Climate change

As a copper producer, we provide a critical raw material for lowcarbon technologies and have also adopted measures to mitigate the carbon footprint of our operations. Through innovation, planning and resilience, we are transforming our production processes and managing risks associated with climate change.

We assessed physical and transition climate change risks to our business from a financial perspective, in order to understand their impact on short-, medium-, and long-term actions. This input is key to strengthening our climate change adaptation strategy and to accomplishing our emissions reduction targets. In addition, we measured our transition risks, in order to assess our decarbonisation plan2.

Climate change mitigation and adaptation is managed in terms of three criteria: climate change risk control, assurance of the destination of investment resources, and consistency of project approval with the internal carbon price. Our focus is to ensure operational continuity, and our investment resources should therefore be aligned with processes across the Group as a whole.

We promote effective risk management as part of our culture and strategy based on acknowledgement that they are inherent to our business. We manage risks using an Integrated Risk Management System based on the ISO 31000 risk management standard and the COSO1 ERM enterprise risk management framework. The system is applied to all our operating companies, projects, exploration activities and support areas in order to ensure a comprehensive overview of the uncertainties that could affect the achievement of our strategic objectives.

The Board of Directors has overall responsibility for risk management, determining the nature and scope of principal and emerging risks, and defining and regularly reviewing acceptable levels of exposure based on the defined risk appetite. The Audit and Risk Committee assists the Board to evaluate the effectiveness of the risk management process. At the executive level, the Risk, Compliance and Internal Control area implements the policy, ensuring that a solid risk management culture exists at all levels of the organisation.

We recognise the threat that climate change poses to human life and the planet. For this reason, we have integrated climate change as one of our principal business risks, allowing us to strengthen our mitigation and adaptation capacity to address the consequences of this phenomenon. We follow the TCFD recommendations to assess our climate-related risks. As part of our risk management, on an annual basis, we review the risk appetite assigned for each principal risk. This is defined as the level of acceptable exposure to risk based on its benefits in terms of the fulfilment of strategic objectives.

We give special priority to the potential financial impact of the transition and the physical risks associated with climate change, as well as to mitigation and adaptation measures, such as the construction of a desalination plant at Los Pelambres.

At Antofagasta we have the ambition to reduce our Greenhouse Gas (GHG) emissions in the short and medium term, and to achieving carbon neutrality by 2050, or sooner if technology allows. Our comprehensive approach to decarbonisation involves our mining site operational teams, our corporate teams and our suppliers.

Scope 1 & Scope 2 2035 goal - 50% emissions reduction with 2020 as baseline

Scope 3 2030 goal - 10% emissions reduction with a projection baseline using 2022 emissions criteria

Concurrently, we are aligning our technological needs with the operational requirements of our mine plan. This includes strategic procurement and replacement of extraction trucks in synchrony with our plan’s requirements, with a 2027-2035 horizon.

The integration of the fleet renewal and the decarbonisation plan presents an opportunity where renewing equipment enables a gradual and cost-efficient transition into electrification. With a lens focused on long-term viability, we assessed emerging technologies’ availability that allows us to solve the challenge of charging the equipment, with a substitute for diesel or a battery without generating stoppages or impacts on the availability of that equipment. Among those solutions, we particularly focused on dynamic charging, which would allow us to electrically charge the truck while moving. Another key factor to consider when choosing technologies is their potential to deliver economic benefits today, as well as considering their potential to enable other technologies such fully electric vehicles in the future. This process allows us to select technological solutions that meet immediate needs and are scalable for future enhancements. We have defined clear design principles for the transition, such as introducing dynamic charging from 2027 onwards and potential upgrades to batteries in vehicles requiring engine rebuild from that date forward.

To accomplish our goals, we have developed specific partnerships. Our agreement with key Equipment Manufacturers (OEMs) allows us to collaborate in low-carbon technology trials and jointly build transition plans for critical equipment. During 2023, we updated the decarbonisation plans for our main pits, where these technologies have the potential to add value to the business. In this way, we are able to establish a new medium-term target for the year 2035.

In 2023, we continued our work to incorporate carbon emission indicators into our large project decisions, integrating the entire organisation into our decarbonisation plan. We conduct thorough analyses to establish whether a large purchase or investment may have a positive or negative impact on our path to decarbonisation.

Decarbonisation initiatives are becoming an increasingly relevant aspect of financial evaluation packages.

We strive to reduce our carbon footprint. As part of these efforts, we have worked with:

       1. Equipment manufacturers to incorporate technology solutions, targeting a reduction in our direct emissions

       2. Since April 2022, all our mining operations have had renewable energy contracts (Scope 2), and

       3. Our suppliers within Scope 3 to include sustainability and carbon footprint reduction into their processes

Electromobility for Decarbonisation

We began developing our decarbonisation plan with a detailed analysis to determine the best technological alternatives to begin the journey towards the decarbonisation of our operations, with a specific focus on replacing diesel fuel in mining haulage trucks and in our ancillary equipment. We studied different low carbon emissions technologies among which are: dynamic charging solutions, electric batteries, green hydrogen and e-fuels. We also integrated collaborative projects in which Antofagasta Minerals has participated, such as Charge On and the Hydra Consortium; we concluded that electrification is currently the best solution for our operations. Although it currently prioritises electrification, our Company is open to integrating adjustments or other compatible technologies available in the future. The Climate Action Plan has been designed to be flexible as we expect that the industry will evolve quickly presenting different solutions for all operational processes.

To achieve our decarbonisation targets, we must develop our knowledge of critical enabling elements that will be required for safe and sustainable energy transition. During 2023, aiming to deepening our knowledge of battery powered equipment, we developed and implemented agreements that included electric vehicles into our current services, such as, the largest battery pickup fleet in Chilean mining industry. We also purchased eight electric ancillary equipment for material movement contracts which will help us develop and experience the operation, charging and maintenance of battery equipment in real mining conditions.

In June, Centinela put the largest fleet of electric pickup trucks in Chile into operation. A total of 50 vehicles began work on the site using energy from 100% renewable sources. This initiative helps Antofagasta Minerals build the foundation to accelerate the transition of all pickup trucks, sharing operational performance and developing critical knowledge for the Group.

As we continue to develop electric technologies into our process, we have identified electrical infrastructure as being a critical enabler that will be required to support this transition, hence Antofagasta Minerals has been reviewing the suitability of our four companies’ energy nodes for electrification of all vehicles and distribution centres in an attempt to establish whether the network and distribution points in northern Chile are prepared for this simultaneous demand. At the national level, infrastructure development and timely availability is critical to enable the industry´s energy transition.

In 2023, following the threefold drop in the cost of green energy over the past decade, and with Board approval, we began the manufacturing and pilot implementation of dynamic charging solutions, and will commence testing a trolley system for haul trucks at Los Pelambres.

Testing the operational impacts of electric powered trolleys will give us the information required to evaluate different designs of our mine plans. Integrating trolley technologies with battery powered drive trains could potentially be the answer for reducing Scope 1 emissions, as well as lowering operational costs. Currently, we believe electrification shows the biggest potential to deliver cost-effective solutions in the next few years, therefore, Antofagasta Minerals has developed an extensive programme of trials to support our decarbonisation plan.

Energy is a strategic resource that must be managed in order to ensure a safe, efficient and sustainable supply for our operations, in accordance with our Climate Change Strategy. Energy represents approximately 18.9% of the total of operational costs of our mining operations. Of this percentage, about 10.4% corresponds to electricity and 8.5% to fuels, mainly diesel.

In accordance with our Energy Policy framework, implemented in 2022, we have incorporated the role of Energy Management Representative at each mining site. They supervise the achievement of decarbonisation and energy goals through energy performance plans and GHG reduction. The role consists of leading and ensuring the implementation and improvement of the Energy Management System according to Chilean Law No. 21,305 on Energy Efficiency.

Our team consists of Energy Management Representatives at each mining site and one in the corporate area. Together they have decided to achieve compliance with the Energy Efficiency Law by implementing the ISO 50001 standard in each company. We are aware of and keen to comply with both legal requirements and voluntary commitments regarding energy use, consumption and efficiency.

Our approach to energy efficiency is incorporated into our operations, into each project design, and into the guidelines on acquiring products and services that may impact the energy performance of mining operations.

In 2023, we focused on ensuring a competitive energy supply for our Centinela Second Concentrator project, and we prioritised external verification in relation to energy management, such as renewable energy certificates (RENOVA and IREC). We also continued reviewing our contracts with our power companies, in order to guarantee a supply of exclusively renewable energy, taking advantage of the abundant solar and wind energy available in Chile.

The competitive prices of renewable energy in Chile have enabled the evaluation of the decarbonisation or energy transition plan for our processes; however, the amount of energy required would be challenging for the current electrical infrastructure. Considering this, the development of energy efficiency initiatives that allow us to reduce the energy consumption of our current processes, as well as the required electrical infrastructure becomes a critical enabler. Our short-term strategy is focused on the renewal of key electric motor and pumps associated with our water and grinding processes with new technologies that allow us to reduce energy consumption and make the overall process more efficient.

In 2023, in acknowledgement of the strategic value of water for our company and our own sustainability, we created the Water Resources Management area to improve technical advice and our role in planning. We also assigned a water lead expert at each mining site to improve water management and to increase water efficiency.

As part of the third pillar of our Climate Change Strategy, water stewardship has become a critical aspect of our operations due to the nature and geographical location of our mining activities. Three of our four mining operations are in the Atacama Desert, and the fourth, Los Pelambres, is located in an area subject to water stress and severe drought in the Choapa Valley.

Our assignment of water leads in each company is intended to improve our governance, recognising a steady development of internal skills over the last two years in this domain. Considered a milestone in our water policy, this new governance structure allows the incorporation of decisions on water use into new projects and the standardisation of processes.

Our water leads are promoting a cultural change based on water stewardship at each company. We now report monthly with the support of skilled professionals. Our objective is to keep working to strengthen the Group’s expertise in water management. With the purpose of safeguarding the availability of water resources within our operations, communities and the environment, we implement practices aligned with the Water Stewardship Framework of the International Council on Mining and Metals (ICMM).

At the operational level, we understand the relevance of compliance, so we prioritise water management to avoid risks that, if not properly treated, may lead to contaminant leaks, harm to communities, or difficulties in obtaining environmental permits. In doing so, we constantly improve the quality of our information and maintain a close relationship with surrounding communities to transform risks into opportunities.

As a company, we are intensifying efforts to protect limited freshwater resources in the communities in which we operate. We work hard alongside the community and the authorities to define the future use of their water rights with sustainability as a key objective (see Our Work with Communities section). We promote transparency through quantitative information in our Sustainability Databook, sustainable and responsible environmental water management, and the water safety of our communities.

Our Approach

Evolution of the water matrix

• Procedure Strengthen the strategy for reducing use of continental water in areas where water is scarce, establishing targets and actions based on climate scenario analysis results

Efficiency, recirculation and reuse measures

• Strengthen efficiency in the use of water and other strategic resources, improving their recirculation, recovery, reuse, and protection in the company’s areas of influence.

Procedure

• Guidance for compliance with the Water Policy’s commitments and the requirements established in the Water Management Standard.

According to our Water Policy and Climate Change Strategy, each Company must have a Water Efficiency and Implementation of New Technologies Plan in place. The objective is to promote the efficient use of water resources from continental sources, seawater or other alternative sources, analysing water use indicators and promoting the implementation of industry best practices. Since 2022, all of our mining sites have a water efficiency plan. In 2023, we set a goal that all Group companies should achieve at least 70% of the water management standard. By the end of 2023, progress in implementation of the standard had reached 80% as a Mining Group. In addition, two water efficiency pilot projects were approved to increase water recovery from tailings at Centinela and Los Pelambres.

Our Pillars

Water Policy

Increase water efficiency in our operations
We are committed to progressively reducing water use per tonne of copper produced and seeking multiple alternative sources of water supply.

Apply robust and transparent water governance
We use consistent industry metrics and widely accepted approaches to report our water management performance.

Cooperate for environmentally responsible, sustainable water management
We work with local communities to cooperate in the management of their water needs, contributing to enhanced water security.

Water Management Standard

Defines the minimum requirements that allow Antofagasta Minerals and its mining operations to ensure a safe, economical, efficient and sustainable water supply throughout the entire lifecycle of a site. It covers the exploration, design, operation and closure phases, along with development projects.

Water Resources Procedure

Technical reference document detailing best practices and recommendations. Provides guidance for compliance with Water Policy commitments and the requirements established in the Water Management Standard.

Leading Seawater Use

Antofagasta Minerals has long been a pioneer of the use of seawater in the Chilean mining industry. We are moving away from dependence on continental water sources and increasing seawater use. In 2023, we achieved two milestones: completion of the Los Pelambres desalination plant as the first of its type in central Chile, and operations at Centinela only use 100% seawater following Antucoya’s lead.

The Los Pelambres desalination plant has a production capacity of 400 l/s of industrial-quality desalinated water. The plant is located at the Los Pelambres industrial facilities at the Port of Punta Chungo in Los Vilos district, Coquimbo region. It includes marine works for capturing seawater and discharging brine, and an underground drive system stretching 61 km to convey desalinated water between the pumping station and the existing recirculation station at the El Mauro Tailings industrial area, before continuing to the mining site in Chacay.

In October 2023, the environmental authority approved doubling the capacity of the desalination plant to 800 l/s and building a new copper concentrate transportation system. The project also involves the construction of a new grinding line and a new flotation line at the Piuquenes Plant, located at the Los Pelambres production facilities.

The Centinela Second Concentrator project, approved by our Board of Directors in December, will also use seawater in its operations.

Following two years of work, Centinela began full operation using seawater in 2023. This milestone brought to an end a small remaining extraction of water from wells in Calama