately $30 million. As technology and digitalization enable us, we are further optimizing functions and challenging the way we run the mindset as well. A second area of focus is around how we continually strive to optimize our operations and run our mines and plants to their full potential. One good example is how, since late 2020, we have been running the Centinela concentrator beyond design capacity through machine learning and the ‘milling feed reconfiguration. This improvement will benefit Centinela for the rest of its operating life. And finally, Goods and Service Productivity. Essentially, procurement. A good example here is our recent energy negotiation at Zaldívar, which shaved off $15 million from our annual energy costs. We have also renegotiated energy supply contracts at all our operations to decarbonize our supply and take advantage of the lower price of the renewable energy in Chile. In the face of the ever-increasing cost pressures due to natural grade decline, at Antofagasta, we are taking a proactive lead in cost savings and operating improvements, and this is something that we will never stop doing as it is central to our strategy. For Antofagasta, our capital allocation framework is fundamental to all our financial decisions. Everything is underpinned by our strong operating cash flow. Here is where our Cost and Competitiveness Program and our capital allocation model are intimately linked, and I would like to highlight this. We don't allocate capital to anything that the cost and competitiveness program hasn't already optimized. After this, we invest through the cycle in ourselves, through sustaining capital programs that will replace old plants and equipments. We also invest in mine development, where we open up different phases of the mine to expose the mineral to be mined later. Next, we fulfill our minimum commitment to our shareholders by paying 35% of our underlying net earnings as dividends. With our excess cash flows, we consider and assess our organic growth project, which must be in line with our stringent return and risk criteria. If nothing fits our criteria, we'll return this excess of cash to our shareholders as part of our dividend policy. Central to our way of mining is to deliver on the value we have committed. Therefore, managing the climate change effects on our portfolio has become an important aspect of this assessment. We have taken many steps in this regard, which I will explain shortly. But I want to highlight that, at Antofagasta, we are putting Value Optimization and Climate Resiliency together at the center of our financial decisions. We have introduced an internal carbon price and are evaluating the impact of climate change variables in the life of our mines. This helps us to be better prepared and resilient for the challenges we will face in the future. Now let's look at this model in action. On this slide, you can see we have been following this capital allocation model for some years. We have generated strong operating cash flows, which will allow us to invest, while leaving plenty of capital to allocate to our growth projects and also reward our shareholders. You can see here that through the cycle, we have delivered consistent and compelling shareholder value. For the last 5 years, our payout ratio has averaged above 65% while always maintaining a strong balance sheet. For next year, capital expenditure is expected to be at similar levels as 2021, and guidance will be finalized when the review of the Los Pelambres expansion project has been completed. Let me describe how we are working within the business to promote and develop our climate resilience, both by adapting our business for climate change and by mitigating the effects of climate change. At Los Pelambres we have been facing acute water shortages for some time, which has also impacted our neighboring communities. Additionally, our climate models showed that this condition would only deteriorate over the coming years. We had to take action and adapt to the reality of climate change. In 2018, we sanctioned the investment in a 400-liter per second desalinization plant, which is currently under construction, and we expect that it will come online in the second half of next year. We have also had to be proactive in mitigating the effects of climate change and are in the process of switching all our mining operations to run wholly on renewable energy, which will not only significantly reduce our emissions, but will reduce our costs as well. We have also introduced an internal carbon price, which we will use in the assessment of projects and in the day-to-day procurement process. Our clear capital allocation strategy has given us the discipline and agility to assess new decision factors, always targeting to achieve sustainable value and shareholder returns over the long term. In summary, I have taken you through how at Antofagasta we seek to manage our cost base, but I also -- how much we focus on this and how this performance and our long-term investment strategies have enabled us to maintain a strong balance sheet. Costs per pound is our key financial KPI, and it reflects the success of all our cost control and productivity improvement activities in an industry, where control of the revenue line is driven largely by external factors. We also looked at our evolving capital allocation framework, where we have explicitly introduced climate change considerations. I believe that we are carefully measured and disciplined in our approach to how we manage our finances and generate shareholder returns. Looking to the future, we are still 100% focused on creating sustainable value and shareholder returns over the long term. We will do this in the same way as we have ensured our successful performance over the last few years. We will manage our operating cash flows by continuing to focus on our costs. We will protect our margins through our Cost and Competitiveness Program, and we will return excess capital to our shareholders consistent with our tradition of being a value and income company. Thank you. I will now hand over to Alan Muchnik, who will tell you about our innovation activities.

Hello. My name is Alan Muchnik, and I am Antofagasta’s  Vice President of Strategy and Innovation. It is a pleasure to be speaking with you all today while I guide you through our innovation strategy, recent successes and future plans. I will also tell you about our new primary leach technology. As you know, Antofagasta’s  central purpose is developing mining for a better future. And innovation sits at the heart of this as one of our strategic pillars. Our efforts around innovation are centered on how we create value across the business. With innovation, we have 2 objectives’ or end goals that we want to achieve: one, to improve our operations continuity and realize their full potential; and two, to enable and develop growth conditions, looking for transformation and business development. Our journey to achieving these goals has been clearly established. It is purpose-driven. We are concentrating on solutions and the differences they will create. Moving on, we can go into more detail of what these end goals look like, in terms of tangible solutions and goals and how they make up our vision for the operation of the future. Taking the first objective, we seek to use our comprehensive innovation process to devise new ways to operate best-in-class digital operations, so that we can sustain our competitive position across our portfolio, while we take advantage of the opportunities from adopting new technologies, from planning, to the mine, to the plant and beyond. This includes dynamic and intelligent planning, new ways of working on digital platforms, and automated or autonomous operations at the mine and plant, using remote operations and data-driven decision making. A few examples for you, some of which I have touched on earlier. We are currently building integrated remote operation centers for Centinela and Pelambres, which is one of our digital roadmap programs and part of our drive to smart operations that we expect will deliver improved safety, savings and productivity gains by targeting global performance optimization. We expect the Centinela IROC to become the platform for future regional operations integration, and hope this will also boost local innovation and employment in the city of Antofagasta. One of the main drivers of digitalization is data, which through analytics can be converted into information, decisions and actions to improve mining operations. This has proven to be a source of competitive advantage in other industries and opens significant value opportunities to our business. A few examples of this are: we increased our metal recovery by anticipating the mineral characteristics of the ore that feeds the flotation circuit using a decision support system based on machine learning and optimization methods. This solution is already in operation on 2 flotation lines at Pelambres and we are extending it to the remaining lines, as well as to Centinela. We have also increased heap leach recoveries in our hydrometallurgical plants by applying data analytics to better understanding the process behavior for different ores. Improving mine stability controls by the detection and early warning of small-scale geotechnical instabilities in open pit slopes. Another aspect we are focusing on is increased use of autonomous equipment at our operations for safety and improved performance from increased reliability and asset utilization, and also disciplined execution. We have started with autonomous drills at Pelambres, and will now introduce autonomous drills and trucks at Esperanza Sur in Centinela. We expect to extend this more widely across the group over the coming years, together with application of robotics in performing maintenance activities, and converting our hydrometallurgical plants to use more automation. Los Pelambres is one of the first sites in the copper industry to have cable-linked autonomous drills in production, significantly increasing their utilization rates and meters drilled compared with manual operations, which also creates savings from an optimized fleet size, and benefits from reduced maintenance and spare parts operating costs. Moving on to the second objective, let me talk about how we use innovation to forge new ways to develop mining and leverage growth. This is a longer-term objective and includes continuing our efforts towards the next generation of mining developing game changing process technology, achieving carbon neutrality and meaningful emission reductions as well as minimizing our tailings footprint. One instance of this process in action is our work towards creating effective tailings and water management solutions. This focuses on water recovery, control and monitoring, and facility integrity. When we seek to solve the challenges we face, we do not set out to own the solutions. In many areas we work with wider industry collaborating and sharing ideas. One of these areas is how we progress new technologies to reduce mining equipment carbon emissions. For instance, we have recently become a sponsor of Charge On, an international open innovation challenge for suppliers to develop solutions to supply electricity safely, sustainably and quickly to battery-powered mining trucks. We have also recently joined the Hydra Consortium, which aims to develop and test the technology needed to replace the use of diesel in heavy-duty vehicles and thus reduce GHG emissions with hydrogen. None of these efforts would be successful without an able and digitally literate workforce, inspired to innovate and approach solutions together. To enable this mindset, we developed our digital academy to upskill our employees with the know-how they need in today's digital era. Launched in 2020, the academy is focused on upskilling and reskilling our workforce to match the new demands of our digital transformation and our innovation processes. In 2020, over 15 hundred senior leaders and supervisors took digital literacy courses on basic terminology and tools. By the end of the year, 94% had received diplomas for completing all 9 online courses. In 2021, 270 supervisors started a specialist course on data-based decision making. Now I'd like to take you through one of the innovations we are most proud of, our primary sulfide leach technology, Cuprochlor-T. [Presentation]

Innovation is central to our success and our purpose. It has been an important enabler in recent years, and has helped us identify opportunities to unlock growth and remain a reliable and responsible copper producer. It will remain integral as we continue to focus on maximizing the benefits of our embedded growth potential, and on how we can sustain and improve our competitive position, while we keep moving towards carbon neutrality and ensuring our operations remain as responsible as ever to our people, to our shareholders, to our communities and to our climate. We have significantly progressed in our technology roadmap and have a clear vision as we move forward, driven by our people, so that we can continue delivering our purpose, developing mining for a better future. And with that, I'll hand you over to Iván to wrap up today's presentations.

Thank you, and thanks to the rest of the management team. I would like to make a couple of short closing remarks, and then we will open up for questions. Today, we have explained how Antofagasta is a reliable and responsible copper producer, with embedded growth ready to be unlocked to create value for all our stakeholders. In summary, a very large 18-billion tonne copper inventory in highly prospective copper regions, mainly in Chile. A new proprietary primary sulfide-leach technology that will potentially unlock value from previously uneconomic mineral resources, identified key brownfield and incremental growth within our asset portfolio, a 5-year production plan that could potentially take us to approximately 900,000 tonnes by 2026. An expanded capital allocation framework that includes climate risk mitigation, environmental commitments to significantly reduce our freshwater consumption, and emissions by 2025 or earlier, strong social commitments to our workers and our communities, by making our mines safer and greener and supporting our local suppliers while upskilling our workforce and providing a better work-life balance. We have the financial strength and balance sheet to deliver this growth and extraordinary people who you heard from today, who have the track record of delivering on our promises. Whatever challenges the external environment throws at us, you can trust Antofagasta to be ready to meet that challenge. I would like to thank Professor Velasco for his time and the very interesting comments about the current situation in Chile. And I would like to thank you for listening, and for your continued support of Antofagasta. The future for Antofagasta is bright, and I now will hand over to Andrew, who will open the floor up to your questions. Over to you, Andrew.

Good afternoon, everybody. That concludes the webcast. I hope you will find it useful. If anyone wants to look at the slides, which appeared during the webcast, they are available on our website. And shortly, after the end of the event, we will make the replay available as well. We'll now go to Q&A. And I'll hand over to the operator to ask the -- bring on the first person to ask a question. Over to you, operator.

[Operator Instructions] And our first question today comes from Luke Nelson with JPMorgan.

The presentation is very useful. Three questions from me, which I'll take in turn. The first question, on the midterm 2026 production outlook that you've provided, can you talk through qualitatively the production contribution by each mine within that outlook, especially if you can give any sense of what's driving the dip in 2024 outlook?

Thank you, Luke, and welcome to everybody who's joined the call and has seen the video. So I will address your question. If you look at the production plans outlined in the graph, we basically have base production. And then we have an incremental production, which starts in 2025 and then goes into 2026, which is the Centinela second concentrator project. So the ability to get to 900,000 tonnes, as we've described, is dependent on the ability to undertake the second concentrator project, which is within our plan. As you will recall, we've been working on this project for quite some time. We are very well advanced and are expecting that we will take it to the Board for consideration in the late part of next year, when we are with almost 65% of engineering complete. So our production profile, as I say, is made of those 2 components and contingent on that approval. I think on the base production, what you see is some important new production coming, which is there and which starts in 2023 with the expansion at Los Pelambres, which we are currently building and constructing. The project at Zaldívar, the Chloride Leach, which will begin delivering copper in 2022 and then sort of ramps up. And then the Esperanza Sur pit as well, which will provide feed for the concentrator existing plant at Centinela, starting in the second half of 2022. So that is what you see basically in the profile of base production. And the dip in 2024 is largely explained by grade. So we have some grade decline, which is part of our normal mine planning and sequencing in the mines. And also, we have an increase in grade in 2026, where, as you see, production goes up. So we believe that we're able to maintain an attractive production profile with growth potential out of the new production and projects that we're commissioning mostly next year and in 2023, which are currently under construction, and then basically keep producing and then have another step increase when we commission the Centinela. But in 2024, after we've included the projects that I've mentioned, which are currently in construction, the drop is essentially grade-driven out of the sequence that we have in some of our mines.

Okay. That's useful. Then maybe more on the CapEx side. You've talked about Los Pelambres expansion CapEx being reviewed. Can you maybe talk to what the scope of this review is? And whether this means you're stepping away from your prior comments that 2022 CapEx would be flat relative to 2021? And then maybe looking further afield, sort of 2023 plus, how should we be thinking around the capital intensity to match that baseline production that you provided in that 5-year potential production plan?

Yes. And I'm going to just say some initial comments and then pass over to Mauricio to take the rest of the question. I think on the fact that we've had some extended COVID to basically deal with throughout the construction of the project in terms of the period and also, as a result of that, there's been some extra logistical expenditure, which I think would be familiar and well known to everybody given the current circumstances. So it's basically got to do with integrating those 2 factors into the final estimate, into the CapEx that we have for the Pelambres project, but -- and that's for 2022. But I would say that this is a project which is now 65% complete. And we're basically -- we've got all the materials on site. We are into a period in which vaccination rates are very high in Chile and close to 90%. And therefore, we seem now to be in quite a steady state level of productivity and manpower establishment to be able to continue to complete the project within the schedule that we have highlighted, which is basically the diesel plant in the second half of the year and the concentrator plant by the end of the year. So this review has to do with integrating those factors into capital cost. Now beyond that, I'll pass over to Mauricio for him to refer to what sort of profile to expect in terms of capital expenditure for the sort of midterm. Mauricio?

Thank you, Ivan. Luke, good to see you. Well, in terms of 2023 and beyond, what we have is basically -- we usually said that we have a sustaining CapEx range, which means mine development plus sustaining CapEx ranging between 600 to 800. So for 2023, we will be in the high end of that figure. And beyond 2023, we are going to be within that range. That is for the sustaining CapEx point of view. So then we have the development CapEx. As we commented during the video [Audio Gap] clearer. And therefore, it will be taken with all the information that's available at that time. And like any of these choices, which are significant capital commitments, they will have to factor in all aspects from market outlook to regulatory frameworks and the like. And now as I say, we think that we've got the ability to grow our assets and lot profitable value and that we will continue to do so in Chile, where we operate. So that's sort of our planning assumption. But as I say, more information will be available at the time in which these decisions are scheduled to take place.

Okay. Understood. Understood. And the last question for me about Reko Dig actually in Pakistan. So your JV partner is still keen to pursue this development opportunity? Does this reflect your approach too? And if not, would you consider selling your stake amidst the ongoing legal case with Pakistan?

So on Reko Dig, I mean the -- we've -- since the issue was basically resolved in the courts, in our favor, we are basically continuing to action payment for what we believe is owed to us in the context of the actions that took place which didn't allow us to continue with the project. That's where we are. There's a lot of work being done in that front, and that's our focus. So our focus as Antofagasta is basically to ensure that we get payment out of the -- not being part of the project and that having been taken us -- taken from us at the time in which those actions took place. We have no change in view with that respect. Irrespective, as I say, of what our partners might want or not to do, but that's our perspective and our view with respect to the actions around Reko Dig.

Understood. And then there is no thought process from your side to exit that exposure you have before the payment is received?

Right. We're looking at basically the legal -- several legal avenues and actions that are involved in a procedure like this one. That's our key focus at the moment.

Our next question comes from Jatinder Goel with BNP Paribas.

A couple of questions from my side. On water, is there much update on Centinela water infrastructure, as you were, I think, concluding tendering process sometime this quarter? And is the use of seawater still without much regulatory overburden? And is it likely to remain so under the new constitution? Or do you expect much to change on that front?

Yes. On the Centinela seawater tender, I'll ask Mauricio to address that. But on the regulatory side, I mean water, we think, will be a key theme in the constitutional discussions. Now from the point of view of where we stand in the North, at Centinela and Antucoya, we're mostly running on seawater. And in Pelambres, we will do so shortly when we finish building the desalination plant. So from that point of view, we -- I think we've addressed any concern that we may have from a regulatory point of view. We're not seeing any additional regulatory burdens being discussed in the context of diesel water per se, but more around the use of continental water. And Mauricio, you may want to address then where we are with Centinela seawater tender process, and how we're looking at that?

Sure. Sure. Thank you, Jatinder. Good to hear you. Well, in terms of the process that we are running at Centinela, just let me remind you that one of the main package of investment in Centinela expansion project is the water supply system. So basically, what we are doing there is that we are running a tender process in order to do 2 things: one thing is to award a BOOT contract, a build, own, operate and transfer contract, to supply the water requirements for the second concentrator at Centinela. And that will allow us to optimize our capital intensity if we decide to move forward with the second concentrator project. And the other thing that we are running in parallel because it's part of the same initiative is to divest the existing assets. Remember that now Centinela has a [ rosy ] water supply system, which accounts for something like 1,000 liters per second. And basically, that supply water to Centinela concentrator facilities and Antucoya. So basically, we are running this process. We have a lot of interest from highly reputed counterparties so has been -- so far, has been a very competitive process. But the most important thing, Jatinder and colleagues, is that there are 2 key drivers of -- key decision factors, rather than drivers, key decision factors around the decision of divesting or not and awarding this BOOT contract to a third party. The first one is, must be a value-accretive transaction. So what we are targeting here is to have NPV positive in any case in order to secure the value to our shareholders. And the other one, which is much more qualitative but still is highly relevant for us is that the risk/reward balance remains similar to the risk/reward balance if we develop this infrastructure. So basically, we see a lot of wrapping up. We see a lot of appetite in the 2 components of the project, the BOOT and the divestment of the existing infrastructure. We see a pretty strong rationale in doing this. And we will have these 2 key decision factors around value and risk/reward balance before we take the decision. And the expected day to take the decision will be just before we present the second concentrator to our Board for final investment decision.

Yes, I think that's important to stress that basically these decisions come together in the sense that by the time that we expect to take this to the Board in the second half of next year, then we would have a view on the water system divestment. And therefore, it will be part of the package that we would undertake at that time.

Understood. If I could follow up a little bit on this one. Are you able to indicate how low this $2.7 billion gross CapEx spending can go if you were to opt for both outsourcing the new water infrastructure and sell and lease back the existing infrastructure?

Well, Ivan, do you want to take that?

No, go ahead.

Well, roughly speaking, in the $2.7 billion, there is a number between $450 million to $500 million related to the water infrastructure. So if we finally decide to move forward with this initiative, we are going to optimize total CapEx in roughly that figure, around $500 million. And the other stream of value -- or the other value stream is related to the proceedings of the divestment. And we see there a potential value also ranging in the similar amount of the -- building the new infrastructure. So basically, it's a 2-way avenue, optimizing the capital intensity and also providing proceedings for Centinela.

Just one more question. From a strategic perspective, it looks like you're still focused on 4 areas that you've mentioned in the past as well. But now that you have learned to live with geopolitical uncertainty following the turn of events in Chile since 2019 and Twin Metals doesn't seem to have an easy pathway ahead, why is Africa still off your target jurisdiction despite promising geology?

Why are we -- sorry. I didn't get that, Jatinder. Sorry. Why do we...?

Why is Africa not in your target jurisdictions' list now that you know how to deal with political or geopolitical uncertainty given what's been happening in Chile? And also Twin Metals doesn't seem to have an easy pathway, is Africa still off the list? Or could it become part of your portfolio organically or inorganically?

Yes. So why is Africa off of the -- I'll ask -- I mean, I'll pass on to Andrónico briefly, but just to say some few words on that. I mean we think that the -- certainly, the qualitative difference in terms of political uncertainty and risk between Africa and the Americas and, specifically, Chile, we think is significant. I mean there's a sea change in terms of difference. One of the things that we consider important is that there is an institutional track record and framework established in some of the countries, in other continents, like the one that you mentioned [ that not ] may be present. If you heard the interview with Andrés Velasco, he did point out that despite the fact that we've had unrest, one of the positive issues has been that this has been channeled institutionally. And therefore, in the end, they're being discussed in the context of changing the current constitution with Congress, which is actually quite balanced today. So I think there's a sea change of difference between the sort of political uncertainties that you face in some of the jurisdictions in the Americas compared to what you see in other places, where you have absence of basic legal law and sort of institutional frameworks. So we remain very much focused on the Americas for that reason. I don't know, Andrónico, if you want to comment further or add anything to that?

I don't know if there's much to add. But basically, we decided this strategy 5 years ago. It's on not only Americas, we're basically very focused, of course, in Chile, Peru, as we mentioned, and parts of the U.S. and parts of Canada. So we're very concentrated on this strategy. I think that there's not much to add, and we feel comfortable in those jurisdictions for now.

Yes. And on Twin Metals, I mean, we know that it's a project which is challenging. But it is, from that point of view, known that in the U.S., it does take a long time to permit projects. But we consider the project to be very attractive from the point of view of the ore body, which sits in the place that we plan to mine. And if there's something that we've learned is that we've got to take a long-term view and a long-term perspective and be resilient in how we approach our project development. So from that point of view, we see Twin Metals as continuing to be an option in our pipeline, which we want to continue to pursue despite the challenges because we take a long-term perspective, a long-term view.

Understood. If I could add a little bit to this same question, Sierra Gorda was up for sale in the market again, obviously, part of it, not all of it. You had passed it on in the previous round. Was that of any interest in this round or you are still not convinced?

Andrónico, you may want to answer that on Sierra Gorda?

We were interested. It's -- we've always said that everything that is near to operations, we're interested. But valuation was another problem for us. And we didn't think it fit from a valuation point of view. So yes, but that's the straight answer to that. It didn't fit from our valuation point of view, that's it.

Yes. I think that one must also consider that we have quite a large -- as we've expressed in this meeting, quite a large mineral inventory at Centinela already of ore body, which is, on average, with grades higher than those at Sierra Gorda. And therefore, we own already a big and long position, which we fully control. And I understand this Sierra Gorda, when it came up, it's shareholding, which does not provide the control and it's of an average quality from the point of view of grade, which is lower to what we already own. So we would rather much allocate capital to expanding Centinela and thinking that is a way of adding profitable growth in a way that we can continue to expand production rather than take up this alternative. But as Andrónico was saying, we looked at it and those were the factors that play in our thought process.

Our next question was Richard Hatch with Berenberg.

I'd like to ask and push you a bit harder on CapEx inflation, cost inflation. And it's been a theme that's been creeping out from some of your peers as they've reported. And I just note that some of the CapEx numbers in the presentation are 5 years old-ish, some a little bit more fresh. How comfortable are you with these CapEx numbers that you're putting into this presentation? And just in terms of the costs, you talked about a weakening peso, and I understand that, that helps you to an extent. But if you have a slightly better results from the elections next year, then perhaps the peso gains a little bit of strengthening run. What kind of -- if we were to look at that production profile at 900,000 tonnes over the next 5 years, what does the cost profile look like in that regard? And how comfortable are you that you can fight against kind of that cost inflation that's really biting at the moment?

Yes. So I'll ask -- I'll make a quick comment and ask Mauricio to chip in. But on the -- I mean the big -- I would say the big capital spend that we've got here as a single item is the concentrator at Centinela. And there, we have been running with $2.7 billion as the capital expenditure number. And I must say that we've obviously done a lot of updating and review as we progress that figure. And a lot of components have gone up and down, but we've sort of ended up in a similar number overall. And therefore, that subject to the final review before we take it to the Board. But I must say that our updated figures, when you sort of factor in all the changes that we've made, get us to a level which is essentially very, very similar. So from that point of view, it might be an old number. But in effect, it's reflective as well of the -- or close to what would be sort of updated position. And on top of that, as you say, as Mauricio mentioned, we're seeing a way of eventually reducing the front-end capital associated to the project because of the water system. So on that one, which is the most important singular item, I would say that -- as I say, it's going up and down in terms of components, but the end figure is more or less on the same level. Now in terms of cost -- unit cost going forward, I'll let Mauricio pick up. But I would just say that we obviously are expecting to end this year within what we've guided. So -- and we've guided for $1.20 or thereabout, $1.25. And we would expect cost to go up next year as a result of lower production and some of the factors that Mauricio will explain. But then essentially, be back in 2023 with costs, which are consistent with the sort of level of cost that we're seeing today. So I'll let Mauricio maybe explain a bit more how we're looking at 2022 and the cost profile investments.

Thank you, Ivan. Richard, well, just to add some flavor on 2022, as Ivan described, we have a lower production in 2022 mainly driven by lower throughput at Los Pelambres due to the water scarcity and lower head grade at Centinela concentrator mainly. So that will be basically -- explain the 2 out of the 3 main factors that described 2022 unit cost. So the first one is the lower copper production and the associated one is the lower byproduct production. Remember that at Centinela, we have a relevant stream of gold. And with the lower copper grades also is linked the ore grade. And at Los Pelambres, we have a relevant stream of molybdenum. So with lower throughput, we also -- we will have lower production. So those are the most key factors -- the most relevant factors. And as Ivan said, it's just temporary on 2022. And the third one, this is much more following the -- your way of thinking related to the inflation. And we have two kinds of inflation: the imported one, which is highly linked with the input prices and basically driven by raw material prices, such as steel, ammonia for explosive, oil for our diesel. That is highly linked with our -- with the copper price. So basically, we are going to see with -- some cost pressures in terms of input prices. But at the same time, that is not damaging or diminishing our margins because the copper price is also a raw material and highly linked with these other ones. In terms of the local inflation, we see that as a temporary effect mainly driven by the government aids during pandemic and also some liquidity injection in Chile. But once the government aids and that extraordinary liquidity injection ends by the end of this year, so we see that temporary effect will return to its normal level of inflation in Chile. So that's for the 2022. And just let me describe a bit more about the profile going forward beyond -- 2023 and beyond. Also something relevant to add is that Centinela ore body also contains, as I said, gold. So by 2025 and 2026, when Centinela's second concentrator come online, we will have the benefit of that byproduct from Centinela. And in the meantime, of course, we are working -- as Alan described in his section in the video, we are working in technologies in order to fuel the new wave of CCP mainly by technology. Automation is a huge one. Autonomous hauling trucks is optimizing our capital intensity, and also our OpEx mainly optimizing the headcount. And in the same way, we are doing the other initiatives that Alan described as the IROC at Centinela and some initiatives related with machine learnings and other analytics. So basically, we are going to preserve our competitiveness approach. 2022 -- a little increase in our costs mainly driven by lower production. By 2023 onwards, we are going to return to what you have seen from Antofagasta over the last couple of years.

Very detailed. And my next one is just on that 5-year potential production chart. If we were to kind of fast forward that and make it a 10-year chart, how do you think that would just like just in the kind of with grade decline and grade pressures in mind?

Yes. Maybe I'll pass on to Hernán. But remember that we have grade decline, but we also have the potential -- well, 2 potential projects there. One is the second expansion at Centinela and also the extension of life at Pelambres. So those are the sort of factors at play. But Hernán, you may want to comment on how things would look directionally, I guess, beyond the 5-year period? You are in -- I think you've got your mic off, Hernán.

Okay. Thank you, Ivan. Okay. According to our long-term planning, as we mentioned before, the main milestone during the first year is the second concentrator plant at Centinela Phase 1. As also I mentioned before, the capacity for this concentrator will be about 95,000 tonnes or they assume. This is one important milestone that will contribute to our consolidated production around 900,000 tonnes per year. But in order to maintain this level, we also plan -- we have planned second phase of the concentrator plant at Centinela. With both phases, we are going to have around 150,000 tonnes of product per day. So that is the main important thing according to the development plan at Centinela. Also, we are going to run a full capacity Los Pelambres new line [indiscernible] project. So also, this project can maintain level of over 350,000 tonnes per year more or less during the next year. Also, if project maybe bit overcome the [ hardness overall ] during the future. That are the main important things that we can maintain during the future and [indiscernible] COVID. And in the case of Zaldívar and Antucoya, we maintain the level of approach similar to the maybe that we are trying -- and this year, maybe a little bit much in Zaldívar because of the freight.

So -- and I would say, look, I would add, I think the very positive issue is that we've got the inventory of mineral within our districts. Now -- so therefore, we're able to develop them sequentially to be able to sustain the levels of production that we plan for. And I think that's a very important element. The second phase of the concentrator at Centinela as well as the Pelambres extension will sit -- I mean both sit towards the end of the decade. So we're talking 2030 probably and thereabout as being looked at, and that's the sort of timing that we think of them. But we have the inventory of mineral to be able to sequentially grow our ability to mine, while if, at the same time, grades drop, but we keep our production levels. And I think that's a very positive attribute, which we really want to stress because I think we have, in our hands, the ability to unlock profitable tonnage from our districts, which is a great, I think, advantage.

And sorry, my last one. I promise this is the last one. It's just BHP's got a target agenda and equal -- gender-neutral workforce that is 50% men, 50% women in the middle of this decade, I think, it is. Your kind of target is about 17%, I believe, in this presentation. I'm just wondering where you think you can get that kind of that range, will that sort of specifics?

Yes. No, we've -- I'll tell René  maybe to comment on this. But we basically set our target in '18 to double by 2022 our gender participation, which we achieved this year. And then what we're doing now is reset that target to get to a 30%. And we're establishing exactly when will that be. We want to do it as early as possible. I think there's been tremendous cultural change in the organization by means of introducing diversity really at the core of our strategy. And we've got operations managers, which are exercising an outstanding leadership in some of our operations. We have the leader and general manager at a railway company is one of our team executives, female. And so that change is taking place at a very rapid pace. And as I say, we have to reset our target because we've accomplished doubling it. Now in 2021, we aim to get now from the 16% to double that, to 30%. And we're just firming up when would that happen. But René, you may want to add a bit more color into that.

Yes. Thank you, Ivan. Yes, you're quite right. So we have reached our target before what we were expecting. And in our opinion, it's because the culture that we have been putting in place over the last years. So we think of diversity not as a number but as a cultural change. And we've been working through the whole process within the complete company at central level but also at the company level. to make sure that everybody understand why we're doing this and why diversity is important, not only in gender but also from different backgrounds as well. As Ivan was saying, we have reached our target. And now we are working on setting our new target, which is basically the 30% that Ivan was referring to. Good news on this is that, for instance, in 2020, as that is explained in our [indiscernible] report, 50% of all the new recruits that we had at Antofagasta were women. And we are also establishing a new apprentice program to make sure that more women, particularly from our local communities, are taking part on these developments. So they can apply to our processes and to be part of Antofagasta. So we are also incorporating not only the gender vector on this but also local employment as well. So we think that is going to create a virtual cycle in terms of diversity, inclusion and helping us to be, of course, a better company.

Thank you. And our next question comes from Tyler Broda with RBC.

I just wanted to -- I was going to ask some other questions, but they've all been asked now. So just back to the low grade, the sulfide, the primary sulfide there. How do you sort of expect to see this fitting within the cost profile? Is this something that's going to give you some incremental tonnes at a bit of a higher cost? I mean that 70% recovery number is pretty impressive. I guess how do you sort of see the potential for that shaping up?

How do we see -- sorry, I didn't get that very clear? Sorry, it faded. Can you...

Apologies. Sorry. It's work from home here in the U.K. Again, apologies for that. You can hear me -- the question was on the low-grade sulfide. I guess with the 70% recovery, it's quite impressive. I guess from a cost profile, how do you expect that to play through?

Cost profile, yes. I mean, Alan, you want to take -- I mean the numbers that we've seen is, obviously, the main advantage here is that we reduced the front capital requirements to be able to mine primary sulfides, which you would only, I guess, mine and process through milling and flotation. So that's the big advantage here. We're talking of a fraction of the capital investment per tonnage in capital expenditure. In terms of operating costs, I would say, it's in our hydro operations, our SX-EW operations because the process is similar. So that's a sort of a level of cost that you would see. But the main advantage when you look at the economics stems from the fact that the investment requirement is significantly lower. And we can use the capacity that we have in our SX-EW and then don't have to move the significant investment required for milling and flotation. I don't know, Alan, if there's any -- if anything you want to add on that?

No, that's exactly right, Ivan. Obviously, if successful as we explained, we could bring forward, right, the processing of ore otherwise scheduled to be mined in many more years or allow to process ore that otherwise would be deemed uneconomic so that we can profitably process. Cost-wise, as you explained, it is in the range of the same cost that we have currently in our hydro plants. Though maybe the upside is that we can also benefit in upskilling to this new process in improving our recoveries for secondary and mixed ore.

And on that, I would say that a lot of the learning that we've done in terms of cost comes from the fact that we are doing chloride leach at Zaldívar and, as we say, built on the same philosophy. And that's a project that we're about to commission. And I mean maybe, Paula, you want to just briefly refer to that project? Because I think from a cost point of view, it's -- we're going to have it ready soon. And it's very similar to what we would expect to see. Maybe you can give us just a brief comment on how that project is progressing at Zaldívar?

[indiscernible] and start the ramp-up on Q1 of 2022. And we are going to increase the production because the recovery increase, and the cost position of the -- at Zaldívar could be better because of the high recovery.

Yes. And as I say again, so this would be similar to what we're seeing in Zaldívar today in terms of unit cost of operation and the benefit coming essentially from lower investment compared to milling. I hope that gives you a flavor.

No, that's -- I was going to -- no, it's very helpful. I mean I guess it opens up strategic optionality as well, right, in terms of finding assets that may be out of [ bauxites. ] So yes, very interesting.

I think we've got 1 minute left until we close the call. So if there's any other question, we can take it up in the time left.

Our next question comes from Daniel Major with UBS.

One final question. I'm just trying to get a little bit more detail on the CapEx sort of budget for Centinela. $2.7 billion came from 2015. There's clearly been large quantities of inflation since then. Yet, you're still talking around a number that's comparable. In 30 seconds, what's been the dramatic changes that have stopped the CapEx budget going up over that quite long period?

I would say that the way that we looked at this is -- this was originally predicated on 2 phases, as we just discussed, 90,000 tonne a day and then expanding it to 150,000 tonnes. And we did quite a lot of work on value improvement, essentially taking out pre-investments, which were there for the second phase and which sort of would have been done in the context of eventually thinking of the project in the large scale. And therefore, there's a lot of value improvement extracted from thinking in the sequential way that we're thinking it and in such a way as making it consistent with the definition of a 90,000 tonne a day plant. So we're really ensuring that the investments we make are, to some extent, ring-fenced to the configuration of Phase 1 because we think the expansion is way further down the road. And that would have to be made a decision in its own right and in its own merits. And so that's been quite in the way that we looked at the project. We look at it now as Phase 1 project with an option to do Phase 2 in 2030 or there. And it was -- before, it was looked more as 1 project in 2 phases. So that's mainly from the point of view of equipment, ancillary infrastructure. We've streamlined and value-improved the project. The other change that we've made, which we think it's a big improvement, it's -- and that's not necessarily translating to less capital. But obviously, we think from an operational point of view, it's an improvement is changing to grinding rolls. I think that is less consumption in terms of energy per tonne passed through the roll. And also, we think it's much more consistent with the type of ore and the hardness that we have. So we are looking at getting performance rates in terms of productivity which are much higher. So those are some of the changes that we've made. And obviously, that does change quite a lot of the configuration in terms of the traction circuits and the like. And so those pieces move quite significantly. And then we've also, well, introduced more remote operations. We're moving the operations of Centinela to be run from Antofagasta in a remote operating center. And therefore, we expect that the second concentrator will simply be taken up from the point of view of how it's run from an operating center, which is already in operation. And therefore, that is a change in how we operate the mine, the number of people, the camps that we have. So all of that has already been factored in the way that we look at the project as well as improvements that we have integrated into the project. Okay. So we're a little bit past the hour. We really thank you very much for attending this Capital Market Day. And I do thank the team here that has worked very hard on getting this -- the production of this video and wish you well. And we'll see you next time. Thank you.