MINERA ESCONDIDA
ANALYSTS VISIT
April 24th, 2004 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities •Marketing • Current Activities
Slide 2 World’s Premium Copper Region
TOCOPILLA A
CHUQUICAMATA I
V I
Northern Chile’s Atacama Desert, L
CALAMA
O B 160 km South East of Antofagasta MEJILLONES
ANTOFAGASTA
COLOSO ZALDIVAR CHILE Cerro Colorado MONTURAQUI Quebrada Blanca Collahuasi ESCONDIDA El Abra Radomiro Tomic Chuquicamata Michilla Lince Spence TATAL Mantos Blancos Lomas Bayas Escondida EL SALVADOR El Tesoro Zaldivar CHAÑARAL ARG ENTIN A Manto Verde El Salvador POTRERILLOS
La Candelaria INCA DE ORO
Andacollo El Indio Los Pela mbres
El Soldado Andina Los Bro nces El Teniente
Slide 3 Escondida Zaldivar Norte AerialLeach View Pads of MEL
Zaldivar Pit
Concentrator
Main Pit
Oxide Hamburgo Leach Pads Tails
N Phase IV 5 km Plant site Slide 4 Facilities Layout
CMZ Property Limit E. Norte Waste Dump Limit Northern Waste Dump Limit E. Norte Pit Ultimate Limit
Main Pit Ultimate Limit Hamburgo Waste Dump Phase Limit IV Plant N site
5 km Slide 5 Coloso Filter & Port
Coloso Filter & Port Facilities Slide 6 Escondida’s Strategy Builds on its Strengths to Maximize Long Term Value
WorldWorld’s’s LargestLargest StrongStrong CopperCopper MineMine StrongStrong CashCash CreditCredit FlowFlow RatingsRatings
Low Cost StrongStrong Low Cost Producer SponsorsSponsors Producer
DiversifiedDiversified StableStable SalesSales BaseBase CountryCountry
AbilityAbility toto UnequalledUnequalled ManageManage ResourceResource ExpansionsExpansions HighHigh QualityQuality ConcentrateConcentrate
Slide 7 World’s Largest Copper Mine
Leading Copper Mine Sites Leading Copper Producers Companies
Escondida Laguna Seca Code lc o
PT Freeport E scond ida Lag un a Seca Indonesia
BHP Billiton Chuquicamata
KGHM Polish Ph elps Dod ge Cu
Rio Tint o El Teniente Grupo M exic o Morenci F-M cM Co ppe r & Gold Los Pelambres Anglo American Collahuasi plc KGHM Polska Mie dz Batu Hijau
MIM Holdings Radomiro Tom ic A nto fag asta plc Bingham Canyon SPCC Andina 0 500 1.000 1.500 2.000 - 200 400 600 800 1.000 1.200 Copper Production ( Cu Payable '000 tonnes) Copper Production ( Cu Payable '000 tonnes)
Source: Brook Hunt & Associates, Estimated year 2003, Escondida FY03 and Escondida Laguna Seca Budget 2004
Slide 8 Sponsored By World’s Premier Metals & Mining Houses
Mitsubishi Corporation 60% International Finance BHP Billiton Limited Rio Tinto Plc Mitsubishi Materials Corp 20% Corporation 100% 100% Nippon Mining & Metals Co Ltd 20% 2.5%
Rio Tinto Japan Escon di da BHP Escondi da Inc Escondi da Limited Corporation 57.5% 30% 10%
Owners Council
Minera Escondida Limitada
Slide 9 Unequalled Copper Resource
Ore Head Grades Against Copper in Concentrate Production 2.100 Escondida with Cathodes 1.900
PT Freeport 1.700 Escondida 1.500
1.300
1.100
900
Batu Hijau Los Pelambres 700 Collahuasi Bingham Canyon Candelaria 500 Ok Tedi Andina Highland Valley Los Bronces Copper in Concentrate ( Payable in Mlbs) in ( Payable Concentrate in Copper Alumbrera 300 Cuajones
100 0,00 0,50 1,00 1,50 2,00 Head Grade (% )
Source: Brook Hunt Data for estimated year 2003. Escondida FY03. Slide 10 Total Ore Reserves and Mineral Resources: Official declaration at June 30, 2003, JORC Competent Person: Dr J M Gilligan
Ore Reserves Mineral Resources Ore Tonnes Grade Metal Tonnes Grade Metal Type (millions) (%Cu) (mlbs) (millions) (%Cu) (mlbs)
Sulphide 1,514 1.21 34,293 2,121 1.12 52,550 LG Float 570 0.60 6,026 1,396 0.59 18,254 Escondida LG Leach 673 0.43 6,442 Mixed 51 1.04 478 111 0.82 2,013 Oxide 191 0.71 2,617 248 0.65 3,567 Sulphide 502 1.44 13,541 649 1.33 19,014 Escondida Norte LG Float 95 0.61 998 642 0.58 8,190 Mixed 43 0.81 761 Oxide 105 0.77 1,478 142 0.79 2,476 Sub-Totals All Sulphide 2,680 1.10 54,859 5,481 0.86 104,449 Mixed 51 1.04 478 154 0.82 2,775 Oxide 296 0.73 4,094 390 0.70 6,043 TOTAL All Types 3,027 59,431 6,025 113,266
Slide 11 Copper Production & Head Grade
Material Milled, Headgrade and Copper Production 1,200 3.50%
Tonnes milled (00 000) Production (Cu Contained) (kt) Headgrade (%) 3.00% 1,000
2.50% 800
2.00%
600
1.50%
400 1.00%
200 0.50%
0 0.00% FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 YTD
Slide 12 Concentrate Grade Long Term: Historic Annual Copper in Concentrate (All Production) 46%
44%
42%
40%
38%
Concentrate Grade (%Tcu) Grade Concentrate 36%
34%
32% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Fiscal Years
Slide 13 Escondida Schematic Deposit Evolution Profile: Increasingly complex & variable geological conditions
⇐⇐⇐⇓variability ⇓⇒⇒⇒ “1991-1997” “1998-2010” Cu - Fe Oxides
cc
cc+cv+cp+py cp + py “>2010” py >> cp
Slide 14 Ore-Related Concentrate Grade & Quality Drivers • Copper Mineralogy – Chalcocite to chalcopyrite ratios decrease with depth • Pyrite Content – Increasing pyrite content over last several years • Sulfide-Sulfide and Sulfide-Gangue Intergrowths – Dependent on alteration, lithology, and degree of enrichment • Trace Element Geochemistry – Zonation of trace and minor elements within ore deposit – Elements such as Ag, As, and Cd contained within copper sulfides, with high recovery
Slide 15 Phase IV Expansion Components • An additional mine fleet – (1) 65 yd3 shovel, (6) 380 st haul trucks, (1) drill – Support equipment and maintenance shop expansion • In-pit ore crusher and conveyor to Phase IV concentrator – Relocation of existing crushers • 110,000 tpd Concentrator – 38-ft. SAG mill and (3) 25-ft. Ball mills – Conventional flotation using large cells, regrind, column cells • Concentrate handling – Slurry pipeline to existing concentrator, then on to the port – Added concentrate filtering and storage capacity – Modifications to port facility • Laguna Seca Tailings Facility – Tailings disposal for life of mine – both mills – Improved water reclaim to both mills
Slide 16 Phase IV: Laguna Seca Concentrator: Detailed Site Layout
Slide 17 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities •Marketing • Current Activities
Slide 18 Escondida Organisational Structure
President (A) MEL Kevin O'Kane
VP VP External & Corporate Affairs Human Resources Mauro Valdés Mark Stone
VP VP Mine Finance Larry Hartley Alfredo Atucha
VP (A) VP Process Operations Services Frank Cappelli Jorge Muñoz
Manager Health & Safety Hans Sandoval
Slide 19 Employment
Antofagasta Coloso Escondida Santiago Total Mel Expatriates 2011013 Operators 0 70 1.698 0 1.768 Technical & Admin. 21 0 100 0 121 Professional/Mgrs 49 17 475 10 551 Total 72 87 2.284 10 2.453
Permanent Contractors 2.135 •Avg workforce age – 40 years •Avg length ofservice – 8 years Capital Projects 1.167 •Employee turnover – 0.38% Total Contractors 3.302 •Attendance rates – 96,6%+ •Female employees – 3.9% •Expatriate employees – 0.53%
Note: As at 30 September 2003
Slide 20 Safety – Lost Time Frequency Rate (LTIFR) 5.00 4.54 4.50 4.00 3.77 3.43 3.50 3.00 2.81 2.50 2.00 2.00
LTIFR per mmh per LTIFR 1.65 1.50 1.50 1.00 1.00 0.50 0.00 1998 1999 2000 2001 2002 2003 2004 YTDA 2004 YTDB Fiscal Years
Slide 21 Dimensions Now Final Escondida Mine Pit E-W 2.2km 3.5km N-SMinera Escondida 3.2km 4.8km Ltda. Depth 465m 750m
Slide 22 Escondida Mining Fleet FY-04
• Electric Rope Shovels – Total 14 - P&H 4100 XPB (73 yd Dipper) 3 - BE 495HR (67 yd Dipper) 1 - BE 495 (55 yd Dipper) 9 - BE 395 (30 yd Dipper) 1
• Haul Trucks - Total 92 - Komatsu 830E (240 mt) 28 - CAT 793 B&C (240 mt) 48 - CAT 797 (380 mt) 16
• Front End Loaders – Total 3 - CAT 994 (23 yd Bucket) 3
• Drills – Total 15 - BE 49R R2s (8), IR DMM2s (2), DM45 (2), CM780 (1) & P&H 250XPs (2)
• Auxiliary Equipment – Total 52
Slide 23 Mine Production – ‘000s TPD Ex-Pit
1000 901 900 858 835 814 800 725 678 681 700
600
500
Tonnes per Day 400 '000s 300
200
100
0 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Histor y YTD
Slide 24 Los Colorados Concentrator
Slide 25 Laguna Seca Production – ‘000s TPD Milled 100
90
80
70
60
50 95 40
'000s Tonnes per Day Tonnes'000s 30 51.5 20
10
0 2002 2003 2004
Fiscal Years Histor y YTD
Slide 26 Concentrate Grade Ex-Coloso - % Cu Contained 45.0%
40.0%
35.0%
30.0%
25.0%
20.0% 41.4% 39.8% 39.9% 39.8% 37.3% 35.6% 34.7% 15.0% Concentrate Grade % Cu % Grade Concentrate 10.0%
5.0%
0.0% 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Histor y YTD
Slide 27 Coloso Port – ‘000ts Concentrate Shipped 2500
2000
1500
2,073 2,145 2,105 2,056 1000 1,853 1,813 1,682 '000s Tonnes'000s Shipped
500
0 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Histor y YTD
Slide 28 Copper Production – ‘000ts Cu Contained in Concentrate 1000
900
800
700
600
500
400 860 838 845 726 755 300 611 641 '000s Tonnes of Cu Contained Tonnes'000s 200
100
0 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Histor y YTD
Slide 29 Oxide Production – ‘000s Tonnes of Cathodes 160
140
120
100
Tonnes 80 150.7 150.5 145.1 136.7 '000s 60 113 40 56.4 20
0 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Histor y YTD
Slide 30 Copper Production – ‘000ts Cu Contained 1200 996 1000 894 871 892 860 151 56 766 754 800 145 137 151 113 600
Tonnes of Cu Contained 400 860 838 845 726 755 '000s 611 641 200
0 1998 1999 2000 2001 2002 2003 2004
Fiscal Years Concentrate Cathodes Total
Slide 31 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities •Marketing • Current Activities
Slide 32 C1 Unit Costs in the 1st Quartile Estimated 2003 Brook Hunt, Copper Industry C1 Cost Curve
125
100
75
50 Esc ondida
25 C1 Cash Operating Cost (US c/lb) 0 0 5000 10000 15000 20000 25000 Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003, Escondida FY03
Slide 33 C2 Unit Costs
Estimated 2003 Brook Hunt, Copper Industry C2 Cost Curve
150
125
100
75 Es condida 50
25 C2 Production c/lb)C2 (US Cost
0 0 5000 10000 15000 20000 25000 Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003, Escondida FY03
Slide 34 Only 3 Producers with a Lower C3 Unit Cost Estimated 2003 Brook Hunt, Copper Industry C3 Cost Curve
175
150
125
100
75 Escondida 50 C3Production Cost (US c/lb) 25
0 0 5000 10000 15000 20000 25000 Cumulative Production (Payable in Mlbs)
Brook Hunt Estimated 2003, Escondida FY03
Slide 35 STRATEGIC KEY ELEMENT NPV Optimize Escondida’s Net Present Value We will optimize NPV by: – Taking a leadership role within the industry and adopting a flexible production profile – Continually focusing on cost reduction – Leveraging Six Sigma and the Maintenance Improvent Programs – Using tollgating to improve our Capital Productivity – Capturing the synergies of both concentrators – Leveraging leach technologies – Taking a leadership position in the responsible management of the use of fossil water; 10% reduction in water requirements
Slide 36 STRATEGIC KEY ELEMENT PEOPLE Achieve Maximum Potential with Employees We willl ensure Maximum Alignment Among Employees, Organizational Structure & Performance Management Systems by: – Attracting and retaining high quality employees – Creating a high performance environment – Focusing on the development of technical and people leaders – Ensuring that learning and skills development are applied to everyone in the organization – Creating a work environment where we have positive, mature, and direct working relationships
Slide 37 STRATEGIC KEY ELEMENT CUSTOMERS To Be The Preferred Supplier of Copper in Concentrate & Cathodes We will achieve our value proposition to customers through: – Achieving appropriate geographical and market diversification – Utilizing the BHP Billiton Base Metals Marketing structure – Reducing the impact of variable concentrate grades – Emphazising continuous and proactive interaction between the Operational and Marketing areas – Maintain status as a quality supplier through producing improved and predictable levels of Grade A quality cathode
Slide 38 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities •Marketing • Current Activities
Slide 39 Sulphide Leach – Project Summary 60-100 Mtpa @ 0.6% TCu • 1.6 billion t sulphide ore at 0.6%tcu
raffinate • Current stockpile 100mt • Copper recovery by: Air – ROM leaching – Solvent extraction Solvent Extraction – Electrowinning 180-245 ktpa cathode
• Expected recovery 36% Electrowinning
Crush & Leach + Sulphide/ROM Leach Operations • Approx 50% of Cu is chalcopyrite EW Copper Production 35 0 • Initial copper production 180 ktpa 30 0 EW Capacit y with ROM Le ach • Increasing to 245 ktpa as ore supply 25 0 Sulphide/ROM Leach Crus h Leach increases and oxide T/H capacity 20 0 Crush Leach EW Capacity becomes available 15 0 • Initial capital $ 870M (incl. water supply)
EW Copper Pr oduction - kt 10 0
50 • Operating costs < $0.35/lb Cu
- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Fiscal Period
Slide 40 Bioleaching Technology • Sulphide leaching requires ferric iron as oxidant • Conversion of ferrous iron to ferric is catalyzed by bacteria – Without bacteria, leaching is slow due to lack of ferric iron • Main bacteria are mesophiles such as thiobacillus ferrooxidans • Mesophiles occur naturally in ore and thrive in acidic conditions at temperatures from 20-40C • Bacteria require oxygen as does the oxidation reactions – Forced aeration is key for high bacterial activity and fast leaching • The process is simple and robust
Slide 41 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities • Marketing • Current Activities
Slide 42 Diverse Customer Base
COPPER CONCENTRATE SALES BY DESTINATION - 2003
Merchants Ge rm any China 7.3% 8.0% 6.1% India Br az il 4.1% 3.3% South Korea Sweden 8.9% Philippines 3.4% 3.0%
Spain 2.8% Othe r 14.3% Bulgaria 2.7% Chile South Africa 22.1% 1.6% Iran 0.4% Japan Finland 25.8% 0.4%
Slide 43 Diverse Customer Base
CATHODE SALES BY DESTINATION - 2003
Spain UK 3.0% 2.0% Turkey Canada 0.8% 3.6% Chile Intermediaries / BMAG 4.2% 21.9% Italy 5.9%
Br az il 6.7% Ge rm any 12.5% Japan 8.2%
Taiwan France 8.5% South Korea 11.8% 10.8%
Slide 44 Presentation Content
• Escondida Overview • Operations • Financial Overview • Business Strategy • Growth Opportunities •Marketing • Current Activities
Slide 45 Water Issue
What caused the water problem between Novembre 2003 and January 2004: •Deteriorated water-pulp separation from tailings •Inability to increase fresh water supply to Laguna Seca Concentrator to compensate reduced reclaim water return •Hydraulic restrictions in the tailings transport system did not allow all tailings to report to the impoundment
Slide 46 Water Issue - How MEL is solving the water problem
1. Secured fresh water to the Laguna Seca Concentrator through an additional water line 2. Implemented an aggressive maintenance program to restore wells in various well fields 3. Identified mineral ore types that cause water-pulp separation problems, allowing the mine to better blend plant feed 4. Identified a flocculant that allows the production of higher underflow density at lower yield stress and viscosity 5. Will construct a protective wall around the pump barges in the tailings impoundment 6. Will embark on an engineering program to eliminate hydraulic problems in the tailings transport system 7. Drilled new wells, allowing MEL to pump up to legal and environmental limits 8. Established a water strategy that will secure future water supply to the operation
Slide 47 Action Plans – HSEC
• Simplification and streamlining proposal of the HSEC systems under the BHP Billiton Standards • Employ the Landmark process to engage the workforce and ensure their commitment to a zero harm workplace • Implemention of Cardinal Rules Program • Development of Drug/Alcohol Policy • Alignment of HSEC & RDO • Encourage employee participation in Company sponsored assistance projects for the community to instill a sense of social responsibility in Escondida’s employees, • Adoption of DuPont Job Observation methodology
Slide 48 Action Plans – NPV
• Los Colorados Mill improvement program • Mine to mill improvement project • Light dump bodies project • Develop long term water sourcing plan • Inventory reduction program • Flexible production plans • Develop a program for coordinating plants, crushers, shovels, pipelines, filters shutdowns • Development of an integrated production system
Slide 49 Action Plans – PEOPLE
• Implementation of an employee climate survey • Continuous development of a team based work structure • To build an integrated Performance Management system which links competency development, individual performance on the job and remuneration • To perform the second teams check-up (HISI)
Slide 50 Action Plans – CUSTOMERS
• Eliminate backlog of concentrate deliveries arising from Apollo cuts • Complete Sales Book restructuring – Reduced sales to Merchants – Increase sales to emerging smelter markets, eg., India and China – Initiate spot sales • Continue to push transition to global market terms for concentrates • Close cooperation with Escondida Operations to address concentrate grade reduction and variability issues
Slide 51 Head Grade - % Contained Copper 3.0%
2.5%
2.0%
1.5% 2.75%
Head Head % Cu Grade 2.22% 1.0% 1.95% 1.89% 1.69% 1.54% 1.37% 0.5%
0.0% 1998 1999 2000 2001 2002 2003 2004
Fiscal Years History YT D
Slide 52 Oxide Flowsheet
CRUS HING & PRIMARY STOCKPILE SCREENING ORE CRUS HER
RAFFINATE CONV EYING S YSTEM PLS
EXTRACTION LEACH PAD AGLOMERATION ORGÁNIC ORGÁNIC RECOVERY
SOLVENT WASHING EXT RACTIO N WATER
COPPER CATHODES SULFÚRIC ACID STRIPPING 150.000 TPA
RICH ELECTROLYTE ELECTRO-WINNING LEAN ELECTROLYTE
Slide 53