Report on the Antofagasta AGM, London, 11 May 2022

By Richard Solly, Co-ordinator, London Mining Network, with assistance from Cristian Olmos and Javiera Martinez

Antofagasta’s first in-person AGM for three years included elements of continuity and elements of change from their former practice. It was, in fact, a hybrid meeting, so shareholders could participate online as well – but if any did, they remained silent.

The company has usually been as evasive and as contradictory as possible in responding to unwelcome questions. This year, company Chairman Jean-Paul Luksic took careful notes of questions asked and at least gave the appearance of making an attempt to give comprehensive answers. Company Chief Executive Ivan Arriagada was able to give further detail.

But while Ivan Arriagada seemed on top of the subject matter, Jean-Paul Luksic seemed distracted, lacking the bravado of former years. I thought this was an improvement – it seemed linked with the attempt actually to give answers to the questions asked.

Less welcome was the administrative mix-up that meant that properly appointed proxies were nearly not allowed to speak. At the registration desk, it was claimed that I had sent in forms appointing the Chairman of the meeting as my proxy for two of my four shares (not a controlling shareholding, I should point out). I pointed out that I had appointed two other named individuals as my proxies, but I was contradicted. (Perhaps Jean-Paul Luksic, having decided not to contradict people asking questions in the AGM, had subcontracted the task of contradiction to the registrars.) Nonetheless, the registrar admitted to having a note of the names of the people I had appointed as proxies, so I suggested that, unless one or other of the registrar’s employees had had a revelatory dream enabling them to know the proxies’ names, I must have written them on the proxy forms which I had submitted the previous week. It was accepted that this may be the most obvious explanation of the facts, and we were then given our attendance papers and allowed to speak.

Yet again, the only questions to the company were put by those connected with London Mining Network. These were questions submitted to us by members of communities affected by the company’s operations in Chile. Given the size of the company, the level of scrutiny it receives from shareholders seems pitiful.

Chairman’s comments

Jean-Paul Luksic began the meeting with an overview of the strategy and performance of the company.

He mentioned the company’s efforts to protect workers from COVID19 by ensuring that 97% of employees and contractors had been vaccinated by the end of the year.

He talked about the risks presented by climate change, how the company has set emissions reduction targets, how copper – the mineral which the company produces – is vital for decarbonisation of the economy (so Antofagasta joins Rio Tinto and Anglo American in their joint role of Saviours of the World), how the company is making significant progress in switching to renewable energy in its operations.

He spoke about the need to be careful in its use of water, which is vital for communities, the environment and the company’s operations. As Chile continues to endure a punishing drought which has lasted for over a decade, the desalination plant at Los Pelambres should start operating in the second half of this year and be expanded in 2025, enabling the company to phase out use of ‘continental’ water and to rely on sea water.

He regretted that, after three years of zero fatalities, a contractor had had a fatal accident at Los Pelambres in July last year, and gave his condolences to their family and friends.

He explained the company’s growth options and exploration.

He said that the company was committed to diversity and inclusion on its board, 30% of whom were now women.

He said that the current process of writing a new constitution in Chile could be the basis of new social pact which will unify the people. It will need to build on what has been successful in the past (presumably including large, profitable, private mining companies) while introducing changes that reflect the goals of the majority of the population. Mining will continue to be critical if Chile is to meet the social and development goals of the future, he said. A new mining royalty being considered by the government will probably result in increased taxation for the company. He said that the company’s view is that the main contribution mining makes is investment, high quality employment, community contributions, innovation and technology transfer. Any changes need to make sure that the industry is still competitive because it represents over half of Chile’s exports and 40% of Chile’s GDP.

He said that there are significant uncertainties in the copper market, with the inflation rise and conflict in Ukraine. He expected demand for copper to continue to be strong with growth coming from countries other than China. The supply of copper is constrained by declining resource quality as well as high scrutiny for new projects. Without additional investment in mine production the effect of decline will create a growing supply gap, he said. Antofagasta is in a prime position to capitalise on the growth in demand. It has the mineral resources and the ability to unlock them.

He said that 2021 was a year in which Antofagasta demonstrated its resilience.

Chief Executive’s presentation

Ivan Arriagada gave a presentation about ‘developing mining for a better future’, including the low carbon transition.

He said that Antofagasta has a workforce of nearly 27,000 people, of whom 25.5% are employees (77% of whom are unionised). 17.2% of the workers are women.

He said that the company aims to reduce its scope 1 and 2 greenhouse gas emissions by 30% by 2025 and be carbon neutral by 2050 if technical advances allow it [which is a very big IF]. More than 90% of water used will be sea water or recycled water by 2025. Currently 83% of water used is recirculated. 45% of water used was sea water in 2021.

Recently there was a claim against mining companies for excessive use of water in the past in the Atacama region, he said. He said that Antofagasta has shown it is using less than the recharge rate of the aquifer.

He said that the company works closely with communities near its operations. Participatory dialogue is the right approach. Company-funded projects in Choapa and Antofagasta are in line with the priorities of local municipalities. In 2021, 200 students graduated from the technical school in Los Vilos, sponsored 100% by Antofagasta’s Minera Los Pelambres subsidiary.

Questions and Answers

After drawing attention to the proposals being submitted for voting and opening the poll, Jean-Paul Luksic then called for questions.

Caimanes – Minera Los Pelambres

Expansion of the INCO project: Case in the Supreme Court for prior consultation

I asked about the impacts of the company’s Minera Los Pelambres copper mining operations at Caimanes in central Chile.

“The community of Caimanes has presented an appeal to the Chilean courts over the company’s “Complementary Infrastructure (INCO)” project. This is because of the failure to ensure citizen participation (PAC) by the People of Caimanes. Caimanes is directly affected by this project, since it is located in the “influence area”.

“According to Minera Los Pelambres, the PAC complied with the requirements, since activities would have been carried out in nearby towns, such as Los Vilos, Salamanca or Illapel. However, the Caimanes community has criticised the company’s actions and questions whether these activities have complied with the legal standard. Very few people from the Caimanes community participated. 

“1. Why were consultation activities not carried out directly in the town of Caimanes, given that it is much more affected than Los Vilos, Illapel or Salamanca by INCO? This project contemplates different stages. Is Antofagasta Minerals committed to carrying out an adequate citizen participation process involving the Caimanes community?

“2. The INCO project involves a desalination plant, which requires an aqueduct that will divide the valley in two. What are the environmental protection measures to prevent damage to ecosystems due to the construction and operation of the aqueduct?

Lawsuit for psychosocial damages

“The Caimanes community filed a case in the 16th Civil Court of Santiago for psychosocial damages which the company has generated in the community. Compensation is requested for moral damages, related to psychological damage suffered by the population. Minera Los Pelambres has already been notified of this reason. The case contains psychological reports prepared by professionals from the University of Chile. The reports demonstrate the effects and consequences that the construction, installation, and operation of the El Mauro Dam has had on the lives of the inhabitants of Caimanes.

“1. What measures will Antofagasta Minerals implement to reduce the impact on people’s lives?

2. What actions will Antofagasta Minerals take to minimise the impacts it has generated?

3. Is Antofagasta Minerals committed to financing a comprehensive rehabilitation centre for the psychosocial health of the population?”

Jean Paul Luksic said that it is not up to Antofagasta Minerals to decide who participates in consultations or how. It is the environmental authority who decides, and they decided that Caimanes was part of Los Vilos, so the consultation was carried out in those areas. Minera Los Pelambres provided free transport for people from Caimanes to participate in consultations in Los Vilos. The lawsuit was rejected by the courts.

Regarding psychological damage to the community, the company was waiting for the University of Chile reports to be presented to the court, and they have not been presented. The company does not know what is in the reports.

Ivan Arriagada spoke about concern over tailings. He said that Minera Los Pelambres operates at the highest international standards. He said that 80% of the community have come to agreements with the company and are outside these legal claims and are engaging with the company in a constructive way. The company is also funding projects in the community with community agreement. The space for agriculture and the number of crops grown have increased since mining began in the area.

Ivan Arriagada said that the aqueduct was connected with the desalination plant at Los Vilos and the expansion at the mine. The water line is a limited piece of infrastructure. It has been reviewed by the environmental authority. Appropriate measures are being taken for mitigation and compensation. The pipe is buried to minimise its impact. The approval included protection of biodiversity. Archaeological artefacts in the area are also being protected.

Jean-Paul Luksic added that there is now a conciliation agreement with the people who brought the law suit.

Pueblos Atacameños – Minera Zaldivar – Negrillar Aquifer

Dr Cristian Olmos said, “Hi everyone, my name is Dr Cristian Olmos. I am from the Antofagasta region in Chile. I actually went to the same school as Mr Andrónico Luksic, San Luis School in Antofagasta, so I know how complicated life is in this desert. I have been living in the UK for the past ten years. I am currently working as a researcher at the Governance and Inclusive Development Group (GID) at the Department of Human Geography, Planning and International Development Studies at the University of Amsterdam.

“As you might know, the Atacama Desert is the driest desert on the planet and now is facing an extreme drought that has lasted for a few decades. I was there just a few weeks ago, and it looks dryer and more extreme than usual.

“The Antofagasta Minerals 2021 annual report, in its introduction, Mr. Jean-Paul Luksic emphasises the reduction of the use of continental water and expresses concern that his mining operations are located in water-stressed areas, knowing that water is vital for the environment, for local communities and for his mining operations. Mr Luksic is aware that Chile is in a continued punishing drought that has lasted more than a decade, and he mentions the intention to work on a desalination plant and water pipeline for their operations.

“In addition, in this same report on page 48, and as Mr Arriagada just presented today, they show their climate change strategy.

“Taking into account all these antecedents, and also that the operations are in a final phase. Why did the Zaldívar mining company present an Environmental Impact Study (EIA), which included a request to extend its permit to extract water from the Negrillar aquifer, when it has been declared exhausted and has an early warning plan since 2012 by the General Water Authority (DGA) and a claim for environmental damage filed by the state of Chile with the State Defence Council (CDE) dated March 30, 2022 appealed to the National Environmental Court?

“Why squeeze the Salar de Atacama and not bet on using seawater? What are the limitations to making a radical change in the use of water for its operations rather than continuing to damage this ancestral territory?

“In summary and taking into account the above, why is it requesting to extract more water and what are the water measures and protections in the face of the deficit in the Salar de Atacama basin? What is the use of preparing annual reports where they show concern about the use of water, when in reality there is no correlation with what happens on the ground? What is the purpose of this?”

Indigenous community of Peine

Cristian continued: “The 2021 annual report of Antofagasta Minerals, on page 75, the company mentions that, during the year 2018, Zaldívar submitted an Environmental Impact Assessment (EIA), which included an application to extend its water extraction permit and mining concession from 2025 to 2031. This has meant that government agencies review the request and carry out a consultation process with the indigenous community, led by the environmental authority. The final stages of the review are expected to be completed in the first half of 2022.

“1. Why has the indigenous consultation process been so complex? Why has the Zaldívar mining company been in this process for more than 5 years and there are still no results? No indigenous consultation process in Chile, including the complex processes in Araucanía, has taken so long. When should this stage end? What are the preliminary results?

“2. What community strategies is the Zaldivar company developing to approve the request for extension of water extraction? What are the strategies and concrete actions that are being developed with the community of Peine, to carry out this indigenous consultation process?

“There is public information that shows that the Zaldivar company has developed voluntary parallel indigenous consultations with the board of the Socaire community generating problems between the two neighbouring communities of the Salar de Atacama.

“3. With what other communities has the company been in conversations about the environmental impact which will be generated in Peine by the extraction of water in the Tilopozo-Negrillar basin?”

Jean-Paul Luksic said the company is very proud that they were one of the first companies in Chile to start using sea water. They have been increasing their use of sea water for years. 45% of the water they use now comes from the sea, and by the end of the year, with the new desalination plant, they will increase that dramatically, including at Los Pelambres. The plan is that 90% of their water will come from the sea by 2025. They are proud of that, and it is an important step for the company to take this decision. They are discussing with the authorities and the communities near their operations. At the Zaldivar mine they have asked for and extension of the water permit for four years, from 2025 to 2029, to allow the mine to produce for four more years. The company’s water usage does not damage the Tilipozo-Negrilla area, he said. They know that what they are asking to continue to draw from the ground is less than the natural replenishment into the system. The authorities understand there will not be any damage to the environment. The company is engaging with the community of Peine, who have been very much involved in discussion with the company concerning issues of the extension of water rights for four years.

Cristian Olmos replied that in the company’s annual report, the application for extension of water withdrawal rights is from 2025 to 2031, not four years but seven.

Ivan Arriagada said that the request is to extend the permit for current extraction till 2029 and then, because the mine will close, a very limited amount will be withdrawn from 2029 to 2031, only thirty litres per second. This is a minimal amount for the purposes of progressing the closure of Zaldivar. The reason the company requested the permit is that studies show that it is sustainable to do so, as extraction is below the natural recharge and is only for four years. Zaldivar may have an extension of mine life but any water solution would be poart o that permit and not part of the permit for extension of use of continental water.

Cristian said that the company says it is worried about drought and water stress. “So why do we need to sacrifice a basin like Salar de Atacama rather than use another technology or another source of water?”

Ivan Arriagada replied that the reason is that they believe that doing so at a limited rate and below the natural water recharge rate is not environmentally damaging and it is for a very limited time. During that limited time, there are no alternative sources. Any extension to the mine life would have to find other sources. Antofagasta is concerned about the drought and that is why they have been a pioneer in use of sea water and why they are constructing a plant at Los Pelambres so they can increase use of sea water. The permit at Zaldivar is for a limited amount of time and at a level that the company thinks is sustainable.

Cristian pointed out that neither Jean-Paul Luksic nor Ivan Arriagada had replied to his question about the community strategies the company is developing. What is the strategy being developed with the community of Peine?

Ivan Arriagada replied that the consultation is being done not by the company but by the environmental authority. The company is keen to have engagement with the community through the environmental authority. That is the process that is taking place. The community agreed the methodological procedure a few months ago and that engagement is being undertaken. Antofagasta submitted the project in 2018-19 and COVID has had a big impact on carrying out the consultation procedures. Antofagasta does not manage it. It is done and undertaken by the encvironmental authority.

There were no other questions from within the room.

There were no questions on the phone lines.

There were no written questions submitted online.

And so the meeting ended.

Is this sufficient scrutiny for one of the largest companies listed on the London Stock Exchange?