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Welcome to the Antofagasta live Q&A webinar and conference call.I would like to pass you over to Andrew Lindsay of Antofagasta. Andrew, please go ahead.
Thank you, Rosy. Good morning, good afternoon, everyone. Welcome to our first Q3 Q&A -- live Q&A. This is the first of what will now become routine. We'll have these Q&A sessions after every Q1 and Q3, which we haven't done previously. And that's obviously complementing our normal half year and year-end Q&As and presentations.We have -- with us today, we have Ivan Arriagada, our Chief Executive; Mauricio Ortiz, our CFO; and Rene Aguilar, our Vice President of Corporate Affairs and Sustainability.I'll hand you over to Ivan.
Thank you, Andrew, and welcome, everyone. Thanks for joining the call. I'll just say a few words, and then we'll go into Q&A. We just released third quarter production report. And we're pleased that we continue to make very good progress on sustainability. As you would have noticed, we've been awarded Copper Mark for Centinela and Zaldívar. And we've also recently released a progress report on PCMD, and how we're making progress on our sustainability agenda and disclosing the impact of climate change.With respect to production and cost, copper production and unit costs were in line with what we expected. We produced 181,000 tonnes of copper in the quarter at $1.16 per pound unit cost, which is quite a good cost performance. And for the half year, we recorded 543,000 tonnes at a cost of $1.15 per pound. So we continue to perform according to our plans. Our plants are especially performing well. We have a strong performance in all our plants across our operations and especially at Centinela and the brand is up almost 30%. We're also passing more and more at Pelambres and achieving more treatment at Antucoya and Santiago. So our plants are performing well. We also had quite a strong production for gold in the quarter.Now we've also released our guidance for 2022. And obviously, this is very much impacted by water availability, which we had guided before to impact of no rainfall basically assumed between now and essentially when the diesel plant comes into operation. This is a temporary effect. And therefore, our guidance is very much impacted by water and availability condition. And also according to our mine plans, we have lowered rates at Centinela. So our guided production for next year is between 660,000 and 690,000 tonnes at the midpoint of 675,000.So those are the key highlights, I would say. But -- the good news is, as I say, that our plants are performing very, very well and that the impact that we have next year essentially around water, a temporary impact. The diesel plant construction is actually going quite well. We're 60% of bumps in construction and therefore, expected to be running with the diesel plant in the second half of next year, which is a permanent solution to the water condition at Pelambres.So having said that, I will open it now for Q&A, and we're very glad to be available. Mauricio, Rene and myself to be able to address any questions that you may have.
Thank you very much. We'll now move to Q&A. We will first take questions on the webinar and before moving to any questions that have come through on the conference call. [Operator Instructions].We will take our first question from Janis .
Hello, can you hear me?
Yes.
Two questions from my side. The first on the production guidance for 2022. I guess it's fair to assume that the 660,000 tonnes, which the low end of the range suggests that you see the full impact of the 50,000 tonnes of Los Pelambres due to water scarce today. But what about Centinela grade? What are you assuming at that low end of the range? Because my assumption would be that the Esperanza Sur pit opening would give you better grades at least for the second half of next year? And then the second question around CapEx for 2022. You gave some indication, which feels relatively high to me given the moving parts that I had in mind. Could you please talk about the key items that we should be mindful of for next year? And especially, I'm trying to understand if we are looking at the catch-up on spending, or if there is an incremental CapEx inflation across the growth projects that comes through?
Yes. Okay. So on production, indeed, the range assumes the full impact of the 50,000 tonnes that we had highlighted in our previous report. Now with respect to grade, we are projecting according to our mine plans at Centinela, as I mentioned, a great decline. We are mining this year close to 2.6%, so we're feeding the plant close to 2.6% of 0.59% grade, and that will drop next year. Now we have the first feed from Esperanza Sur coming in, in fact, next year. But this is an orebody Esperanza where initially the first layers of ore, in fact, have lower grade until we get to higher grade later on. So while we always see Esperanza Sur, which will allow us basically to reduce the volatility of grade at Centinela and increased grade during this initial phase what this is actually doing is that we're mining a zone of lower grade, and therefore, we're blending that with the Centinela main pit. So initially, in 2022, it has it doesn't have the impact of increasing the average grade. So that's the situation with respect to production. That's why we're assuming next year, the lower grade across Centinela and that's reflected in the range. Now with respect to capital expenditure, I'll hand over to Mauricio to respond to that. But essentially, let me just maybe some introductory comments say that we've generally guided for mine development and sustaining CapEx to be in the range of between $600 million and $800 million a year. Now we are expecting somewhat of a higher number in 2022. And this is not a permanent change in the range for sustaining CapEx. But we do have some extra projects, which are expected to be to be done and performed in the course of 2022, and Mauricio will talk to those.
Well, as Ivan said, we are moving to the top end of our let's say, traditional range of sustaining plus mine development basically because we are increasing mine development at Pelambres we are increasing movement. So that is mainly driven -- or fully driven by additional mine movement at Los Pelambres. And on top of that, we have, let's say, 2 big components. From 1 side, as you said, the moving pieces, we are updating the project still for Los Pelambres expansion project. And also, we are budgeting or we are guiding the amount for the engineering of the DMC, the second concentrator at Centinela. So basically, that increase our development CapEx to -- rather than increase. That gave us the development CapEx figure driven mainly by the Los Pelambres expansion project, plus the engineering of the second concentrator in order to be ready for final investment decision, as we said, in the second half of 2022. And back to sustaining projects, we have some one-off projects, especially in Centinela, we have very attractive projects related to improve the value and the operation at Centinela. For example, we have an In-pit tailings dam's project, which is interesting because we'll reduce the CapEx intensity going forward in the mine life as we are going to optimize the investment associated to training them using the content pit and also recovery projects related to flotation sales, something like that. But answering your question, Janis, it's not driven by, let's say, inflation costs rather than additional activity associated to, in some cases, the development projects, INCO and second concentrator and the other part mainly related with a one-off sustaining project, as I mentioned, these 2 examples in Centinela.
We will take our next question from Jason Fairclough.
A couple of quick ones for me, if that's okay. Just in terms of the desal plant, you had been hoping that you could maybe bring the construction forward a little bit and speed it up. And so we wouldn't have to wait until the second half, have you been unsuccessful, or is it just the range that you've given us reflects a different timing for the commissioning of the desal plant? So that's the first question. Second question is, can you confirm for us again that the desal plant supplies 100% of the needs of Los Pelambres at the expanded rate?
Yes. Okay. So on the first one, I think we continue to -- and we'll continue to look at opportunities to be able to advance the delivery of water, I mean, no question. But we are -- I mean, we're still working on that. I think the challenge that we've seen in project construction, which I think is common across projects, has been following the very high levels of COVID infections, is to bring workers back. And I think that's something that we've experienced and we've seen in the industry generally, when it comes to projects, but absenteeism rates have been high. So we are factoring in those elements as well as we sort of return to construction to normal. And therefore, we have been conservative or prudent in assuming therefore, that any opportunity to bring this forward has to be locked in full. So we will continue to look at opportunities, but nothing that we can firm up at this stage because there are other challenges around increasing the number of people working on site, which we're now reaching levels, which give us much more confidence and comfort, I must say. I mean in the last, I would say, month, 1.5 months, we are back to levels of manpower in our construction projects, which gives us much more confidence. We know that some of the government help will go away now in a month or so, and that will essentially provide also more opportunity to increase the numbers of workers at side. So we continue to work on this, Jason, but there's nothing that we can firm up now with full confidence to say that will allow us to bring forward the availability of water. But...
Ivan, sorry, can I just push you a little bit there? So just so that I understand. So let's say that you could bring forward the desalination plant by 2 months or 3 months. Does that bring up the bottom end of the range, the new range? Or does it bring up the whole range? Do you see what I mean?
Yes. Well, I think that the way that we've constructed the range again is that the -- we assume because we're going into the summer season, that there's no rain basically until June next year. And we won't -- I don't think it's realistic to assume that we would be able to bring forward the plan -- the plant before June. So I think that at this stage, it's a given that we will be doing with the current situation until June. Now we may be able to do things within the second half of the year when it comes into the sort of construction date and availability of work. And if we do that, then that may move indeed the whole range. But I think the margin in which we're talking is more limited given that this is essentially moving within the second half. And we will obviously keep you guys updated on this. I mean, we're seeing much more better conditions today in terms of non-power numbers. and therefore, looking at ways to accelerate this. Now the other thing is that I think we're confident that we can progress the plan and complete it within the current schedule because we've got all the supplies on site. We've got the contractors working. We've got all the permits. There's no logistical issues, which are constraining us to be able to continue to progress according to the schedule. The question is, can we bring this forward? Can we accelerate this? We're working, but we haven't got yet plans which give us full certainty so that we could convey those to you. That's on the...
So again, just to push on the other thing that you said. So you said no rain at all. Again, is that you guys being your classic sort of Uber conservative? I mean is it really likely that we have no rain at all now until next June?
Well, I think it's -- we've maybe been conservative, but -- I mean, normally between January and June, it is a dry season. And therefore, while there may be some rain, we expect it to be minimal, and it won't make a difference. So I don't think that you can count on a significant deviation from that condition. I don't think that, that would be realistic either because it is the dry season. So I think it's a reasonable assumption, probably on the side of being conservative, but I think a reasonable assumption to go with. Now on the plant itself, I mean what we've said is that we've got this first when we finish the plant, we will have around 450 liters per second of water available. And essentially, that will allow us to, we think, derisk the water supply condition. Now we've also talked about expanding it to 800 meters per second subsequently. And that would essentially replace all continental water going forward. But with the first phase, we basically have a water balance, which we think is derisked, from the point of view of the sources, that we are extracting combining both continental and sea water. So we don't see that risk going forward after we've completed this part of the desal plant.
Thank you. We will take our next question from Abhi Agarwal.
I have a couple of questions. The first one is on a follow-up on CapEx. Can you talk a bit more about what is the driving force behind the higher mine development at Los Pelambres? Should we see better flexibility post 2022 as a result of the higher mine development this year? Also the second part of my CapEx question is, could you talk a bit more about how much CapEx have you attributed to the DMC project -- the engineering portion of the DMC project? My second question I have is can you talk a bit -- can you talk about the ongoing debate around the Chilean royalties? What are your expectations? And do you think it's realistic to assume that there could be an agreement reached ahead of the November elections?
So on CapEx, the mine development component at Pelambres, this I mean -- Mauricio may be able to complete the exact quantum, but it's an increase, obviously, over what we've spent in 2021. I would say that as a matter of -- from a business point of view, what we're doing is, we are during this period in 2022, when we will have some restrictions in terms of the plant at Pelambres. We really want to go forward and develop the mine and continue to develop the mine in a way that allows us, basically, when we've got the new line available by the end of the year, and the water supply resolved to be able to be running at full speed. And I think this mine development expenditure is in line with our mine plan, but it essentially allows us to have flexibility, as you mentioned, in the mine to be able to manage a blending of hardness of the ore and grade in an improved way and be able to use full force the capacity that we will have when we get the plant and the water. And we're also from that point of view during this time doing some client maintenance at Pelambres, which will allow us, again, to be able to be running with a plant that has increased levels of reliability. So we're taking advantage of this plant to be able to position Pelambres to be able to run, as I say, full speed when we got the income delivered towards the end of next year. Now -- so that's on mine development that it's flexibility, and it's basically, as I say, ensuring that we are in a very strong position when the plant is up and running, and we've got the full water availability. In the case of the DMC capital expenditure, that's 1 element of the development CapEx for next year. I think it's probably around $100 million. the engineering that we're expecting to spend. So it's not that significant. I just want to remind you that the while we get ready for the DMC, the DMC is a position that we are scheduled to take to the board in the second half of next year. and therefore, going ahead certainly depends on that decision. We've not made that decision to move ahead with the project, but we're obviously, doing the work that's necessary to be able to have the full engineering available as we approach that date. Now, as Mauricio was saying on the sustaining side, and mine development, therefore, next year, we will be slightly above the higher end of the range that we normally guide to. And there are some interesting projects that he mentioned, which I'd like just to touch on a couple of them, but he said of in-pit tailings, for example. That's a very interesting development that from an environmental and sustainability point of view, I think it's worth developing. And therefore, we are investing in the feasibility of any detailing disposal, which would allow us to improve or reduce the footprint on tailings, then increasing concentrate grade, adding flotation circuits at Centinela and then also overhauling the water system and piping at Centinela, which is also one of the sustaining capital expenditure that's scheduled for next year and which is not recurring, that will happen next year. So there is a suite of projects on the sustaining capital side, which I think essentially make our facilities reliability increase, and therefore, they're good product for the long term. And that's why we're spending more in 2022. It was tough during 2020 to meet the targets that we had because of COVID, and therefore, some of that is also catching up with respect to CapEx that had been deferred. Let me now talk about the royalties, which was the last part of your question. I think the -- as we mentioned before, the loyalty discussion started with the project in the lower house, which was quite a -- regard a bad project in the sense of how it was built on the sort of royalty rate. The discussion has been moderated quite significantly in the senate. And there was a growth range of opinions being consulted as to how could mining contribute more and therefore, keep the incentives for the mining industry to be able to continue to invest and develop at the same time as looking at ways of increasing some of the tax base. Now that center is where the project still is sitting today. And because of the very heated base around the presidential election, I don't think one can realistically think that this will get resolved before the presidential election takes place on November 21. I have mentioned before and have mentioned that I believe that this is something that probably will get resolved before March next year when Congress changes, but that's subsequent to the election that's due to take place in November. And as I say, I don't think that it will be a table before, because it's an element which will carry a lot of political debate. And I think candidates during this time are essentially focused on other topics and therefore, don't want to bring this as an extra one to be discussed in the context of the political election. So I don't think this is something that will get resolved before the election in November, but it may well be before March next year. That's what I would expect.
Got it, very clear. So I just had another follow-up on CapEx. So the higher spending at Los Pelambres next year, we should not read it as sustaining CapEx has moved up permanently. That should not be as is, right?
No, no, no. And that's what I said at the beginning. I think we still our range would normally be between $600 million and $800 million. I think we're going to be above -- slightly above next year, but because it's an unusual year because of some sustaining capital projects, which will not recur. And therefore, we're not changing, that range should not change. On a programming basis, we think we should be on that range.
We will take our next question from Daniel Major.
I mean, a number of them have already been asked, But one on the approval of the expansion at Centinela, you're saying is second half target approval. If that goes is approved, is there upside risk to the full year CapEx number that you've guided to or really realistically be able to start spending in 2023. And what's the latest on the monetization or potential monetization of the water assets? Is that something that you would look to finalized at the time of approval? Or will it come after approval? That's the first question.
Yes, if the project gets approved, we don't see that there will be any human change to capital expenditure next year. The bulk of it will come in the following year. So we wouldn't expect to change the sort of guidance that we will provide on CapEx in January. So if it gets approved, it's likely to be in the second half, probably in the late second half and therefore, no material spend expected next year. On the monetization of water, yes, we basically are in the process of receiving or have received at this stage at the bid for the modernization of the assets, and this is something we're quite keen on looking at, and we would expect to be able to make a decision on this at the time we go ahead with the project. So the project therefore, will contain from its very beginning a decision on the water system in a way, or it's going to third parties and the party will actually take the water system that we have today, and spend on the expansion of the water system as part of DMC, or we will do it ourselves. So that choice, that decision will be made at the time that we made the decision to go ahead with the project not later.
Very clear. And then second question, just on CapEx again. How much of the uplift in sort of sustaining and mine development is the product of I guess, temporarily high input costs for certain things that may normalize? And also any related catch-up from COVID-related delays to either maintenance or stripping. So how much of the sort of uplift from what is it, $600 million to $800 million, maybe $900 million to $1 billion is associated with those 2 items rather than scheduling of various maintenance items.
Yes. Look, as Mauricio mentioned, I think from a point of view of the input cost. I think it's mostly activity-driven. So we're not seeing in capital expenditure a lot of pressure from the tons of input costs being reflected in the figure that we've sort of are looking at. And as I say, we will provide specific guidance in January, but that's the way that we're looking at it today, it's mostly activity based. Now in terms of COVID, I would say that there is a component which is COVID related, and I think no question that probably the 35%, 40% of the extra spend is associated to spend, which would have been scheduled to take place during the covenant, which had to be deferred changed, and on which there was some flexibility to do that. But I think certainly in that sort of range, I would say that it's COVID related, so things that would have been spent over the last couple of years but moved to be spent later on a...
Okay. Just a final one, just a follow-up on that CapEx sort of debate. I mean is it fair to assume when we look beyond 2022 that's had some one-offs, a normalized level would be at the higher end of the $600 million to $800 million range. And assuming you go ahead with the DMC expansion, what would be sustaining and mine development number be following that expansion?
Yes. On the first part, I think it's -- we will be in that range. I think we're seeing, obviously, a higher level of activity and also and therefore, reasonable to assume that we would be in that way in some years mid-range but some years at the top end. Now with respect to -- the question is with respect to sustaining and mine development after the DMC, how that looks like. We don't have a number that we can share on that now. But obviously, you have to reflect the fact that there is another plant operating and a full set of new infrastructure in place. involving the project expansion. So we would provide visibility on that. Certainly at the timing which we do DMC decision, which would be end of next year, if we go ahead with the project.
Okay. But I guess would it be fair to assume a proportional increase in the sustaining and mine development with the increase in group production as a starting point?
Yes. When a plant is new, normally, the profile of spend is lower in the front end. And therefore, it's not proportional, but you will need to assume that during the initial years probably the sustaining capital expenditure is a bit lower compared to the later years.
So I will now move to the next question from [ Ian Mozu ].
So just a question to follow up on the Centinela sulfides. You -- I recall in the year results, Ivan, you were talking about medium-term grade expectations typically to be somewhere on average between what you had in 2020 and 2021. Just in the context of your comment about the lower grade initially from Esperanza Sur. When can we expect that grade, I guess, presumably that number is around 0.55. When can we get back to that grade now on the medium term? Will that already happen in 2023, or will that be later?
Yes. We -- our plans show that in 2023 during the second half, we will be moving to higher rates at Esperanza. Yes, 2023, second half.
Okay. All right. That's clear. And then just on El Tesoro, I mean, do you expect some grade decline over the next few years? Or is that fairly constant where it's been mining the last couple of years?
Where, sorry?
El Tesoro, the oxide mine at Centinela.
Yes, there we do expect some great decline. In fact, we are seeing some of that this year. So we do expect some great decline progressively, but we've got good plant performance there, and we're looking at ways to compensate that through higher production at oxide. So -- but we are expecting some great decline there. at the sort of, yes.
Okay. And then just finally, your partner in Reko Diq seems to be keen to develop the assets I think based on commentary from you previously, that doesn't seem like something you'll be interested to do. Could you maybe just give some brief -- what's your view on that? And I guess, how do you resolve that situation? Your thoughts on that would be appreciated.
Yes. We -- yes, we exited the -- as you know, well, the project some time ago out of the change of conditions there with respect to the title and access to the mine property. And therefore, we're not -- it's not within our plans to pursue a project in Pakistan. So I can confirm that for certain. And therefore, we will continue to pursue recovery of the amount as per the legal rents associated to the award. So that's basically the update. Nothing has substantially changed, I think, from that point of view for us.
Okay. And sort of potential time lines on that resolution? Do you think it still takes a number of years?
I don't have any update on that.
We will take our next question from Jack O'Brien.
Question, if we look forward to 2023 production, and I appreciate you're not giving guidance on that yet, but just if you will, on some of the math here. So desal plant comes in second half of next year, should remove that 50 kt overhang that's impacting next year, so sort of mechanically into '23, we could add that back. Then you have the concentrator plant finishing by end '22, which I think you've talked about being a sort of 60,000 tonne on average through the first 5 years, but I think maybe first year would be nearer 40,000 you've potentially got sort of 90 kt additional coming from Pelambres? And then I guess, this out of our chloride leach maybe adds 10,000 and some of the grade improving at Centinela off the back of these brands as pit moving into perhaps more of the core of the ore body? Is that sort of rough math is fair?
Yes, I think those are the factors that are in play, as you say. I mean we do expect that next year will be a low point from that point of view, specially the water availability -- but then come 2023, if we have the water and the ramp-up of the new mill at Pelambres. We would be able to see fresh and new production. We will also have, by then, been working on the San dealer project for the full year of 2022 and therefore, we have completed most of the ramp-up. And in the case of Pelambres Sur, as you rightly point out, we will be into a different sum in terms of grade. So I think all of those factors are some right sort of trends. And therefore, we look forward to 2023, which we'll see count change compared to 2022. Now there are other factors. I mean, obviously, we got grade declining in some of our operations, and that changes year-to-year, and therefore, we will provide more specific guidance to that effect. But I think the elements that you've mentioned and referred to are correct.
Great. And just 1 follow-up on the Centinela second concentrate. I think historically, you'd mentioned that, that could cost around $2.7 billion. And clearly, there's a bit of inflation going on in the industry at the moment. I'm just wondering if you have any sort of latest thoughts or estimates regarding the CapEx for that second concentrator?
Yes. We did an estimate recently on the basis of final feasibility in the number. is within that same approximation that before, there are different components. I mean, it's some have gone up and some have come down. We're also -- and therefore, we don't have a significantly different number at this stage. We are -- we'll do the final update before we take this to the board in the second half of next year and then factor in these elements that you mentioned. And we're also looking, as was discussed previously at the water system, and that may actually provide an opportunity to reduce the fund and capital expenditure, which is reflected in the $2.7 billion that you referred to because obviously, that won't be if we go that route, that will be invested and we will be able to recycle that category back. Now in terms of cost inflation, I would say, on projects. I mean, when it comes down to labor, which I think is a very important component locally. And we mentioned, we've seen some increase in labor cost for projects in Chile. We think those are associated to very specific bottlenecks and very much a lead also due to the fact that the government is providing quite an extensive network of health and that continues despite the fact that from a sanitary point of view team is doing quite well. But if you look at the more fundamental baseline of the labor market locally, we don't see a tight market. I mean, investment is in the country is coming down. And the projects which are being constructed are due to be completed by when you start DMC. And therefore, we're not expecting more planning on a labor market, which would be tight for projects at the time that we made the decision for the DMC in the second half of next year.
We will take our next question from Jatinder.
A couple of questions. On 2022 production guidance, what does it imply in terms of gross unit cost? Is it 7% production decline proportionately impacting unit cost? Or will it be disproportionately higher? If you could give any indication that would be amazing. Second question, how much freshwater withdrawal at Los Pelambres are you budgeting for your 2022 guidance? And is there any scenario where your water availability could be lower versus what you're currently budgeting, depending on if there is any reprioritization for community usage, et cetera?
Okay. Let me address the second one, first. In terms of -- and I'll ask Mauricio to talk about the cost guidance for next year. The -- so in terms of fresh water, I mean, we're assuming basically that we continue to grow from one of the main sources of fresh water that we have. And this is part of the makeup that we have at Pelambres. Pelambres, 85% of the water that we use is, in fact, recycle. So you have to be -- have that in mind and only 15% is actually the makeup of fresh water. But we're assuming that we use 1 of the continental sources of water on a continued basis throughout this period, and we don't see a risk there. And maybe I'll just mention that the way that the water balance is built in the labs that we have this continental source of water. And then also because of the seasonality, rain accumulates at Mauro, and then we use that water during the dry season. And that's the source which provides the greater variability in the supply water for us, that's the water that basically we're not counting on during the first 6 months of this year. So that's the situation on the on the world. Now, could it be worse? I mean, I think the risks to the downside are one which affects, I think, obviously, a delay in the desal plant with pricing risk to our lower end of our guidance. We don't see that as a meaningful analysis because we're working basically on the project with all the supplies, manpower and program in place. On the contrary, as we were talking earlier, we're actually looking at ways to bring that bit for. But if that were to get delayed, it will be layed in a significant way, that would be that would be a risk. So having said that, I'll pass it on to Mauricio so that he can address our thinking on costs going forward.
Jatinder, well, in terms of OpEx for 2022, we are still working on the final figures, of course, and we are going to disclose as usual we do on the next -- in our next release. But let's say, in terms of moving pieces, we have 3 main trends we are looking at. The one is that you mentioned, which is the production reduction, which is a direct impact. And the other two, that is related with, first, the change of portfolio -- We are reducing the, let's say, the relevance of Pelambres production within our portfolio from slightly above 50% to slightly below 50% of overall production. So that also will have an impact in terms of portfolio and costing. And finally, in we have seen significant input prices, and that is something that we are closely monitoring going forward. Because, for example, we have an increase on assets and that put our SX-EW operations up in the cost curve. And also, we have an impact on diesel and steel millings material. So these are the moving pieces in terms of cost pressure. we also have some, let's say, positive trends as the foreign exchange rate with a weaker peso. But those are the moving business, and there is not only related with production reduction as you said, because also we have this other cost pressure that I mentioned.
Mauricio, If I could follow up on the cost a little bit. Are you able to indicate what percentage of costs at Los Pelambres are fixed versus variable? Because I would imagine labor is by and large fixed. But you can -- if you can give a cost component split that can help to then figure out which components will be static with lower production.
Yes. Well, roughly speaking, it's about 60% fixed, 40% variable. And in terms of exposure to Chilean peso, which is also important on the term of modeling costs going forward is roughly 50%, 50%, it's 55% to 45%, with 45% exposure to Chilean peso. So I hope that gives you a better flavor on what our cost will look like ahead of our announcement in a couple of months.
We have no more questions on the webinar. So I'm now going to hand over to the conference call to our operator, Ryan. Ryan, please do put through any questions that have come through on the conference call.
[Operator Instructions] It appears that there are no questions at this time.
I will now hand back to Ivan for any final or closing remarks.
Thank you. So we just want to thank everybody for joining the call and been able to answer the questions on the credits that you have. As I say, we look forward to finalizing this year with a good performance that we're sitting in our plants in line with the guidance that we've outlined for this year. And while next year is impacted by water availability, we consider that situation to be temporary, as we continue to finalize and build the desalination plant that will be ready. And we will take any opportunity to obviously bring that construction forward. to be able to increase our production. So with that, thank you from the Antofagasta team, and we hope to see you again soon.
Thank you. That concludes today's webinar.