Antofagasta plc

Andrew Lindsay - IR Diego Hernandez - CEO Ivan Arriagada - CEO, Minerals Alfredo Atucha - CFO

Ian Rossouw - Barclays Alon Olsha - Macquarie Research Ioannis Masvoulas - RBC Capital Markets Liam Fitzpatrick - Credit Suisse Daniel Major - UBS Alain Gabriel - Morgan Stanley Anna Mulholland - Deutsche Bank Ed Sterck - BMO Capital Markets

Good morning, ladies and gentlemen. Welcome here to this new venue we're using.

We're going to present our 2015 year-end results. We have with us today Diego Hernandez, our Chief Executive; Ivan Arriagada, head of our mining division and Alfredo Atucha, our CFO.

We'll run through a presentation, take about 40 minutes or so and then at the end we'll open up the floor to Q&A. Those of you who are listening in via audio conferencing, you've been given instructions about how to submit questions.

And we'll probably take the questions from the floor first and then we'll take some questions from you, after that. Okay?

Hand over to Diego.

Thank you for your introduction Andrew. And may I add my welcome to all of you who are here today, as well as those attending via the webcast and conference call.

I would like to start with a brief overview of the year and our thoughts on the copper market, before handing over to Ivan, who will give you a more detailed update on our operational performance and the status of our various growth opportunities. Following this, Alfredo will discuss the financials in more detail.

And then, I will close with a few words on why we believe Antofagasta remains a solid investment, before opening to the floor for questions. I start, as always, with our safety report.

Sadly, one of our contractors was involved in a fatal accident at Michilla. He was killed in a fall of ground in the underground mine.

And although this was our only underground mine and we closed it last year, we have taken the lessons learned and apply them to the rest of our operations. In particular, we're now enforcing our own safety standards on all of our contactors, who make up some three quarters of our workforce.

We put safety first in everything we do and do continue to focus all of our efforts to achieving our target of zero fatalities. We're now recording high-potential near misses and this is giving us some further insight in to the key risk areas at our operations which we expect to translate in to an improved safety record over the coming years.

As we all know, 2015 was a difficult year for the mining industry and it certainly was for us and we do not expect a rapid reversal in 2016. We have ended the year in a net debt position, but it's modest in size and still gives us security and allows us to preserve our options for growth.

Whilst we concentrate on managing our cost structure, we're also very conscious of the need for sustainable development and the importance of working together with the communities in which we operate and we have made significant progress in this regard during the year. We have optimized our portfolio of assets by divesting our water division which we sold for nearly $970 million.

This sale strengthened our balance sheet and allows us to focus more closely on our core activities of mining and transport. Earlier in the year, we acquired the balance of the Twin Metals project that we did not already own.

And at the end of the year, we completed the purchase of Zaldivar. We also closed our oldest mine, Michilla.

Our newest mine, Antucoya, started production in September and is currently ramping up to operating at designed capacity. So, with this change, we have tightened the focus of the Group on copper mining, while adding short term and long term growth.

As we position ourselves in these challenging times, we continue to invest in our assets and optimize our portfolio. However, we must be cautious to maintain our discipline.

This discipline allows us to deploy our resource on opportunities that we have carefully assessed and meet our return criteria. Moreover, we must do all we can to strip out excess costs without increasing the risk at our operations, while maintaining control of our rate of capital expenditures, without compromising our future growth.

We have focused our efforts on positioning the Company, optimizing our portfolio of assets and maintaining our discipline and flexibility. I will give you a brief overview of the headline financials we have achieved and Alfredo will go through them in more detail with you a little later.

Also, please note that all of the P&L figures we will be giving you will be for continuing operations only, unless we say specifically that they are not. The low copper price and lower-than-anticipated production has impacted our revenue which is down 34% at just below $3.4 billion.

During 2015, we produced 630,300 tonnes of copper, together with 214 ounces of gold. We also produced just over 10,000 tonnes of moly, our highest moly production since 2012.

Our copper production was 10.6% lower than the previous year. And we experienced lower throughput at Los Pelambres as moved in to harder ore at the bottom of the pit, as well as lower grades at Centinela.

EBITDA for the year was $890.7 million; a 58.4% decrease from the previous year, primarily reflecting the lower revenues. Net earnings for our continuing operations are down significantly, reflecting the weak market and lower production, offset in part by the lower taxes payable.

Group net cash costs in 2015 were $1.5 per pound which were 4.9% higher than the previous year. While our cash costs before by-products were lower than the previous year, this was overshadowed by the weaker-than-expected by-product prices.

As we all know, the copper price declined significantly during the year, down almost 24% from the previous year. This has impacted our financial results for the year and it has also impacted the way we look at our business over the next few years.

We're responding to these uncertain times by taking actions that will leave us in a stronger position than when we entered the downturn. Times like these are definitely challenging, but they are also times of opportunity; the main one of which is to make changes that give us a firmer, more robust base from which to grow into the upturn of the cycle when it comes.

We have a long term approach to development. And our balance sheet and our shareholding structure allow us to focus more on the positives of what comes from a downturn than on the negatives.

This year, we expect to be at least free cash flow neutral at the prices we have seen during the first two months of this year. Antofagasta's three pillars which underpin our investment case, these are our high quality assets, our focus on costs and our capital discipline and these will allow us to build a firm platform for long term growth.

Let me take each of these in turn. We have a large resource base in two mining districts in Chile which are the source of over 90% of our production and will be the root of our organic growth.

Our operations are low cost and long life. We're focused on achieving operating efficiencies and protecting our margins.

Last year, we initiated our cost and competitiveness program with new goals for rebasing our cost structure and taking advantage of operational efficiencies across our operations. I'm pleased to say that this program has done well, exceeding our targets.

And we will give you more details of this in a few minutes time. We're committed to maintaining our financial discipline in good times and in bad.

This strategy has served us well in the past and we continue to adhere to this principle. Even following the acquisition of Zaldivar, we have modest debt levels and maintain our flexible and robust balance sheet.

We're committed to building a firm platform for sustainable growth without compromising our high-quality asset base or our cost base or our disciplined approach to capital allocation. This is all directed at our overall goal of enhancing shareholders' value in the medium and long term.

Clearly, the copper market is depressed and although expected surpluses have not materialized, the copper price has, in any event, slipped to lows in January we haven't seen since 2009. In 2015, the copper price fell 20% to an average of $2.50 per pound, from $3.11 per pound in 2014 and for the next two years, we expect it to be lower.

We're currently enjoying a rally in the copper price, this does seem to be driven more by financial investors than any change in the fundamentals. Throughout last year there was a constant stream of news on the demand and the supply side, both positive and negative.

The main focus, though, as always, has been China. But on the supply side, new mines, including our own, have been encountering difficulties with start dates and ramps up.

And this, combined with some voluntary closure, has led to the reduced expectation of a significant supply surplus this year. Estimates vary, but there seem to have already been 0.5 million tonnes of annualized voluntary closures in 2015.

The market is waiting to see if there are significant cuts in supply this year and I believe that we will see some if the copper price settles at around ?2 per pound. And if it drops convincingly below $2 then I expect a surge in the number of closures.

Of course, these closures will be, for the main part, temporary but, combined with the lack of new projects being started, the supply side is much more constrained. And, as long as demand grows at 2% to 3% per annum, as we expect, we should see deficits by the end of the 2017, early 2018.

Some producers have already reacted by taking copper out of the market and all have considerably cut their cost bases, helped in part by external factors, such as weaker local currencies and the oil price. Nonetheless, the cost curve has shifted down and flattened as we all seek to protect our margins and maintain our profitability.

On the physical side, we see a much tighter market than is reflected in the weak copper price we have seen at the start of this year. Smelter, particularly in China, are demanding greater quantities of copper concentrate which has been reflected in 2016 TC/RCs' benchmark being set 9% below the 2015 rate.

Overall, we're aware of the current risk to demand. But in the medium to longer term, we remain confident that steady demand growth from emerging markets, particularly China, even as it slows, combined with the current lack of commitment to investment in new mines, expansions will lead to a shortfall in supply and support the recovery in prices.

China defies accurate forecasting. But our confidence in the copper outlook comes not just from the supply slowdown and our own experience on the ground but also from the belief that, with its enormous financial resources, China can manage its way out of the crisis.

They have stated that they plan to move the growth in their economy away from being led by exports and fixed assets investments and more towards increased domestic consumption. However, we feel that, even if this doesn't occur at the rate they originally intended, they will supplement any anticipated shortfall by further investment stimulus.

They want sustainable growth, but they also need to avoid the hard landing and they have the financial resources to prevent such an occurrence. I would now like to pass over to Ivan, who will give you an update on our operational performance and progress on our growth opportunities.

Ivan.

Thank you, Diego. Good morning.

I'm very glad to be here today to present to you our operations review. Most of you are familiar with our strategy.

It reflects how we view our industry and what our long term objectives are. So, just to run through it quickly again, we focus, firstly, on our core businesses, striving for our portfolio to perform at its maximum potential; next, we look for organic growth opportunities at our core businesses to enhance our performance and lastly, we look for opportunities further afield.

Last year was a challenging year, production for the year was down by close to 10%. Some of the disruptions were the consequence of external factors, such as the earthquake in the vicinity of Pelambres and the flooding and heavy rains at Centinela.

But there are also areas where our performance was short of our expectations. While we have started at Antucoya, our new operation and commissioned the crushing circuit expansion at Centinela which will allow higher throughput, they took longer than our initial production estimates had contemplated for 2015.

We have been focusing closely on these areas which will allow us to increase our production, going forward. We reported our production figures in January, so I will briefly summarize them now.

Los Pelambres' principal challenge during the year was to keep throughput levels up as the mine moved in to a new harder ore zone. In the short term, we're optimizing the use of the plant and equipment we already have.

And in the longer term, we have an expansion solution that I will tell you about shortly. Los Pelambres is our flagship operation with costs after by-product credits of $1.23 per pound in 2015.

At Centinela, our throughput expansion plans continued with most of the major equipment being installed during the year. In 2015, we faced lower grades in both copper and gold.

Copper grades were down 11% at Centinela concentrates and down 25% at Centinela cathodes which led to lower production. We produced 221,100 tonnes of copper at the net cash cost of $1.85 per pound.

With respect to Michilla, this was the last year of operation at Michilla. And despite the reduction of staff and closure plans, we were still able to produce some 30,000 tonnes of copper.

Michilla was the Group's first copper mine and has produced copper for over 50 years. However, mining has now become sub-economic, given the increasingly low extraction rates, resulting from a depleted mineral reserve and, therefore, in line with our cash flow discipline, at the end of 2015 we stopped operations at Michilla.

As a Group, we produced 630,300 tonnes of copper during the year at a net cash cost of $1.50 per pound. Our unit cash costs before by-product credits at $1.81 per pound was down compared to the previous year, despite the significant impact on unit costs which flows from the 10% lower production in the year, our focus on delivered cost savings at our operations of more than $150 million or $245 million including the reduction in exploration and evaluation spend.

And this compensated for the lower production before by-product credits. I'll talk about our growth and development options, briefly.

Given the challenging operating environment, we have decided to phase our projects and evaluation studies, including the expansion of Los Pelambres, to protect our cash flow and balance sheet. This also allows the risk in project execution and project costs.

Our approach is to preserve or advance the growth options and to prudently invest through the cycle. We don't anticipate any major capital commitment decision under our current development pipeline until 2017 which we will properly consider at that time in the context of the then prevailing market conditions.

We will, in the meantime, continue to advance our critical path items to ensure we maintain flexibility, should the market conditions change. As you can see from this diagram, our new major development projects are not expected to be completed until after 2020.

At the moment, we're integrating Zaldivar in to the Group and constructing the Encuentro oxides project and molybdenum plant at Centinela. However, we now do not plan to complete either project until 2017 as we're extending their completion dates without any material impact on their project construction cost with the purpose of conserving cash in 2016.

In this environment, our approach is to focus on getting the most of our existing operations, resetting our cost base and improving operational efficiency. And with respect to our development options, preserving them for the future and ensuring they are ready to advance at the right time.

Let me talk a little bit more about Zaldivar. At the beginning of December, we closed the acquisition of a 50% stake in Zaldivar from Barrick Gold, who retained the other 50% and we became the operators of the mine.

We consider this to be an important milestone, as this is the first operating mine the Group has acquired since purchasing Michilla in 1983. We're reinvesting capital from our non-core activity, the water division, in to our core copper business.

And this acquisition was, we think, a rare opportunity to acquire a substantial interest in an established and cost-competitive mining operation. We had been looking at potential acquisitions in the past, but this is the first one we have completed.

We have been operators for just over three months and we're fast integrating the mine in to our processes and organization. The fact that Zaldivar is in Chile makes it simple for us and allows us to extract an estimated $15 million to $20 million in synergies and cost savings in the course of this year.

The marketing is now managed by our team in Santiago and Zaldivar is already benefiting from our Group procurement pricing. Zaldivar is not just an oxide leach, but has leachable sulfides as well and we believe we can improve the recoveries of this mixed material.

We have set up a taskforce to work on a fast-track recovery optimization project and expect material improvements to be achievable, although most of this will be captured after 2016. In 2015, Zaldivar produced just over 100,000 tonnes of copper and has the potential to increase production to 150,000 tonnes over the next five years as the mine moves in to higher grade areas.

In terms of capital intensity, the acquisition remains competitive having no construction or permitting risk and with immediate cash flow on copper production. Antucoya, Antucoya produced its first cathode in September 2015 and 12,200 tonnes during the year.

We're pleased how the ramp up has been proceeding during this current year, although we did have a few commissioning issues, as we have previously mentioned. But we have resolved some of these and are solving the others now.

These issues related to a misaligned tripper of the tertiary crusher which was fixed last year and abnormal levels of dust emissions. Higher levels of dust have been considered in our ramp-up planning for 2016 and we're implementing improvements now that should suppress the dust and return the working conditions to what was initially expected.

We expect Antucoya will reach commercial production in the second quarter and its full production rate of approximately 85,000 tonnes per annum by the end of the first half of the year. Cash costs this year are expected to be $1.65 per pound, rather than the $1.80 per pound we had previously indicated for the first five years which reflects the current more favorable cost environment.

I will refer now to the Centinela mining district. The Centinela mining district has a portfolio of projects and deposits for near- and longer term development and this will be advanced over the coming years.

The first of these is the completion of a debottlenecking project to process 105,000 tonnes of ore per day in the concentrator plant. This project is progressing and the secondary and tertiary crushers have now been commissioned and once the final thickener is completed, it will operate continuously at its new expanded capacity.

In addition to this, we're also constructing a moly plant at Centinela which will come in to production in 2017. This plant, although small and not a big capital expenditure, will provide us important by-product credits, in addition to the gold we're currently producing.

As I mentioned, we have decided to delay the completion of this plant and of Encuentro oxides, to spread our capital commitments over a longer period to conserve cash flow in 2016. Encuentro oxides was approved in early 2015.

Construction is currently underway with the pre-strip effectively completed and completion is now expected in late 2017. This project will provide feed for Centinela SX-EW plant, allowing it to resume production of 100,000 tonnes per annum of copper, with the first full year of production of approximately 50,000 tonnes in 2018.

Importantly, Encuentro oxides acts as a pre-strip for the much larger Encuentro sulfide deposit which lies below it and will feed the new second concentrator at Centinela. As we have previously announced, we intend to build another concentrator at Centinela.

There are nearly 7 million tonnes of mineral resources in the district and the concentrators on the oxide plant provide optionality for how these are developed over the coming years and decades. In June last year, we submitted the environmental impact assessment for the second concentrator and have been working with the local authorities to address their comments on our proposals.

Due to the pressures on the commodity complex and specifically in relation to copper, we have decided to delay the completion of the feasibility study, while still moving it forward, focusing just on the critical path items. If necessary, it can be accelerated again.

But, at the moment, we don't expect to complete the study until 2017. Los Pelambres.

For the incremental expansion at Los Pelambres, we have decided to take a phased approach. In the first phase, we will seek to maximize throughput of the mine under the existing permits that we have in place.

In this phase, we will spend approximately $1.1 billion for a new grinding and flotation circuit to counter the increased hardness of the ore. We will also construct a desalination plant and pipeline that will provide up to 400 liters per second of water.

We expect to make our environmental impact assessment submission during this year and our Board will make an investment decision in 2017, once the necessary permits are updated. In the second phase, we will seek to extend the life of the mine beyond 2037.

Los Pelambres has large mineral resources, but the reserves are limited by the size of our tailings dam. In this phase, we will evaluate the various alternatives to increase the size of the dam and the capacity of the waste rock deposits.

We expect to make our environmental impact assessment submission in 2018, after the first phase has already started construction. This phase is expected to cost approximately $500 million.

We're confident that by splitting the project into two distinct phases we can improve the processing rate to compensate for harder order, whilst taking time to properly evaluate the alternatives to extend the mine life. With respect to other opportunities, we continue to develop our portfolio of growth prospects, both in Chile and abroad, although we have reduced our expenditure in exploration and evaluation by $66 million, as part of our cost saving program.

Twin Metals represents a long-dated option and is the Group's most advanced international opportunity. Earlier in 2015, the Group completed the acquisition of Duluth Metals Limited, our partner in the project, to consolidate the Group's ownership to 100%.

We have reduced expenditure in the project to a minimum, consistent with critical path and permitting milestones. And finally, I would just like to take you through our guidance for 2016.

In 2016, we expect Group copper production to increase to a range between 710,000 tonnes to 740,000 tonnes of copper and gross cash costs to fall by nearly 10% to $1.65 per pound as we increase production at Centinela we ramp up Antucoya and integrate Zaldivar. Net cash costs are expected to be about $1.35 per pound.

I would like now to pass over to Alfredo, who will give you an update on our financial performance.

Morning. Thanks, Ivan.

Firstly, I would like to look at turnover which fell by 34%. The largest impact on turnover was, of course, the fall in the copper price.

The realized copper price declined 23.9% to $2.28 per pound and this reduced turnover by $1.1 billion, 63% of the entire $1.75 billion decrease. Copper volumes sold were down by 9.5% which, together with the impact on this year fees, reduced the turnover by a further $447 million.

Moly production was the highest since 2012, but this was not enough to completely offset the dramatic fall in the moly price which closed the year down almost 50%. The gold price was also down, as were volumes.

And, in total, turnover from the sales of by-products fell by $187 million. Now, turning to costs, the top graph shows the movement in our cash costs before by-products by mine.

Although costs have increased at Centinela, they were down in Las Pelambres and even at Michilla. In the bottom graph, we see that between 2014 and 2015 the total operating cost, including TC/RCs, on a unit-cost basis decreased by $0.02 per pound to $1.81 per pound.

The weaker peso reduced costs by some $0.12 per pound, but inflation offset this drop with a resultant saving of $0.07 per pound. Our cost reduction was further supported by lower input prices, such as energy, diesel and acid which lowered costs by a further $0.10 per pound.

However, these reductions were outweighed by the impact of the 10% decrease in production between the two years which increased unit costs by $0.24 per pound. Our cost and competitiveness program has contributed some $150 million of cost savings, resulting in a drop in the cash costs of some $0.11 per pound and I will speak about this a bit more, later.

EBITDA, EBITDA fell 58.4% to $891 million during the year, with the fall in revenues accounting for a decrease of $1.75 billion which was partially offset by a reduction in mining costs of $433 million and exploration and evaluation costs which were $66 million lower. These factors led to a $1.25 billion fall in EBITDA.

The Group made every effort to preserve margins in this difficult environment which still dropped slightly to 26.2%. Net earnings have been restated for 2014 to exclude discontinued operations, officially, the water division.

Net earnings for the year decreased $417 million over the previous year to $5.5 million. Net earnings in the first half of the year were $90.3 million; but in the second half of the year the Group recorded a loss of $84.8 million, mainly explained by Centinela.

For the Group, the impact of the fall in EBITDA was partially offset by lower corporation tax and lower minorities as profitability dropped. However, the Group effective tax rate did increase from 46.3% to 61.8% which was primarily the result of carry-back losses and the application of the mining tax.

I would be happy to give you more detail on this in our Q&A session, but I will not dwell on this now. Operating cash flow, moving on to operating cash flow, despite a decrease in revenues, the Group operations continue to generate significant cash, $858 million during the year.

This was a year for us to optimize our portfolio. And, as you can see, the sales of our water division almost offset the investment we made in acquiring the 50% share of Zaldivar.

Capital expenditure for the period was $1 billion, some $250 million less than 2014, as we completed construction Antucoya. This resulted in a closing gross net debt position of slightly over $1 billion, compared to $1.6 million net debt at the beginning of 2015.

On attributable basis, we're in a net debt position of $525 million, compared to $315 million of net cash at the end of 2014. These figures include $483 million of subordinated debt at Antucoya and Centinela provided by our joint venture partners, Marubeni.

If we exclude this debt, our net debt on a gross basis is $540 million and, on an attributable basis, $187 million. [Indiscernible] cash, but to maintain the flexibility of our balance sheet we're planning to raise about 50% of the purchase amount as a corporate loan.

I mentioned a few slides back, that our costs and competitiveness program have made $152 million of mine site savings during 2015. These savings were obtained through lower negotiated prices with our suppliers; savings flowing from the merger last year of Centinela and various operating efficiencies we have achieved.

These do not include savings from external factors, such as the weaker peso or lower energy or asset prices. In addition, we reduced our exploration and evaluation expenditure by $66 million and our corporate costs by $28 million, so, in the total, we have reduced operating costs by just over $245 million.

This is an equivalent to about $0.11 or 8% of the mining division 2014 operating costs. This year, our target operating cost savings are $160 million which are included in our cost guidance figure.

Total CapEx for 2015 was $1 billion as we completed construction of Antucoya and began construction of the Encuentro oxides project and the molybdenum plant at Centinela, nearly $600 million less than 2014. Expenditure on Antucoya was $144 million, while $179 million was spent on Encuentro oxides and $18 million on the moly plant.

Combining with the $245 million of lower operating cost this gives us a total reduction of expenditure of over $840 million in 2015. As we have mentioned, this year we're slowing down the development of Encuentro oxides and the moly plant and spreading the costs over the next two years.

This helps us to drop our expected development capital expenditure to $400 million in 2016. This year, we expect to incur $265 million of stripping costs at Centinela, up from $60 million, $65 million over the last two years, as we work on mine development for future period, as per our mine planning sequencing.

We're making a committed effort at reducing our sustaining CapEx and expect to spend $285 million, compared to the $350 million we previously guided you. Our sustaining capital expenditure per tonne of copper produced which is a key metric we use, has been steadily declining from $566 in 2014 to an expected $414 in 2016.

Overall total capital expenditure, including pre-capitalized stripping costs, will be at almost the same level in 2016 as it was in 2015. These figures do not include Zaldivar, as it is accounted for a joint venture, but capital expenditure there of 100% basis is expected to be $110 million in 2016.

I would like now to pass you back to Diego. Thanks very much.

Okay, thank you, Alfredo. So, to wrap up this presentation and to remind you of what you already know, we have a portfolio of quality long-life assets.

We're focused on developing and expanding our two world-class mining districts and we're well positioned on the cash costs curve. We're focused on operating efficiencies and protecting our operating margins.

We're committed to maintaining our financial discipline in good times and in bad. This strategy has served us well in the past and we continue to adhere to this principle.

We have modest debt levels and maintain our flexible and robust balance sheet. We're committed to building a solid platform for sustainable growth without compromising the quality of our asset base or our cost base or our capital discipline.

Thank you for your time. And now we would be happy to take any questions you may have.

Ian Rossouw from Barclays. Just a couple of questions, firstly, on the working capital, Alfredo, I remember you were saying in the first half we saw quite a strong inflow in working capital and, at the time, you said you expect that to remain relatively stable.

But it looks like in the second half there was basically a $260 million outflow in working capital. Maybe if you could just give a bit more detail around that and your expectations for this year.

And then, just on the moly plant, previously, you've expected the project to be pretty strong returns. Is the delay in this just because you don't think the profitability would be good?

Or surely, you've got enough debt capacity and your leverage ratio doesn't look that bad, so why make the decision to delay this?

Alfredo, let me answer the second part of the question. I think the way we will be managing the Company this year is protecting cash.

Then, with current price, we should end the year without increasing our debt level. For that, we have delayed the project split in the way that we split the investment between this year and next year.

Moly price, as you know, are not very attractive; that's why delaying the moly plant doesn't affect too much and the same for the Encuentro oxide project. The main reason to delay the projects is to keep cash and without increasing our debt.

Alfredo?

In terms of working capital, we have been concentrated on improving our working capital in the last couple of years, especially in inventories. In terms of the stock, we have reduced by $100 million the total stocks during 2014 and 2015.

In 2015, we continue with this reduction in stock. However, we suffered some deterioration in the creditors, not from changing in the payment terms, but basically due to two factors, the first is lower level of OpEx and CapEx and the second effect was arising from the SAP implementation.

As a consequence of that, in December we need to anticipate the payment from January to December, reducing significantly the creditors. And finally, we reduced practically all the creditors coming from Michilla as a consequence of the closure.

So creditors was the main impact in the second half and especially in the last couple of months, in the last month of the year 2015. But this is a very temporary situation.

So our objective is to maintain our effort in reducing and improving the working capital, especially inventories and, of course, we recover the position at creditors.

So what is a sustainable level for creditors? Or what's the absolute number we should look at, going forward?

Yes.

No, but what number would you say? What do you expect the inflow in creditors to be for this year?

I think that our intention is to maintain our total working capital level during 2016 in the region of the same figure that we have at the end of 2015, $800 million, $850 million.

Alon Olsha from Macquarie. Just three questions, quick questions.

Firstly, just on Centinela cathodes, your decision to slow down Encuentro oxides, how is that going to affect production volumes at Centinela in 2017, because the feed there is supposed to keep that plant running close to name plate? And then also, how does it affect unit costs there?

And then secondly, just generally on your Group unit cost guidance, the Chilean peso, at the time you announced your guidance, was at around 7.15, 7.16; it's now strengthened to 6.80. Does that put your guidance at risk?

And then finally, on your Group production profile going out for the next few years, about a year ago, I think at your previous annual results, you put a chart with your long term expectations, expecting volume to hit 900,000 tonnes by 2018; that was excluding Zaldivar. Given the changing conditions and some of the things you've said today, how does that profile change?

Okay, with respect to Centinela cathodes, the extended execution on the Encuentro oxides of approximately eight months will have an impact of around 15,000 to 20,000 tonnes of copper being moved to 2018. And that's something that we factored in to our plans and calculations in making this decision.

I think the decision to delay the project is basically preserving its return. And one of the advantages that we think that we can also harvest from this extension is lower project costs.

We're seeing an ease in the contractors market and, therefore, we believe that we can also complete the project, even though we will take a bit long, at the same or lower cost than what was originally envisaged. And I think that's also true in the case of the molybdenum plant.

In respect of the second question with regard to the exchange rate - we, obviously, to the extent that the exchange does - the peso does appreciate, it has an impact on our costs. And around one-half of our cost structure is peso and one-half is dollar-based and, therefore, it does have an impact.

I think we're not anticipating a deviation from the cost guidance that we've provided so far. We will be updating this periodically, in the course of the quarterly reports.

If we see this change in exchange rate to be permanent then some adjustment may be warranted, but we're not foreseeing that at this moment. And then finally, with respect to production guidance in the long term, I think the 900,000 tonnes is aspirational in nature in the sense of the projects that our possibilities and options being put together and advanced in terms of execution.

We still are moving in the direction of increasing our production with the projects that we have, especially Centinela, the second concentrator and Pelambres and, therefore, we continue to move in that direction. Exactly where we will be in 2019 or 2020, is something we will be providing, I guess, numbers at a later stage, not now.

But I think the fact that we've extended the period for Centinela district for a year means that that number probably has moved a year as well. So the 900,000 should be considered as a year later, because of the Centinela deferral.

And we defer that because we don't want to take any investment decision for a new project this year; we want to be ready by the end of next year. Why?

Because of the market that has been worse than expected. The other question about exchange rates, if the peso strengths a lot, it's because copper price goes up.

Then, it's a direct relation there between exchange rate and copper price. Chilean economy is copper dependent and both are very related.

Then, if the peso is stronger it's probably because we have good news.

Ioannis Masvoulas from RBC. Three questions, first, on labor costs, given the Chilean labor reform, do you see the risk of higher costs for outside contractors?

And how are you positioned to address that? Second question, on stripping costs at Centinela, do you see stripping costs remaining elevated for 2017, too or is it just a 2016 issue?

And third, on taxes, can you give us guidance on the effective tax rate for the current year? Thank you.

Well, let me start with the first one about labor costs. The labor reform, we don't like it, but it shouldn't affect our labor costs because what it is about is to strength the unionists and trade union federation and so on.

In our industry, we have a very high rate of - all our employees are unionized for many years. The average unionized workforce in Chile, depending on how you count, goes from 10% to 15%.

On the mining industry, workers are in excess of 90% unionized. Then, it shouldn't affect our costs.

Okay, with respect to the stripping cost of Centinela, this reflects, essentially, the fact that we're opening faces which will benefit in a period different to this year. So it's a very important investment with respect to the complying with our planned sequencing and feeding ore to our mill.

We expect that we will have a period in 2016 and 2017 where we will have higher expenditure in stripping that we've guided for this year and then that to come down again in 2018. And this follows, as I say, the mine plan sequence and the different faces that need to be opened and exposed to be able to feed the plant with the high grade ore.

In terms of the tax, well, effective tax rate differs from standard rate basically due to the tax losses at Centinela and Antucoya. In accordance with the Chilean tax law, the tax laws have marginally carry back, generating a credit at a historic rate.

Historic rate was in the region of 18%. But because of this is a timing difference, we need to calculate a deferred tax.

And the deferred tax is calculated using the tax we'll provide when the timing difference reverse and this is 27%. So this is basically the impact on the effective tax rate, among other minor effects.

We think that during 2016 we should be, again, in the region of 40%, 42% effective tax rate. This was a very particular situation in 2015.

Liam Fitzpatrick from Credit Suisse. Two questions, first, on M&A, given where your balance sheet is now, is that you largely done on deals or are you still looking?

Secondly, on production at Zaldivar, you've given a fairly wide range, up to 150,000 tonnes. Can you give us a bit more of a feel for how that could evolve, post 2016?

On M&As, of course, we monitor the market and we look what is going on. We haven't seen too many opportunities in copper.

We consider that the best opportunity has been Zaldivar in the last 12 months. The other two that we have seen recently, one is Morenci and the other one is Kevitsa, both imply long term copper price at least of $3.20 or more.

And then, I think we monitor what is going on in the market. But at the same time, we make progress in our projects in a way that we keep all our options open.

On the production profile of Zaldivar, as I mentioned before, we have been operating the mine now for three months, so we're reviewing the mine plans in detail. But what I can tell you at this stage is that the profile will, essentially, be similar production in 2017 to 2016 and then over the following three-year period an even annual increase to get to 150,000.

I just caution, however, that we're looking at the plans and optimizing them, so that may change slightly. But that's, essentially, the pattern that we expect to see.

[Indiscernible] from JPMorgan. The priority for 2016 seems to be, clearly, to not increase the net debt number.

If we think about copper prices or other inflationary factors coming back, are you still committed to a 35% dividend payout in 2016; i.e., would you be willing to pay the dividend this year from balance sheet?

Well, our dividend policy has not changed. It's a minimum of 35% payout ratio.

The reason why we're not paying a final dividend now is because on the interim was big enough to cover the 35% or more. That's the only reason we haven't changed our policy and the Board doesn't intend to change it.

It's Daniel Major from UBS. Two questions, firstly, in terms of your medium term project profile and capital allocation, if I look at the Centinela second concentrator and the Los Pelambres project, if these were to be developed simultaneously between, say, 2018 and 2020 in the current price environment that would suggest that a substantial increase in net debt would be required to fund those projects at the same time.

Can you give us a sense about how you're feeling about the prioritization of those two projects, I guess particularly in respect to today's announcement of the phasing of Los Pelambres, to allow you to commit capital for that project prior to the approval of the water permits? And then secondly, looking at your cost reduction target of $160 million in 2016, can you give us a sense of how much of that might be coming from corporate and exploration spend and a guidance number for those two line items in your P&L?

Yes, okay, on the project pipeline, as we've said, we basically are advancing those projects, but expect no commitment to execution until 2017, at the earliest. And that will be considered in the context of the conditions then.

I think if we have to prioritize them, Pelambres is certainly - Phase I is a project that we would look at as a first priority. It's got several advantages beyond the simple higher return that Pelambres has; but also the fact that it involves a lower investment and it basically allows to compensate for some of the harder ore that we're seeing today and, therefore, increase production to levels that we've seen in Pelambres before.

And then, we would look at Centinela. I think that would be the sort of order in - we would look at them.

But again, any significant commitment going forward in terms of capital allocation, we would take in consideration of the conditions prevailing at that time.

In terms of cost program, the $160 million considered for the year 2016 are basically due to our competitiveness and cost program implemented during 2016. Basically, we will be concentrated on to renegotiate a group of contracts.

We're implementing a very aggressive productivity program in - on the seven biggest service contracts in Los Pelambres and Centinela. We're going to centralize, in a radical way, all the functions at corporate level; that means accounting, tax, treasury, financing, human resources and doing that, we will be in condition to capture in the region of $25 million just for this action and this initiative.

And we're improving our maintenance program and incorporating some preventive maintenance program, in order to improve our planned utilization and be more efficient in terms of the operating cost. So, we think that basically these are the main aspects to be considered in 2016.

In this figure, we have not considered any benefit coming from exchange rate or non-controlling prices movement, so just the competitiveness and cost program in this initiative I mentioned.

Sorry, just to follow that, do I interpret that as all of the $160 million of savings comes from mine site costs and your corporate overheads and exploration spend would be similar year on year? Is that--?

Yes, that's correct.

Alain Gabriel at Morgan Stanley. My question is on Los Pelambres, in light of the new phasing, should we exclude the expansion of Los Pelambres, where do see volume evolving by 2020?

More importantly, where do you see the gross cash costs evolving in the context of the rising rock hardness and the fall in grade? Thanks.

In terms of volume, what we think is that with the Phase I expansion that volume at Los Pelambres would go back to around 400,000 tonnes of fine copper. And if we don't exclude the expansion, we expect grades will probably be - we're projecting that they will be fairly stable, declining only gradually and, therefore, that we would be in the range of between 350,000 tonnes and 360,000 tonnes.

And the impact on the gross cash costs of the rising rock hardness? 0Would there be an impact on the gross cash costs of the rising rock hardness by 2020 should you not go ahead with the Phase I?

Pelambres had a net cash cost of $1.23 last year and what we're expecting is that the level of cost would be in the range of $1.25, even in the most adverse conditions; it's a pretty cost efficient operation.

Thank you.

Anna Mulholland from Deutsche Bank. Just a specific question on your production guidance for this year, what's the difference between the 710,000 tonnes and the 740,000 tonnes; i.e., what's the biggest risk that you come in below the top end of the range which is what you've based your cost guidance on?

Within that, what is your Centinela concentrate grade profile for this year, going in to next year? And then, a final question on Los Pelambres in terms of the various legal actions.

You've given a lot of detail in your statement this morning. We're expecting decisions on most of those legal actions at some point this year.

Where are you at with that? And specifically, are you feeling more optimistic, more confident as we go into those decisions or less and why?

We'll answer the last question. If we compare the legal situation that we have in Pelambres today with a year ago, we have improved.

Then, to demolish the tailings dam is out of question now, legally. Then, we have made progress on that, but we're not yet there; we haven't reached a final agreement yet with the communities, but we're in a better position.

In the case of the production rates, I would say that there are a couple of things that would or could be subject to variation. One is we're ramping up Antucoya, as you know.

The ramp of Antucoya is going well. As I have mentioned before, there is one issue with the levels of dust that we're dealing with and we're basically implementing a solution to that.

But there could be variations around that and that is a factor that provides for some of the range that we've given. I think in the case of Centinela, we have the crushing circuit which we have completed.

The equipment is implemented. But there is a thickener as well, a third thickener that we're finishing the construction and that will complete basically the expansion, allowing us to reach the 105,000 tonnes of treatment that we have already installed.

So, it's essentially around completing that piece of equipment. Then, could be some external factors, as we did experience in 2015 which could have an impact; but obviously, those tend to be more of a random nature as are related to the weather and so on.

In terms you also asked about the concentrate grade. We don't expect variations to what we've had in terms of grade for concentrate in both Pelambres and Centinela over the past year.

Questions, no questions from the web? There is another question here?

Can I just come back to effective tax guidance for the 2017 effective tax? When should we expect the deferred tax credits to be fully utilized?

Is 40% to 42% effective tax rate appropriate for 2017?

Yes, we expected to have a 40%, 42% effective tax rate in 2016, because of we don't think we have again the tax loss situation at Centinela and Antucoya in this year. So, yes, we will return to the normal effective tax rate.

In 2017, yes, we will be in the region of the similar situation, between 40%, 45%, depending on some specific peculiarities of the income tax law in Chile, as consequence of the tax reform, but it will be in this area.

Dan Major from UBS. Just a quick follow up.

You identified some synergies that you used locked in at Zaldivar. Is that it for the synergies or as you still working on further opportunities to add to those?

No, we're working on further opportunities. It's, as I was saying, early days.

We've only been operating for Zaldivar for three months. We've basically moved all the marketing, as we had said before, in to our marketing operation in Antofagasta and, therefore, did not require, basically, the marketing organization that Zaldivar had.

We're reviewing all the contracts to ensure that we get the same pricing that we're getting for Group purposes and that's something that's still ongoing, still progressing, therefore, there's more to be identified there. And then, out of incorporating Zaldivar into our cost and competitive program, we've identified, the Zaldivar management team has identified, around between $15 million and $20 million.

This is preliminary. I think we continue to work and we should expect to identify more going forward, as well.

As I mentioned before, in addition to that, we're working on this recovery optimization project, where we do have identified there is potential there for us to increase recoveries and, therefore, have set up a task force to fast track that.

Could you give us a sense of the magnitude of additional synergy you believe is possible?

I think it's probably too early, beyond the numbers that we've given. But we will provide that in as soon as we've got numbers that we can feel more confident with.

Thanks.

Ed Sterck, BMO. Just on that question on Zaldivar, the $15 million to $20 million, is that included in the Group level cost savings target of $165 million?

And then also, just a simple question, is that attributable or 100%, in terms of the cost savings at Zaldivar?

Yes, it's not included and it's 100%.

Just a follow up question on Zaldivar. You mentioned the five-year target to get to 150,000 tonnes, is that mostly grade that you mentioned?

Or do you also expect the improvement in recoveries or any other improvement in the production process to get there?

That's essentially driven by improvement in grade. We have not factored in what could be the potential impact of the recovery optimization that we're undertaking.

As we sort of firm up those numbers and what those recovery improvements might be, we will include those, but they're not included in the 150,000 tonnes, it's grade driven.

Okay. Thank you very much.

Thank you.