Antofagasta Chairman Jean-Paul Luksic Wednesday warned that the mining sector in general and not least in Chile continues to be increasingly subject to global economic pressures.

These pressures affect not only the cost, but in some cases the availability of steel, energy, fuel and oil products, sulphuric  acid and equipment-all essential components of mining operations-as well as a shortage of trained labor and professionals, he added.

During a presentation during Antofagasta's annual general meeting in London, Luksic noted that the international business climate is becoming more and more complex. By that I refer to changing tax regimes, increasingly onerous regulatory environmental and unprecedented cost inflation such as oil and energy.

All of these translate to our major challenge which is maintaining profit margins. I can assure you that even with these higher copper prices we are focusing very carefully on our costs, Luksic said. Nevertheless, he forecast strong demand for copper and difficulties in supply.

Luksic told shareholders that production of copper in concentrates at the Los Pelambres mine in Chile is expected to increased from 289,900 tonnes last year to 330,000 tonnes this year due to better ore grades and higher throughput. In addition, Los Pelambres has substantially completed a two-year exploration programme and drilling results under review, so far are promising. Los Pelambres is believed to have an estimated mine life of 30 years.

El Tesoro's grade A cathodes production dropped from 94,000 tonnes in 2006 to 93,000 tonnes last year. Luksic said production this year is expected to drop to 90,000 tonnes.  Costs at El Tesoro have been increasing substantially in 2007 and 2008 due to higher energy and sulphuric acid, both important elements in SX-EW production facilities like El Tesoro's, he added.

Production of grade A cathodes also dropped at Chile's Michilla mine from 47,300 tonnes in 2006 to 45,100 tonnes in 2007. Luksic explained that decreasing ore grades are expected to further reduce production to around 43,000 tonnes this year.  A feasibility study that is expected to be finished by April 2009 will determine the viability of Antucoya as a standalone project or a satellite mine for Michilla.

The US$1.9 billion Esperanza project in the Sierra Gorda district of Chile is on schedule with first production of copper concentrate, gold and silver, still scheduled for the end of 2010. The project is expected to yield an annual average of 195,000 tonnes of payable copper and 229,000 ounces of gold for the first 10 years of operations. Luksic noted that Esperanza will increase Antofagasta's gold production seven-fold. Molybdenum production is anticipated to start in 2015.