Antofagasta plc

Andrew Lindsay - IR Ivan Arriagada - CEO Alfredo Atucha - CFO

Daniel Major - UBS Alain Gabriel - Morgan Stanley Tyler Broda - RBC Jason Fairclough - Bank of America Edward Sterck - BMO Jitender - Exane BNP Paribas

Good morning, ladies and gentlemen, my name is Andrew Lindsay. I run Antofagasta's office in London.

Today, we bring you our half year results webcast. So this year, for probably many years, we're bringing it from Santiago.

And we have here Ivan Arriagada, our Chief Executive; and Alfredo Atucha, our CFO, who will take you through the presentation. I'll hand you over to Ivan.

Thank you for your introduction, Andrew, and welcome to Antofagasta webcast and conference. I would like to start with a brief overview of our performance during the first half of the year.

Alfredo will then take you through our financial results. I will then talk about the copper market and our development options, with a focus on value delivery and return.

Finally, I will close with our guidance for the year, which is unchanged, and key messages before opening the floor for questions. I'm pleased to start by saying that there have been no fatalities at the group this year.

And indeed, we have had no fatalities since 2016. We are working hard to ensure that this continues to be the case for the rest of the year and the years thereafter.

We continue to focus on reporting high-potential incidents and then the verification of critical safety controls. We have extended the focus we applied to safety to also include health.

This will further help our past efforts to prevent future risks of disease or injury as a result of tasks carried out today. As expected, it has been a challenging first half of the year with the lower grades impacting our performance.

It is important to remember that we always said that 2018 would be a year of two very distinct halves. As we have been guiding previously, our production profile for the year is skewed to the second half, as grades are projected to increase throughout the year, allowing us to meet full year guidance.

This improvement in grades will also be maintained and carried into 2019. The greatest improvement in performance is expected at Centinela Concentrates, where the increasing grade will be the most pronounced as mining moves into a higher-grade areas of the Esperanza pit.

We also expect to achieve higher recoveries at Zaldívar and Antucoya. In both cases, processing conditions have been adjusted earlier in the year to optimize recoveries but the typically more extended leaching cycles will result in improvements later in 2018.

There are some headwinds, such as cost escalation from input prices and a stronger Chilean peso. However, we remain focused on cost, operating consistently and using all of the capacity at our operations.

At the same time, we continue advancing the growth alternatives at Los Pelambres and Centinela and focus on returns to shareholders. You have all seen this slide before, but it is center to how we operate, and our decision making process for capital allocation is simple.

Cash is applied first to maintaining our operations, including sustaining CapEx and mine development, and is then allocated to pay dividends according to our minimum committed payout ratio of 35% of underlying net earnings. We then consider capital investment in development options with a strict focus on returns, with then excess cash returned to shareholders typically by paying a larger final dividend.

The 2017 total dividend, which was completed in May this year, was $500 million, equivalent to a pay ratio 67% and the interim dividend this year is $67 million, which represents 35% of net earnings. In the period, we also repaid some $310 million of debt.

Now turning to the highlights during this period, as I mentioned earlier, during this first half year, we had no fatalities. In terms of copper production, we produced 317,000 tonnes in half one.

As you will recall from the beginning of the year, we planned to produce 45% of the annual production during the first half of the year. And if you allow for the 9,200 tonnes of copper in concentrate stockpile at Los Pelambres are being placed as a result of the pipeline blockage, we achieved this.

Our production guidance is unchanged for the year at the range of between 705,000 and 740,000 tonnes, and a net cash cost of $1.35 per pound. We have labor negotiations with the two main unions at Los Pelambres, which were completed successfully.

And now, our next scheduled negotiation is not until next year. As part of our plan for monetizing some of our infrastructure assets, in July, we announced that we came into an agreement to sell the open access and regulated sections of Centinela transmission lines for $117 million, and we are considering divestment alternatives for some of our other energy and water assets.

Social and environmental issues are important to the sustainability of our business and the way we approach this is key. At Zaldívar, we submitted an Environmental Impact Assessment to the authorities to extend our water permits to match the life of mine currently extending it to 2029.

And we also entered, in Zaldívar, into a renewable power agreement. During this first half of the year, we have continued working on optimizing our assets.

Los Pelambres continued delivering high-performance. The blockage of the concentrate pipeline was an isolated incident, as we have moved to more intensive maintenance practices and have adjusted our procedures to avoid this type of event recurring.

Los Pelambres received approval for the environmental impact study for the Phase I expansion. I will refer to this in more detail in the growth alternative section.

At Centinela, we have added a second line of oxides through the addition of a new open-pit mine and a plant, including crushing and heap leaching to feed the existing SX-EW facility. Encuentro Oxide is ramping up and is expected to contribute some 40,000 tonnes of copper this year.

The moly plant is also ramping up at Centinela, and we shipped our first cargo of moly from Centinela in July. As mentioned before, and as part of our plans, we agreed to a sale of a section of the power transmission lines for $117 million at Centinela as well.

At Antucoya, we are focused on further recovery optimization and we're looking at ways to further improve dust management and spent ore disposal to [Indiscernible] for the high level of fines in the mine ore. At Zaldívar, we continue to optimize recoveries for high sulphide content ore.

Actions taken include reducing the height of the leach pads and adding chloride following the Michilla patented process. During the first 6 months of the year, Zaldívar signed a new power purchase agreement, which will bring its energy cost down from 2020 onwards, and it will be the first mine in Chile to operate with 100% of renewable energy.

I would like now to pass you over to Alfredo, who will give you some more detail on our financial performance.

Thank you, Iván. Let's now move to our financials, and let's start with a brief overview before going into more detail.

Revenue rose by 3.6% to $2.1 billion for the year, while EBITDA was $904 million, 16% lower than in the same period last year. This is consistent with our previous guidance of lower sales costs and higher production costs impacting our first half EBITDA.

Earnings per share totaled $0.194 per share, 34% lower than in the same period last year due to lower EBITDA and higher depreciation and amortization charge as Encuentro's oxides is now in production. Operating cash flow at $890 million was down 22% because of lower EBITDA, and net cash costs were $1.52 per pound.

Our EBITDA decreased by $175 million to $904 million in the first half 2018. The impact of higher realized copper, gold and molybdenum prices was $239 million on revenue, partially offset by lower sales volume because of planned lower mining grade, which reduced revenue by $175 million.

Mining costs increased by $191 million, partially due to the start of the Encuentro Oxides mine and plant. Of course, we are also impacted by the strengthening of the Chilean peso and higher input prices, especially energy and diesel, acid and steel-based consumable like grinding balls.

Additionally, we're spending $3 million more on exploration and evaluation as we move to progress exploration work at what we consider a highly prospective target in Chile. The evaluation expenditure at Twin Metals also increased following the reaffirmation of the project right to renew its mineral lease.

A continuation for our Transport Division associates and joint venture has also decreased by $9 million. At the railroad, although transport volumes increased by 2.2%, higher diesel costs reduced margin temporarily, and this get passed to the customers.

Now turning to cost in '18, the top graph shows the movement in our cash costs before byproduct credits by mine. Cash costs before byproduct credits were up $0.36 per pound compared with the same period last year.

All operations were affected by the stronger local currency and higher input prices. In the case of Los Pelambres, in relation to costs, we're impacted by the one-off signing bonus.

However, after byproduct credits, Los Pelambres unit costs at $0.104 per pound were 5% lower in the first half compared to the last year. At Centinela, the stronger local currency and higher energy, diesel and acid prices were combined with the new Encuentro Oxides mine and plant coming into production and ramping up to achieve full capacity later in 2018.

In addition, lower grade resulted in lower absorption of fixed cost as copper production declined. Our total group level byproduct credit were $0.40 per pound for the first half, $0.08 per tonne higher than in 2017, which brought our net cash cost to $1.52 per pound.

In the bottom graph, you can see the driver of the change in the cash cost. Our successful Cost and Competitiveness Programme achieved $64 million in savings reducing cost by six-- sorry $0.07 per pound during the first 6 months of the year.

Expected lower production for the first half of 2018 impacted unit cost by $0.29 per pound, while exchange rate, inflation and input costs brought costs up by $0.13 per pound. As you know, we implement our Cost and Competitiveness Programme back in 2014.

And from then, nearly $580 million has been removed from our cost structure. Productivity improvements are not just something that we do in the downturn, but are something that we strive to do all of the time just in the same way as we always strive to improve safety.

Our target this year is $100 million, of which $54 million have been captured so far and a large portion of the annual target has been already identified for our team. One of the main goals of this program is to improve the structural competitiveness of the group, and we believe that by embedding our program, framework in the company, we will achieve this saving in a sustainable way.

We are committed to continue working to improve our cost position. The total capital expenditure for the half year on a cash basis was $422 million, and we are on track to be at or below the $1 billion guidance for the year.

As we explained at the beginning of the year, in 2018, sustained capital is projected to include a concentration of scheduling mine fixed replacement and tailing dams, well enlargement costs during the year. Moving on to cash flow and the movement in the group net debt position.

Net debt decreased by $79 million before paying the final 2017 dividend of 400 million, which took the closing net debt to 781 million. Cash flow including EBITDA from subsidiaries of 845 million plus a cash positive contribution in working capital movement of 46 million.

Main cash outflow included taxes paid during the period, which were higher than in the same period last year even though pretax profit reduced. Prior year provisional tax payments are based on previous year's profit, which were higher in 2017.

In addition, tax payments also include 148 million of payment in settlements of the sustaining balance in respect of the 2017 tax charge. Although it is not shown in the graph, still debt repayment totaling a net of 308 million were made during the first half of the year.

As of the end of the period, our net debt EBITDA ratio was 0.32 times, maintaining the strength of our balance sheet. I would like now to pass you back to Ivan.

Thank you very much.

Thank you, Alfredo. I would like to say a few words about the copper market.

The outlook for copper in the medium term remains very positive. China continues to grow strongly, as do the other major economies in the world, and the role of copper in a more sustainable and green economy is well recognized.

On the supply side, significant constraints remain given grade decline and the long lead times on relatively low production expected from the new projects in the industry's pipeline. However, in the shorter term, we expect volatility in copper prices to persist.

Uncertainty arising from the ongoing global trade negotiation is impacting all commodities. And in the case of copper, although we have not seen any discernible impact on demand yet, the market seems to have already reacted.

To date, disruptions to global supply have been lower than normal, and currently, everyone is watching labor negotiations here in Chile. The main risk, of course, is that the trade war might impact global trade and that will be negative for commodities, especially if it were to have a knock-on effect on economic growth in emerging markets.

In the meantime, the impact is being felt through the short-term price decline. However, we are well positioned, especially with our improving grade profile and in the long-term, the outlook continues to look very positive for copper.

Now I take you through our growth opportunities. During the year, we have continued progressing with our two main development projects: the Los Pelambres incremental expansion and the expansion alternatives at Centinela.

By the end of this year, we expect to approve the 1.3 billion Los Pelambres expansion, with production starting towards the end of 2021, adding 55,000 tonnes of copper production a year. At Centinela, we will decide on whether to expand the existing plant or build a separate one by the end of the year.

And in either case, we expect production to start in 2023. The second concentrator would add 180,000 tonnes of copper equivalent and the alternative expansion would be smaller, and we're working on quantifying this at the moment.

In addition, we have continued reshaping our portfolio, investing in mining projects and divesting some of our non-mining assets. We announced the sale of the Centinela transmission lines in July, and we're now considering monetizing the value of some of our other infrastructure and equity investments.

Remaining focused on copper mining is core to our strategy. On guidance, as I mentioned earlier, our guidance is unchanged.

For the full year 2018, production guidance is in the range of between 705,000 and 740,000 tonnes and net cash cost to be close to $1.35 per pound, assuming no further strengthening of the Chilean peso and current moly prices. For the second half of the year, you will see our production up as grades will grow quarter-by-quarter, and at the same time, our costs will decrease to reach our targets.

So let me conclude then by summarizing the main points. As expected, this has been a challenging first half of the year and grades are expected to improve in the second half of the year and that will get -- carried on into 2019.

We remain focused on cost and operating consistency using all of the spare capacity at our operations. Our growth projects are on track and we are committed to maintaining our financial discipline.

We have low debt levels, and have a flexible and robust balance sheet. Thank you for your time.

And now I will be happy to take any questions that you may have.

A few questions. Can you give us any guidance on your expended expenditure in exploration and evaluation and also corporate and other line in the second half of this year running to next year?

Secondly, on costs, I believe there were a number of one-off items that are not captured in the net cash cost guidance, some increases in provision, some environmental expenditure, et cetera. Can you give us any guidance on those items going forward, whether they will be repeated?

And then the third question, we're halfway through the year, can you give us any preliminary guidance on CapEx for 2019, assuming that you approve the Los Pelambres expansion in line with your plans by the end of the year?

Look, on costs, I mean the first thing I would stress is that if you look at our unit cost performance in the first half of this year compared to the prior year, 80% of that is linked to lower production volume. And therefore, as we move into the second half, the rate of absorption of our fixed costs increases due to higher growth and higher production.

And therefore, we expect to see that, therefore, removed from our cost increase and cost base. And then the balance of the cost increase on a unit basis is exchange rate and input costs, and about two thirds or half -- between half and two thirds of that was actually compensated by our Cost and Competitiveness Program.

As you've mentioned, we've had a few one-off items, so there is some environmental compliance expenditure. We also spent some amount in what -- the sort of closure of some Chilean assets and those are one-off.

And therefore, we do not expect those to recur in the second half. So we're not expecting any material, I would say, one-off items or charges as we move into the second half and then the rate of absorption out of higher production, which is the main component of the unit cost increase in the first half we think will help our cost come down quite significantly in the second half.

In terms of exploration and evaluation, we have, in fact, increased our spend in exploration. I think we've got a few targets which we have been working on now for a few years in Chile, and we feel those are very attractive and prospective.

And therefore, we are spending more money on drilling, which is where we want our exploration money to go. I think the trend of spend of the run rate that you've seen in exploration spend in the first half is likely to continue in the second half maybe slightly lower, but in that order of magnitude.

And as I say, it's very much driven and directed towards specific targets that we've been looking at for quite some years, and which we're now moving into doing some very significant drilling there. On the capital expenditure, I think we will provide guidance when we release later in the year our third quarter production figures, as we normally do.

And therefore, I am unable now to share specific numbers. I think we have been keeping our capital expenditure figures within guided figures.

We've guided for this year that it would be in the range of around $1 billion, and we're probably coming at a number which is slightly below that. If you look at next year, we expect to have spend on sustaining CapEx and mine development.

I think different to this year where we have some specific mine replacement activity and also the enlargement of some of our tailings dam, some of that spend will not be there next year; but we will add, on the other hand, the development of the Los Pelambres incremental expansion. So figures I think will compensate, and therefore, we don't expect to see great differences in CapEx year-on-year.

However, specific numbers we will give guidance as we move into the later part of the year and release our third quarter production results.

Great. So just to follow-up on the CapEx.

That you reiterate the mine development and sustaining CapEx is expected to drop sequentially year-on-year in 2019 versus '18. Is that correct?

If you can repeat that, sorry, we didn't get that...

You expect mine development and sustaining capital to sequentially drop year-on-year in 2019, is that correct?

In the case of sustaining CapEx, yes, to the extent that we don't have a concentration of capital replacement on mine fleets, which we're having this year, we would expect that to get reflected in the numbers for next year. Mine development, probably at similar levels as to what we've seen this year.

Two questions from my side. Firstly, on the sale of energy and water assets, do you mind giving us a sort of sense of the scale of the capital release that we should expecting in the next two years as a result of those sales?

And the second question is on the credit profile going into 2019. You gave us a bit of a teaser saying that the grade strength is likely to continue well into 2019.

Are you able to put some numbers behind that, at least for the two major mines, Centinela and Pelambres? Thank you.

Okay. Look, in the case of the sales of energy and water assets, I think we are giving the first steps in that direction by means of having divested, first of all, some of our equity stakes in power assets which we had in the past, and we continue to move in that direction.

We've also sold the transmission lines at Centinela, and a portion of the transmission lines which is of open axis. And in the case of water assets, we're exploring the options there.

I'm a bit reluctant to give a specific number because that's something that we're looking at as we speak, and I think it will be very much driven by the specific opportunities that we see. I am of the belief, we are of the belief, that these assets, which used to be part of the core infrastructure required for mine and plant development and, therefore, part of normal investments, we've progressively, in our case, be done, and the bulk of those investments done by others.

And it's moving in sort of that direction that we intend to continue. In the case of water assets, I mean, we've got our water supply system at Centinela, which is based on seawater, and therefore, it does involve installations in the port, a line and pumping facilities.

And in the case of Pelambres, we are now developing a water supply system, which does involve the construction of a desalination plant. And while we have decided to build it ourselves, we believe that once it's built and construction risk is removed, it will be a good opportunity for others to take.

The replacement cost of desalination of seawater, in that case, facility tends to be around $1 million per liters per second. So that's the sort of replacement value that those assets tend to have.

In the case of Pelambres, we are building a plant, which roughly will be able to pump around 500 liters per second. And in the case of Centinela, our water system has a capacity of -- depending on usage between 800 and 1,000 liters of per second.

So that will sort of give you a feel of what those magnitudes might be. But again, we will be communicating and share those opportunities as we see them specifically arise.

On grades, yes, we have been indicating for a while that -- especially at Centinela, which is beside the -- which has most of the grade viability, that we're moving now into a higher-grade zone. We've guided that Centinela will have a grade, on average for this year, of around 0.52.

And I think for next year, we expect to see a number which is closer to 0.6 and slightly above 0.6. That's the sort of grade change that we expect to see.

We went to a very low grade shown earlier in the year, and obviously that effect show into the numbers, and that was part of the guidance that we had provided previously. And now, we are into a much higher grade zone, which will be -- carry on into 2019, with grades north of 0.6, which is quite a significant change compared to what we were feeding at the beginning of this year.

And Pelambres, do you have any sense of the grade development? Is it more flattish year-on-year?

In the case of Pelambres, we tend to see much more stability in terms of grade. We are mining today at around 0.67.

And while there's expected to be a slight increase, it's probably going to be 1 or 2 points, so maybe 0.68, but not significantly changing from what we're feeding today. Pelambres, as we've seen, had a great first quarter.

Production was slightly down on grade as we have guided. But in fact, costs we're very competitive at Pelambres.

Unit cash cost remain close to $1 in terms of per pound basis and then very good cash generation. We don't expect to see a lot of variation of the variability that we see in Centinela, Pelambres, so next year, a slight pickup in grade of around 1 percentage points or thereabouts.

Just a follow-up on the last question there. In terms of what you monetize as water assets, am I correct in understanding there've associated increases in cash costs once you -- if you sell those?

And then if you could give the extent of exactly how much of the cost comes from the [indiscernible] grade? And then secondly, if you could perhaps comment, now we've seen a bit of up and down in terms of production, the throughput rates, do you expect will be elevated in the second half?

I didn't get the second part of the question. It didn't come across very clearly.

It was around throughput. Is that Centinela or Pelambres?

Yes, it's the audio. It's very bad.

Sorry about that. [indiscernible].

So let me on the -- yes, I mean the arrangements -- if we move into monetizing some of these noncore mining investments, we convert those investments into a variable cost based on the consumption of water or at a specific supply, very much as we do with the energy today. So we would be expected to see some impact on cost, and that's exactly the sort of trade-off and assessment that we will do in making these choices.

We believe that some of these assets are very attractive for some investors. And therefore, on the back of a supply contract, which is a solid commitment to purchase water or energy as the case maybe, there may be a good opportunity for us to enter into a transaction, which is very value-creative, which creates value rather than the opposite.

So that's exactly what we want to ensure that happens. Some of the ways in which these investments get discounted by different parties are different to the ones that we use in mining.

And therefore, we think this can be done with the delivery also of value accretion. And therefore, that is the choice and tradeoff that we will make.

We would not go into these transactions, we would not do these investments if that hurdle of being value creative would not be achieved or accomplished. But we believe that the majority of the investors and operators around these assets today in Chile has -- always changing, such that, that can be accomplished.

On the throughput, I didn't get the question precisely, but I will comment on throughput at Centinela. I mean, we have installed capacity of 105,000 tonnes per day.

We've been running, if you look at our affiliates as we reported them, at numbers which are below that full capacity. And our aim is to, obviously, use all the latent capacity.

Now those 105,000 tonne a day are based on a certain level of hardness in the ore. And therefore, when we see the harder ore, that obviously does have a trade-off throughput.

And what's happened in the first half is that we had lower grade at Centinela and also had harder ore, and therefore, that's reflected in the performance of the plant. I think the good news is that as we move into the second half, we've seen higher grade and software ore, which will allow us to capture that extra throughput capacity for that period.

So that's what we expected will happen in terms of throughput. In the case of Pelambres' throughput rate, the plant is running at quite interesting rates in the first half.

We did see an increase when we compare to the first half 2017, and we believe the plant is running actually at -- operationally very well. So that's positive from the point of view of what we can expect in the balance of the year and then going into 2019.

A year in which we expect to see higher growth, and therefore, we do want our plants to be running at full capacity.

Just first, I did want to say congratulations on the safety record and the zero fatality record, ANTO really does stand out here versus some mining industry peers. Two questions from me, first on the projects.

Could you give us some color around sensitivity to inflationary pressures? To what extent should we see higher steel, higher oil, stronger Chilean peso feed through into your CapEx budget?

Have you locked in any prices? Second question, could you give us some color on sulfuric acid in the market locally in Chile?

And just tell us whether you buy sulfuric acid on spot or at longer-term contracts.

I think certainly that's very important. It is the first and foremost priority, and we're certainly pleased with what we're seeing in terms of safety record.

On the projects, I think in the case of Pelambres, which we expect to take to the board for approval. We did, as you will recall, review that capital cost estimate.

And in doing that, we mentioned at the time that we had de-risked, in our view, the capital cost. And therefore, we are very much locked into values that are consistent with delivering at -- the capital cost estimate that you know.

So we're not expecting, anticipating to see impacts on that cost coming out of appreciation of the Chilean peso or, for that matter, still beyond what we've already incorporated as escalation into that cost estimate. So we have and are reviewing that very closely, and we have -- we see no change to that figure out of cost escalation or further cost escalation or inflation, which it was exactly the purpose of reviewing that number when we did.

On -- so no change there expected. On sulfuric acid, I think what we're seeing in Chile in the first half is that there's been more imports than you would normally have seen compared to the prior year.

I think part of that has to do with the fact that some of the smelters in Chile have been making some upgrades as the norm -- the regulatory norm on environmental emissions is changing, and therefore, there have been some stoppages. So imports have come up in the first part of this year.

We expect that situation to be relatively transitory, and we're looking at that very closely. The way that we purchase sulfuric acid is that around 70%, 75% is on term contracts.

So the spot component is around -- between 20% and 25%. So most of it we do commit the supply on a term basis.

The price of acid has gone up, that's what we've seen as a result of the lower availability of acid locally. But as I say, as these smelters get back into production at full capacity, we expect some of that to ease.

In the longer term, the acid is used mostly for leaching operations in oxides. And as you know, those oxide operations are coming down as those mines age.

And therefore, what we expect overtime is that imports in Chile will actually come down as we move into the future.

Most of my questions have been asked and answered, but just to drill down on a couple of things here, just to [Indiscernible] exploration. If you look beyond 2018 and possibly beyond 2019, do you see half the exploration spend going back up to historical range of less than $150 million to $200 million per annum?

And then on the top asset sales, just to confirm that it is only power and related assets -- or power and water assets that you might look at selling and not the rail or trans business?

Yes. On the power and -- yes, I mean, the assets that we look at I think are I would say, primarily power and water.

There may be some other infrastructure, but it's not really, at this stage, probably material. I think it's -- and therefore, we're focused on those two areas, when we think of infrastructure, which is supportive of operations and which could eventually be owned by other parties.

On exploration, I think we have made some important changes in the way that we approach exploration, which would lead overall, I think, to lower spend compared to what probably has the been the spend taken over a longer period of time in the past. We're very much focused on what we call the Americas and therefore have, to some extent, diminished and removed expenditure that we were incurring on traditionally or typically doing exploration outside the Americas.

And in the Americas, I think this is primarily Chile, and also we're doing some in Peru, in Mexico and in Canada. Therefore, I would think that the level of exploration expenditure that we would see this year is probably in the kind of a theme of what you would expect to see going forward.

And as I say, we've readjusted our exploration strategy so that we're much more focused in the Americas, and especially pursuing targets which we believe our prospective here in Chile and in the region.

Two questions please. Firstly, on your volume guidance for 2018, it's a very wide range.

I think you are almost eight months down into the year. Was there no point in narrowing this down?

And how comfortable are you with the top end of guidance versus your first half performance? Secondly, do you still stand by your gross unit cost guidance of $1.65 indicated earlier in the year but haven't seen that number in subsequent releases?

Okay. In terms of guidance, I mean, we have reaffirmed our guidance on volume.

We have not narrowed or changed the range. And I think from that point of view, we will move, as we've said in the past, in the second half to mine higher-grade areas.

And therefore, that range captures the sort of variability that we think is still relevant for these purposes. So the midpoint of that range, which is I guess the expected number, remains unchanged and we have not really felt the need to narrow that at this stage.

In terms of cost, I think we were guiding for $1.35 on C1, and I think that's been mostly our focus. I mean these numbers, these are single points and these numbers do vary according to issues like exchange rate, input prices and the like.

And therefore, our guidance is focused more on C1 costs, which is really our cash cost which is relevant as it makes it through our cash flow from operations. And therefore, that's the figure that we're focusing on.

I think we don't expect to see variations, which are significant at the level of the gross or precredit cost of $1.65, but our main updates and what we're focusing in on is the net unit cash cost.

We just got one question here, which is about the market. Just asking, can you give a bit more color your perspective on the long-term copper price and about long-term net cash cost.

On the market, I think we believe copper remains very much a supply story. I think supply is constrained in copper, very much more than in other cyclical commodities.

And therefore, what we've seen this year is that physical market, it's starting to move into deficit. And therefore, we're positive on the copper market performance.

So as you will recall, we have declining grades, and therefore, every year that passes, we do get volume out of our market, out of grade decline with everybody keeping production up. So midterm, long term, very positive on copper as we think these fundamentals will prevail.

I think the other comment I would make in the more shorter term is that the round 80% of the copper that goes into emerging economies, and especially when we think about copper consumption in China, is actually used for domestic purposes. And therefore, it's very much linked to the ability of those economies to continue to develop infrastructure and continue to grow, which is also, therefore, somewhat isolating copper from the sort of trade wars that we're seeing which are taking place.

So I think there's also an element there which is favorable for copper. And therefore, we remain very positive in our outlook for the copper market.

Now we, however, believe that what we control is what we should focus on, and therefore, costs remain very important. We are seeing some cost pressures in exchange rate movements in half 1 and input prices, as we have mentioned.

Some of that is starting to ease as the dollar has gotten stronger. Out of the monetary changes and growth in the U.S., we've seen that the local currency has started to depreciate again at levels, today, which is similar to what we were seeing last year.

And in our particular case, most of our unit cost increase comes out of production decline in the first half. So that is something that we expect to see reverse in the second half as more production and the higher grades allow us to achieve a higher rate of absorption of fixed cost.

So yes, there is some cost escalation, but I think in our numbers, around 80% of what we're seeing in terms of cost increase is volume related, and therefore, that's where our attention is. We need to get our volumes up.

We have the grade profile to accomplish that in the second half of this year and into next year, and we think that will be a tremendous sort of help in terms of managing our costs down. That's it.

Thank you very much and we expect to see you in September.