Antofagasta Annual Report and Financial Statements 2009: Overview

1. Securing and strengthening the Core Business

The first pillar of our strategy for the mining business is to optimise and enhance our existing core business – our operating assets and development projects.

Los Pelambres

Completion of the Los Pelambres plant expansion is expected to increase plant throughput by approximately 30%, from the current 130,000 tonnes per day level to a 175,000 tonnes per day level in 2010. As a result, the production of payable copper is expected to be 407,000 tonnes in 2010, compared with 311,600 tonnes in 2009.

Find out more about our mining activities at Los Pelambres

El Tesoro

During 2009 the El Tesoro plant began processing material from the Tesoro North-East deposit, and run-of-mine processing of the Esperanza oxide cap also commenced. These additional resources extend the mine life to 2019. As a result of the full year impact of these additional resources, production in 2010 is expected to increase to 96,000 tonnes from the 90,200 tonnes produced in 2009.

Find out more about our mining activities at El Tesoro

Michilla

Michilla has approved an extension of its mine plan through to 2012 with expected production of 40,000 tonnes in 2010.

Find out more about our mining activities at Michilla

Esperanza

Esperanza is expected to complete construction and begin commissioning by the end of 2010. Over its first 10 years of operation it is expected to produce on average 191,000 tonnes of payable copper in concentrate containing 215,000 ounces of payable gold annually.

Find out more about our mining activities at Esperanza

2. Organic and sustainable growth of the Core Business

The second aspect of the strategy is to achieve sustainable, organic growth from further developing the areas around our existing asset base in Chile.

Sierra Gorda District

The Group’s primary focus for exploration in Chile remains the Sierra Gorda district, where El Tesoro and Esperanza are located. Promising exploration results have been obtained from drilling programmes at the Caracoles, Mirador and Telégrafo deposits. These could eventually provide further mineral resources to extend the life or scale of the existing El Tesoro and Esperanza plants, or for additional stand-alone operations in the future.

Find out more about our mining activities in the Sierra Gorda District

Los Pelambres District

Los Pelambres has total mineral resources of 6.2 billion tonnes with an average copper grade of 0.52% which is significantly greater than the 1.5 billion tonnes of proven and probable reserves currently incorporated in Los Pelambres’ mine plan. This presents opportunities for longer term planning either by providing additional material in future years to extend the existing mine life, or by enabling Los Pelambres in the longer term to consider possibilities for future growth.

Find out more about our mining activities in the Los Pelambres District

Michilla/Antucoya

The Group is currently carrying out studies to examine the potential to further extend the life of Michilla through to 2018. In August 2009 a decision was taken to progress with a full feasibility study for a stand-alone heap leach SX-EW operation at Antucoya, located approximately 45km east of Michilla. The feasibility study is expected to be completed by mid-2011.

Find out more about our mining activities at Michilla/Antucoya

3. Growth beyond the Core Business

The third aspect of the strategy is to look for growth beyond the areas of its existing operations – both in Chile and internationally. The primary focus is on potential early-stage developments.

Reko Diq

The feasibility study and the environmental and social impact assessment study are in their final stages with negotiations continuing for agreements with relevant authorities for a mineral agreement and mining lease. The mineral resource estimate at Reko Diq is 5.9 billion tonnes with an average copper grade of 0.41% and an average gold grade of 0.22g/t.

Find out more about our mining activities at Reko Diq

Other exploration and evaluation activities

The Group is undertaking extensive exploration work throughout the world. The Group’s internal team conducts exploration on its own account principally in Chile. The Group has also been growing its portfolio of international early-stage exploration agreements.

In January 2010 a Heads of Agreement was signed with Duluth Metals Limited to acquire an interest in the Nokomis deposit in the United States.

Find out more about our exploration and evaluation activities

Strategic Enablers

The Group uses the following enablers to support our strategy:

Quality of existing assets

The Group has a high-quality, low-cost portfolio of operating assets and development projects, with a weighted average net cash cost of 96.3 cents/lb in 2009. This means it is well positioned to perform strongly throughout the commodity price cycle. The Esperanza project will add additional new production also with a low net cash cost.

Strong financial position

The Group has a strong balance sheet, with net cash of US$1.6 billion at the end of 2009. Its strong financial position has allowed it to maintain its growth plans in full,despite the difficult financial markets. It further strengthened its position through two major financings for a total of US$1.8 billion.

Experienced management team

The Group’s stable, well-established management team has an excellent track record of delivering on planned production growth and operational performance.

Extensive mineral resource base

The Group has substantial mineral resources, well in excess of the ore reserves incorporated in existing mine plans, which could provide the potential for expansions in production volumes or extensions of existing mine lives.

Commitment to health and safety

Management of health and safety is a key priority for the Group. The Group aims to work to the highest standards to safeguard its employees, contractors and communities.

Strong labour relations

The Group values the importance of its workforce. The Group provides its employees with training and opportunities to fulfil their potential, and with fair remuneration which reflects their contribution. This has been reflected in the good history of labour relations across the Group.

Community relations

The Group seeks to manage the social impact of its activities, and aims to make use of its operations as a platform for the social and economic development of its local communities.

Efficient environmental management

The Group recognises the importance of the effective management of the environmental impacts of its activities, from exploration through to closure. It promotes efficient management of natural resources, in particular energy efficiency and responsible water use.

Social and environmental strategy

The Group recognises that achieving its strategic plan depends on effective management of social and environmental issues, and during 2009 the mining division approved a social and environmental strategy which is integral to its business plan. This sets out the Group’s objective to create economic, social and environmental value as a participant of the mining sector.

Strategy for the Mining Business