Earnings Call: H1 2020

Aug 20, 2020

Morning, everybody. Welcome to Antwerp Gas' Half Year Results Call being held virtually for the first time. I'm Andrew Lindsay. I'm Head of the London office, and I'll be moderating this call. Anybody who has a question, you'll need to ask it through the live event Q and A. And if you're looking at your screens, there's a symbol at the top right, a couple of rectangles, one of them with a question mark on it. If you click on that, you'll be able to ask a question and I will try and ask that. Clearly, if you everyone's asking similar questions, we may not ask your questions abeytin. Okay. I'll now hand over to Ivan. Thank you, Andrew, and greetings to everyone. So we've just released our results for the first half of the year this morning. You've seen our figures and numbers. And the intent is then that we have a Q and A session now and then let's proceed according to that. So Andrew will moderate providing the questions and we hope to be able to address all your queries. Thank you. Okay. So the first question I have is from Ian Russo at Barclays. Ivan, you mentioned in the presentation that mine development and maintenance has resumed. Can you talk about the extent of the backlog, when you'll be able to catch up with this backlog and whether this could potentially impact planned production levels in 2021? Okay. Yes, when we I would say when as we've communicated in the past when COVID-nineteen began, we had to make changes moving some of our workforce to teleworking, which happened very quickly and continues to this day and also changes in some of our routines, essentially around mine development and maintenance. Now that was late March and I think we saw the impact of that during the most part of the Q2. Since then, the peak of cases in Chile has passed. And what we have seen is that we're able now essentially to move the number of people that we require for maintenance and also the absenteeism levels that we were experiencing in mine development have come down. So I think where we stand today is that we are in a much better position and shape in terms of how the COVID-nineteen risk is being managed nationally and our ability also with all the measures that we've implemented to provide with the requisite conditions for the number of people that are required for maintenance and mine development to be on-site. So this is something which I think is largely corrected now in the sense that we are being able to perform our big maintenance in a way even though we've also modularized them, but in a way that essentially are not creating any material backlogs. Now we still have the backlog of what happened in the 1st part of the second quarter, and we are essentially being focused on addressing those in the course of this year. So we expect by the end of this year or end of Q1, we basically would be up to date on both mine development and maintenance. We do expect some impact moderate impact for next year as a result of this. But as I say, not of great significance. So we believe that our plans will be updated according to these impacts, but that they will be moderate at this stage. So because as I say, we're essentially seeing that we're able to address this mostly or for the most part in the course of this year and the early part of next year. Okay. Thank you for that. Second question then, this one is from Jatinder Go at BNP Paribas, ex MNP Paribas. Are you able to provide any indication of the building blocks towards total 2021 CapEx spend, including both approved and yet to be approved expenditures? Well, our we normally would provide will provide guidance on 20, 29 CapEx in the Q3. What we are seeing this year is that we started with CapEx guidance at RUB1.5 billion at the very beginning. And since then, we've reduced our CapEx guidance to SEK1.3 billion. And now we're saying it's going to be slightly below SEK1.3 billion. And that's on the back essentially of some project expenditure being deferred as a consequence of COVID-nineteen. So that's the situation this year. What we expect then next year is that we will have to undertake some of the CapEx expenditure that's been deferred from this year. And therefore, now we're working on the detailed costing and planning for that purpose, which we will be able to release. However, if we had originally planned for BRL1.5 billion, we're down to BRL1.3 billion, those BRL200 1,000,000, we think we have to be spent for the most part in 2021, 2022. So I would think of capital expenditure for 2021 probably in line or around or approximate to the original number that we had envisaged for 2020 before we made any adjustment, considering that this NOK200 1,000,000 will be deferred to 'twenty one, 'twenty two. But we will provide specific guidance on this figure in quarter 3. Okay. Thank you. Sticking on the theme of CapEx, a question from Luke Nelson at JPMorgan. So sort of double question. Based on the full year guidance of $1,300,000,000 and the $549,000,000 spent in H1, how much the balance of around $750,000,000 is going to be spent on mine development, sustaining CapEx and development capital? And then the follow-up, which is tied in really is of the $200,000,000 CapEx reduction this year, how much of this relates to sustaining mine development and development capital? And how much and you've answered the second part, the deferral to 2021? So I'll ask Mauricio probably to give more details about the breakdown. But generally, what we had in mind initially was that you will recall we had the development CapEx was significant in 2020 and it will be 2021 associated to the Pelambres Inco project and also to Sal Diva. So we were expecting to spend in those projects north of €650,000,000 So that was the bulk of the expenditure in capital for this year. And then the balance was sustaining and mine development. But Mauricio, you may be able to provide some further background on how the split is between the 3 components? I think you are in mute. Sure. No. Thank you. Thank you, Ivan. Well, as you said, we are going to provide a detailed guidance on Q3 production report. And how can the thing that we can split now is the actual CapEx expenditure over the first half. That number was roughly speaking 50% associated to development CapEx, mainly in Los Pelambres expansion. And the other 50% is split into health as associated to mine development and sustaining CapEx. And in terms of our overall number, which came down from EUR 1.5 billion to EUR 1.3 billion, it's worthwhile to mention that there is some savings from a weaker peso, something like 30% out of that reduction is coming from weaker peso and the rest are going to be scheduled for following periods. So that is what I can comment. Thank you, Mauricio. All right. Okay. Sorry. Next question is on the Los Pelambres desalination plant from Ioannis Masoulis from Morgan Stanley. Given the tougher operating environment, what is a realistic timeline for bringing this plant into operation? And can you commission the plant prior to completing the concentrator expansion? Yeah. So in respect of the desalination plant, we as we've mentioned and have shared with you, at the onset of COVID-nineteen, we made the decision to suspend construction of the project on the basis that it was very difficult to keep the sanitary risk in a way managed in a way at the beginning that we thought was consistent with the need to protect the health of the workers, especially because of restrictions on camp and transport. That has basically introduced a delay in the schedule, original schedule that we have of 6 months. And because we suspended for 4.5%, but you needed we needed time to demobilize and a ramping up and that also takes some time. It's not done from one day to another. So we have a delay of 6 months built into our schedule today. And I think going forward, what we are contemplating is reformulating in a detailed way the project execution plan, which is currently work that's being done, integrating fully the COVID-nineteen protocols on the assumption that COVID will be with us until the end of 2021 at least. And therefore, we're taking that, I would say, reasonable, but maybe slightly conservative approach, but we want to do it on that basis. And that work detailed work of rescheduling what that impact is currently being done. In addition, as we've also mentioned, we did make some changes in the scope of the diesel plant in the sense that we are creating the ability to be able to expand in a phased way from the current 400 to 800 meters per second in a separate project in the future once we get the environmental permits to do so. So that is essentially what we're looking at right now in terms of the detailed execution plan. And we will have the information and be provided before the end of the year. Obviously, we're trying to compress as much as possible any requirement for extra time beyond the 6 months that we've already built into the schedule. And but we are positive that this work will yield a realistic construction schedule, which will allow us to continue to build this facility in the shortest time possible. Now the desalination plan is decoupled from the concentrator in the sense that these projects can be looked at separately. And therefore, our priority certainly is the desalination plant. And as I say, they are decoupled from a construction point of view. So there's no interdependence from the 2 and one can be performed in under a separate schedule than the other. Our priority is to do the desalination plant in the sense that this provides a derisking of the water supply for Pelambres. And also from a work point of view, it does involve less workforce on-site at Los Filos because of the type of work that's required. We've just assigned the big contract for the marine works. So that's already been done and the teams are mobilizing. We just finished the shaft and are seeing the shaft for the diesel plant. So that work is progressing well. But we will provide a detailed schedule update before the year end to see how all of this plays into the final construction schedule. But we're positive about continuing construction, certainly in the desalination plan. And as I say, this is or can be thought of as separate or decoupled with the construction of the concentrator plant, which is also part of Inco. But from a construction point of view, they are separate. Okay. Thank you. We've had a couple of questions on the sort of CapEx for the increase in 400 to 800 liters. I'll just ask one of them from Jatinder. How would how different would the total CapEx on the incremental 400 liters per section desal part be versus the €500,000,000 for the construction of the same size plant that we're doing at the moment? And what is the realistic spending timeline? Well, that's exactly, as I say, I'm not sure I'll ask you to speak a bit louder, Andrew, because I didn't get fully the question. But I understand that the question relates to the CapEx for the desalination plant expansion. And I would say that we are doing some in this phase, we're not doing expansion to the 800 liters per second, but what we're saying is that we will create the facilities such that the project can be undertaken in a very smooth and swift way when environmental permit is approved in a subsequent stage. And the investments that we're doing today, which we've sort of assessed as being approximately 150,000,000 dollars relate to changes in some of the piping and some of the layout, which will allow basically a bigger plant to be constructed. And now we believe doing it now is more capital efficient and therefore will provide efficiencies on our investment in terms of per liter basis in the overall project. Now I would not expect the expansion to from 400 to 800 liters would be significantly different to the capital expenditure per liter that we've invested in the 400 meters except for the efficiencies that we're achieving in this €150,000,000 So I think that gives you a reasonable benchmark to contemplate for the cost of the additional water. Sorry, I don't speak up a bit this time, but the second part was what's the realistic timeline for the expansion to 800 liters? Well, we think that in the case of time line, the critical path really is given by the permitting. And our expectation is that we will initiate the permitting early next year and that this may well take the full of 2021 and part of 2022. So if it does take, say, 18 months, then we would be in a position to start building the expansion in the second half of twenty twenty two. With the pre investments having been made, we consider that the execution of that expansion can be compressed. And therefore, it probably would take from that moment in time around another year and a half to actually have the water available from the incremental expansion. So that means that, that water would essentially be available around 2024. And I'm talking here about preliminary sort of dates. As I say, we don't control the permitting process. If it does take a bit longer, then obviously those dates get changed. So it's just to give an outline of what the likely timing might be. Okay. Just another got another couple of questions here on the desal plant. One is short, and I think you partially answered it already. But the why was the scope change made mid project during Phase 1 of the Los Pelambres expansion? Sorry, what was there? Sorry, I want to speak out. Why was the scope change made mid project for the desalination plant? Yes. I think the what we've seen, I think, is the evolving nature, if you want, in a very fast pace of the impacts of climate change. And I think there is much more reliable modeling now that we've been able to look at and this is something that we've been observing over the years. I think last year 2019 was a year which was extremely dry among 10 years of drought and it just evidenced how significant the drought condition could become in 1 single year. I think what we've seen since is that 2020 has been a better year from a rainfall point of view. So the view we took was as we were building the plant, we've got more information. We understand better the modeling around the likely impacts of climate change in the central area of Chile. And that is important because if you look at those models, there's going to be more rain, in fact, in parts of the north, there's going to be more rain in parts of the south, but it's in the central area where Pelambres and other facilities allocate this with a slightly to be less rain. So those models became more reliable. We've got more information and we decided therefore to respond at the time that we felt we could still do it so as to in an efficient way, so that we could take advantage of the fact that we're starting to build a diesel plant now. There are some, as I say, advantages of addressing this now from the point of view of capital efficiency. And therefore, we felt this was the right moment to do it. It was not within the original design, as has been pointed out, but we felt that we have the conditions to make this change. Now this is something that is facilitating the build up to 800 meters. We're not changing the plant now, but it's about some of the intake and transport system, which we could do now at gaining capital efficiency. So on the back of that additional information and assessment of risk, we made this choice now. That's the reason. Thank you. Okay. Last question on the desalination plant. I think this one's from Jatinder again at Exane BNP Paribas. How much of the water your water requirement will be met from an 800 liter per second desal plant at the 205 kilotons per day milling rate? And do you foresee any scenario where you'll need to move to 100 percent desalination? Yes. So on the sizing of the 800 meters basically allows for the plant to run at full capacity. We recycle 85% of the water that we use in any event. So the 800 liters is the makeup of water that we need, which in addition to the water that we recycle is used in the system for the purposes of production. In our measurements, considering how much we recycle and the scope there is still to improve that, we our view is that this 800 liters per second when built and available essentially will make up for the totality of the makeup requirements needed to run the plant at the expanded capacity. So this is intended to achieve that purpose. Okay. Thank you. Another water question now about Zaldiva. Zaldiva has applied for an extension. This is from sorry, Ed Sturt at BMO. Zaldiva has applied for an extension to its water abstraction license. Yet Escondida can now supply 100% of its needs from desalinated water. How much pressure is there for Zaldivar to move to desalination? Can the project support the cost of desalination? Can additional water be sourced from Escondiva? If I can add in a further question from someone else. And can you please give an update on the progress of the application to extend your permit, water extraction permit at Zaldivar? Yes. Indeed, in the conditions are very different to the one at Escondida. Zaldivar is certainly a much smaller operation. And the water requirements at Saldivar are around 200 meters per second. We have rights for around 500 meters. So we extract around 38% or 40% of the water rights that we have. And those numbers are well below the natural recharge of the aquifer in which we have our water extraction. Now and that I will say has been becomes much more evident now that Escondida has withdrawn the extraction of water in the same basin. Now it's also different in the sense that the current mine life that we have for Sandibar substantially, essentially runs out of minerals by 2,031. And therefore, since we have permits today to 2025, we have a shorter lifespan to provide for with this water extension. Now so for all those reasons, we think this is very different to Escondida. And we believe and this is according to our modeling that it is possible therefore for us to extract the 200 liters under a permit in a sustainable way according as I say, to our hydrological models because this is well below the natural recharge of the aquifer where the water is extracted. So from that point of view, I think we've provided this permit, which we started a time ago. And where it sits today, basically, we have a model from an ideological point of view, which is now validated and complete. We essentially, the way this works in Chile is that we presented the permit and we received some commentaries and we're about to respond to those commentaries, most of which are clarifications around the project description and definition. Remember that this project also involves some changes in the plant and therefore a lot have to do with conditions there, which we have are upgrading or changing. And therefore, that's the process we're in. So in the midst of it now, with COVID-nineteen, the process is going somewhat slower considering that there is a requirement for community participation and the engagement of community for the purposes of the project has slowed down because it's not possible to meet physically anymore. And therefore, we're working with the authorities to see how we bridge that condition. In Chile, that has started to be considered now so that the permits don't get stopped. And we believe that in the course of the next month or so, we will be able to resume that participation, so as to be able to progress with the permit. And after that, there will be another round of comments and questions after which we expect a decision will be made with respect to the permit. So that's where we are with the permit itself now. Now maybe just one other final point. We do think and are positive about the potential extension of the mine life of Saldiva beyond what we have today through the exploitation of the primary ore body, which eventually could provide us the possibility of mining Sandiva for a much longer time beyond 2,031. Now that project is something that we are we've done drilling and we're doing the studies now to be able to complete. And if that ends up being a positive economic proposition, I mean, obviously, the water solution would be different and the project we would expect would have to be able to pay economically for that different water solution. So from that point of view, I want to make a distinction between the current mine of life, which ends in 2,031 and the potential extension, which would be mined through accessing this primary ore body. For the current life of mine, since we only have from 2025 to 2,000 31, building a desalination plant is not an economically viable solution. And that's why we considering that and the fact that we think it's sustainable to continue to extract water for the period of 5 years, we've submitted this permit. Thank you. Right. Now we have a question on COVID-nineteen or the effects of it. Are there any operation this is from Chris Lefebena at Jefferies. Are there any operational changes that you've had to make in response to COVID-nineteen that may lead to higher operating costs or sustaining CapEx in the longer term? Certainly, we have to make adjustments, no question. I mean, we have we believe I mean, on average, it's around 30% to 35% of our workforce are actually teleworking. And we've made changes to the way we move people. We've made changes to some rosters. We are applying sanitary measures and use enhanced health protective equipment. We're using social distancing as a key criteria in our sites, which means that camp and accommodation and catering circuits have become different. Now I think that has added some cost. But I think in the overall picture of things, those direct costs are not that material at this stage. I mean, in the sense that we believe that in terms of spend, I think to date our spend on these elements is around R38 1,000,000 or R40 1,000,000 and therefore, something which will not change our cost position. And now in terms of productivity, what we're seeing is that this is making these adjustments takes some time, which is happening, but it is opening up opportunities to do work also more efficiently. And we think the teleworking has allowed us, for example, to reduce can costs and to reduce transport costs to our benefit. It has probably indicated as well that in terms of manpower numbers, there are certain activities where we can make adjustments going forward in terms of the manpower requirements needed for certain activities. So I think still the balance of this, I think, is showing us some opportunities. So I'm not seeing any structural change to the disadvantage of COVID-nineteen at this stage in our operations. In the case of our projects, and I will make a difference there. I think to the extent that the project is activity that is finite in the sense that it takes time in a span of time. And the restrictions from COVID-nineteen mean that we're not going to be able to fully load the manpower requirements that were expected originally, but we may have to have some limitations, then we think it's going to have some cost impact there. In the case of Inco, as we've disclosed, we have indicated that so far, we believe that adds up to around $50,000,000 and we still have to estimate what that will mean for what's left of the construction of the project. In the essence, to the extent that we're able to use camps and accommodations with lower manpower numbers, we're looking at things of pre assembling differently and modularizing different some of differently some of the construction, but there may be some extra costs there that we have to bear. But on the operations, as I say, on balance, nothing structured at this stage and we're looking at some opportunities. Thank you. Okay. Now a question from Tom Streator at Streator Investment Research about renewables. From 2022, all of the group's mines will use only renewable energy. Please can you say how this will work in practice and what kind of cost savings you expect? Yeah. In practice that means that we basically contracted out and changed our contracts such that they are priced on the basis of renewable power generation costs. And since we have a grid, an integrated grid in Chile, what we are part of the contract is that these the renewable nature of the energy that we get we need to be certified such that there is an equivalent amount of renewable energy that's been produced by the generators that supply us and provide it to the grid so that we can ensure that we are triggering the right type of incentive for renewable energy to be incorporated into the grid. But that's the way it will work. So we will be priced on a renewable energy basis and we will have a certificate, which will tie the source of energy to a renewable facility even though we have an integrated grid. Now in terms of cost saving, I think the good news is that it is important. We our contract probably will see a reduction when we're fully into renewable of around 35% to 40% in the cost of energy over time. And that because we are contracted now and that's there is a step trip to get to that level. We've got we're seeing some of those benefits this year. We'll see more next year and we expect that by 2022, we'll have the full benefit of that 35% to 40% reduction in energy costs. So I think that's good news. It's more reliable because it's still taking from the grid and the grid now is fully integrated between the north and the south. It's more competitive from a price point of view and it's much more efficient from a carbon footprint standpoint. So this is, we think, a very positive step. Okay. Thank you. Okay. Now a question from Dan Major, UBS. Can we have an update on the timeline on when the Centinela expansion will be presented to the Board for approval? Yes. We had originally planned that this would be taken to the Board end of 2021. And with the COVID situation, we've moved that to the 1st part of 2022. So that's essentially the schedule that we have. We have a project team that's continued to work on this project and now are doing some further vendor engineering to and also preparing some of the bid for the key packages. So that's the updated timeline. It's been affected by COVID-nineteen for a few months, but work continues basically on a similar line except for the impact of COVID. So early 2022. Very good. Okay. And now a financial question from Yanis at Morgan Stanley about oil prices and how they feed into the profit loss account. How much cost benefit is there from the lower prices that you've seen this year compared to last year? Mauriz, you want to take that? Okay. Well, first of all, it's worthwhile to mention that our main supplies are fully in line with the international markets. So for example, in the case of the diesel, our supply contract is capturing all the movement coming from the international markets. So we capture the benefit of the lower diesel prices during the year. Roughly speaking, our the benefit that I mentioned is something like for every $10 in the barrel price, we have an impact in our cost structure of something like €0.01 So over the in comparison with the last year, we have a benefit of something like $0.03 to $0.04 as a difference and as a saving coming from the diesel price. Okay. Just a question from Ed at BMO. Can you give us an update on what's going on with the Ryker Dick arbitration plan? Yeah. There are several, I would say, since the award was granted, there are several legal steps that need to take place to be able to proceed. And those are basically taking step right now in with the court and with some of the particular jurisdictions where these award is being registered at national level. So those are steps that are taking place at this moment and still have to be completed. So we're still in the basically working through those legal steps as expected or as planned. Okay. And another question from Ed about the workforce headcount. Antivagastra is operating at close to normal levels with only 2 thirds of the normal workforce on-site. How sustainable is this? How many of the other 1 third are working from home in a contributory fashion? And how significantly could the workforce be trimmed in the future without compromising output? Yes. Look, I think certainly this has shown that there is a new way that we can work combining teleworking with work that takes place at site. And that's something which I think has opened an avenue to accelerate some of the changes especially around innovation and digital transformation that we were working on. I there is a of the 2 thirds which are working outside sites the site, there is around 20%, which is not working on the grounds that they have conditions, which don't allow them to go to site and for health reasons. And therefore, it's safe that they don't do. And their work is not work that would normally amend itself to teleworking. But for the rest, what we're seeing is that the ability to telework is proving very effective. Even though this and we are in contingency mode, that's happening. And therefore, what we've done is that we've recently set up a formal project to look at new ways of working, thinking of what the permanent implications of this might be and which specific roles we might then move to work from distance with some level of attendance on-site. And we expect basically to draw some conclusions from this in the month of September to be able to make some changes to our operating model such that we move some of these roles to distant working, thinking more permanently as a condition of work. And I think that would be positive. It's an opportunity that allows us to be more flexible, to be more adaptable as an organization, allows better conciliation between work life balance and also eventually productivity improvements. We're not looking at this as a means to driven by a need to reduce the workforce. We think it's a benefit from the point of view of productivity. If there are some changes in manpower numbers, those would be consequential, but it's not the main driver in what we are looking at. We think that we have a number of people that are required to run our operations, but this will just provide productivity enhancements and more effective operating conditions. And therefore, that's the main driver, flexibility, adaptability, better reconciliation of work life and then productivity gains through better results. Thank you. Okay. We've had several questions about the refinancing at Antekoya. I'll ask Ian Roussos from Barclays as it's the sort of most detail of this question. What is the rationale for the refinancing of Anticoi's shareholder loans with equity? Is the simple answer that it had too much debt, which was unsustainable versus EBITDA? Even after the refinancing, it looks as if the net debt EBITDA is still greater than 7 times. Yes. I'll ask Mauricio, you want to take that? Okay. Thank you, Ivan. Well, as Ivan mentioned during the presentation, along with the operational improvement that we have seen during the first half of Antuquoya, we also upgrade the Antuquoya's capital structure in both ways in 2 ways. 1, we refinanced the original project financing with an unsecured corporate loan. So that allow us to capture the benefit of a lower interest rate and also some more flexible covenants around the financing on Atukoya. And in terms of the sub debt, well, as you may aware, our definitions is each asset must stand on their own feet for financing. So I think we believe that the refinancing with of the sub debt was value accretive from the point of view that we are providing Antu Goya a much stronger balance sheet and that allow us to look the future for Antu Goya from a different way. And as a summary, in terms of net debt to EBITDA ratio, we are quite comfortable where we are now. And of course, we are fully aligned with all the agreements that we have with the unsecured corporate loan. So I think it was a very good decision in term of providing on a stronger balance sheet for Entucoya as a solely entity. Thank you. Okay. So now a question from Daniel Chigumira at Bernstein. Annualizing H1 production would give production for the full year towards the middle of the guided range, but Antifragast is still guiding at the lower end of the range. What mines would you see a half year on half year sequential decrease in order to get to the bottom end of the range? Okay. Yes. I think it's a good I think the profile of production quarter on quarter in the course of this year, we are expecting it to be different. And if you look at the first half, I think there's been some front loading of production, especially, I would say, in Pelambres. So we would expect that to moderate as we continue and advance the year. And considering that quarterly on quarter profile, as I say, we would expect them to be more towards the lower range of the range, so between 7.25 and the midpoint. But it's got to do with the fact that indeed the profile of production is a bit front ended in the numbers that we've just reported and especially in the case of Pelambres. So we still believe that the right expectation should be set more towards the lower end of the range for that reason. Okay. Another question from Daniel. Will the delay of work in the Esperanza Sur pit mean that the expected grade recovery for fentanyl concentrates in 2021 is also now delayed? Esperanza Sur was not expected to deliver FEED in 2021. So it doesn't have an impact on that year. Now 2021, we're obviously revising the mine plans and we will provide guidance in quarter 3. We were expecting, you would recall that Centinela, it was going to see an increase in grade compared to 2020 and therefore, an uptick in production. Now I think with the impact of COVID-nineteen that still holds, but it will be moderated on the grounds of the impact of COVID-nineteen, which we're still fully assessing. As I had mentioned before, in terms of maintenance, we're catching up on backlog. We will complete any backlog and we expect by the beginning of next year or end of this. And in terms of mine development, there are some changes as a result of the impact that COVID-nineteen has had. So that will obviously translate into some impact in 2021. So the production profile for 2021, we still expect directionally to be as we had guided before, but the exact number would be moderated somewhat on the grounds of the impacts of COVID-nineteen. But Esperanza's rule was not expected to feed into concentrator in 2021 in any significant way. Okay. Thank you. Right, we've had several questions about the minority dividend paid in 8.1, as in there were no minority dividends paid in H1. Can we expect that there will be dividends paid in the second half of the year? Will it be will there be catch up dividends? Or will it be like previous second half of the year? Or is there a change of policy? No change on policy. It's just phasing, but I'll ask Mauricio to elaborate further on minority dividends. Thank you, Ivan. Well, in terms of the dividend coming from the companies and of course, the minority dividends, We maintain our policy of dividend payment coming from the companies. And I think there is a there was a component of volatility during the first half that drive us to retain some catch levels at the companies. But as with this economic context and having a more stronger copper price, of course, we are going to maintain our dividend policy as was in the past. And there is no reason to change, and we feel like our assets are very robust to keep providing dividends in the near term and in the future. So that is the underlying of the H1 decision and an update for what we've seen for the second half? Yes. So it was mostly as what we've seen precautionary. I mean, we had the onset of COVID-nineteen, which broke up in Chile very heavily in March. And then there was a lot of volatility in copper price. You would recall that copper price did drop to levels around $2 per pound. So I think from a precautionary point of view, some of those timings were changed without impacting our policy. And those conditions seem to have eased now. So we should expect basically to be back into normal territory. Okay. Another question. Can you elaborate on the impact on the deferment of on mine development and maintenance in the first half of the year and what that means for the rest of the year and indeed 2021 and possibly even 2022? Yes. As I've mentioned, on maintenance, we have a backlog as a result of COVID-nineteen, which we are expecting to basically be able to catch up on by the beginning of next year. So by then, we think this will be behind us. The good news is that we performed since several major maintenances, which we've done completely within the scope of what was planned and moving a significant amount of people to be able to perform those tasks. So we've got, so to say, the means and the practice to do this post COVID in a way that has already been done in an effective and successful way. In the case of mine development, we also had an impact during the Q2. And we are factoring in the full effect of those delays. So some of that is reflected this year, and that's why we've said we're going to be closer to the lower end of the range of production. If you take the low end compared to the midpoint, it's around a 3% impact. So if we were to be at the low end, the impact of that would be essentially a 3% impact. And in 2021, I would say, we would expect some moderation to the numbers that we had before, but probably in similar range, not more significant than about a number close to the figure that we are sort of expecting in 2020. And beyond then that we expect this will sort of essentially be removed. There will be no impact. So this year around the 3% considering the low end of the range, next year a magnitude which would be updating our numbers and we will provide updating our numbers and we will provide specific guidance in quarter 3. Okay. Thank you. Can you say a bit more about the Zaldivar chloride leach project? How that's progressing and how it's been affected by the COVID-nineteen? Yes. So in the case of the chloride leach project, Cuprochlor, we when the COVID-nineteen outbreak happened, we were starting to mobilize contractors site. And therefore, it was easier than at Pelambres because we basically stopped that mobilization from occurring. And therefore, it had a much lower impact in term of cost because we could avoid suspension costs there. We're now back basically during August, we've been moving back people into the site for construction purposes. We've finished the camp where people have moved. And therefore, we are essentially resuming the project as per the original schedule. Now because of the suspension, this essentially means that our schedule is delayed compared to the original plan by 6 months. But then we expect to complete basically the project with that change, so with a 6 months delay compared to the original scale. In terms of cost, there is a small cost impact, as I say, because we managed to early on stop the project without creating a lot of suspension cost with existing contractors. And therefore, we believe that consider that the amount of this extra cost can be accommodated within the existing budget. This is a simpler project compared obviously to the other ones that I've mentioned and also of a much more limited budget from the point of view of size. So in essence, we think impact of 6 months and costs within the original budget figure, and we're now back into construction. Another project question from Dan Majer, UBS. Can you provide an update on the Phase 2 of the Lost Palembres expansion project, timing, CapEx, licensing, etcetera? Yes. So the Phase 2 the main element in the Phase 2 expansion project is the extension of the mine life. You will recall that currently Pelagres has a mine life that spans to 2,037 and the intent of Phase 2 is essentially to be able to extend that mine life and add mineral resources into reserves. Now for that, the key is to be able to extend the ability of the tailings dam at Mauro to be able to deposit more tailings. So that's the really the center of that project. There's also some optimization at the mill in terms of throughput capacity, but the essence of this has to do with the extension of the mine life. Now we expect that this would come sequentially to the construction of the current Phase 1 at Pelambres. And the key thing is the permitting. So the sequence of permits that now we're envisaging is that we will have a permit for the expansion of the water supply to 800 liters per second. And then subsequent to that, we would have the permit for the extension of the mine life. So I think time wise, we would expect this project probably to be considered for approval and to initiate construction around 2025. You're in mute, Andrew. Sorry, I'm trying to stop coughing while you're speaking. A bit more about water. This is partly you partly answered this, I think, already and it's partly probably just a clarification you could give. But is the water if this water issue is structural, do you need desalination plants down the line at Centinela and Zaldivar as well? It's more of a general question about impact of climate change on Chile and Omar. As I was saying, the climate change impacts and we've done a lot of modeling for some time now on this is different depending on the region of Chile in which you are situated. So the expectation is that in the central part of Chile, there's going to be drought. In the northern part of Chile, there's going to be actually more rain. Now because there's desert there, this is all relative. We don't have a lot of rain in the desert, so there's going to be more rain, but rain is limited. And in the southern part of Chile, there's going to be more rain rather than less. So it's not a foregone conclusion that everywhere you have the same climate impact. That's why in Los Pelambres, we're very keen to progress our diesel facility. In the case of the north of Chile, we won't have the same impact, but it is a dry zone because it's desert. So we draw water from continental sources, which are limited. That's why Antu Goya and Centinela run on seawater. I mean, those facilities run on seawater completely. And the expansion at Centinela is predicated on using seawater as well. The only facility where we're extracting water from continental sources is Sandiva. And for the reasons that I've explained, because it's got a short mine life, we're extending it, the permit only for 5 years, And it's a moderate amount of water that we believe can be extracted in a sustainable way for the period that we got the permit and the consideration. If we want to grow Saldiva and develop a primary ore body, which is a project which would require 20 years more of water supply, yes, we would have to think that project with a different water solution indeed. So that's the way that we see the sort of water supply for our different facilities and operations. Okay. And one final question because we're just coming up for the full hour. And what better way to finish than to talk about tax. Can you please provide an update on any discussions regarding taxation changes in Chile? Do you expect this to be a feature or part of the agenda associated with the referendum on the change for the competition? Yes. Okay. I would say that the there's been no specific discussion so far in the context of taxation that I would think involves the sector. Now obviously, the focus of government has been responding to the sanitary crisis. And as has happened in other places as well, there has been a significant effort being made by the government, both in terms of fiscal and monetary policy to be able to ensure the recovery of the economy. In that context, obviously, that the public finances projection has shows a deterioration in terms of budget deficit. So that's one piece of information, which I think is common to Chile and probably to most economies as they respond to the current situation. Now we are in course, as it was mentioned, to have a referendum about changes to the constitution. I think that's essentially driven by pushing an agenda around education, health and pensions. So it's very much a social agenda. So tax has not been figuring in that conversation at this stage because it's about ensuring that these rights are enshrined in the constitution in a different way as they've been in the past. That referendum has to take place yet and that's scheduled to take place in October, so soon now. Now as part of that, I think I would not be surprised. I think I would expect that some discussion will happen subsequently in that process around taxation and how to reform the tax system in Chile. I think that the comments that we've seen and heard so far is that most of that has to be has to do with how the tax system will affect all corporates and citizens and therefore have an impact across all industries to be able to provide for the added requirements on social needs out of education, health and pensions. So there's not been a discussion about taxation that would be specific to mining, which we already have. There's already a tax, which is specific to mining in Chile. And also the tax burden for the sector in Chile is equivalent to that of advanced economies like Australia and Canada in terms of total tax for mining. So I think in that context, there would be an impact, but that impact would be common to all corporates and mining would not certainly be excluded then from eventually paying more taxes out of higher corporate income tax. But I've not seen any specific discussion that would involve mining as a sector being targeted at this stage. Although, as I say, I do expect that if the tax system gets reformed and companies have to pay more and citizens have to pay more, mining would also have to provide its share. But just as a general, increase in corporate tax rather than a specific tax condition. Okay. So I think that's we've gone just over the full hour. So I think that's it. I apologize to anyone who doesn't feel their question was asked. But there were lots of very similar questions, but I think we covered all the major topics. Goodbye from me. Okay. Thank you to everybody and goodbye and keep safe. Thank you very much.