Mining

3. Growth beyond the Core Business

Exploration and evaluation activities

The Group is also undertaking exploration and evaluation work in a number of other countries. Normally when the Group wishes to engage in early-stage exploration work in areas outside of its traditional areas of deepest experience, namely Chile and in previous years Peru, it typically does so through partnerships with other companies already established in those locations or otherwise with significant international experience.

United States – Nokomis deposit/Duluth Metals Limited

Subsequent to the year end, on 14 January 2010 the Group signed a legally binding Heads of Agreement (“HoA”) with Duluth Metals Limited (“Duluth Metals”), a company listed on the Toronto Stock Exchange (“TSX”) to acquire an interest in Duluth Metals’ Nokomis copper-nickel-platinum group metal (“PGM”) deposit (“Nokomis”).

Nokomis is a potentially world-class base and precious metal deposit located in the highly prospective Duluth Complex in north-eastern Minnesota. Duluth Metals published a NI 43-101 compliant resource estimate for Nokomis in October 2009 which consisted of 550 million tonnes of indicated resources with average grades of 0.639% for copper, 0.200% for nickel and 0.660 grams per tonne for platinum, palladium and gold, plus an additional 274 million tonnes of inferred resources with average grades of 0.632% for copper, 0.207% for nickel and 0.685 grams per tonne for platinum, palladium and gold.

The Group will initially become a 40% partner in Nokomis by committing to fund a total of US$130 million of further exploration and feasibility study expenditure over a three year period. The Group will have the option to acquire an additional 25% interest in Nokomis (to own in aggregate 65%) at the then net present value of the project based on operating parameters outlined in the bankable feasibility study, which will become exercisable and payable upon receipt of the required permits to develop the project. The Group has also subscribed for approximately 6.55 million new ordinary shares in Duluth Metals by way of a private placement and a subsequent anti-dilution pre-emptive subscription at Cdn$2.00 per share in cash, to become an approximately 7% shareholder in Duluth Metals.

The Group and Duluth Metals expect to establish the project company and conclude a definitive Participation and Shareholder Agreement in the second quarter of 2010.

Other international exploration agreements

The Group has made significant progress during 2009 in expanding its portfolio of early-stage international exploration interests through a number of exploration agreements.

In November 2009 the Group entered into an agreement with International Base Metals Limited (“IBML”) of Australia in respect of its Kopermyn mining property in northern Namibia. The Group can earn up to a 60% interest in the property over a two year period by funding up to US$1.8 million of exploration activities, with a minimum commitment of US$0.5 million.

The Group entered into an agreement with Ormonde Mining plc (“Ormonde”) in respect of its La Zarza deposit in southern Spain during October 2009. The Group has the right to earn a 51% interest in the deposit over a three year period by funding US$7 million of exploration and subsequent evaluation activities, with a minimum commitment of US$1 million in the first year. Antofagasta will have the right to increase further its interest in the La Zarza project to 75% by funding a feasibility study for the project.

In September 2009 the Group entered into an agreement with Sunridge Gold Corp (“Sunridge”). The Group can earn an initial 60% interest in Sunridge’s Asmara project in Eritrea by funding US$10 million of exploration work over a five year period, and a further 15% interest (for an aggregate 75% interest in the project) by delivering a feasibility study on the project. In October 2009 the Group acquired approximately 18% of the issued share capital of Sunridge under a private placement for a consideration of US$5.0 million.

During March 2009 the Group entered into an agreement with Almaden Minerals Ltd (“Almaden”) in respect of the Tuligtic copper-gold project in Mexico. Following the review of initial drilling results, the Group has decided not to proceed further with this project.

In 2008 the Group entered into an agreement with TEAL Exploration & Mining Incorporated (“TEAL”) to acquire an initial interest in two of TEAL’s exploration licences on the Zambian Copperbelt, and the Group is continuing to review the potential of these deposits.

Opportunities in geothermal and coal exploration and generation

The Group is also continuing with its exploration and development activities relating to geothermal and coal energy prospects.

Energía Andina S.A, the joint venture between the Group and the Chilean state-owned Empresa Nacional del Petróleo (“ENAP”), is continuing with its activities for the exploration and development of geothermal energy prospects in Chile. Following initial exploration work Energía Andina opted to apply for further concessions, and during 2009 was granted the Puchuldiza Sur 1 concession, increasing its total number of concessions to eight. The company is currently engaged in the application process for additional concessions, which could further enhance its exploration portfolio. During 2010 the company intends to continue its exploration activities, both to evaluate its existing concessions, with a view to commencing drilling work, and also to identify further potential concessions.

Work is continuing on the potential underground coal gasification project at the Mulpun coalfield, situated near Valdivia in southern Chile. The Group acquired an option over this deposit in 2008. During 2009 the Group completed its initial hydrology studies for the project, which included the drilling of six wells. In December 2009 the Group entered into an agreement with Carbon Energy Limited (“Carbon Energy”) of Australia in respect of the project. Carbon Energy can earn a 30% stake in the deposit through contributing its underground coal gasification technology to the project, and will fund 30% of the development costs of a trial project. During 2010 the Group is planning to undertake engineering studies in relation to the trial project, and commence environmental permitting.

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