TIDMANTO
RNS Number : 9098J
Antofagasta PLC
14 April 2015
For immediate release, 14 April 2015
2014 ANNUAL REPORT AND FINANCIAL STATEMENTS
Antofagasta plc (the "Company") will today post its 2014 Annual
Report and Financial Statements and notice of the Annual General
Meeting of the Company (the "2015 AGM Notice") to shareholders.
The 2014 Annual Report and Financial Statements, which was
approved by the Board of Directors on 16 March 2015, constitute the
Company's statutory accounts for the purposes of section 434 of the
Companies Act 2006 and the Annual Financial Report for the purposes
of DTR 4.1.
The Annual General Meeting will be held at Church House
Conference Centre, Dean's Yard, Westminster, London SW1P 3NZ on 20
May 2015 from 10.30 a.m.
In compliance with LR 9.6.1, the Company has submitted to the
Financial Conduct Authority each of the following documents:
-- 2014 Annual Report and Financial Statements;
-- 2015 AGM Notice;
-- Form of Proxy for Ordinary Shareholders for Annual General Meeting;
-- Form of Proxy for Preference Shareholders for Annual General Meeting; and
-- Letter to Shareholders regarding Electronic Communications.
These documents will shortly be available for inspection via the
National Storage Mechanism, www.hemscott.com/nsm.do, which may be
searched by company name and filing date and/or document type. The
2014 Annual Report and Financial Statements and 2015 AGM Notice are
also available on the Company's website at
www.antofagasta.co.uk.
In compliance with DTR 6.3.5, the following information is
extracted from the 2014 Annual Report and Financial Statements and
should be read in conjunction with the Company's Preliminary
Results Announcement issued on 17 March 2015. Together, these
constitute the material required by DTR 6.3.5 to be communicated to
the media in full unedited text through a Regulatory Information
Service. This material is not a substitute for reading the full
2014 Annual Report and Financial Statements and page numbers and
cross-references in the extracted information below refer to page
numbers and cross-references in the 2014 Annual Report and
Financial Statements.
The information contained in this announcement and in the
Preliminary Results Announcement does not constitute the Group's
statutory accounts as defined in section 434 of the Companies Act
2006, but is derived from those accounts. The statutory accounts
for the year ended 31 December 2014 have been approved by the Board
and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting, which will be held on 20 May
2015. The auditors have reported on those accounts and their report
was unqualified, with no matters by way of emphasis, and did not
contain statements under section 498(2) of the Companies Act 2006
(regarding adequacy of accounting records and returns) or under
section 498(3) (regarding provision of necessary information and
explanations).
Directors' Responsibility Statement
The following information is extracted from page 102 of the 2014
Annual Report and Financial Statements.
"Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- the Financial Statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole;
-- the Directors' report and the Strategic report include a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face; and
-- the Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
By order of the Board
Jean-Paul Luksic, Chairman, 16 March 2015
William Hayes, Senior Independent Director and Chairman Audit
and Risk Committee, 16 March 2015"
Principal Risks and Uncertainties
The following description of Principal Risks and Uncertainties
is extracted from pages 35 to 37 of the 2014 Annual Report and
Financial Statements.
"Community relations
Risk
Failure to identify and manage local concerns and expectations
can have a negative impact on the Group. Relations with local
communities and stakeholders affect the Group's reputation and
social licence to operate and grow.
Mitigation
The Group engages with local communities to establish and
maintain relations based on trust and mutual benefit throughout the
mining lifecycle, from exploration to final remediation. The Group
seeks to identify any potentially negative operational impacts and
minimise these through responsible behaviour. This means acting
transparently and ethically, prioritising the health and safety of
its workers and contractors, promoting dialogue and complying with
commitments to stakeholders and establishing mechanisms to prevent
or address a crisis. These steps are undertaken in the early stages
of each project and continue throughout the life of each operation.
The Group also contributes to the development of communities in the
areas of influence in which it operates, particularly through human
capital development - the education, training and employment of the
local population. The Group endeavours to communicate clearly and
transparently with local communities, in line with the established
Community Relations Plan, including the use of a grievance
management process, local perception surveys, local media and
community engagement.
Reference
Details of the Group's community relations activities are
included in the Sustainability section on page 57.
Strategic resources
Risk
Disruption to the supply of any of the Group's key strategic
inputs such as electricity, water, fuel, sulphuric acid and mining
equipment could have a negative impact on production. Longer term,
any restrictions on the availability of key strategic resources
such as water and electricity could affect the Group's
opportunities for growth. A significant portion of the Group's
input costs are influenced by external market factors.
Mitigation
Contingency plans are in place to address potential short-term
disruptions to strategic resources. The Group commences early
negotiations in supply contracts for key inputs to ensure supply
continuity. Certain key supplies are purchased from several sources
to mitigate potential disruption arising from exposure to a single
supplier. Technological and innovative solutions, such as using sea
water in the Group's mining operations, can help mitigate exposure
to the potential lack of availability of scarce resources. Access
to energy is a priority for the Group and during 2014 the Group
secured several sources of non-traditional energy such as wind and
solar power.
Reference
Information on the Group's arrangements for the supply of key
inputs is included within the Key inputs section on pages 22 to 24,
and details of significant operational or cost factors related to
key inputs are included within the Operational review on pages 38
to 49.
Operational
Risk
Mining operations are subject to a number of circumstances not
wholly within the Group's control. These include damage to or
breakdown of equipment or infrastructure, unexpected geological
variations or technical issues, extreme weather conditions and
natural disasters, any of which could adversely affect production
and/or costs.
Mitigation
The key risks relating to each operation are identified as part
of the regular risk review process undertaken by the individual
operations. This process also identifies appropriate mitigation
techniques for such risks. Monthly reports to the Board provide a
variance analysis of operational and financial performance,
allowing potential key issues to be identified in a timely manner
and any necessary actions, such as monitoring or control
activities, to take place. During 2014, the Group implemented a
Business Continuity Plan and Disaster Recovery Plan for all key
processes within its operations in case of crisis or natural
disaster. The Group has insurance to provide protection from some,
but not all, of the costs that may arise from such events.
Additionally, the Group has reinforced the corporate supply
strategy, productivity innovation plan and geometallurgical
standards and guidelines.
Reference
Details of the operational performance of each of the Group's
operations are included within the Operational review on pages 38
to 49.
Project management
Risk
Failure to effectively manage the Group's development projects
could result in delays in the start of production and cost
overruns. Demand for supplies, equipment and skilled personnel
could affect capital and operating costs. Increasing regulatory and
environmental requirements could result in delays in construction
or increases in project costs.
Mitigation
The Group has a project management system consisting of
standards, manuals and procedures containing the best practices
applicable and enforceable in all phases of project development.
The project management system supports the decision-making process
by balancing risk versus benefit, increasing the likelihood of
success and providing a common defining language and standards. All
geometallurgical models are reviewed by independent experts.
Additionally, during the project lifecycle, quality checks for each
of the standards applied are carried out by a panel of experts from
within the Group. This panel reviews the feasibility study in order
to assess the technical and commercial viability of the project.
Detailed progress reports on ongoing projects are regularly
reviewed, including assessments of progress against the key project
milestones and performance against budget.
Reference
Details of the progress of the Group's development projects are
included within the Operational review on pages 44 to 47.
Political, legal and regulatory
Risk
The Group may be affected by political instability and
regulatory developments in the countries in which it is operating,
pursuing projects or conducting exploration activities. Issues
regarding the granting of permits or amendments to permits already
granted, and changes to the legal environment or regulations, could
adversely affect the Group's operations and development
projects.
Mitigation
The Group assesses political risk as part of its evaluation of
potential projects, including the nature of any foreign investment
agreements. Political, legal and regulatory developments affecting
the Group's operations and projects are monitored closely on a
continuous basis. The Group operates in full compliance with the
existing laws, regulations, licences, permits and rights in each
country in which it operates. The Group monitors proposed changes
in government policies and regulations and participates in several
associations that consult with the government on these changes.
Reference
Details of any significant political, legal or regulatory
developments impacting the Group's operations are included within
the Operational review on pages 38 to 49.
Health and safety
Risk
Health and safety incidents could result in harm to the Group's
employees, contractors or to local communities. Ensuring their
safety and wellbeing is first and foremost an ethical obligation
for the Group and is stated in the Charter of Values. Poor safety
records or serious accidents could have a long-term impact on the
Group's morale, reputation and production.
Mitigation
Health and safety risk management procedures are being
strengthened, with particular focus on preventing fatalities and
the early identification of risks. The corporate Health and Safety
department provides a common strategy to the Group's operations and
coordinates all health and safety matters. The Group is currently
introducing a Significant Incident Report system as an important
part of the Group's overall approach to safety. The Group's goal is
for zero fatalities and to minimise the number of accidents. This
goal requires all contractors to comply with the Group's
Occupational Health and Safety Plan, which is monitored through
monthly audits and supported by regular training and awareness
campaigns for employees and contractors. The Plan is also being
extended to employees' families and local communities, particularly
with regard to road safety.
Reference
Further information about the Group's activities in respect of
health and safety is set out in the Sustainability section on pages
53 and 54.
Environmental management
Risk
An operational incident which impacts the environment could
affect the Group's relationship with local stakeholders, its
reputation and ultimately undermine its social licence to operate
and to grow. The Group operates in challenging environments,
including the Atacama Desert where water scarcity is a key
issue.
Mitigation
The Group has a comprehensive approach to incident prevention.
Relevant risks have been assessed and are monitored and controlled.
The Group's approach includes raising awareness among employees and
providing training to promote operational excellence. Potential
environmental impacts are key considerations when assessing project
viability, including the integration of innovative technology in
the project designed to mitigate these effects. The Group has
pioneered the use of sea water for mining operations in Chile and
strives to ensure maximum efficiency in water use, achieving high
rates of reuse and recovery.
Reference
Further information in respect of the Group's environmental
activities is set out in the Sustainability section on pages 50 to
60.
Growth opportunities
Risk
The Group may fail to identify attractive acquisition
opportunities or may select inappropriate targets. The long-term
commodity price forecast and other assumptions used when assessing
potential projects and other investment opportunities have a
significant influence on the forecast return on investment and if
incorrectly estimated could result in the wrong decisions being
made.
Mitigation
The Group assesses a wide range of potential growth
opportunities, both internal projects and external opportunities. A
rigorous assessment process is followed to evaluate all potential
business acquisitions, which are subjected to different stress test
scenarios for sensitivity analysis and to determine the risks
associated with the project or opportunity under assessment. The
Group's Business Development Committee reviews potential growth
opportunities and potential transactions, and approves or
recommends them within authority levels set by the Board.
Reference
The sensitivity of Group earnings to movements in commodity
prices is set out in Note 23 to the Financial Statements. Details
of the Group's growth opportunities are set out in the Operational
review on pages 44 to 47.
Commodity prices
Risk
The Group's results are heavily dependent on commodity prices -
principally copper and, to a lesser extent, gold and molybdenum.
The prices of these commodities are strongly influenced by a
variety of external factors, including world economic growth,
inventory balances, industry demand and supply, possible
substitution, etc.
Mitigation
The Group considers exposure to commodity price fluctuations to
be an integral part of the Group's business and its usual policy is
to sell its products at prevailing market prices. The Group
monitors the commodity markets closely to determine the effect of
price fluctuations on earnings, capital expenditure and cash flows.
Very occasionally the Group uses derivative instruments to manage
its exposure to commodity price fluctuations when it feels it to be
appropriate. The Group runs its business plans through various
different commodity price scenarios and develops contingency plans
as required.
Reference
Details of hedging arrangements put in place by the Group are
included in Note 23 to the Financial Statements.
Foreign currency exchange
Risk
The Group's sales are mainly denominated in US dollars and some
of the Group's operating costs are in Chilean pesos. The
strengthening of the Chilean peso may negatively affect the Group's
financial results.
Mitigation
As copper exports account for over 50% of Chile's exports, there
is a correlation between the copper price and the US dollar/Chilean
peso exchange rate. This natural hedge partly mitigates the Group's
foreign exchange exposure. However, the Group closely monitors the
foreign exchange markets and the macroeconomic variables that
affect it and on occasion maintains a focused currency hedging
programme to reduce short-term exposure to fluctuations in the US
dollar against the Chilean peso.
Reference
Details of the Group's currency hedging arrangements are shown
in Note 23 to the Financial Statements.
Identification of new mineral resources
Risk
The Group needs to identify new mineral resources to ensure
continued future growth. The Group seeks to identify new mineral
resources through exploration and acquisition. There is a risk that
exploration activities may not identify sufficient viable mineral
resources.
Mitigation
The Group conducts exploration programmes both in Chile and
other countries. The Group has entered into early-stage exploration
agreements and strategic alliances with third parties in a number
of countries and has also acquired equity interests in companies
with known geological potential. The Group focuses its exploration
activities on stable and secure countries to reduce country risk
exposure.
Reference
A review of the Group's exploration activities is set out in the
Operational review on page 47.
Ore reserves and mineral resources estimates
Risk
The Group's ore reserves and mineral resources estimates are
subject to a number of assumptions and estimates, including
geological, metallurgical and technical factors, future commodity
prices and production costs. Fluctuations in these variables may
result in some reserves or resources being deemed uneconomic, which
could lead to a reduction in reserves and/or resources.
Mitigation
The Group's reserves and resources estimates are updated
annually to reflect material extracted during the year, the results
of drilling programmes and any revised assumptions. The Group
follows the Joint Ore Reserves Committee ("JORC") Code in reporting
its ore reserves and mineral resources, which requires that the
reserves and resources estimates are based on work undertaken by a
Competent Person, as defined by the Code. In addition, the Group's
reserves and resources estimates are subject to a comprehensive
programme of internal and external audits.
Reference
The ore reserves and mineral resources estimates, along with
supporting explanations, are set out on pages 162 to 169.
Talent management and labour relations
Risk
The Group's highly skilled workforce and experienced management
team are critical to maintaining current operations, implementing
development projects, achieving long-term growth and preserving
current operations without major disruption. Managing talent and
maintaining a high quality labour force is a key priority for
the
Group and any failures in this respect could have a negative
impact on the performance of the existing operations and future
growth.
Mitigation
There are long-term labour agreements in place with employees at
each of the Group's mining operations, which help to ensure labour
stability. These agreements were renegotiated for a period of up to
four years for all of the Group's operations in 2014. The Group
seeks to identify and address labour issues that may arise
throughout the period covered by existing labour agreements, to
anticipate any potential issues in good time. Contractors are also
an important part of the Group's workforce and under Chilean law
are subject to the same duties and responsibilities as the Group's
own employees. The Group's approach is to treat contractors as
strategic associates and its goal is to build long-term mutually
beneficial contractor relationships. The Group maintains
constructive relationships with its employees and the unions that
represent them through regular communication and consultation.
Union representatives are regularly involved in discussions about
the future of the workforce.
The Group develops the talents of its employees through training
and development, invests in initiatives to widen the talent pool
and focuses on maintaining good relationships with employees,
unions and contractors. The Group's performance management system
is designed to provide reward and remuneration structures and
personal development opportunities to attract and retain key
employees. The Group has in place a talent management system to
identify and develop internal candidates for critical management
positions, as well as processes to identify suitable external
candidates where appropriate.
Reference
Details of the Group's relations with its employees and
contractors are set out within the Sustainability section on page
56 and within the Operational review on pages 38 to 49."
Related party transactions
The following description of related party transactions is
extracted from Note 34 on page 153 of the 2014 Annual Report and
Financial Statements. A condensed version of this note was
published in the Preliminary Results Announcement as Note 25.
"34. Related Party Transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note. Transactions between the Group and its
associates are disclosed below.
The transactions that Group companies entered into with related
parties who are not members of the Group are set out below.
a) Quiñenco S.A.
Quiñenco S.A. ("Quiñenco") is a Chilean financial and industrial
conglomerate, the shares of which are traded on the Santiago Stock
Exchange. The Group and Quiñenco are both under the control of the
Luksic family, and three Directors of the Company, Jean-Paul
Luksic, Andrónico Luksic and Gonzalo Menéndez, are also directors
of Quiñenco.
The following material transactions took place between the Group
and the Quiñenco group of companies, all of which were on normal
commercial terms:
-- the Group bought supply from Madeco, a subsidiary of Quiñenco
for $0.4 million (2013 - nil). The balance due from Madeco at the
end of the year was nil (2013 - nil);
-- the Group sold copper cathodes during the year for nil (2013
- $6.8 million) to Madeco S.A., a subsidiary of Quiñenco. The
balance due from Madeco at the end of the year was nil (2013 - less
than $0.1 million);
-- the Group bought copper wire from Madeco for nil (2013 - for $0.8 million);
-- the Group earned interest income of $0.5 million (2013 - $0.7
million) during the year on deposits with Banco de Chile S.A., a
subsidiary of Quiñenco. Deposit balances at the end of the year
were $70.1 million (2013 - $48.7 million);
-- the Group earned interest income of $1.5 million (2013 - $1.1
million) during the year on investments with BanChile Corredores de
Bolsa S.A., a subsidiary of Quiñenco. Investment balances at the
end of the year were $26.3 million (2013 - $17.3 million);
-- the Group bought fuel from ENEX S.A. a subsidiary of Quiñenco
of $54.3 million (2013 - $79.2 million). The balance due from ENEX
S.A. at the end of the year was nil (2013 - nil); and
-- the Group has contract shipping services from Compañia
Sudamericana de Vapores S.A., subsidiary of Quiñenco, of nil (2013
- $0.5 million).
b) Compañía de Inversiones Adriático S.A.
In 2013, the Group leased office space on normal commercial
terms from Compañía de Inversiones Adriático S.A., a company
controlled by the Luksic family, at a cost of less than $0.7
million (2013 - $0.7 million).
c) Compañía Antofagasta Terminal Internacional S.A.
As explained in Note 16, the Group has a 30% interest in
Antofagasta Terminal Internacional S.A. ("ATI") which is accounted
for as an associate. During 2014, the Group has not received
dividends from ATI (2013 - nil).
d) Antomin Limited, Antomin 2 Limited and Antomin Investors
Limited
The Group holds a 51% interest in Antomin 2 Limited ("Antomin
2") and Antomin Investors Limited ("Antomin Investors"), which own
a number of copper exploration properties. The Group originally
acquired its 51% interest in these properties for a nominal
consideration from Mineralinvest Establishment, a company
controlled by the Luksic family, which continues to hold the
remaining 49% of Antomin 2 and Antomin Investors. During the year
ended 31 December 2014 the Group incurred $17.0 million (year ended
31 December 2013 - $22.1 million) of exploration work at these
properties.
e) Tethyan Copper Company Limited
As explained in Note 16 the Group has a 50% interest in Tethyan
Copper Company Limited ("Tethyan"), which is a joint venture with
Barrick Gold Corporation over Tethyan's mineral interests in
Pakistan. During 2014 the Group contributed $8.5 million (2013 -
$7.0 million) to Tethyan. The balance due from Tethyan to Group
companies at the end of the year was nil (2013 - nil).
f) Energía Andina S.A.
As explained in Note 16, the Group has a 50.1% interest in
Energia Andina, which is a joint venture with Origin Energy
Geothermal Chile Limitada for the evaluation and development of
potential sources of geothermal and solar energy. The balance due
from Energía Andina S.A. to the Group at 31 December 2014 was less
than $0.1 million (2013 - less than $0.1 million). During the year
ended 31 December 2014 the Group contributed $7.7 million to
Energía Andina (2013 - $21.6 million).
g) Minera Cerro Centinela S.A.
In March 2014 the Group acquired an additional 25.7% interest in
Michilla for $30.9 million, increasing the Group's interest from
74.2% to 99.9%. This included the acquisition of the 7.973% stake
held by Minera Cerro Centinela S.A., an entity ultimately
controlled by the Luksic family, for $9.6 million. Prior to this
transaction, Michilla paid dividends of $1.6 million to Minera
Cerro Centinela S.A. (2013 - nil).
h) Directors and other key management personnel
Information relating to Directors' remuneration and interests
are given in the Remuneration report on pages 86 to 99. Information
relating to the remuneration of key management personnel including
the Directors is given in Note 7.
i) Inversiones Hornitos S.A.
As explained in Note 16, the Group has a 40% interest in
Inversiones Hornitos S.A., which is accounted for as an associate.
The Group paid $175.3 million (year ended 31 December 2013 - $167.8
million) to Inversiones Hornitos in relation to the energy supply
contract at Centinela. During 2014, the Group has received
dividends from Inversiones Hornitos S.A. for $20 million (2013 -
nil).
j) El Arrayán
As explained in Note 16, the Group has a 30% interest in Parque
Eólico El Arrayán S.A. ("El Arrayán"), which is accounted for as an
associate. The Group paid $12.0 million (year ended 31 December
2013 - nil) to El Arrayán
in relation to the energy supply contract at Los Pelambres.
During 2014 the Group has contributed $2.6 million to El Arrayán
(year ended December 2013 - nil).
k) Alto Maipo SpA
As explained in Note 16, the Group has a 40% interest in Alto
Maipo SpA ("Alto Maipo"), which is accounted for as an associate.
During 2014 the Group has not made capital contributions to Alto
Maipo (2013 - $52.6 million). The balance due from Alto Maipo to
the Group at 31 December 2014 was $152.4 (2013 - $47.0 million)
representing loan financing with an interest rate of LIBOR
six-month plus 4.25%.
l) Twin Metals
As explained in Note 16, the Group holds a 40% interest in Twin
Metals Minnesota LLC ("Twin Metals"), which from July 2014 has been
accounted for as an associate. The Group has contributed $2.8
million to Twin Metals since July 2014 while it has been accounted
for as an associate. Throughout 2013 and up to July 2014 Twin
Metals was controlled by the Group and accounted for as a
subsidiary, and therefore all contributions from the Group to Twin
Metals during this period were between consolidated Group
subsidiaries."
Investors - London Media (Brunswick)
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Partesh Bhanderi pbhanderi@antofagasta.co.uk Robin Wrench antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors - Santiago
Alfredo Atucha aatucha@aminerals.cl
Telephone +56 2 2798 7000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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