TIDMANTO
RNS Number : 5934O
Antofagasta PLC
22 August 2017
NEWS RELEASE, 22 AUGUST, 2017
HALF YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 JUNE 2017
STRONG FIRST HALF
Antofagasta plc CEO Iván Arriagada said: "Antofagasta has had a
strong first half year, with EBITDA up 88% versus HY 2016. Our
performance benefited from increases in the copper price, higher
sales volumes and tight cost management. As a result, EBITDA
margins have returned to over 50% and cash flow from operations is
up 48% to $1.1 billion.
"This better performance means the Company's interim dividend
has significantly increased compared to last year to 10.3 cents per
share with the Company's policy of paying out a minimum of 35% of
underlying net earnings unchanged.
"Antofagasta's strategy remains focused on producing profitable
tonnes through reducing costs, making improvements in productivity
and efficiency and the application of innovative solutions. A
disciplined approach to capital allocation underpins our
decision-making process. Projects and future developments must
compete internally for capital with any excess cash distributed to
shareholders.
"The Company is well positioned for future growth, generating
strong cash flows and improving returns against a background of a
recovery in copper demand. The outlook for Antofagasta is positive
- we have the assets, capabilities and strategy to continue to
create long-term value for all of our stakeholders."
HY 2017 financial performance compared with HY 2016
-- Revenue 41.9% higher at $2,049 million, as realised copper
prices increased by 25.3% and sales volumes increased by 14.3%
-- EBITDA(1) increased 87.8% to $1,079.8 million mainly due to higher revenues
-- EBITDA margin(2) strengthened to 52.7%, up from 39.8% in the
same period last year and 44.9% for the full year 2016
-- Operating cost reductions of $44 million achieved, as part of
the Costs and Competitiveness Programme, contributing to savings of
$0.06/lb in cash costs during the current period
-- Operating profit and net earnings per share rose by 149.9% and 231.5% respectively
-- Operating cash flow generation of $1,147 million in the period, up 48.2%
-- Capital expenditure of $410.0 million, 46% of full year guidance
-- Group net debt reduced by $212.1 million to $859.6 million,
since the end of 2016 reducing Net Debt/EBITDA to 0.4 times or 0.2
times if subordinated shareholder loans are excluded
-- Interim dividend of 10.3 cents per share, a 232.3% increase
on last year's interim dividend and equivalent to a payout ratio of
35%.
HY 2017 operating performance compared with HY 2016
-- Group copper production is 7.1% higher at 346,300 tonnes, due
to increased production at Centinela and Antucoya
-- Group cash costs before by-product credits fell by 2.5% to
$1.56/lb, primarily due to higher production and cost savings
achieved from the Cost and Competitiveness Programme
-- Group net cash costs were 1.6% lower at $1.24/lb, reflecting
lower cash costs before by-product credits and higher by-products
credits
Outlook
-- Group copper production for the year is expected to be
between 685-720,000 tonnes as guided in January and unit costs for
the full year are unchanged with cash costs before by-product
credits expected to be $1.55/lb and net cash cost of $1.30/lb
-- Capital expenditure guidance for the full year unchanged at $900 million
Other
-- Labour negotiations successfully concluded at Centinela and Zaldívar
-- Encuentro Oxides project ramp-up will begin in the second half of the year
UNAUDITED RESULTS SIX MONTHS 2017 2016 %ING 30 JUNE
------------------------------- ------- -------- -------- -------
Revenue $m 2,049.2 1,444.2 41.9
EBITDA(1) $m 1,079.8 575.1 87.8
EBITDA margin(2) % 52.7 39.8 32.4
Earnings per share cents 29.5 8.9 231.5
Dividend per share cents 10.3 3.1 232.3
Cash flow from operations(3) $m 1,147.1 774.1 48.2
Group net debt at period
end $m 859.6 1,039.6 (17.3)
Average realised copper price $/lb 2.72 2.18 25.3
-------
Copper sales - included in
Revenue(4) kt 309.8 271.1 14.3
Gold sales koz 114.6 97.1 18.0
Moly sales kt 4.3 3.1 38.7
Cash costs before by-product
credits(1) $/lb 1.56 1.60 (2.5)
Net cash costs(1) $/lb 1.24 1.26 (1.6)
------------------------------- ------- -------- -------- -------
Note: The financial results are for continuing operations (i.e.
excluding Michilla from 2016) and are prepared in accordance with
IFRS, unless otherwise noted below.
(1) Non-IFRS measures. Refer to the alternative performance
measures in Note 21 to the half-yearly financial report below.
(2) Calculated as EBITDA/Revenue. If Associates and JVs' revenue
is included EBITDA Margin was 48.3% in HY 2017 and 36.0% in HY
2016.
(3) From continuing and discontinued operations.
(4) Excludes 25,600 tonnes of sales by Zaldívar in HY 2016 and
24,300 tonnes in HY 2017, 11,400 tonnes of pre-commercial
production sales by Antucoya and 900 tonnes of sales by Michilla in
2016.
Investors - London Media - London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Paresh Bhanderi pbhanderi@antofagasta.co.uk Will Medvei antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors - Santiago Media - Santiago
Francisco Veloso fveloso@aminerals.cl Pablo Orozco porozco@aminerals.cl
Telephone +56 2 2798 7000 Carolina Pica cpica@aminerals.cl
Telephone +56 2 2798 7000
DIRECTORS' COMMENTS FOR THE SIX MONTHSED 30 JUNE 2017
FINANCIAL
Group revenue was $2,049.2 million, 41.9% higher than in the
same period last year as realised copper prices increased by 25.3%
and copper sales volumes increased by 14.3%. By-product sales
revenue also increased, mainly due to increased volumes.
EBITDA from continuing operations increased by 87.8% to $1,079.8
million reflecting the increased revenue, partly offset by higher
operating costs from increased production at Antucoya. The EBITDA
margin rose from 39.8% in the first half of 2016 to 52.7% in the
current period, the highest half year margin reported by the Group
since 2012.
The Board has declared an interim ordinary dividend of 10.3
cents per share, which represents a pay-out ratio of 35%,
consistent with the Group's dividend policy.
PRODUCTION AND CASH COSTS
Group copper production in the first half of 2017 was 346,300
tonnes, 7.1% higher than in the same period last year due to higher
production at Centinela and Antucoya. In the first half of 2016
Antucoya was ramping up to full production having achieved
commercial production in April 2016.
Group gold production was 112,200 ounces in the first six months
of the year, 2,700 ounces higher than in the first half of 2016 as
a result of higher grades at Centinela.
Molybdenum production at Los Pelambres was 4,500 tonnes in the
first half of 2017, compared with 3,300 tonnes in the first six
months of 2016, principally due to significantly higher grades.
Group cash costs before by-product credits in the first half of
2017 were $1.56/lb, a $0.04/lb decrease compared with the same
period last year. This decrease was achieved due to higher
production and $0.06/lb of savings achieved from the Cost and
Competitiveness Programme partly offset by increased input prices,
the stronger Chilean Peso and inflation. Net cash costs for the
first half of 2017 were $1.24/lb, 1.6% lower than in the same
period last year reflecting the lower cash costs before by-product
credits and higher by-product credits.
COST AND COMPETITIVENESS PROGRAMME
The Group introduced the Cost and Competitiveness Programme
(CCP) in 2014, with the aim of reducing the cost base and improving
the Group's competitiveness within the industry. Since then, the
Group has achieved savings in mine site costs of $403 million,
approximately $44 million of which have been made during the first
half of 2017, equivalent to $0.06/lb. Together with exploration,
evaluation and corporate cost savings, total savings since 2014
have been $563 million. The Group is on track to achieve the
savings target of $140 million during 2017 with a majority of the
cost savings expected during the second half of the year.
During the year a review was conducted to embed the Programme
framework and the New Operating Model into sustainable business
practice to achieve these savings. The Programme continues to focus
on four areas set out below to capture the benefits for the long
term and improve the structural competiveness of the Group.
Framework Sustainable Objective
Practice
--------------------------- ------------------------ --------------------------------
Services Productivity Contract Administration Strengthen the administration
Model of service contracts to
capture gains and ensure
delivery throughout the
life of contracts
--------------------------- ------------------------ --------------------------------
Operating & Maintenance Maintenance Ensure the integrity, life
Management Strategy & cycle and reliability of
New Operating assets and facilities
Model
--------------------------- ------------------------ --------------------------------
Corporate & Organisational Revised Structure Strengthen operating discipline
Effectiveness & New Operating ensuring accountabilities
Model are clearly defined
--------------------------- ------------------------ --------------------------------
Energy Efficiency Energy Management Identification, implementation,
System measurement and ongoing
verification of energy
efficiency measures, based
on ISO 50001
--------------------------- ------------------------ --------------------------------
LABOUR AGREEMENTS
Following the end of the period, labour negotiations were
successfully concluded with the supervisors at Centinela and the
workers at Zaldívar. These were the first agreements signed under
the new labour legislation that came into effect on 1 April 2017.
Under this legislation the maximum term of labour contracts has
been reduced to three years.
The next scheduled labour negotiation is with the workers at Los
Pelambres early next year.
SAFETY & HEALTH
The Group is fully committed to achieving zero fatalities and
zero occupational diseases, and to reducing the frequency and
severity of accidents. The safety and health strategy is based on
managing critical controls, in line with international best
practices. Analysis of past accidents identified 15 types of fatal
risks present at the Group's operations. The Group has put in place
critical controls and empowered employees to safeguard against
these fatal risks. There have been no fatalities during the first
half of 2017.
During the year the Group has extended its focus and commitment
to include health, which prevents future risks of disease or injury
to employees as a result of tasks carried out today. The Group has
identified ten types of risks that have the potential to harm the
health of employees and has put in place a strategy to minimise the
effect of these risks in the long term.
For the first six months of the year the Group achieved an LTFIR
of 1.6, a slight increase from the 1.5 achieved during 2016.
TAX
During the first six months of the year the Effective Tax Rate
(ETR) was 34.0%, lower than the 42.7% in the same period last year
and the 38.2% achieved in the full year 2016. The decrease in the
effective tax rate was largely due to the reduced proportional
impact of expenses not deductible for Chilean corporate tax and
mining royalty purposes on the effective tax rate, given the higher
profit before tax in the current period. For the full year this
year, the ETR is expected to be at the lower end of the previously
announced guidance of 35-40%, depending on realised metal prices
during the rest of the year.
DEPRECIATION AND AMORTISATION
Depreciation and amortisation for the first half of 2017 was
$289.9 million compared to the $247.5 million in the first half of
2016 and for the second half of the year it is expected to be
broadly in line with the first half.
OUTLOOK
Group copper production for the full year is expected to be
between 685-720,000 tonnes as originally announced in January, and
cash costs before by-product credits and net cash costs are also
unchanged and are expected to be $1.55/lb and $1.30/lb
respectively. Production for the year is expected to be higher in
the second half of the year with the Encuentro Oxides project
coming into operation at Centinela.
The copper market is currently exhibiting unexpected strength,
but it is unclear if this can be maintained although it does appear
that a new base price level has been established at $2.50-2.60/lb.
The outlook in the mid to longer term continues to be favourable as
demand is expected to grow at around 2% while supply growth remains
constrained. In the shorter term, the market is moving to a tighter
demand-supply position with a small deficit expected this year and
next. However, volatility is anticipated as demand expectations are
continually reassessed although supply has stabilised following the
spate of disruptions earlier in the year.
REVIEW OF OPERATIONS AND PROJECTS
MINING DIVISION
LOS PELAMBRES
Financial performance
EBITDA at Los Pelambres was $521.7 million in the first half of
2017, compared with $435.0 million in the first six months of 2016.
This increase was due to higher realised copper prices, offset by
lower sales volumes which fell by 13.5% as stocks increased at the
port as shipping was delayed at the period end due to adverse sea
conditions.
Production
Copper production in the first six months of 2017, decreased by
4.6% compared with the same period last year. This decrease was
primarily due to lower grades, despite an increase in throughput.
Molybdenum production in the first six months of 2017 was 4,500
tonnes, 36.4% higher than in the comparable period in 2016 as
grades increased.
Costs
Cash costs before by-product credits in the first half of the
this year were $1.45/lb, 9.0% higher than in the same period in
2016 primarily due to higher energy prices and maintenance costs,
and the impact of lower copper production. Net cash costs for the
first half of the year were $1.09/lb, 6.9% higher than the same
period last year as a result of higher costs before by-products
despite a greater contribution from by-product credits.
Capital expenditure
Capital expenditure in the first six months of 2017 was $104.6
million and for the 2017 full year is expected to be approximately
$260 million. Mine development during the period was $50.7 million
and is expected to fall to approximately $30 million in the second
half of the year.
Cerro Amarillo Waste Dump
As previously announced, in 2014 Xstrata Pachón S.A. ("Xstrata
Pachón"), a subsidiary of Glencore plc, filed civil and criminal
claims against Los Pelambres before the Federal Courts of San Juan,
Argentina, alleging that Los Pelambres had unlawfully extended a
waste-rock dump ("Cerro Amarillo Waste Dump") on its property
(which is adjacent to Los Pelambres on the Argentinian side of the
Chile/Argentina border) and that Los Pelambres had violated several
Argentinian laws relating to the misappropriation of land, unlawful
appropriation of water bodies and that people's health was in
jeopardy from the alleged contamination that the Cerro Amarillo
Waste Dump might generate.
In July, the court hearing the criminal complaint received an
independent environmental expert's report and ruled on certain
applications made by one of the complainants, the Province of San
Juan.
Separately, members of the Foreign Affairs Ministries of
Argentina and Chile have met in a bilateral working group during
the year to discuss a possible diplomatic solution to this
matter.
Los Pelambres is exercising all available legal avenues to
defend its position and will continue to take steps to implement
the appropriate environmental measures on the Cerro Amarillo Waste
Dump to prevent any potential environmental damage.
Further details are set out in Note 20 to the Financial
Statements
CENTINELA
Financial performance
The EBITDA for the first six months of 2017 was $420.0 million,
compared with $85.4 million in the first half of 2016. This
increase of nearly five times was due to significantly higher sales
volumes, in part because of delayed shipments at the end of HY
2016, and improved realised copper prices and unit cash costs.
Production
During the first six months of the year production at Centinela
was 18.9% higher than in 2016 primarily as a result of higher
grades. Copper in concentrate production for the first six months
of the year was 17.9% higher than in the same period last year and
cathode production has also increased. Compared with the first half
of last year higher throughput and increased production reflected
improved operating practices and higher grades. Gold production for
the year to date was 85,500 ounces, 6.2% higher than in the first
six months of 2016 due to higher grades.
Costs
Cash costs before by-product credits for the first six months of
2017 were 18.9% lower than in HY 2016 as a result of higher copper
production and cost savings achieved from the Cost and
Competitiveness Programme. Net cash costs for the first half of
2017 were $1.20/lb compared with $1.53/lb in the first half of
2016, down 21.6% as higher gold production more than offset the
slightly weaker realised gold price.
Capital expenditure
Capital expenditure in the first six months of 2017 was $271.4
million of which some $100 million was spent on the Encuentro Oxide
and Molybdenum Plant projects. Capital expenditure for the 2017
full year is expected to be approximately $550 million.
ANTUCOYA
Financial performance
For the first half of the year EBITDA at Antucoya was $79.9
million, compared with $16.2million in the same period last year.
During 2016 Antucoya was ramping up to full commercial production,
which was achieved in April.
Production
Copper production at Antucoya was 39,500 tonnes, 46.3% higher
than in the previous year following the completion of the ramp-up
in 2016.
Costs
For the year to date cash costs were $1.71/lb.
Capital expenditure
Capital expenditure in the first six months of 2017 was $19.7
million and for the full year is expected to be approximately $85
million, including some $20 million relating to mine
development.
ZALDÍVAR
Financial performance
Attributable EBITDA at Zaldívar was $56.8 million in the first
half of 2017, compared to $37.1 million from the same period last
year mainly as a result of higher realised prices
Production
Copper production at Zaldívar of 25,900 tonnes on an
attributable basis, was almost unchanged compared with the same
period last year despite higher grade material being stacked on the
heap as a larger proportion of sulphide ore was processed, with
lower recoveries and longer leaching times.
Costs
Cash costs for the first six months of 2017 were $1.60/lb
compared with $1.50/lb for the same period in 2016, primarily due
to increased energy prices (which are coal price linked) and higher
maintenance costs.
Capital expenditure
Attributable capital expenditure in the first six months of 2017
was $16.9 million, with the bulk of the expenditure, $11.7 million,
being spent on mine development. Capital expenditure for the 2017
full year is expected to be approximately $50 million, of which
about half is on mine development.
GROWTH PROJECTS AND OPPORTUNITIES
Projects under construction
Encuentro Oxides
The Encuentro Oxides deposit is in the Centinela Mining
District. It is expected to produce an average of approximately
43,000 tonnes of copper cathode per year over an eight-year period,
utilising the existing capacity at Centinela's SX-EW plant, helping
to offset a natural decline in production due to falling mined
grades at Centinela's existing oxide pits.
During the first six months of 2017, total expenditure incurred
was $70.3 million bringing the accumulated cost to $514 million.
Construction was over 91% complete at the period end and is
on-budget. First production is expected in Q4 2017.
Molybdenum Plant
This project will allow Centinela to produce an average of 2,400
tonnes of molybdenum per year helping reduce its unit cash costs.
As at the end of June construction of the project was complete with
pre-commissioning tests underway and first production expected in
January 2018.
Capital expenditure in the first six months of the year is $29.6
million.
Brownfield growth projects
Los Pelambres Incremental Expansion
The expansion project has been split into two phases in order to
smooth its progress, simplify permitting applications and spread
the capital cost over a longer period.
- Phase 1
This phase is designed to optimise throughput within the limits
of the existing operating, environmental and water extraction
permits so that they will require only relatively simple updates.
During this phase, Los Pelambres will operate at an average
throughput of 190,000 tonnes per day with the addition of a new
grinding and flotation circuit, to mitigate the hard ore currently
being mined, and a 400 litres per second desalination plant and
pipeline. Desalinated water will be pumped to the tailings storage
facility at El Mauro where it will connect with the recycling
circuit returning water to the Los Pelambres plant.
The feasibility study estimate of the capital expenditure for
this project is approximately $1.05 billion, with some $580 million
allocated to the additional crushing and flotation circuits and the
balance to the desalination plant and water pipeline. The expansion
is estimated to increase copper production by an average of 55,000
tonnes per year over a period of 15 years.
The feasibility study was completed in Q1 2017 and detailed
engineering will be completed once Environmental Impact Assessment
(EIA) approval for the desalination plant is received, which is
expected towards the end of the year. The project will be presented
to the Board for approval shortly thereafter and production is
expected to commence some two years later.
- Phase 2
In this phase the Group will seek to increase throughput to
205,000 tonnes per day and to extend the mine life beyond the
currently approved 21 years. As part of this development a new EIA
must be submitted to increase the capacity of the mine's El Mauro
tailings storage facility and the mine waste dumps.
Capital expenditure for this phase is estimated at approximately
$500 million, with the majority of the expenditure being on mining
equipment, additional crushing and grinding capacity and flotation
cells. The project will only proceed following a decision on Phase
1 and will require the submission of various permit applications,
including a new EIA. First production from this phase would be in
2022.
The Group has commenced the environmental baseline study for the
EIA and is expected to submit the results of the study in 2018.
Greenfield growth projects
Centinela Second Concentrator
The Centinela Mining District is a key area for longer-term
growth and the Group continues to evaluate options for its
development. These include phasing the project over a longer period
than originally proposed to capture value while spreading
expenditure over a longer period. Evaluation of these options is
expected to continue through 2018.
The original project envisaged the construction of a new 90,000
tonnes per day concentrator some 7 km from Centinela's current
concentrator to produce some 170,000 tonnes per annum of copper
equivalent (copper, gold and molybdenum) from ore sourced initially
from the Esperanza Sur deposit and later from Encuentro
Sulphides.
A decision to proceed with the project will depend on the market
outlook and the sequencing of the project relative to the Los
Pelambres project.
United States - Twin Metals
Twin Metals Minnesota LLC (Twin Metals) is a wholly-owned
copper, nickel and platinum group metals (PGM) underground mining
project holding the Maturi, Maturi Southwest, Birch Lake and Spruce
Road copper-nickel-PGM deposits located in north-eastern Minnesota,
US.
As previously announced, on 15 December 2016 Twin Metals was
notified that the relevant U.S. authorities had denied renewal of
two of its long-held federal mining leases. Twin Metals' leases had
been held in good standing by the federal government for more than
50 years, and had been twice renewed without controversy.
Twin Metals has filed a federal lawsuit seeking to secure its
rights to the two federal mineral leases and believes denial of the
leases is inconsistent with federal law, the terms of the leases
themselves and the federal government's established precedent in
supporting and renewing the leases over five decades. The
government has moved to have the motion dismissed.
While Twin Metals is assessing the impact of the agencies' lease
renewal decision, it will continue to advance the project while
also pursuing legal avenues to protect its contractual mineral
rights and respond to the motion to dismiss.
During the year the Group is working on finalising a full
engineering design and cost estimation for the project which
incorporates a mine plan of operations. The Group is also
evaluating alternatives for tailings disposal while baseline
environmental studies are also underway.
Further details are set out in Note 20 to the Financial
Statements.
Other exploration and evaluation activities
The Group has an active early-stage exploration programme beyond
the core locations of the Centinela and Los Pelambres mining
districts. This is managed through its in-house exploration team
and utilises partnerships with third parties to build a portfolio
of longer-term opportunities across Chile and the rest of the
world.
Chile
The Group focuses its exploration activities on the main copper
porphyry belts in northern and central Chile. Drilling continued at
the Cachorro prospect south of Antucoya and the El Encierro
prospect in the third region of Chile. The Group continued its
asset rationalisation programme, whereby low priority targets and
associated tenement holdings were relinquished and new tenements
that are more closely aligned with target areas were acquired.
International
The Group's international exploration strategy is to identify,
secure and evaluate high-quality copper exploration projects in
target jurisdictions in the Americas. Working in partnership with
selected companies, both public and private, the Group drilled and
tested projects in Canada and Mexico and exited from projects in
Zambia and Australia.
TRANSPORT DIVISION
Operating performance
The Transport Division generated $48.0 million of EBITDA in the
first half of 2017, $1.5 million higher than in the first six
months of 2016. Lower railway tonnages adversely affected EBITDA
but were offset by improved performance at the division's other
business units.
Transport volumes
Total transport volumes in the first half of 2017 were 3.0
million tonnes, compared to 3.3 million tonnes in the first half of
2016. This decrease in volumes was driven primarily by a strike at
one of the Division's largest customers during the period and
reduced production at another. The road transport operation remains
focused on supporting the railway logistics chain and, when
possible, capturing spot bulk cargo orders within the existing area
of operation.
Safety and Health
The Division's safety model is fully aligned with the Mining
Division's and has been fully implemented at its railway, truck and
terminal operations. This Model involves the identification and
control of the Critical Safety Risks and reinforces incident
reporting.
FINANCIAL REVIEW FOR THE SIX MONTHSED 30 JUNE 2017
Results (unaudited)
Six months Six months Movement Movement
ended ended
30.06.2017 30.06.2016
$m $m $m %
Revenue 2,049.2 1,444.2 605.0 41.9
------------------------------- ----------- ----------- --------- ---------
EBITDA (including results
from associates and
joint ventures) 1,079.8 575.1 504.7 87.8
------------------------------- ----------- ----------- --------- ---------
Depreciation and gains
/ losses on disposals (289.9) (247.5) 42.4 17.1
------------------------------- ----------- ----------- --------- ---------
Net finance expense (53.8) (20.8) 33.0 158.7
------------------------------- ----------- ----------- --------- ---------
Profit before tax 689.1 276.5 412.6 149.2
------------------------------- ----------- ----------- --------- ---------
Income tax expense (234.5) (118.0) 116.5 98.7
------------------------------- ----------- ----------- --------- ---------
Profit from continuing
operations 454.6 158.5 296.1 186.8
------------------------------- ----------- ----------- --------- ---------
Profit from discontinued
operations - (0.4) 0.4 (100.0)
------------------------------- ----------- ----------- --------- ---------
Earnings per share
from continuing operations
(US cents) 29.5 9.0 20.5 227.8
------------------------------- ----------- ----------- --------- ---------
Earnings per share
from discontinued operations
(US cents) - (0.1) 0.1 (100.0)
------------------------------- ----------- ----------- --------- ---------
Total earnings per
share from continuing
and discontinued operations
(US cents) 29.5 8.9 20.6 231.5
------------------------------- ----------- ----------- --------- ---------
Net cash/(debt) (859.6) (1,039.6) 180.0 (17.3)
------------------------------- ----------- ----------- --------- ---------
As a result of the disposal of Michilla in December 2016 its net
results for 2016 are shown in the "Profit from discontinued
operations" line. The comparative figure for the six months ended
30 June 2016 have been restated to reflect this presentation.
A detailed segmental analysis of the components of the income
statement is contained in Note 4 to the 2017 half yearly financial
report.
The following table reconciles between EBITDA in the first half
of 2016 and the first half of 2017:
$m
---------------------------------- --------
EBITDA in the first half
of 2016 575.1
---------------------------------- --------
Revenue
---------------------------------- --------
Increase in copper volumes
sold 186.1
---------------------------------- --------
Increase in copper realised
price 372.1
---------------------------------- --------
Decrease in tolling charges (0.6)
---------------------------------- --------
Increase in revenue from
copper concentrate and cathodes 557.6
---------------------------------- --------
Increase in gold revenues 20.6
---------------------------------- --------
Decrease in silver revenues (0.1)
---------------------------------- --------
Increase in molybdenum revenues 24.7
---------------------------------- --------
Increase in revenue from
by-products 45.2
---------------------------------- --------
Increase in transport division
revenue 0.7
---------------------------------- --------
Increase in corporate division
revenue 1.5
---------------------------------- --------
Increase in Group revenue 605.0
---------------------------------- --------
Operating costs
---------------------------------- --------
Increase in mining operational
costs (114.2)
---------------------------------- --------
Increase in charge for closure
provisions (1.4)
---------------------------------- --------
Increase in exploration and
evaluation costs (3.1)
---------------------------------- --------
Increase in corporate costs (3.9)
---------------------------------- --------
Increase in operating costs
for mining division (122.6)
---------------------------------- --------
Increase in transport division
operating costs (6.3)
---------------------------------- --------
Increase in EBITDA relating
to investments in associates
and joint ventures (*) 28.6
---------------------------------- --------
Total EBITDA in the first
half of 2017 1,079.8
---------------------------------- --------
(*) attributable
Revenue
Group revenue in the first half of 2017 was $2,049.2 million,
41.9% higher than the $1,444.2 million achieved in the first half
of 2016. The increase of $605.0 million mainly reflected an
increase in the realised copper price and higher copper sales
volumes, as well as higher by-product revenues.
Revenue from the mining division
Revenue from copper concentrate and copper cathodes
Revenue from copper concentrate and copper cathode sales
increased by $557.6 million, or 47.7%, to $1,725.8 million,
compared with $1,168.2 million in first six months of 2016. The
increase reflected the impact of higher realised prices and higher
sales volumes.
(i) Copper volumes
Copper sales volumes reflected within revenue increased from
271,100 tonnes in the first half of 2016 to 309,800 tonnes in this
period, accounting for an increase of $186.1 million in revenue.
This increase in volumes came from Centinela and Antucoya.
Centinela's increased volumes were primarily a result of higher
ore grades. The increased sales volumes at Antucoya reflect the
fact that the operation achieved commercial production on 1 April
2016 and so revenue in the first half of 2016 only included three
months' of sales volumes from Antucoya, and also that Antucoya
ramped-up to full capacity in the second half of 2016.
(ii) Realised copper prices
The Group's average realised copper price increased to $2.72/lb
in first six months of 2017 (first six months of 2016 - $2.17/lb),
resulting in a $372.1 million increase in revenue. The level of
increase in the realised price was higher than the increase in the
average LME copper price, which increased to $2.61/lb from $2.13/lb
in the first half of 2016, due to a higher level of positive
provisional pricing adjustments in the current period compared with
the prior year.
Realised copper prices are determined by comparing revenue
(gross of tolling charges for concentrate sales) with sales volumes
in the period. Realised copper prices differ from market prices
mainly because, in line with industry practice, concentrate and
cathode sales agreements generally provide for provisional pricing
at the time of shipment with final pricing based on the average
market price for future periods (normally about 30 days after
delivery to the customer in the case of cathode sales and up to
90-150 days after delivery to the customer in the case of
concentrate sales). Realised copper prices also reflect the impact
of realised gain or losses of commodity derivative instruments
hedge accounted for in accordance with IAS 39 "Financial
Instruments: Recognition and Measurements".
Further details of provisional pricing adjustments are given in
Note 5 to the 2017 half yearly financial report.
In the first six months of 2017 revenue includes nil impact
(first six months of 2016 - gain of $0.1 million) from commodity
derivatives which matured during the period. Further details of
hedging activity in the period are given in Note 6(c) to the half
yearly financial report.
(iii) Tolling charges
Tolling charges for copper concentrate increased by $0.6 million
to $132.3 million in the first six months of 2017 from $131.7
million in the first six months of 2016.
Tolling charges are deducted from concentrate sales in reporting
revenue and hence the marginal increase in these charges has had a
small negative impact on revenue.
Revenue from molybdenum, gold and other by-products
Revenue from by-products at Los Pelambres and Centinela relate
mainly to molybdenum and gold, and a lesser extent silver. Revenue
from by-products increased by $45.2 million or 23.1% to $241.1
million in the first half of 2017, compared with $195.9 million in
the first half of 2016.
Revenue from molybdenum (net of roasting charges) was $68.5
million (first half of 2016 - $43.8 million), an increase of $24.7
million. The increase was mainly due to higher sales volumes of
4,300 tonnes (first half 2016 - 3,100 tonnes) as well as a higher
realised price of $8.0/lb (first half of 2016 - $7.4/lb).
Revenue from gold in concentrate (net of tolling charges) was
$145.2 million (first half of 2016 - $124.6 million), an increase
of $20.6 million, which reflected an increase in volumes partly
offset by a lower realised price. Gold sales volumes increased from
97,100 ounces in the first half of 2016 to 114,600 ounces in this
period. The realised gold price was $1,272.4/oz in the first half
of 2017 compared with $1,288.1/oz in the first half of 2016.
Revenue from silver decreased marginally by $0.1 million to
$27.4 million in the first six month of 2017 (first six months of
2016 - $27.5 million). The sales volumes decreased slightly from
the prior period to 1.7 million ounces, which was partly offset by
an increased realised silver price of $16.6/oz (first half of 2016
- $16.1/oz).
Revenue from the transport division
Revenue from the transport division (FCAB) increased by $0.7
million or 0.9% to $80.8 million.
Operating costs (excluding depreciation and gains / losses on
disposals)
Operating costs (excluding depreciation and gains / losses on
disposals) amounted to $1,038.0 million (first half of 2016 -
$909.1 million), an increase of $128.9 million. This increase was
mainly due to increased volumes impacting cost of sales at the
mining division.
Operating costs (excluding depreciation and gains / losses on
disposals) at the mining division
Operating costs at the mining division increased from $868.0
million in the first half of 2016 to $992.6 million in the first
half of 2017, an increase of $124.6 million. Of this increase,
$98.6 million is attributable to increased volumes at Antucoya,
reflecting the fact that the operation achieved commercial
production on 1 April 2016 and so cost of sales in the first half
of 2016 only reflected three months' of sales volumes from
Antucoya, and also that Antucoya ramped-up to full capacity in the
second half of 2016.
Weighted average unit cash costs for the Group excluding
by-product credits (which are reported as part of revenue) and
tolling charges for concentrates (which are deducted from revenue)
decreased from $1.38/lb in the first half of 2016 to $1.37/lb in
this period.
Exploration and evaluation costs increased by $3.1 million to
$22.0 million (first half of 2016 - $18.9 million), which reflected
a general increase in exploration activity, and in particular at
the Twin Metals project in the United States. The income statement
also includes a charge in respect of mine closure provisions of
$4.9 million (first half of 2016 - charge of $3.7 million).
Operating costs (excluding depreciation and gains / losses on
disposals) at the transport division
Operating costs at the transport division increased by $4.3
million to $45.4 million, mainly reflecting higher diesel prices
and increased maintenance and staff costs.
EBITDA and operating profit from subsidiaries and joint
ventures
EBITDA
EBITDA (earnings before interest, tax, depreciation and
amortisation) from subsidiaries and joint ventures increased by
$504.7 million or 87.8% to $1,079.8 million in the first six months
of 2017 (first six months of 2016 - $575.1 million).
EBITDA includes the Group's proportional share of EBITDA from
associates and joint ventures. Zaldívar contributed $56.8 million
in the first six months of 2017 (first half of 2016 - $37.1
million) and other associates and joint ventures contributed $11.8
million (first half of 2016 - $2.9 million).
EBITDA from the Group's mining subsidiaries increased by 96.7%
from $496.1 million in the first half of 2016 to $975.8 million in
this period. As explained above, this was mainly due to the
increase in the revenues resulting from the higher realised copper
price and copper sales volumes, partly offset by the higher
operating expenses as a result of those increased volumes.
EBITDA at the transport division decreased by $3.6 million to
$35.4 million in the first half of 2017, mainly reflecting the
increased operating costs as explained above.
Depreciation and gains / losses on disposals
The charge for depreciation and gains / losses on disposals was
higher at $289.9 million (first half of 2016 - $247.5 million),
with increased depreciation at Antucoya and Centinela reflecting
increased sales volumes, partly offset by reduced depreciation at
Los Pelambres as a consequence of lower sales volumes.
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries increased by 153.9% to $721.3 million.
Share of results from associates and joint ventures
The Group's share of results from its associates and joint
ventures was a gain of $21.6 million (first half of 2016 - gain of
$9.7 million). This mainly reflects the Group's share of results
from Zaldívar.
Net finance expense
Net finance expense in the first half of 2017 was $55.7 million,
compared with a net finance expense of $20.8 million in the first
half of 2016.
Six Six
months months
ended ended
30.06.17 30.06.16
$m $m
--------------------- ---------- ----------
Investment income 10.2 13.1
--------------------- ---------- ----------
Interest expense (48.6) (32.0)
--------------------- ---------- ----------
Other finance items (15.4) (1.9)
--------------------- ---------- ----------
Net finance expense (53.8) (20.8)
--------------------- ---------- ----------
Interest income decreased by $3.1 million from $13.1 million in
first six months of 2016 to $10.2 million in first six months of
2016.
Interest expense increased from $32.0 million in the first half
of 2016 to $48.6 million in the first half of 2017, mainly due to
increased interest expense at Antucoya and Corporate. Antucoya
recognised a full six months of interest expense in the current
period, compared with only three months in the comparative period
from the start of commercial on 1 April 2016. A $500m Corporate
loan was put in place at the end of April 2016, and so a full six
months of interest expense in respect of this loan has been
recognised in the current period compared with two months in the
prior period.
Other finance items comprised a loss of $15.4 million (first
half of 2016 - loss of $1.9 million). A loss of $4.6 million (first
half of 2016 - loss of $0.3 million) has been recognised in respect
of the time value element of changes in the fair value of commodity
derivative options, which is excluded from the designated hedging
relationship, and is therefore recognised directly in profit or
loss. Foreign exchange losses included in finance items were $5.4
million in first half of 2017, compared with a gain of $3.3 million
in first half of 2016. An expense of $5.4 million (first half of
2016 - $4.9 million) has been recognised in relation to the
unwinding of the discount on provisions.
Profit before tax
As a result of the factors set out above, profit before tax
increased by $412.6 million or 149.2% to $689.1 million in the
first half of 2017 compared with $276.5 million in the first half
of 2016.
Income tax expense
The tax charge in the first half of 2017 was $234.5 million
(first half of 2016 - $118.0 million) and the effective tax rate
was 34.0% (first half of 2016 - 42.7%).
Six Six
months months
ended Effective ended Effective
30.06.2017 tax 30.06.2016 tax
rate rate
$m % $m %
----------------------------------- ----------- ---------- ----------- ----------
Profit before tax from continuing
operations 689.1 276.5
----------------------------------- ----------- ---------- ----------- ----------
Taxes (Current and deferred)
----------------------------------- ----------- ---------- ----------- ----------
Corporate tax (189.9) 27.6 (82.2) 29.7
----------------------------------- ----------- ---------- ----------- ----------
Royalty (24.8) 3.6 (32.8) 11.9
----------------------------------- ----------- ---------- ----------- ----------
Withholding tax (20.1) 2.9 (8.3) 3.0
----------------------------------- ----------- ---------- ----------- ----------
Exchange rate 0.3 (0.1) 5.3 (1.9)
----------------------------------- ----------- ---------- ----------- ----------
Total tax charge (234.5) 34.0 (118.0) 42.7
----------------------------------- ----------- ---------- ----------- ----------
The effective rate of corporate tax was 27.6% compared to the
statutory tax rate of 25.5%. The difference was principally due to
the effect of expenses not deductible or not subject for Chilean
corporate tax purposes (principally the funding of expenses outside
of Chile) (increase in tax charge of $9.1 million or 1.3%),
adjustments in respect of prior years (increase in tax charge of
$9.9 million or 1.4%), partly offset by the tax effect of the share
of results of associates and joint ventures (decrease in tax charge
of $5.5 million or 0.8%). In addition, the overall effective tax
rate reflects the Chilean mining royalty charge of $24.8 million
and a withholding tax charge of $20.1 million. Further details are
given in Note 8 of the 2017 half yearly financial report.
Non-controlling interests
Profit for the first half of the year attributable to
non-controlling interests was $164.1 million, compared with $70.0
million in the first half of 2016, reflecting the higher profit
attributable to the non-controlling interests as a consequence of
the increase in the earnings of the mining operations analysed
above.
Earnings per share
Six Six
months months
ended ended
30.06.17 30.06.16
$ cents $ cents
----------------------------------- ---------- ----------
Earnings per share from
continuing operations 29.5 9.0
------------------------------------ ---------- ----------
Earnings per share from
discontinued operations - (0.1)
------------------------------------ ---------- ----------
Total earnings per share
from continuing and discontinued
operations 29.5 8.9
------------------------------------ ---------- ----------
Earnings per share calculations are based on 985,856,695
ordinary shares. As a result of the factors set out above, profit
from continuing operations in the first half of 2017 attributable
to equity shareholders of the Company was $290.5 million compared
with $88.1 million in the first half of 2016. Accordingly, earnings
per share from continuing operations were 29.5 cents in the first
half of 2017 compared with 9.0 cents in first half of 2016, an
increase of 228.2%.
Dividends
Dividends per share declared in relation to the period are as
follows:
Six Six
months months
ended ended
30.06.17 30.06.16
$ cents $ cents
----------------------------- ---------- ----------
Ordinary
----------------------------- ---------- ----------
Interim 10.3 3.1
------------------------------ ---------- ----------
Final - -
----------------------------- ---------- ----------
Total dividends to ordinary
shareholders 10.3 3.1
------------------------------ ---------- ----------
The Board determines the appropriate dividend each year based on
consideration of the Group's cash balance, the level of free cash
flow and earnings generated during the year and significant known
or expected funding commitments. It is expected that the total
annual dividend for each year would represent a payout ratio of at
least 35% of underlying net earnings for that year.
The Board has declared an interim dividend for the first half of
2017 of 10.3 cents per ordinary share, which amounts to $101.5
million and will be paid on 6 October 2017 to shareholders on the
Register at the close of business on 8 September 2017.
Capital expenditure
Additions to property, plant & equipment (on an accruals
basis) decreased by $32.8 million from $508.9 million in the first
half of 2016 to $476.1 million in the period. This was mainly due
to a decrease at Los Pelambres, which had acquired $77.5 million of
mining trucks under finances leases in the first half of 2016.
Within the additions were $32.6 million of assets acquired under
finance leases (first six months of 2016 - $77.5 million).
Capital expenditure on a cash flow basis was $410.0 million,
compared with $385.4 million in the first six months of 2016
(analysed in more detail below in the cash flow section).
NB: capital expenditure figures quoted in other sections of this
report are on a cash flow basis, unless stated otherwise.
Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce exposure to commodity price movements. At 30 June 2017 the
Group had entered into min/max contracts at Centinela and Antucoya
for a notional amount of 36,000 tonnes and 20,400 tonnes of copper
production, respectively. The instruments cover a period up to 31
December 2017, with an average minimum price of $2.27/lb and an
average maximum price of $2.82/lb at Centinela and with an average
minimum price of $2.40/lb and an average maximum price of $2.98/lb
at Antucoya.
The Group also periodically uses interest rate swaps to swap the
floating rate interest for fixed rate interest. At 30 June 2017 the
Group had entered into contracts at Centinela for a maximum
notional amount of $52.5 million at a weighted average fixed rate
of 3.372% fully maturing in August 2018. The Group had also entered
into contracts in relation to a financing loan at the FCAB for a
maximum notional amount of $90 million at a weighted average fixed
rate of 1.634% fully maturing in August 2019.
Cash flows
The key features of the Group cash flow statement are summarised
in the following table.
Six Six
months months
ended ended
30.06.17 30.06.16
$m $m
----------------------------------- ---------- ----------
Cash flows from continuing
and discontinued operations 1,147.1 774.1
------------------------------------ ---------- ----------
Income tax paid (165.3) (257.5)
------------------------------------ ---------- ----------
Net interest paid (19.8) (13.6)
------------------------------------ ---------- ----------
Capital contribution and
loan to associates (39.7) (1.0)
------------------------------------ ---------- ----------
Purchases of property, plant
and equipment (410.0) (385.4)
------------------------------------ ---------- ----------
Acquisition of mining properties - (7.0)
------------------------------------ ---------- ----------
Proceeds from sale of property,
plant and equipment 0.3 0.1
------------------------------------ ---------- ----------
Dividends paid to equity (150.8) -
holders of the Company
----------------------------------- ---------- ----------
Dividends paid to non-controlling
interests (100.0) (40.0)
------------------------------------ ---------- ----------
Dividends from associates 8.4 13.6
------------------------------------ ---------- ----------
Other items - (59.1)
------------------------------------ ---------- ----------
Changes in net debt relating
to cash flows 270.2 24.2
------------------------------------ ---------- ----------
Exchange and other non-cash
movements (58.1) (40.3)
------------------------------------ ---------- ----------
Movement in net debt in the
period 212.1 (16.1)
------------------------------------ ---------- ----------
Net debt at the beginning
of the year (1,071.7) (1,023.5)
------------------------------------ ---------- ----------
Net debt at the end of the
period (859.6) (1,039.6)
------------------------------------ ---------- ----------
Cash flows from continuing and discontinued operations were
$1,147.1 million in the first half of 2017 compared with $774.1
million in the first half of 2016. This reflected EBITDA from
subsidiaries for the period of $1,011.2 million(1) (first half of
2016 - $535.1 million) adjusted for a net working capital decrease
of $135.9 million (first half of 2016 - decrease of $242.5
million).
Cash tax payments in the first half of 2017 year were $165.3
million (first half of 2016 - $257.5 million), comprising corporate
tax of $128.0 million (first half of 2016 - $242.4 million), mining
tax of $17.2 million (first half of 2016 - $2.2 million) and
withholding tax of $20.1 million (first half of 2016 - $12.9
million). These amounts differ from the current tax charge in the
consolidated income statement of $234.5 million (first half of 2016
- $118.0 million) mainly because cash tax payments for corporate
tax and the mining tax partly comprise the settlement of
outstanding balances in respect of the previous year's tax charge
and payments on account for the current year based on the prior
year profit levels.
Contributions to associates and joint ventures of $39.7 million
relate to the Group's funding of Alto Maipo ($36.0 million accrued
at December 2016 and paid in 2017), Tethyan Copper Company ($3.5
million) and Energia Andina ($0.2 million).
Cash disbursements relating to capital expenditure in the first
half of 2017 were $410.0 million compared with $385.4 million in
the first half of 2016. This included expenditure of $19.7 million
at Antucoya (first half of 2016 - $7.3 million), $271.4 million
relating to Centinela (first half of 2016 - $262.1 million) and
$104.6 million relating to Los Pelambres (first half of 2016 -
$94.4 million).
At 30 June 2016 dividends paid to ordinary shareholders of the
Company were $150.8 million, which related to the payment of the
final dividend declared in respect of the previous year.
Dividends paid by subsidiaries to non-controlling shareholders
were $100.0 million (first half of 2016 - $40.0 million).
________________________
(1) EBITDA excluding the Group's share of EBITDA from associates and joint ventures.
Financial position
At 30.06.17 At 30.06.16
$m $m
------------------------- ------------ ------------
Cash, cash equivalents
and liquid investments 2,166.1 2,180.1
--------------------------- ------------ ------------
Total borrowings (3,025.7) (3,219.7)
--------------------------- ------------ ------------
Net debt at the
end of the period (859.6) (1,039.6)
--------------------------- ------------ ------------
At 30 June 2017 the Group had combined cash, cash equivalents
and liquid investments of $2,166.1 million (30 June 2016 - $2,180.1
million). Excluding the non-controlling interest share in each
partly-owned operation, the Group's attributable share of cash,
cash equivalents and liquid investments was $1,880.3 million (30
June 2016 - $1,801.8 million).
New borrowings in the first half of 2017 were $160.0 million
representing new short-term borrowings at Los Pelambres (first half
of 2016 - $656.8 million). Repayments of borrowings and finance
leasing obligations in the first half of 2017 were $308.8 million,
relating mainly to repayments at Los Pelambres of $189.8 million,
Centinela $75.0 million and Antucoya $41.7 million.
Total Group borrowings at 30 June 2017 were $3,025.7 million (at
30 June 2016 - $3,219.7 million). Of this, $2,266.3 million (at 30
June 2016 - $2,410.1 million) is proportionally attributable to the
Group after excluding the non-controlling interest shareholdings in
partly-owned operations.
Going concern
The Group's business activities, together with those factors
likely to affect its future performance, are set out in the Review
of Operations. Details of the cash flows of the Group during the
period, along with its financial position at the period-end are set
out in this Financial Review. The half yearly financial report
includes details of the Group's cash, cash equivalent and liquid
investment balances in Note 19, and details of borrowings are set
out in Note 15. When assessing the going concern status of the
Group the Directors have considered in particular its financial
position, including its significant balance of cash, cash
equivalents and liquid investments and the borrowing facilities in
place, including their terms and remaining durations. When
assessing the prospects of the Group, the Directors have considered
the Group's copper price forecasts, the Group's expected production
levels, operating cost profile, capital expenditure and financing
plans. The Directors have taken into consideration the Group's key
risks which could impact the prospects of the Group, with the most
relevant to this assessment considered to be risks to the copper
price outlook. Robust downside sensitivity analyses have been
performed, assessing the impact of a significant deterioration in
the copper price outlook. These stress-tests all indicated results
which could be managed in the normal course of business. Based on
their assessment of the Group's prospects and viability, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements.
Having reassessed the principal risks, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing its condensed interim financial statements.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the year ended 31 December 2016. A detailed explanation
of the risks summarised below can be found in the Risk Management
section of that annual report which is available at
www.antofagasta.co.uk. Key headline risks relate to the
following:
-- Community relations
-- Strategic resources
-- Operational risks
-- Projects management
-- Political, legal and regulatory risks
-- Health and safety
-- Environmental management
-- Growth opportunities
-- Commodity prices
-- Foreign currency exchange
-- Identification of new mineral resources
-- Ore reserves and mineral resources estimates
-- Talent management and labour relations
Cautionary statement about forward-looking statements
This half yearly financial report contains certain
forward-looking statements. All statements other than historical
facts are forward-looking statements. Examples of forward-looking
statements include those regarding the Group's strategy, plans,
objectives or future operating or financial performance, reserve
and resource estimates, commodity demand and trends in commodity
prices, growth opportunities, and any assumptions underlying or
relating to any of the foregoing. Words such as "intend", "aim",
"project", "anticipate", "estimate", "plan", "believe", "expect",
"may", "should", "will", "continue" and similar expressions
identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors that are beyond the
Group's control. Given these risks, uncertainties and assumptions,
actual results could differ materially from any future results
expressed or implied by these forward-looking statements, which
speak only as at the date of this report. Important factors that
could cause actual results to differ from those in the
forward-looking statements include: global economic conditions,
demand, supply and prices for copper and other long-term commodity
price assumptions (as they materially affect the timing and
feasibility of future projects and developments), trends in the
copper mining industry and conditions of the international copper
markets, the effect of currency exchange rates on commodity prices
and operating costs, the availability and costs associated with
mining inputs and labour, operating or technical difficulties in
connection with mining or development activities, employee
relations, litigation, and actions and activities of governmental
authorities, including changes in laws, regulations or taxation.
Except as required by applicable law, rule or regulation, the Group
does not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Past performance cannot be relied on as a guide to future
performance.
Condensed Consolidated Income Statement
Six months Six months Year ended 31.12.2016
ended ended
30.06.2017 30.06.2016
--------------------------------------------------------------
Notes (Unaudited) (Unaudited/ Before Exceptional Total
Restated) exceptional items
items (Note
3)
(Audited) (Audited) (Audited)
$m $m $m $m $m
Revenue 2,5 2,049.2 1,444.2 3,621.7 - 3,621.7
Total operating
costs (1,327.9) (1,156.6) (2,698.1) (456.6) (3,154.7)
------------------- ------------------- ------------ ------------------------------------ ----------
Operating profit
from
subsidiaries 2,4 721.3 287.6 923.6 (456.6) 467.0
Net share of
profit/(loss)
from associates
and joint
ventures 2,4 21.6 9.7 23.4 (134.7) (111.3)
------------------- ------------------- ------------ ------------------------------------ ----------
Total profit
from
operations,
associates
and joint
ventures 742.9 297.3 947.0 (591.3) 355.7
Investment
income 10.2 13.1 26.9 - 26.9
Interest expense (48.6) (32.0) (86.1) - (86.1)
Other finance
items (15.4) (1.9) (11.9) - (11.9)
------------------- ------------------- ------------ ------------------------------------ ----------
Net finance
expense 7 (53.8) (20.8) (71.1) - (71.1)
------------------- ------------------- ------------ ------------------------------------ ----------
Profit before
tax 689.1 276.5 875.9 (591.3) 284.6
Income tax
expense 8 (234.5) (118.0) (313.5) 204.9 (108.6)
------------------- ------------------- ------------ ------------------------------------ ----------
Profit for the
period from
continuing
operations 454.6 158.5 562.4 (386.4) 176.0
=================== =================== ============ ==================================== ==========
Discontinued
operations
Profit for the
period from
discontinued
operations - (0.4) 38.3 - 38.3
------------------- ------------------- ------------ ------------------------------------ ----------
Profit for the
period 454.6 158.1 600.7 (386.4) 214.3
=================== =================== ============ ==================================== ==========
Attributable to:
Non-controlling
interests 164.1 70.0 220.9 (164.6) 56.3
Profit for the
period
attributable
to the owners
of the parent 290.5 88.1 379.8 (221.8) 158.0
------------------- ------------------- ------------ ------------------------------------ ----------
US cents US cents US cents US cents US cents
Basic earnings
per share
From continuing
operations 9 29.5 8.9 34.7 (22.6) 12.1
From
discontinued
operations 9 - - 3.9 - 3.9
------------------- ------------------- ------------ ------------------------------------ ----------
Total continuing
and
discontinued
operations 29.5 8.9 38.6 (22.6) 16.0
Condensed Consolidated Statement of Comprehensive Income
Six Six
months months
ended ended Year
ended
30.06.2017 30.06.2016 31.12.2016
(Unaudited) (Unaudited) (Audited)
Notes $m $m $m
Profit for the period 454.6 158.1 214.3
Items that may be or were reclassified
subsequently to profit or loss:
Losses in fair value of cash
flow hedges deferred in reserves (0.3) (3.6) (3.5)
Share of other comprehensive
(losses)/ income of equity accounted
units, net of tax (0.1) (17.5) 4.4
(Losses)/Gains in fair value
of available for sale investments 14 (0.4) 1.2 1.7
Tax effects arising on cash
flow hedges deferred in reserves (0.2) 1.3 0.6
Losses in fair value of cash
flow hedges transferred to the
income statement 6 0.8 3.6 5.8
Share of other comprehensive
income of equity accounted units
transferred to the income statement - - 52.6
Tax effects arising on amounts
transferred to the income statement 0.1 (0.9) (1.4)
------------ ------------ -----------
Total items that may be or were
reclassified subsequently to
profit or loss (0.1) (15.9) 60.2
Items that will not be subsequently
reclassified to profit or loss:
Actuarial gains/(losses) on
defined benefit plans 2.5 (2.3) 7.8
Tax on items recognised through
OCI which will not be reclassified
to profit or loss in the future (1.4) 1.1 (1.3)
------------ ------------ -----------
Total Items that will not be
subsequently reclassified to
profit or loss 1.1 (1.2) 6.5
Total other comprehensive income 1.0 (17.1) 66.7
Total comprehensive income for
the period 455.6 141.0 281.0
============ ============ ===========
Attributable to:
Non-controlling interests 164.4 70.0 24.9
Equity holders of the Company 291.2 71.0 256.1
------------ ------------ -----------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017 (Unaudited)
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 17) 17) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2017 89.8 199.2 (22.3) 6,548.6 6,815.3 1,694.4 8,509.7
Profit for the
period - - - 290.5 290.5 164.1 454.6
Other comprehensive
expense for the
period - - 8.0 (7.3) 0.7 0.3 1.0
Dividends - - - (150.8) (150.8) (100.0) (250.8)
Balance at 30
June 2017 89.8 199.2 (14.3) 6,681.0 6,955.7 1,758.8 8,714.5
========= ========= ========== ========== ======== ============= ========
For the six months ended 30 June 2016 (Unaudited)
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 17) 17) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2016 89.8 199.2 (59.3) 6,416.4 6,646.1 1,873.2 8,519.3
Profit for the
period - - - 88.1 88.1 70.0 158.1
Other comprehensive
expense for the
period - - (15.6) (1.5) (17.1) - (17.1)
Dividends - - - - - (40.0) (40.0)
Balance at 30
June 2016 89.8 199.2 (74.9) 6,503.0 6,717.1 1,903.2 8,620.3
========= ========= ========== ========== ======== ============= ========
For the year ended 31 December 2016 (Audited)
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 17) 17) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2016 89.8 199.2 (59.3) 6,416.4 6,646.1 1.873.2 8,519.3
Profit for the
year - - - 158.0 158.0 56.3 214.3
Other comprehensive
income for the
year - - 37.0 4.8 41.8 24.9 66.7
Dividends - - - (30.6) (30.6) (260.0) (290.6)
Balance at 31
December 2016 89.8 199.2 (22.3) 6,548.6 6,815.3 1,694.4 8,509.7
========= ========= ========== ========== ======== ============= ========
Condensed Consolidated Balance Sheet
At 30.06.2017 At 30.06.2016 At 31.12.2016
(Unaudited) (Unaudited) (Audited)
Non-current assets Notes $m $m $m
Intangible asset 11 150.1 150.1 150.1
Property, plant and equipment 12 8,868.5 8,799.1 8,737.5
Other non-current assets 2.7 2.6 2.6
Inventories 111.8 213.9 157.3
Investment in associates
and joint ventures 13 1,100.7 1,087.7 1,086.6
Trade and other receivables 55.5 308.1 66.7
Derivative financial instruments 0.1 - 0.2
Available-for-sale investments 14 4.4 4.1 4.6
Deferred tax assets 80.3 150.3 82.8
10,374.1 10,715.9 10,288.4
-------------- -------------- --------------
Current assets
Inventories 512.8 364.7 393.4
Trade and other receivables 467.9 385.9 736.1
Current tax assets 212.6 341.8 255.2
Derivative financial instruments 6 0.1 0.4 2.2
Liquid investments 19 1,421.1 1,602.4 1,332.2
Cash and cash equivalents 19 745.0 577.7 716.3
-------------- -------------- --------------
3,359.5 3,272.9 3,435.4
Total assets 13,733.6 13,988.8 13,723.8
============== ============== ==============
Current liabilities
Short-term borrowings and
leases 15 (822.7) (813.2) (836.8)
Derivative financial instruments 6 (4.2) (1.9) (2.0)
Trade and other payables (447.9) (464.7) (595.8)
Current tax liabilities (65.8) (25.6) (119.4)
(1,340.6) (1,305.4) (1,554.0)
-------------- -------------- --------------
Non-current liabilities
Medium and long-term borrowings
and leases 15 (2,203.0) (2,406.5) (2,283.4)
Derivative financial instruments 6 (0.1) (2.1) (0.5)
Trade and other payables (5.9) (4.5) (7.9)
Liabilities in relation to
joint venture 13 (3.6) (6.4) (3.1)
Post-employment benefit obligations (94.9) (100.1) (92.2)
Decommissioning & restoration
and other long term provisions (399.3) (399.6) (392.1)
Deferred tax liabilities (971.7) (1,143.9) (880.9)
(3,678.5) (4,063.1) (3,660.1)
-------------- -------------- --------------
Total liabilities (5,019.1) (5,368.5) (5,214.1)
============== ============== ==============
Net assets 8,714.5 8,620.3 8,509.7
Equity
Share capital 16 89.8 89.8 89.8
Share premium 16 199.2 199.2 199.2
Other reserves 17 (14.3) (74.9) (22.3)
Retained earnings 17 6,681.0 6,503.0 6,548.6
Equity attributable to equity
holders of the Company 6,955.7 6,717.1 6,815.3
Non-controlling interests 1,758.8 1,903.2 1,694.4
Total equity 8,714.5 8,620.3 8,509.7
============== ============== ==============
The interim condensed consolidated financial statements were
approved by the Board of Directors on 21 August 2017.
Condensed Consolidated Cash Flow Statement
Six Six
months months
ended ended
Year
ended
30.06.2017 30.06.2016 31.12.2016
(Unaudited) (Unaudited) (Audited)
Notes $m $m $m
Cash flows from continuing
and discontinued operations 18 1,147.1 774.1 1,457.3
Interest paid (29.2) (20.5) (46.3)
Income tax paid (165.3) (257.5) (272.6)
Net cash from continuing
and discontinued activities 952.6 496.1 1,138.4
-------------- ------------- ------------
Investing activities
Capital contributions and
loans to associates and joint
ventures (39.7) (1.0) (10.1)
Acquisition of joint ventures - - 20.0
Dividends from associate 8.4 13.6 10.2
Disposal of subsidiaries - - 10.0
Acquisition of mining properties - (7.0) (7.0)
Proceeds from sale of property
plant and equipment 12 0.3 0.1 0.5
Purchases of property, plant
and equipment 12 (410.0) (385.4) (795.1)
Net increase in liquid investments 19 (88.9) (678.3) (408.1)
Interest received 9.4 6.9 14.4
Net cash used in investing
activities (520.5) (1,051.1) (1,165.2)
-------------- ------------- ------------
Financing activities
Dividends paid to equity
holders of the Company (150.8) - (30.6)
Dividends paid to preference
shareholders of the Company - (0.1) (0.1)
Dividends paid to non-controlling
interests (100.0) (40.0) (260.0)
Net proceeds from issue of
new borrowings 19 160.0 656.8 938.8
Repayments of borrowings 19 (291.3) (292.5) (693.1)
Repayments of obligations
under finance leases 19 (17.4) (14.7) (31.3)
Net cash (used in)/from financing
activities (399.5) 309.5 (76.3)
-------------- ------------- ------------
Net increase /(decrease)
in cash and cash equivalents 19 32.6 (245.5) (103.1)
============== ============= ============
Cash and cash equivalents
at beginning of the period 716.3 807.5 807.5
Net increase/(decrease) in
cash and cash equivalents 19 32.6 (245.5) (103.1)
Effect of foreign exchange
rate changes 19 (3.9) 15.7 11.9
Cash and cash equivalents
at end of the period 19 745.0 577.7 716.3
============== ============= ============
Notes
1. General information and accounting policies
a) General information
These June 2017 interim condensed consolidated financial
statements ("the condensed financial statements") are for the six
months ended 30 June 2017. The condensed financial statements are
unaudited.
The information for the year ended 31 December 2016 does not
constitute the Group's statutory accounts as defined in section 434
of the Companies Act 2006 (the "Act") but is derived from those
accounts. The statutory accounts for the year ended 31 December
2016 have been approved by the Board and have been delivered to the
Registrar of Companies. The auditor has 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 Act (regarding adequacy of accounting records and returns) or
under section 498(3) (regarding provision of necessary information
and explanations).
b) Significant events during 2017
The Group completed the disposal of its 40% interest in Alto
Maipo in March 2017 for nil consideration. An impairment provision
was recognised in respect of the carrying value of the Group's
investment in Alto Maipo in the 2016 year-end results, and no gain
or loss resulted from the completion of the disposal in the current
period.
c) Basis of preparation
The annual financial statements of Antofagasta plc for the year
ended 31 December 2016 were prepared in accordance with
International Financial Reporting Standards ("IFRS") and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS. For these purposes, IFRS comprise the standards issued
by the International Accounting Standards Board ("IASB") and IFRS
Interpretations Committee ("IFRIC IC") that have been endorsed by
the European Union ("EU").
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
the accounting policies for the year ended 31 December 2016 and the
International Accounting Standard ("IAS") 34 Interim Financial
Reporting and the requirements of the UK Disclosure and
Transparency Rules ("DTR") of the Financial Conduct Authority
("FCA") in the United Kingdom as applicable to interim financial
reporting.
The condensed financial statements represent a "condensed set of
financial statements" as referred to in the DTR issued by the FCA.
Accordingly, they do not include all of the information required
for a full annual financial report and are to be read in
conjunction with the Group's financial statements for the year
ended 31 December 2016.
The Group completed the sale of Minera Michilla SA to Haldeman
Mining Company S.A. on 30 December 2016, and accordingly in the
2016 year-end results the net results of Michilla for the twelve
months to December 2016 were shown in the income statement on the
line for "Profit for the period from discontinued operations". The
comparative results for the six months to 30 June 2016 in this
half-yearly financial report have been restated in order to present
the comparative net results on the "Profit for the period from
discontinued operations". During the first six months of 2016
Michilla contributed $36.9 million cash outflow (first six months
of 2015 - $33.3 million cash inflow) in respect to the Group's net
cash flow from operating activities, nil (first six months of 2015
- nil) in respect to net cash used in investing activities and nil
(first six months of 2015 - nil) in respect to net cash provided in
financing activities.
d) Going concern
Having reassessed the principal risks, the Directors considered
it appropriate to adopt the going concern basis of accounting in
preparing its condensed interim financial statements.
e) Accounting policies
The following International Reporting Standards (IFRS),
amendments and interpretations are effective for the first time in
the current reporting period.
Adoption of new accounting standards
The following accounting standards, amendments and
interpretations became effective in the current reporting
period:
- Recognition of Deferred Tax Assets for Unrealised Losses
(Amendments to IAS 12)
- Disclosure Initiative (Amendments to IAS 7)
- Annual improvements 2014 - 2016 Cycle (Amendments to IFRS
12)
The application of these standards and interpretations effective
for the first time in the current period has had no material impact
on the amounts reported in these condensed consolidated financial
statements.
Accounting standards issued but not yet effective
The following accounting standards, interpretations and
amendments have been issued by the IASB, but are not yet
effective:
New Standards Effective date (Subject
to EU endorsement)
-------------------------------- -------------------------
IFRS 9, Financial instruments Annual periods beginning
on or after January
1, 2018
-------------------------------- -------------------------
IFRS 15, Revenue from Contracts Annual periods beginning
with Customers on or after January
1, 2018
-------------------------------- -------------------------
IFRS 16, Leases Annual periods beginning
on or after January
1, 2019
-------------------------------- -------------------------
IFRS 17, Insurance Contracts Annual periods beginning
on or after January
1, 2021
-------------------------------- -------------------------
Amendments to IFRSs Effective date (Subject
to EU endorsement)
------------------------------------- -------------------------
Sale or Contribution of Effective date deferred
Assets between an Investor indefinitely
and its Associate or Joint
Venture (Amendments to IFRS
10 and IAS 28)
------------------------------------- -------------------------
Classification and Measurement Annual periods beginning
of Share-based Payment Transactions on or after January
(Amendments to IFRS 2) 1, 2018
------------------------------------- -------------------------
Applying IFRS 9 'Financial Deferral approach
Instruments' with IFRS 4 effective for annual
'Insurance Contracts' (Amendments periods beginning
to IFRS 4) on or after 1 January
2018 and only available
for three years
after that date
------------------------------------- -------------------------
Transfers of Investment Annual periods beginning
Property (Amendments to on or after January
IAS 40) 1, 2018
------------------------------------- -------------------------
Annual Improvements to three Annual periods beginning
IFRS Standards 2014-2016 on or after January
Cycle 1, 2018
------------------------------------- -------------------------
New Interpretations Effective date (Subject
to EU endorsement)
--------------------------- -------------------------
IFRIC 22, Foreign Currency Annual periods beginning
Transactions and Advance on or after January
Consideration 1, 2018
--------------------------- -------------------------
IFRIC 23, Uncertainty over Annual periods beginning
Income Tax Treatments on or after January
1, 2019
--------------------------- -------------------------
The Group is continuing to evaluate the impact of adopting these
new standards and interpretations.
In respect of IFRS 15 Revenue from contracts the current
expectation is that the principal impact will relate to situations
where the Group is effectively providing a shipping service to
customers who have purchased copper from the Group, to transport
that copper to a destination port specified by the customer. Such
shipping services will represent a separate performance obligation
and should be accounted for over time separately from the sale of
goods. The impact of recognising shipping revenue over time rather
than at a point in time is not expected to have a material impact
on the financial statements.
IFRS 16 Leases will result in most of the Group's existing
operating leases being accounted for similar to finance leases
under the current IAS 17, resulting in the recognition of
additional assets within property, plant and equipment in respect
of the right of use of the lease assets, and additional lease
liabilities. The operating lease charges currently reflected within
operating expenses (and EBITDA) will be eliminated, and instead
depreciation and finance charges will be recognised in respect of
the lease assets and liabilities. Based on the operating leases in
place at 31 December 2016 it is currently estimated that this would
result in the recognition of additional lease assets within
property, plant & equipment and additional lease liabilities as
at 1 January 2017 of approximately $100 million in each case. It is
also estimated that this would result in a decrease in annual
operating expenses before depreciation (and therefore an increase
in EBITDA) of approximately $75m, an increase in annual
depreciation of approximately $70 million, an increase in finance
costs of less than $15m, and a net impact on profit before tax of
less than $15 million.
2. Total profit from operations, associates and joint ventures
Six
Six months months Year
ended ended ended
30.06.2017 30.06.2016 31.12.2016
$m $m $m
Revenue 2,049.2 1,444,2 3,621.7
Cost of sales (1,091.5) (933.4) (2,087.0)
Gross profit 957.7 510.8 1,534.7
Administrative
and distribution
expenses (192.5) (189.1) (479.1)
Provision against
carrying value
of assets - - (456.6)
Other operating
income 10.3 6.6 20.2
Other operating
expenses (54.2) (40.7) (152.2)
Operating profit
from subsidiaries 721.3 287.6 467.0
Equity accounting
profit 21.6 9.7 23.4
Provision against
carrying value
of assets - - (134.7)
------------ ------------ ------------
Net share of income/(loss)
from associates
and joint ventures 21.6 9.7 (111.3)
Total profit from
operations, associates
and joint ventures 742.9 297.3 355.7
============ ============ ============
3. Exceptional items and assets sensitivities
Exceptional items are material items of income and expense which
are non-regular or non-operational and typically non-cash
movements. There were no exceptional items at June 2017 and June
2016. The exceptional items in the year ended 31 December 2016 and
their impact on the results are set out below.
Operating profit Share of profit/(loss)
from associates
and joint ventures
-----------------------------------------
Six Six Six Six Year
months months Year months months ended
ended ended ended ended ended 31.12.2016
30.06.2017 30.06.2016 31.12.2016 30.06.2017 30.06.2016
$m $m $m $m $m
Before exceptional
items 721.3 287.6 923.6 21.6 9.7 23.4
Provision against
the carrying
value of assets
Alto Maipo - - (241.0) - - -
- Loan
Alto Maipo
- Investment - - - - - (126.6)
Antucoya - - - (215.6) - - -
PP&E
Energia Andina
- Investment - - - - - (8.1)
------------ ------------ ------------- ------------ ------------ ------------
Total Provision
against the
carrying value
of assets - - (456.6) - - (134.7)
------------ ------------ ------------- ------------ ------------ ------------
After exceptional
items 721.3 287.6 467.0 21.6 9.7 (111.3)
============ ============ ============= ============ ============ ============
Profit before Earnings per
tax share
-----------------------------------------
Six Six Six Six
months months Year months months Year
ended ended ended ended ended ended
30.06.2017 30.06.2016 31.12.2016 30.06.2017 30.06.2016 31.12.2016
$m $m $m US $m US
cents cents
Before exceptional
items 687.2 276.5 875.9 29.5 8.9 38.6
Provision -
against the
carrying value
of assets
Alto Maipo
- Loan - - (241.0) - - 6.3
Alto Maipo
- Investment - - (126.6) - - 5.8
Antucoya -
PP&E - - (215.6) - - 10.7
Energia Andina
- Investment - - (8.1) - - (0.2)
------------ ------------ ------------- ------------ ------------ -------------
Total Provision
against the
carrying value
of assets - - (591.3) - - (22.6)
------------ ------------ ------------- ------------ ------------ -------------
After exceptional
items 687.2 276.5 284.6 29.5 8.9 16.0
============ ============ ============= ============ ============ =============
Antucoya 2016 impairment
There have been no indications of potential impairments during
the first six months of 2017, and accordingly no impairment reviews
have been performed as at 30 June 2017.
At the 2016 year-end an impairment review was conducted for the
Antucoya operation, which resulted in the recognition of an
impairment provision of $215.6 million (on a pre-tax basis) in the
2016 financial statements. To illustrate the sensitivity of the
2016 year-end valuation of Antucoya to negative movements in these
parameters, a 5% decrease in the forecast long-term copper price
would have resulted in an increase in the impairment of $121.0
million, and an increase in the discount rate from 8% to 9% would
have resulted in an increase in the impairment of $89.0 million.
These are simple sensitivities, looking at illustrative movements
in the long-term copper price and discount rate in isolation. In
reality, a deterioration in the long-term copper price environment
is likely to result in corresponding improvements in a range of
input cost factors, as well as potential operational changes, which
could partly mitigate these estimated potential sensitivities.
Other asset sensitivities and relevant considerations
There were no indicators of impairment for the Group's other
mining operations at the 2016 year-end, and accordingly no detailed
impairment reviews were performed for those operations. However, in
order to provide an indication of the sensitivities of the
valuations of these assets, a sensitivity analysis was performed at
the 2016 year-end. For all of the other mining operations a
valuation exercise using assumptions consistent with those used in
the Antucoya impairment review confirmed that the recoverable
amount of the assets was in excess of their carrying value. The
recoverable amount of the assets still remained in excess of their
carrying value for all of the other mining operations with either a
5% decrease in the forecast long-term copper price or an increase
in the discount rate from 8% to 9%.
With regard to the Twin Metals project, in December 2016 Twin
Metals was notified that the relevant U.S. authorities had denied
renewal of two of its long-held federal mining leases. Twin Metals'
leases had been held in good standing by the federal government for
more than 50 years, and had been twice renewed without controversy.
Twin Metals filed a federal lawsuit seeking to secure its rights to
the two federal mineral leases and believes denial of the leases is
inconsistent with federal law, the terms of the leases themselves
and the federal government's established precedent in supporting
and renewing the leases over five decades. At the 2016 year-end the
potential operating and financial impact of the non-renewal of
these leases was reviewed, including an analysis of the potential
impact on the mine plan and value of the project of excluding the
mineral resources relating to these two leases. This indicated a
reduction in the net present value of the project, but that the
updated net present value was still in excess of the carrying value
of the assets relating to the Twin Metals project. As such the
non-renewal of these leases does not have any financial impact and
therefore no adjustment was made to the carrying value of the Twin
Metals project assets. There have been no further significant
developments during the first six months of 2017. Details of the
current status of the legal process are set out in Note 20.
4. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Michilla (sold in 2016)
-- Antucoya
-- Zaldivar
-- Exploration and evaluation
-- Railway and other transport services
-- Corporate and other items
For management purposes, the Group is organised into two
business divisions based on their products - Mining and Railway and
Other Transport Services. The mining division is split further for
management reporting purposes to show results by mine and
exploration activity. Following the completion of construction, the
Antucoya achieved commercial production in April 2016. The Group
acquired a 50% stake in the Zaldivar mine in December 2015. The
Michilla mine was placed on care and maintenance at the end of
2015, and was disposed of in December 2016. Los Pelambres produces
primarily copper concentrate and molybdenum as a by-product.
Centinela produces primarily copper concentrate containing gold as
a by-product and copper cathodes. Antucoya and Zaldivar produce
copper cathodes, as did Michilla. The transport division provides
rail cargo (based in Chile and formerly Bolivia) and road cargo
(based in Chile) together with a number of ancillary services
(based in Chile). The Exploration and evaluation segment incurs
exploration and evaluation expenses. "Corporate and other items"
comprises costs incurred by the Company, Antofagasta Minerals S.A.,
the Group's mining corporate centre and other entities, that are
not allocated to any individual business segment. Consistent with
its internal management reporting, the Group's corporate and other
items are included within the mining division.
The Chief operating decision maker monitors the operating
results of business segments separately for the purpose of making
decisions about resources to be allocated and of assessing
performance. Segment performance is evaluated based on the
operating profit and EBITDA of each of the segments.
a) Segment revenues and results
For the six months ended 30 June 2017
Los Centinela Antucoya Zaldivar Exploration Corporate Total Railway Total
Pelambres and and Mining and
evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 943.3 794.0 229.6 - - 1.5 1,968.4 80.8 2,049.2
Operating
costs excluding
depreciation (421.6) (374.0) (149.7) - (22.0) (25.3) (992.6) (45.4) (1,038.0)
Depreciation
and
amortisation (88.6) (152.2) (37.8) - - (3.6) (282.2) (7.8) (290.0)
Gains on
disposals - - - - - - - 0.1 0.1
---------- ---------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Operating
profit/(loss) 433.1 267.8 42.1 - (22.0) (27.4) 693.6 27.7 721.3
Equity
accounting
profit/(loss) - - - 21.2 - (5.4) 15.9 5.8 21.6
Investment
income 1.6 2.8 0.4 - - 5.1 9.9 0.3 10.2
Interest expense (3.4) (13.7) (22.1) - - (8.3) (47.5) (1.1) (48.6)
Other finance
items (3.7) (8.7) (1.4) - - (1.2) (15.0) (0.4) (15.4)
---------- ---------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
before tax 427.6 248.2 19.0 21.2 (22.0) (37.2) 656.8 32.3 689.1
Tax (139.4) (63.5) (0.1) - - (25.1) (228.1) (6.4) (234.5)
---------- ---------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period
from continuing
operations 288.2 184.7 18.9 21.2 (22.0) (62.3) 428.7 25.9 454.6
Profit for
the period
from
discontinued
operations - - - - - - - - -
---------- ---------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period 288.2 184.7 18.9 21.2 (22.0) (62.3) 428.7 25.9 454.6
Non-controlling
interests 114.6 50.3 (0.8) - - - 164.1 - 164.1
========== ========== ========== ========= ============== ========== ========== ========== ==========
Profit/(loss)
for the period
attributable
to owners
of the parent 173.6 134.4 19.7 21.2 (22.0) (62.3) 264.6 25.9 290.5
Total
EBITDA(1) 521.7 420.0 79.9 56.8 (22.0) (24.6) 1,031.8 48.0 1,079.8
Additions to non-current
assets
Capital
expenditure 114.0 296.4 52.2 - - 1.3 463.9 12.2 476.1
---------- ---------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Segment assets
and liabilities
Segment
assets 3,580.9 5,213.1 1,759.5 - - 1,727.9 12,281.4 351.5 12,632.9
Investment
in associates
and joint
ventures - - - 21.8 - 1,003.7 1,025.5 75.2 1,100.7
Segment
liabilities (1,298.5) (1,875.1) (1,078.8) - - (635.4) (4,887.8) (131.3) (5,019.1)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the period, operating cash outflow from exploration
and evaluation was $38.8 million
For the six months ended 30 June 2016 (Restated)
Los Centinela Antucoya Exploration Corporate Total Railway Total
Pelambres and and Mining and
Zaldivar evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 847.5 449.3 67.3 - - - 1,364.1 80.1 1,444.2
Cost of
sales (412.1) (364.5) (51.1) - (18.9) (21.4) (868.0) (41.1) (909.1)
Depreciation
and
amortisation (96.7) (123.4) (16.7) - - (3.2) (240.0) (7.3) (247.3)
(Loss)/gain
on disposals (0.2) - - - - - (0.2) - (0.2)
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Operating
profit/(loss) 338.5 (38.6) (0.5) - (18.9) (24.6) 255.9 31.7 287.6
Share of
profit/(loss)
from associates
and joint
ventures 1.2 - - 12.2 - (5.7) 7.7 2.0 9.7
Investment
income 7.6 3.1 0.2 - - 1.8 12.7 0.4 13.1
Interest
expense (3.0) (15.0) (9.7) - - (3.0) (30.7) (1.3) (32.0)
Other finance
items 1.1 (4.0) 0.8 - - 1.1 (1.0) (0.9) (1.9)
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
before
tax 345.4 (54.5) (9.2) 12.2 (18.9) (30.4) 244.6 31.9 276.5
Tax (91.7) (0.8) (11.1) - - (3.9) (107.5) (10.5) (118.0)
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period
from continuing
operations 253.7 (55.3) (20.3) 12.2 (18.9) (34.3) 137.1 21.4 158.5
(Loss)/profit
for the
period
from
discontinued
operations - - - - - (0.4) (0.4) - (0.4)
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period 253.7 (55.3) (20.3) 12.2 (18.9) (34.7) 136.7 21.4 158.1
Non-controlling
interests (101.6) 21.7 9.9 - - - (70.0) - (70.0)
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period
attributable
to owners
of the
parent 152.1 (33.6) (10.4) 12.2 (18.9) (34.7) 66.7 21.4 88.1
========== ========== ========== ========== ============== ========== ========== ========== ==========
EBITDA(1) 435.0 85.4 16.2 37.1 (18.9) (26.2) 528.6 46.5 575.1
---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Additions to
non-current
assets
Capital
expenditure 182.0 289.7 7.3 - - 24.1 503.1 5.8 508.9
----------------- ---------- ---------- ---------- ---------- -------------- ---------- ---------- ---------- ----------
Segment assets
and liabilities
Segment
assets 4,099.6 4,911.3 2,015.4 - 9.5 1,514.0 12,549.8 351.3 12,901.1
Investment
in associates
and joint
ventures 18.3 - - 966.2 - 31.7 1,016.1 71.6 1,087.7
Segment
liabilities (1,404.1) (2,040.3) (1,244.8) - (4.5) (199.4) (5,193.1) (175.4) (5,368.5)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the period, operating cash outflow from exploration
and evaluation was $17.6 million
For the year ended 31 December 2016
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 1,845.6 1,338.0 277.9 - - - 3,461.5 160.2 3,621.7
Operating
costs excluding
depreciation (923.8) (775.5) (213.0) - (44.3) (56.5) (2,013.1) (86.9) (2,100.0)
Depreciation
and
amortization (195.7) (299.4) (62.7) - - (5.2) (563.0) (15.4) (578.4)
Loss on
disposals (0.2) (17.1) - - - (0.6) (17.9) (1.8) (19.7)
Provision
against
the carrying
value of
assets (241.0) - (215.6) - - - (456.6) - (456.6)
---------- ---------- ----------
Operating
profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Equity
accounting
profit/(loss) 0.4 - - 29.5 - (11.2) 18.7 4.7 23.4
Provision
against
the carrying
value of
assets (126.6) - - - - (8.1) (134.7) - (134.7)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Net share
of
profit/(loss)
from associates
and joint
ventures (126.2) - - 29.5 - (19.3) (116.0) 4.7 (111.3)
Investment
income 15.7 5.3 0.6 - - 4.7 26.3 0.6 26.9
Interest
expense (6.5) (32.0) (30.5) - - (14.6) (83.6) (2.5) (86.1)
Other finance
items (2.7) (5.4) (5.0) - - 3.0 (10.1) (1.8) (11.9)
---------- ---------- ----------
Profit/(loss)
before tax 365.2 213.9 (248.3) 29.5 (44.3) (88.5) 227.5 57.1 284.6
Tax (117.4) (73.3) 94.3 - - 5.3 (91.1) (17.5) (108.6)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period from
continuing
operations 247.8 140.6 (154.0) 29.5 (44.3) (83.2) 136.4 39.6 176.0
Profit for
the period
from
discontinued
operations - - - - - 38.3 38.3 - 38.3
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period 247.8 140.6 (154.0) 29.5 (44.3) (44.9) 174.7 39.6 214.3
Non-controlling
interests (97.9) (32.8) 74.3 - - 0.1 (56.3) - (56.3)
---------- ---------- ----------
Profit/(loss)
for the
period
attributable
to the owners
of the parent 149.9 107.8 (79.7) 29.5 (44.3) (44.8) 118.4 39.6 158.0
========== ========== ========== ============== ============== ========== ========== ========== ==========
EBITDA(1) 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Additions to
non-current
assets
Capital
expenditure 316.6 617.4 27.4 - - 31.0 992.4 16.9 1,009.3
========== ========== ========== ============== ============== ========== ========== ========== ==========
Segment assets
and liabilities
Segment
assets 3,606.2 5,008.0 1,740.5 - 9.5 1,945.8 12,310.0 327.2 12,637.2
Investment
in associates
and joint
ventures - - - 983.7 - 25.1 1,008.8 77.8 1,086.6
Segment
liabilities (1,368.2) (1,979.3) (1,085.3) - (4.5) (638.3) (5,075.6) (138.5) (5,214.1)
========== ========== ========== ============== ============== ========== ========== ========== ==========
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the year, operating cash flow from exploration and
evaluation was $22.1 million
b) Entity wide disclosures
Revenue by product
Six Six
months months Year
ended ended ended
30.06.2017 30.06.2016 31.12.2016
$m $m $m
Copper
- Los Pelambres 828.1 741.7 1,627.0
- Centinela concentrates 491.1 245.9 778.7
- Centinela cathodes 177.0 113.3 278.1
- Antucoya 229.6 67.3 277.9
Gold
- Los Pelambres 30.1 40.1 78.5
- Centinela 115.1 84.5 261.2
Molybdenum
- Los Pelambres 68.5 43.8 94.0
Silver
- Los Pelambres 16.6 21.9 46.1
- Centinela 10.8 5.6 20.0
Corporate
- Electricity Services 1.5 - -
------------ ------------ ------------
Total Mining 1,968.4 1,364.1 3,461.5
Railway and transport
services 80.8 80.1 160.2
2,049.2 1,444.2 3,621.7
============ ============ ============
Revenue by location of customer
Six Six
months months
ended ended Year ended
30.06.2017 30.06.2016 31.12.2016
$m $m $m
Europe
- United Kingdom 33.0 0.1 -
- Switzerland 319.7 93.5 217.7
- Spain 90.5 48.8 115.6
- Germany 45.1 15.9 38.5
- Rest of Europe 52.1 58.7 157.3
Latin America
- Chile 101.0 101.5 105.2
- Rest of Latin America 94.8 29.3 126.4
North America
- United States 68.5 14.1 49.5
Asia Pacific
- Japan 735.6 613.0 1,483.5
- China 214.8 250.2 771.9
- Rest of Asia 294.1 219.1 556.1
------------ ------------ ------------
2,049.2 1,444.2 3,621.7
============ ============ ============
Information about major customers
In the first half of 2017 the Group's mining revenue included
$227.3 million related to one large customer that individually
accounted for more than 10% of the Group's revenue (six months
ended 30 June 2016 - one large customer representing $279.2
million; year ended 31 December 2015 - one large customer
representing $694.7 million).
Non-current assets by location of asset
Six Six
months months Year
ended ended ended
30.06.2017 30.06.2016 31.12.2015
$m $m $m
- Chile 10,072.4 10,384.6 9,996.3
- USA 216.9 170.6 204.4
- Other 0.1 (0.1) 0.1
10,289.4 10,555.1 10,200.8
============ ============ ============
Notes to geographical information
The non-current assets balance disclosed by location of assets
excludes financial instruments, available-for-sale investments and
deferred tax assets.
5. Revenue
Copper and molybdenum concentrate sale agreements and copper
cathode sale agreements generally provide for provisional pricing
of sales at the time of shipment, with final pricing being based on
the monthly average London Metal Exchange copper price or monthly
average molybdenum price for specified future periods. This
normally ranges from one to five months after shipment to the
customer. The provisional pricing mechanism within the sale
agreements is an embedded derivative under IFRS. Gains and losses
from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors
in the balance sheet. The Group determines mark-to-market prices
using forward prices at each period end for copper concentrate and
cathode sales, and period-end month average prices for molybdenum
concentrate sales due to the absence of a futures market in the
market price references for that commodity in the majority of the
Group's contracts.
In addition to mark-to-market and final pricing adjustments,
revenue also includes realised gains and losses relating to
derivative commodity instruments. Details of these realised gains
or losses are shown in the tables below. Further details of
derivative commodity instruments in place at the period end are
given in Note 6.
Copper and molybdenum concentrate sales are stated net of
deductions for tolling charges, as shown in the tables below.
For the period ended 30 June 2017 $
$m $m $m $m $m m $m
Los Los Centinela Los
Pelambres Centinela Centinela Antucoya Pelambres Pelambres
Gold
Copper Copper Copper Copper in Gold in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
Provisionally
invoiced gross
sales 868.0 507.3 177.7 227.8 30.9 114.7 77.6
Effects of
pricing
adjustments to
previous year
invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year (28.0) (15.3) 0.4 0.6 - 1.3 0.7
Settlement of
sales
invoiced in
the
previous year 53.3 37.6 - 0.7 (0.9) (2.2) 2.0
Total effect of
adjustments to
previous year
invoices in the
current period 25.3 22.3 0.4 1.3 (0.9) (0.9) 2.7
Effects of
pricing
adjustments to
current period
invoices
Settlement of
sales invoiced
in the current
period (10.9) (1.8) (2.4) (0.7) 0.1 1.9 -
Mark-to-market
adjustments at
the end of the
current period 26.0 14.0 2.6 1.2 - (0.2) (3.8)
Total effect of
adjustments to
current period
invoices 15.1 12.2 0.2 0.5 0.1 1.7 (3.8)
Total pricing
adjustments 40.4 34.5 0.6 1.8 (0.8) 0.8 (1.1)
Realised - - - - - - -
gains/(losses)
on commodity
derivatives
Revenue before
deducting
tolling charges 908.4 541.8 178.3 229.6 30.2 115.5 76.5
Tolling charges (80.3) (52.0) - - (0.1) (0.4) (8.0)
Revenue net of
tolling charges 828.1 489.8 178.3 229.6 30.1 115.1 68.5
For the period ended 30 June 2016
Los Michilla Antucoya Los Los
Pelambres Centinela Centinela Pelambres Centinela Pelambres
Copper Copper Copper Copper Copper Gold in Gold in Molybdenum
concentrate concentrate cathodes cathodes cathodes concentrate concentrate concentrate
$m $m $m $m $m $m $m $m
Provisionally
invoiced gross
sales 816.6 280.6 113.9 4.1 67.4 39.9 78.9 40.4
Effects of
pricing
adjustments to
previous year
invoices
Reversal of
mark-to-market
adjustments at
the end of the
previous year 14.5 6.2 (0.2) (0.1) - - 2.2 (1.0)
Settlement of
sales invoiced
in the
previous year (19.0) (7.8) - (0.3) - (0.1) (1.0) 1.5
Total effect of
adjustments to
previous year
invoices in
the current
period (4.5) (1.6) (0.2) (0.4) - (0.1) 1.2 0.5
Effects of
pricing
adjustments to
current period
invoices
Settlement of
sales invoiced
in the current
period 9.3 1.2 (0.6) 0.1 (1.1) 0.3 2.4 7.8
Mark-to-market
adjustments at
the end of the
current period 13.3 4.3 0.1 - 0.9 - 2.3 2.1
Total effect of
adjustments to
current period
invoices 22.6 5.5 (0.5) 0.1 (0.1) 0.3 4.7 9.9
Total pricing
adjustments 18.1 4.0 (0.7) (0.4) (0.1) 0.2 5.9 10.4
Realised
gains/(losses)
on commodity
derivatives - - 0.1 - - - - -
Revenue before
deducting
tolling
charges 834.7 284.6 113.3 3.8 67.3 40.1 84.9 50.8
Tolling charges (93.0) (38.7) - - - (0.1) (0.3) (7.0)
Revenue net of
tolling
charges 741.7 245.9 113.3 3.8 67.3 40.0 84.5 43.8
For the year ended 31 December 2016
$
$m $m $m $m $m m $m
Los Los Centinela Los
Pelambres Centinela Centinela Antucoya Pelambres Pelambres
Gold
Copper Copper Copper Copper in Gold in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
Provisionally
invoiced gross
sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5
Effects of
pricing
adjustments to
previous year
invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year 14.5 6.2 (0.2) - - 2.2 (1.0)
Settlement of
sales
invoiced in
the
previous year (18.9) (7.8) - - (0.1) (1.0) 1.7
Total effect of
adjustments to
previous year
invoices in the
current year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7
Effects of
pricing
adjustments to
current year
invoices
Settlement of
sales invoiced
in the current
year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4
Mark-to-market
adjustments at
the end of the
current year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7)
Total effect of
adjustments to
current year
invoices 108.5 44.0 3.7 3.7 (0.1) (2.9) 1.7
Total pricing
adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4
Realised loss on
commodity
derivatives - - (2.2) - - - -
Revenue before
deducting
tolling charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9
Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9)
Revenue net of
tolling charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0
The revenue from the individual products shown in
the above tables is reconciled to total revenue in
Note 3(b).
(i) Copper concentrate
The typical period for which sales of copper concentrate remain
open until settlement occurs is a range of approximately three to
five months from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 148,400 161,400 199,900
Average mark-to-market price $/lb 2.69 2.20 2.51
Average provisional invoice price $/lb 2.57 2.15 2.41
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain
open until settlement occurs is approximately one month from
shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 10,300 5,400 13,200
Average mark-to-market price $/lb 2.69 2.15 2.51
Average provisional invoice price $/lb 2.60 2.07 2.54
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain
open is approximately one month from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Ounce 16,300 34,900 36,400
Average mark-to-market price $/oz 1,242 1,317 1,167
Average provisional invoice price $/oz 1,254 1,251 1,203
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is
approximately two months from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 1,900 1,000 1,300
Average mark-to-market price $/lb 7.2 7.9 6.6
Average provisional invoice price $/lb 8.2 6.9 6.9
As detailed above, the effects of gains and losses from the
marking-to-market of open sales are recognised through adjustments
to revenue in the income statement and to trade debtors in the
balance sheet. The effect of mark-to-market adjustments on the
balance sheet at the end of each period are as follows:
Gain/(loss) on debtors of period end
mark-to-market adjustments
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Los Pelambres - copper
concentrate 26.0 13.3 28.0
Los Pelambres - molybdenum
concentrate (3.8) 2.1 (0.7)
Centinela - copper concentrate - 4.3 15.3
Centinela - gold in concentrate (0.2) 2.3 (1.3)
Centinela - copper cathodes 16.6 0.1 (0.4)
Antucoya - copper cathodes 1.2 0.9 (0.6)
39.8 23.0 40.3
=====================
6. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Financial assets
Derivatives in designated hedge accounting relationships 0.1 0.4 2.4
Available-for-sale-investments 4.4 4.1 4.6
Loans and receivables at amortised cost (including cash
and cash equivalents) 1,268.4 1,271.7 1,519.1
Fair value through profit and loss (liquid investments and
mark-to-mark debtors) 1,464.9 1,625.6 1,365.5
Financial liabilities
Derivatives in designated hedge relationships (4.3) (4.0) (2.5)
Financial liabilities measured at amortised cost (3,479.4) (3,688.9) (3,725.9)
Fair value through profit and loss (mark-to-mark creditors) (4.0) - (3.0)
The fair value of financial assets and financial liabilities
carried at amortised cost is not materially different from the
carrying value presented above.
Fair value of financial instruments
An analysis of financial assets and financial liabilities
measured at fair value is presented below:
Level 1 Level 2 Level 3
Six months Six months
ended ended Year ended
30.06.2017 30.06.2016 31.12.2016
Recurring fair
value measurements $m $m $m $m $m $m
Financial assets
Derivatives in
designated hedge
accounting
relationships - 0.1 - 0.1 0.4 2.4
Available-for-sale
investments 4.4 - - 4.4 4.1 4.6
Fair value through
profit and loss 1,421.1 - - 1,463.7 1,602.4 1,322.2
Debtors
mark-to-market - 43.8 - 43.8 23.2 43.3
Financial
liabilities
Derivatives in
designated hedge
relationships - (4.3) - (4.3) (4.0) (2.5)
Creditors
mark-to-market - (4.0) - (4.0) - (3.0)
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting period.
Derivatives in designated hedge accounting relationships are
valued using a discounted cash flow analysis valuation model, which
includes observable credit spreads and using the applicable yield
curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
These are level 2 inputs as described below.
Available-for-sale investments are investments in shares on
active markets and are valued using unadjusted quoted market values
of the shares at the financial reporting date. These are level 1
inputs as described below.
Provisionally priced metal sales for the period are
marked-to-market at the end of the period. Gains and losses from
the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and trade debtors in
the balance sheet. Forward prices at the end of the period are used
for copper sales while period-end average prices are used for
molybdenum concentrate sales. These are level 2 inputs as described
below.
Financial assets measured at fair value through profit and loss
are highly liquid current asset investments that are valued using
market prices at the period end. These are level 1 inputs as
described below.
The inputs to the valuation techniques described above are
categorised into three levels, giving the highest priority to
unadjusted quoted prices in active markets (level 1) and the lowest
priority to unobservable inputs (level 3 inputs):
- Level 1 fair value measurement inputs are unadjusted quoted
prices in active markets for identical assets or liabilities.
- Level 2 fair value measurement inputs are derived from inputs
other than quoted market prices included in level 1 that are
observable for the asset or liability, either directly or
indirectly.
- Level 3 fair value measurement inputs are unobservable inputs for the asset or liability.
The degree to which inputs into the valuation techniques used to
measure the financial assets and liabilities are observable and the
significance of these inputs in the valuation are considered in
determining whether any transfers between levels have occurred. In
the six months ending 30 June 2017 and 30 June 2016, there were no
transfers between levels in the hierarchy.
b) Embedded derivatives
As explained in Note 5, copper and molybdenum concentrate sale
agreements and copper cathode sale agreements generally provide for
provisional pricing of sales at the time of shipment, with final
pricing being based on the monthly average London Metal Exchange
copper price or monthly average molybdenum price for specified
future periods. The provisional pricing mechanism within the sale
agreements is an embedded derivative under IFRS. Details of the
provisional pricing arrangements are included in Note 5.
c) Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce its exposure to commodity price, foreign exchange and
interest rate movements. The Group does not use such derivative
instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39
"Financial Instruments: Recognition and Measurement". Changes in
the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows have been
recognised directly in other comprehensive income, with such
amounts subsequently recognised in the income statement in the
period when the hedged item has been recognised in the income
statement within revenue. The time value element of changes in the
fair value of derivative options is excluded from the designated
hedging relationship, and is therefore recognised directly in the
income statement within other finance items.
(i) Mark-to-market adjustments and income statement impact
The balance sheet mark-to-market adjustments in respect of
derivatives at the end of each period, and the total effect on the
income statement and reserves for each period are as follows. The
impact on reserves is shown before tax and non-controlling
interests.
For the six months ended 30 June 2017
Fair value recorded
Impact on income statement Impact on reserves on balance sheet
Realised losses Losses resulting Total net loss Gains resulting Net financial
from from liability
mark-to-market mark-to-market
adjustments on adjustments on
hedging hedging
instruments instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela - (4.2) (4.2) - (3.1)
Antucoya - (0.4) (0.4) - (0.4)
Interest Derivatives
Centinela (0.6) - (0.6) 0.5 (0.6)
Railway and other
transport services (0.2) - (0.2) - -
(0.8) (4.6) (5.4) 0.5 (4.1)
For the six months ended 30 June 2016
Fair value
Impact on recorded on
Impact on income statement reserves balance sheet
Realised Losses resulting Total net loss Gains/(losses) Net financial
gains/(losses) from resulting from asset/(liability)
mark-to-market mark-to-market
adjustments on adjustments on
hedging hedging
instruments instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela 0.1 (0.3) (0.2) 0.4 0.4
Interest
Derivatives
Centinela (2.7) - (2.7) 0.6 (2.4)
Railway and other
transport services (1.0) - (1.0) (0.7) (1.6)
-- (3.6) (0.3) (3.9) 0.3 (3.6)
For the year ended 31 December 2016
Fair value recorded
Impact on income statement Impact on reserves on balance sheet
Realised losses Losses resulting Total net Gains resulting from Net financial
from mark-to-market loss mark-to-market asset/(liability)
adjustments on adjustments on
hedging instruments hedging instruments
$m $m $m $m $m
Commodity Derivatives
Centinela (2.2) 1.0 (1.2) - 1.0
Interest Derivatives
Centinela (2.6) - (2.6) 1.8 (1.2)
Railway and other
transport services (1.0) - (1.0) 0.5 -
(5.8) 1.0 (4.8) 2.3 (0.2)
The gains/(losses) recognised in reserves are disclosed before
non-controlling interests and tax.
The net financial asset/(liability) resulting from the balance sheet mark-to-market adjustments
is analysed as follows:
At 30.06.2017 At 30.06.2016 At 31.12.2016
$m $m $m
Analysed between:
Current assets 0.1 0.4 2.2
Non-current assets 0.1 - 0.2
Current liabilities (4.2) (1.9) (2.0)
Non-current liabilities (0.1) (2.1) (0.5)
(4.1) (3.6) (0.1)
(ii) Outstanding derivative financial instruments
a) Commodity derivatives
The Group periodically uses commodity derivatives to manage its exposure to commodity price
fluctuations. As at the end of the period the open instruments details are:
- Min/max instruments At 30.06.2017 For instruments held at 30.06.2017
Weighted
average
Copper remaining
production period from 1 Weighted Weighted
hedged July 2017 Covering a average average cap
tonnes months period up to: floor$/lb $/lb
Centinela 36,000 3.5 31.12.2017 2.27 2.82
Antucoya 20,400 3.5 31.12.2017 2.40 2.98
b) Interest derivatives
The Group periodically uses interest derivatives to reduce its exposure to interest rate movements.
As at the end of the period the open instruments details are:
- Interest rate swaps
The Group has used interest rate swaps to swap the floating rate interest relating to the
Centinela project financing and long-term loans at the Railway for fixed rate interest. At
30 June 2016 the Group had entered into the contracts outlined below.
Actual notional Weighted Average
Start date Maturity date amount Fixed Rate
$m %
Centinela 15.02.2011 15.08.2018 52.5 3.372
Railway and other
transport services 12.08.2014 12.08.2019 90.0 1.634
The actual notional amount hedged depends upon the amount of the related debt currently outstanding.
7. Net finance expense
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Investment income
Interest receivable 4.7 9.4 20.4
Gains on fair value through
profit or loss 5.5 3.7 6.5
10.2 13.1 26.9
Interest expense
Interest expense (48.6) (31.9) (86.0)
Preference dividends - (0.1) (0.1)
(50.5) (32.0) (86.1)
Other finance items
Time value element of
changes in the fair value
of derivatives options (4.6) (0.3) 1.0
Unwinding of discount
on provisions (5.4) (4.9) (10.0)
Impairment of available-for-sale
investments - - -
Foreign exchange (5.4) 3.3 (2.9)
(15.4) (1.9) (11.9)
Net finance expense (53.8) (20.8) (71.1)
In the six months ended 30 June 2017, amounts capitalised and
consequently not included within the above table were as follows:
Antucoya of nil (six months ended 30 June 2016 - $8.9 million; year
ended 31 December 2016 - $9.2 million), $3.3 million at Centinela
(six months ended 30 June 2016 - $19.0 million; year ended 31
December 2016 - $2.3 million) and $0.5 million at Los Pelambres
(six months ended 30 June 2016 - $2.0 million; year ended 31
December 2016 - $0.5 million).
8. Taxation
The tax charge for the period comprised the following:
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Current tax charge
Corporate tax (principally first category tax in Chile) (96.1) (57.1) (222.1)
Mining tax (royalty) (28.4) (13.2) (35.3)
Withholding tax (20.1) (8.3) (3.8)
Exchange gain/(losses) on corporate tax balances 0.3 5.3 -
(144.3) (73.3) (261.2)
Deferred tax credit/(charge)
Corporate tax (principally first category tax in Chile) (93.8) (25.1) (27.5)
Exceptional items - - 204.9
Mining tax (royalty) 3.6 (19.6) (24.8)
(90.2) (44.7) 152.6
Total tax charge (income tax expense) (234.5) (118.0) (108.6)
=====================
The rate of first category (i.e. corporate) tax in Chile is
currently 25.5% (2016 - 24%).
In addition to first category tax and the mining tax, the Group
incurs withholding taxes on any remittance of profits from Chile.
Withholding tax is levied on remittances of profits from Chile at
35% less first category (i.e. corporation) tax already paid in
respect of the profits to which the remittances relate.
The Group's mining operations are also subject to a mining tax
(royalty). Production from Los Pelambres, El Tesoro Central and
Mirador pits at Centinela cathodes and Antucoya are currently
subject to a rate of 4% of taxable operating profit and Centinela
concentrates of 5%, and production from El Tesoro North East pit
and the run-of-mine processing at Centinela cathodes is subject to
a rate of between 5-14%, depending on the level of operating profit
margin.
Six months Six months ended Year ended Year ended
ended 30.06.2016 31.12.2016 (Before 31.12.2016 (After
30.06.2017 Exceptional Items) Exceptional Items)
$m % $m % $m % $m %
Profit before tax 687.2 276.5 875.9 - 284.6
Tax at the Chilean
corporate tax rate
of 25.5% (2016 -
24%) (175.5) 25.5 (66.3) 24.0 (210.2) 24.0 (68.3) 24.0
Provision against
carrying value of
assets (exceptional
items) - - - - - - 63.0 (22.1)
Effect of increase in
future first
category tax rates
on deferred tax
balances (0.4) 0.1 2.3 (0.8) (24.6) 2.8 (24.6) 8.6
Adjustment in respect
of prior years (9.9) 1.4 - - - - - -
Items not deductible
from first category
tax (15.6) 2.3 (8.7) 3.1 (23.7) 2.7 (23.7) 8.3
Items not subject to
first category tax 7.0 (1.0) - - 8.5 (1.0) 8.5 (2.9)
Carry-back tax losses
resulting in credits
at historic tax
rates - - (11.8) 4.3 (5.4) 0.6 (5.4) 1.8
Mining Tax (royalty) (24.8) 3.6 (32.8) 11.9 (60.1) 6.9 (60.1) 21.1
Withholding tax (20.1) 2.9 (8.3) 3.0 - - - -
Withholding tax -
adjustment to
previous year - - - - (3.8) 0.4 (3.8) 1.3
Tax effect of share
of profit of
associates and joint
ventures 5.5 (0.8) 2.3 (0.8) 5.6 (0.6) 5.6 (1.9)
Net other items (0.5) 0.0 5.9 (1.9) 0.2 - 0.2 -
Tax expense and
effective tax rate
for the period (234.5) 34.0 (118.0) 42.7 (313.5) 35.8 (108.6) 38.2
The tax charge for 2017 was $234.5 million and the effective tax
rate was 34.0%. This effective tax rate varied from the statutory
rate principally due to the effect of expenses not deductible for
Chilean corporate tax purposes (principally the funding of expenses
outside of Chile) and items not subject to first category tax
(total impact of $8.6 million or 1.3%), the mining tax (impact of
$24.8 million or 3.6%) and the withholding tax paid mainly due to
on remittances of profits from Chile (impact of $20.1 million or
2.9%). The exceptional impairment provisions at end 2016 impacted
on the overall tax charge and the reconciliation of the effective
tax rate, and accordingly the tax reconciliation above has been
presented both including and excluding the impact of the
exceptional items.
The current and deferred tax relating to items that are charged
directly to equity was $1.5 million (30 June 2016 - $1.5 million
credit).
The main factor which is expected to impact the sustainability
of the Group's existing effective tax rate (excluding exceptional
items) is the increase in the rate of first category (i.e.
corporate) tax in Chile from the 2017 rate of 25.5% to 27% in
2018.
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
9. Earnings per share
Basic and diluted earnings per share is calculated on profit
after tax and non-controlling interests giving profit for the
period attributable to the owners of the parent of $290.5 million
(six months ended 30 June 2016 - $88.1 million, year ended 31
December 2016 - $158 million) and amounted to 29.7 cents and based
on 985,856,695 ordinary shares. There was no potential dilution of
ordinary shares in any period.
10. Dividends
The Board has declared an interim dividend of 10.3 cents per
ordinary share for the 2017 half year (2016 half year - 3.1 cents).
Dividends are declared and paid gross. Dividends actually paid in
the period and recognised as a deduction from net equity under IFRS
were 3.1 cent per ordinary share (2016 half year - nil),
representing the final dividend declared in respect of the previous
year.
The interim dividend will be paid on 6 October 2017 to ordinary
shareholders that are on the register at the close of business on 8
September 2017. Shareholders can elect (on or before 11 September
2017) to receive this interim dividend in US Dollars, Pounds
Sterling or Euro, and the exchange rate to be applied to interim
dividends to be paid in Pounds Sterling or Euro will be set as soon
as reasonably practicable after that date (which is currently
anticipated to be on 14 September 2017). Further details of the
currency election timing and process (including the default
currency of payment) are available on the Antofagasta plc website
(www.antofagasta.co.uk) or from the Company's registrar,
Computershare Investor Services PLC on +44 870 702 0159.
11. Intangible asset
At 30.06.2017 At 30.06.2016 At 31.12.2016
$m $m $m
Balance at the beginning of the period 150.1 150.1 150.1
Additions - - -
Amortisation - - -
Balance at the end of the period 150.1 150.1 150.1
The $150.1 million intangible asset reflects the value of Twin
Metals' mining property assets. The mining properties will be
amortised once production commences.
12. Property, plant and equipment
Mining Railway and other transport At 30.06.2017 At 30.06.2016 At 31.12.2016
$m $m $m $m $m
Balance at the beginning of the
period 8,576.1 161.4 8,737.5 8,601.1 8,601.1
Additions 437.0 12.4 449.4 445.3 921.7
Additions - depreciation
capitalised 27.0 - 27.0 43.2 87.6
Reclassifications 2.2 - 2.2 - 3.7
Adjustment to capitalised
decommissioning provisions - - - - 16.9
Depreciation (282.2) (7.8) (290.0) (247.3) (578.4)
Depreciation capitalised in PP&E (27.0) - (27.0) (43.2) (87.6)
Depreciation capitalised in
inventories (30.5) - (30.5) 0.4 8.4
Provision against the carrying
value of assets - - - - (215.6)
Asset disposals/write off - (0.1) (0.1) (0.4) (20.3)
Balance at the end of the period 8,702.6 165.9 8,868.5 8,799.1 8,737.5
At 30 June 2017 $57.5 million (30 June 2016 - $42.8 million; 31
December 2016 - $79.2 million) of depreciation in respect of assets
relating to Los Pelambres, Centinela and Antucoya has been
capitalised within property, plant and equipment or inventories,
and accordingly is excluded from the depreciation charge recorded
in the income statement as shown in Note 3(a).
At 30 June 2017 the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $312.5 million (30 June 2016 - $975.1 million; 31
December 2016 - $196.1 million).
There have been no indicators of potential impairments during
the first six months of 2017, and accordingly no impairment reviews
have been performed as at 30 June 2017. The Group performed
impairment reviews in respect of the Centinela and Antucoya
operations at the 2016 year-end.
13. Investment in associates and joint ventures
Six months
Inversiones El Minera Energía Tethyan ended Year ended
Hornitos ATI Arrayan Zaldívar Andina Copper 30.06.2017 31.12.2016
$m $m $m $m $m $m $m $m
Balance at the
beginning of the
year 71.3 6.5 21.9 983.7 3.2 - 1,086.6 1,149.1
Obligations on
behalf of JV - - - - - (3.1) (3.1) (2.5)
Capital
contribution - - - - 0.2 3.5 3.7 47.0
Capital decrease
and others - - - - - - - (0.6)
Adjustment to
Purchase price - - - - - - - (45.0)
Disposal - - - - (3.2) - (3.2) -
Losses in fair
value of cash
flow hedges
deferred in
reserves of
associates - - (0.1) - - - (0.1) 4.4
Provision against
carrying value
of assets - - - - - - - (82.1)
Share of
profit/(loss)
before tax 8.4 (0.6) (0.4) 29.4 - (4.0) 32.8 36.4
Share of tax (2.1) 0.1 0.2 (9.4) - - (11.2) (13.0)
Share of
income/(loss)
from associate 6.3 (0.5) (0.2) 20.0 - (4.0) 21.6 23.4
Dividends
received (8.4) - - - - - (8.4) (10.2)
Balance at the
end of the year 69.2 6.0 21.6 1,003.7 0.2 - 1,100.7 1,086.6
Obligations on
behalf of JV - - - - - (3.6) (3.6) (3.1)
The investments which are included in the $1,097.1 million
balance at 30 June 2017 are set out below:
Investment in associates
(i) The Group's 40% interest in Inversiones Hornitos SA, which
owns the 165MW Hornitos thermoelectric power plant operating in
Mejillones, in Chile's Antofagasta Region. The Group has a 16-year
power purchase agreements with Inversiones Hornitos SA for the
provision of up to 40MW of electricity for Centinela.
(ii) The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.
(iii) The Group's 30% interest in El Arrayan, which operates an
115MW wind-farm project. The Group has a 20-year power purchase
agreements with El Arrayan for the provision of up to 40MW of
electricity for Los Pelambres.
Investment in joint ventures
(iv) The Group's 50% interest in Minera Zaldívar SpA
("Zaldívar"), an open-pit, heap-leach copper mine located in
Northern Chile, which produces approximately 100,000 tonnes of
copper cathodes annually.
(v) The Group's 50.1% interest in Energia Andina, which is a
joint venture with Origin Geothermal Chile Limitada for the
evaluation and development of potential sources of geothermal and
solar energy.
In February 2017 the disposal of the interest in Javiera was
agreed. The terms of the sale agreement indicated a recoverable
value for the interest in Javiera which was $8.1 million below the
carrying value, and accordingly an impairment provision for this
amount was recognised in the 2016 year-end results. The disposal
completed in May of 2017.
(vi) The Group's 50% interest in Tethyan Copper Company Limited
("Tethyan"), which is a joint venture with Barrick Gold Corporation
over Tethyan's mineral interest in Pakistan, which is now subject
to international arbitration. As the net carrying value of the
interest in Tethyan is negative it is included within non-current
liabilities, as the Group is liable for its share for the joint
ventures obligations.
Summarised financial information for the associates at June 2017
is as follows:
Inversiones ATI El Arrayan Total Total
Hornitos
30.06.2017 30.06.2017 30.06.2017 30.06.2017 30.06.2016
$m $m $m $m $m
Cash and cash equivalents 22.5 1.1 5.0 28.6 225.1
Current assets 36.6 9.4 11.8 57.8 113.0
Non-current assets 288.3 133.9 244.1 666.3 1,708.8
Current liabilities (32.3) (23.6) (12.2) (68.1) (177.6)
Non-current liabilities (162.5) (103.2) (188.2) (453.9) (1,607.0)
Revenue 80.1 21.3 15.0 116.4 95.2
Profit/(loss) from continuing operations 15.5 (1.7) (0.5) 13.3 4.0
Other comprehensive income - - (0.3) (0.3) (21.5)
Total comprehensive income/(loss) 15.5 (1.7) (0.8) 13.0 (17.5)
Summarised financial information for the joint ventures at June
2017 is as follows:
Minera Energía Tethyan Total Total
Zaldivar Andina Copper
30.06.2017 30.06.2017 30.06.2017 30.06.2017 30.06.2016
$m $m $m $m $m
Cash and cash equivalent 128.0 0.5 3.4 131.9 49.1
Current assets 522.6 0.1 0.2 522.9 333.5
Non-current assets 1,559.0 - 0.2 1,559.2 1,847.0
Current liabilities (89.2) - (10.7) (99.9) (95.6)
Non-current liabilities (112.9) - (0.1) (113.0) (193.1)
Revenue 284.2 - - 284.2 243.8
Profit/(loss) after tax 39.9 - (8.0) 31.9 64.7
Other comprehensive income - - - - -
Total comprehensive income 39.9 - (8.0) 31.9 64.7
Notes to the summarised financial information
(i) The summarised financial information is based on the amounts
included in the IFRS Financial Statements of the associate or joint
venture (ie. 100% of the results or balances of the associate or
joint venture, rather than the Group's proportionate share), after
the Group's fair value adjustments.
14. Available-for-sale investments
At 30.06.2017 At 30.06.2016 At 31.12.2016
$m $m $m
Balance at the beginning
of the period 4.6 2.7 2.7
Additions - - -
Reclassification (0.4) - -
Movements in fair value - 1.2 1.7
Foreign currency exchange
difference 0.2 0.2 0.2
Balance at the end of
the period 4.4 4.1 4.6
Available-for-sale investments represent those investments which
are not subsidiaries, associates or joint ventures and are not held
for trading purposes. The fair value of all equity investments are
based on quoted market prices.
15. Borrowings and leases
At 30.06.2017 At 30.06.2016 At 31.12.2016
$m $m $m
Los Pelambres
Corporate loans - (34.6) (17.5)
Short-term loan (312.0) (272.1) (312.0)
Finance leases (51.3) (74.4) (62.2)
Centinela
Project financing (senior debt) (670.1) (817.5) (743.8)
Shareholder loan (subordinated debt) (188.7) (178.5) (183.6)
Short-term loan (200.0) (200.0) (200.0)
Antucoya
Project financing (senior debt) (573.0) (567.0) (608.7)
Shareholder loan (subordinated debt) (338.8) (322.7) (330.4)
Short-term loan (30.0) (104.9) (30.0)
Finance leases (46.3) - (16.2)
Corporate and other items
Long-term loan (497.7) (496.9) (497.2)
Finance leases (24.7) (26.3) (25.1)
Railway and other transport services
Long-term loans (89.6) (119.2) (89.4)
Finance leases (0.7) (2.5) (1.6)
Preference shares (2.8) (3.1) (2.5)
Total (3,025.7) (3,219.7) (3,120.2)
At 30 June 2017 $28.3 million (30 June 2016 - $100.7 million; 31
December 2016 - $29.1 million) of the borrowings has fixed rate
interest and $2,997.4 million (30 June 2016 - $3,119.1 million; 31
December 2016 - $3,091.1 million) has floating rate interest. The
Group periodically enters into interest rate derivative contracts
to manage its exposure to interest rates. As explained in Note 5,
these include interest rate swaps which have the effect of
converting $278.4 million of floating rate borrowings into fixed
rate borrowings. Details of any derivative instruments held by the
Group are given in Note 5(c).
16. Share capital and share premium
There was no change in share capital or share premium in the six
months ended 30 June 2017 or the comparative periods. Details are
shown in the Consolidated Statement of Changes in Equity.
17. Other reserves and retained earnings
At At At
30.06.2017 30.06.2016 31.12.2016
$m $m $m
Hedging reserves (1)
At 1 January (8.8) (44.1) (44.1)
Parent and subsidiaries net cash flow hedge fair value gains/(losses) (0.2) (3.6) (2.4)
Parent and subsidiaries net cash flow hedge gains/(losses) transferred to the
income statement 0.6 3.6 4.1
Share of other comprehensive losses of equity accounted units, net of tax (0.1) (17.5) 3.1
Share of other comprehensive gains of equity accounted units, net of tax
transferred to the
income statement - - 31.6
Reclassification(6) 8.2 - -
Tax on the above (0.1) 0.7 (1.1)
At 30 June (0.4) (60.9) (8.8)
Available for sale revaluation reserves (2)
At 1 January (11.2) (12.9) (12.9)
Losses on available for sale investment (0.4) 1.2 1.7
At 30 June (11.6) (11.7) (11.2)
Foreign currency translation reserves (3)
At 1 January (2.3) (2.3) (2.3)
Parent and subsidiaries currency translation and exchange adjustments - - -
Tax on the above - - -
At 30 June (2.3) (2.3) (2.3)
Total other reserves per balance sheet (14.3) (74.9) (22.3)
Retained earnings (4)
At 1 January 6,548.6 6,416.4 6,416.4
Parent and subsidiaries profit for the period 268.9 78.4 269.3
Equity accounted units' loss after tax for the period 21.6 9.7 (111.3)
Actuarial gains/(losses) (5) 2.3 (1.5) 5.1
Reclassification (6) (8.2) - -
Tax relating to components of other comprehensive income (1.4) - (0.3)
Total comprehensive income for the period 6,831.8 6,503.0 6,579.2
Dividends paid (150.8) - (30.6)
At 30 June 6,681.0 6,503.0 6,548.6
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognised initially in equity, as described in
Note 5.
(2) The available for sale revaluation reserves record fair
value gains or losses relating to available for sale investment, as
described in Note 14.
(3) Exchange differences arising on the translation of the
Group's net investment in foreign controlled companies are taken to
the foreign currency translation reserve. The cumulative
differences relating to an investment are transferred to the income
statement when the investment is disposed of.
(4) Retained earnings and movements in reserves of subsidiaries
include those arising from the Group's share of joint
operations.
(5) Actuarial gains or losses relating long - term employee
benefits.
(6) During the period $8.2 million was reclassified between the
hedging reserve and retained earnings
18. Reconciliation of profit before tax to net cash inflow from
operating activities
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Profit before tax from
continuing operations 689.1 276.5 284.6
Profit before tax from
discontinued operations - (0.4) 35.1
Depreciation and amortisation 290.0 247.3 578.4
Net (profit)/loss on disposals (0.1) 0.2 19.7
Provision against carrying
value of assets - - 456.6
Profit on disposal of
discontinued operation - - (35.1)
Net finance expense 53.8 17.7 71.1
Share of (loss)/profit
from associates and joint
ventures (21.6) (9.7) 111.3
(Increase)/decrease in
inventories (43.5) (13.8) 3.9
Decrease/(increase) in
debtors 280.8 254.4 (124.9)
(Decrease)/increase in
creditors and provisions (101.4) 1.9 56.6
Cash flows from continuing
and discontinued operations 1,147.1 774.1 1,457.3
19. Analysis of changes in net (debt)/cash
At 01.01.2017 Cash flows Other Exchange At 30.06.2017
$m $m $m $m $m
Cash and cash equivalents 716.3 32.6 - (3.9) 745.0
Liquid investments 1,332.2 88.9 - - 1,421.1
Total cash and cash equivalents and liquid investments 2,048.5 121.5 - (3.9) 2,166.1
Bank borrowings due within one year (814.2) 92.5 (76.2) - (797.9)
Bank borrowings due after one year (2,198.4) 38.8 57.7 - (2,101.9)
Finance leases due within one year (22.6) 0.8 (3.0) 0.1 (24.7)
Finance leases due after one year (82.6) 16.6 (32.0) (0.4) (98.4)
Preference shares (2.4) - - (0.4) (2.8)
Total borrowings (3,120.2) 148.7 (53.5) (0.7) (3,025.7)
Net (debt)/cash (1,071.7) 270.2 (53.5) (4.6) (859.6)
Net debt
Net debt at the end of each period was as follows:
Six months Six months
ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016
$m $m $m
Cash, cash equivalents and liquid investments 2,166.1 2,180.1 2,048.5
Total borrowings (3,025.7) (3,219.7) (3,120.2)
Net debt (859.6) (1,039.6) (1,071.7)
20. Litigation and Contingent liabilities
Antofagasta plc or its subsidiaries are subject to various
claims which arise in the ordinary course of business. None of
these claims are currently expected to result in any material loss
to the Group. Details of the principal claims in existence either
during, or at the end of, the period and the current status of
these claims are set out below:
Los Pelambres - Cerro Amarillo Waste Dump
In 2004, Los Pelambres received all of the required
authorisations from the Chilean government to deposit waste-rock
from its mining activities in its current location (the "Cerro
Amarillo Waste Dump"). According to the then official Chilean maps
(1996), this area was located entirely within Chile. In 2007, Chile
modified the official maps in the area without making the changes
public. Based on the permits granted by the Chilean government, Los
Pelambres used this area as a mining waste dump from 2006 until
2011.
In February 2012, a binational border commission, established to
clarify the exact position of the Chile/Argentina border, installed
some signposts indicating the border in the area which confirmed
that part of the Cerro Amarillo Waste Dump was located in
Argentina.
In May 2014, Xstrata Pachón S.A. ("Xstrata Pachón"), a
subsidiary of Glencore plc and the holder of the mining properties
on the Argentinian side of the border, filed a claim against Los
Pelambres before the Federal Court of San Juan, Argentina, alleging
that Los Pelambres had unlawfully deposited waste-rock on its
property. In this civil claim, Xstrata Pachón has asked the Court
to order Los Pelambres to remove the rocks and to compensate
Xstrata Pachón for any and all damage suffered (but without
specifying the nature of this damage).
Xstrata Pachón also filed a criminal complaint before a separate
division of the Federal Court of San Juan alleging that, when Los
Pelambres was depositing rock on the Cerro Amarillo Waste Dump, it
violated several Argentinian laws relating to the misappropriation
of land, unlawful appropriation of water bodies and that peoples'
health was in jeopardy from the alleged contamination that the
Cerro Amarillo Waste Dump might generate.
In both cases, Los Pelambres submitted preliminary objections to
the Argentinian courts.
In the civil case, the Court of Appeals dismissed these
preliminary objections; however, Los Pelambres has filed an
extraordinary appeal against this decision before the Federal
Supreme Court which is currently pending. Notwithstanding so, this
appeal does not suspend proceedings in relation to the substantive
arguments, which were submitted to the Federal Court of San Juan in
July 2017.
In April 2016 Los Pelambres and the Province of San Juan
executed an agreement by means of which Los Pelambres had committed
itself to close the Cerro Amarillo Waste Dump, perform regular
monitoring of underground and surface waters, and perform other
additional actions requested by the Province. In November 2016 the
Province of San Juan unilaterally revoked this Agreement.
Notwithstanding, between November 2016 and January 2017 and with
the support of the Chilean and Argentine governments, Los Pelambres
completed the removal of pneumatic tyres previously placed at the
Cerro Amarillo Waste Dump. In 2017, at the Province of San Juan's
request, Los Pelambres filed before the Federal Court Ndeg 1 of San
Juan two alternative environmental provisional action plans for the
Cerro Amarillo Waste Dump aimed at preventing any potential
contamination arising out from it, which are currently subject to
review by the parties to the proceedings and the judges.
In the criminal proceeding, in March 2016, the Federal Court of
Appeals of Mendoza held that the Argentinian courts had
jurisdiction to hear this matter. At the end of 2016 and beginning
of 2017, some managers and the Chairman of Los Pelambres were
submitted to inquiry before the court. In March 2017 a visual
inspection was carried out at Cerro Amarillo Waste Dump, during
which rock and water samples were extracted. Subsequently, an
independent environmental expert's report was made concluding that
the rocks of the Cerro Amarillo Waste Rock Dump have the potential
to generate acid drainage and have affected the quality of the
waters of a pond near to the Cerro Amarillo Waste Rock Dump, but
that there is no evidence of any impact on the waters of the
Carnicería river, a river that provides potable water to the city
of San Juan in Argentina.
In July 2017, the Province of San Juan applied to the court to
intervene as a complainant, seeking to extend the criminal
investigation to include Xstrata Pachón's executives, on the
grounds that Xstrata Pachón had tenure of the mining titles in the
relevant area and therefore was accountable for any act or omission
on it, regardless of who it was caused by. On 9 July 2017 the court
issued a ruling (a) adding the Province of San Juan as complainants
in the case; (b) adding as yet unnamed officers of Xstrata Pachón
as defendants in the case; (c) requiring that precautionary
measures be taken to limit the possibility of water contamination
(without specifying who should take such measures); (d) requiring
the removal of the waste dump in Argentina as soon as possible but
in accordance with a plan to be devised in the future by the court
appointed experts; and (e) that environmental monitoring continues.
Los Pelambres will be filing an appeal imminently and in the
meantime notes that the court has not specified a timetable for
compliance with the orders and who should be responsible for
performing these obligations. Nor has any form of bond or guarantee
been ordered.
Separately, members of the Foreign Affairs Ministries of
Argentina and Chile have met in a bilateral working group during
the year to discuss a possible diplomatic solution to this
matter.
Los Pelambres will exercise all available legal avenues to
defend its position and will continue to take steps to implement
the appropriate environmental measures on the Cerro Amarillo Waste
Dump to prevent any potential environmental damage.
Twin Metals Minnesota - Federal Mineral Leases MNES-1352 and
MNES-1353
On 8 March 2016, the Solicitor of the Department of the Interior
issued a legal opinion concluding that the Bureau of Land
Management (BLM) has discretion to deny Twin Metals' application
for renewal of federal mineral leases MNES-1352 and MNES-1353. The
United States Forest Service (USFS) declined to consent to renewal
of the leases on 14 December 2016, and BLM rejected Twin Metals'
application to renew the leases the next day.
The BLM's denial relied on the Solicitor's Opinion's conclusion
that it had discretion to deny the renewal, and BLM took the view
that USFS consent was required to renew the leases. According to
BLM, because the USFS refused consent, BLM was required to reject
the lease renewal application.
The Forest Service's decision was based ofn the potential
environmental impacts of sulphide-ore copper mining in the Boundary
Waters watershed. The USFS decision did not discuss the terms and
conditions of the leases or the project, nor did it address Twin
Metals' legal rights to the leases.
On 12 September 2016, Twin Metals filed a complaint in the U.S.
District Court in Minnesota against the United States, the U.S.
Department of the Interior, Secretary of the Interior Sally Jewell,
Solicitor Hilary C. Tompkins and BLM. Twin Metals brought claims
under the Quiet Title Act (QTA) and the Administrative Procedure
Act (APA) seeking to secure its rights to the two federal mineral
leases. Following the USFS withholding of consent and BLM's denial
of renewal, Twin Metals filed an amended complaint on 3 January,
2017, adding the U.S. Department of Agriculture, Secretary of
Agriculture Thomas J. Vilsack, the USFS and Chief of the USFS
Thomas L. Tidwell as defendants. The amended complaint seeks
similar relief under the QTA and APA, and also requests that the
court overturn the government's denial of the leases.
On 21 February 2017, Northeastern Minnesotans for Wilderness
(NMW), a local environmental advocacy group, intervened in the
lawsuit. On 5 June 2017, the government and NMW each filed a motion
to dismiss Twin Metals' complaint. Twin Metals is currently
preparing its response to these motions.
21. Related party transactions
a) Joint ventures
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 the six months
ended 30 June 2017 the Group contribution was $3.5 million (six
months ended 30 June 2016 - nil; year ended 31 December 2016 -
$10.0 million) to Tethyan.
The Group has a 50.1% interest in Energía 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. During the six months ended 30 June 2017 the Group
contributed $0.2 million (six months ended 30 June 2016 - $1.0
million; year ended 31 December 2016 - $1.0 million)
The Group's 50% interest in Minera Zaldívar which was acquired
on 1 December 2015, which is a joint venture with Barrick Gold
Corporation. Antofagasta is the operator of Zaldívar from 1
December 2015 onwards.
b) Associates
The Group has a 40% interest in Inversiones Hornitos S.A. During
the six months ended 30 June 2017 the Group paid $86.2 million (six
months ended 30 June 2016 -$70.0 million; year ended 31 December
2016 - $112.6 million) to Inversiones Hornitos in relation to the
energy supply contract at Centinela. During the six months ended 30
June 2017 the Group has received dividends from Inversiones
Hornitos S.A. of $8.4 million (six months ended 30 June 2016 -
$13.6 million; year ended 31 December 2016 - $10.1 million).
The Group has a 30% interest in Parque Eólico El Arrayán S.A.
("El Arrayán"). During the six months ended 30 June 2017 the Group
paid $20.9 million (six months ended 30 June 2016 - $19.9 million;
year ended 31 December 2016 - $38.1 million) to El Arrayan in
relation to the energy supply at Los Pelambres.
During 2017, the Group sold its 40% interest in Alto Maipo SpA
("Alto Maipo").
c) Other related parties
The ultimate parent company of the Group is Metalinvest
Establishment, which is controlled by the E. Abaroa Foundation, in
which members of the Luksic family are interested. The Company's
subsidiaries, in the ordinary course of business, enter into
various sale and purchase transactions with companies also
controlled by members of the Luksic family, including Banco de
Chile S.A., Madeco S.A. and Compañía Cervecerías Unidas S.A., which
are subsidiaries of Quiñenco S.A., a Chilean industrial and
financial conglomerate the shares of which are traded on the
Santiago Stock Exchange. These transactions, all of which were on
normal commercial terms, are in total not considered to be
material.
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. The Group is
responsible for any exploration costs relating to the properties
held by these entities. During the six months ended 30 June 2017
the Group incurred $0.1 million (Six months ended 30 June 2016 -
$2.3 million; year ended 31 December 2016 - $1.0 million) of
exploration costs at these properties.
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
b) the half yearly financial report includes a fair review of
the information required by DTR 4.2.7R (being an indication of
important events that have occurred during the first six months of
the financial year, and their impact on the half yearly financial
report and a description of the principal risks and uncertainties
for the remaining six months of the financial year); and
c) the half yearly financial report includes a fair review of
the information required by DTR 4.2.8R (being disclosure of related
party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial
position or the performance of the Group during that period and any
changes in the related party transactions described in the last
annual report that could have a material effect on the financial
position or performance of the Group in the first six months of the
current financial year).
By order of the Board
Jean - Paul Luksic Ollie Oliveira
Chairman Director
21 August 2017
Independent review report to Antofagasta Plc
Report on the interim condensed consolidated financial
statements
Our conclusion
We have reviewed Antofagasta Plc's interim condensed
consolidated financial statements (the "interim financial
statements") in the half-yearly financial report of Antofagasta Plc
for the 6 month period ended 30 June 2017. Based on our review,
nothing has come to our attention that causes us to believe that
the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
the condensed consolidated balance sheet as at 30 June 2017;
the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
the condensed consolidated cash flow statement for the period
then ended;
the condensed consolidated statement of changes in equity for
the period then ended; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly financial report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 August 2017
a) The maintenance and integrity of the Antofagasta Plc website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Production and Sales Statistics (not subject to audit or
review)
a) Production and sales volumes for copper, gold and molybdenum
Production Sales
Six months Six months Six months Six months
ended ended ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016 30.06.2017 30.06.2016 Year ended 31.12.2016
000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 164.2 172.1 355.3 150.2 173.6 351.6
Centinela 116.6 98.2 236.2 120.3 83.4 227.6
Antucoya 39.6 27.0 66.2 39.3 26.0 66.6
Michilla - - - - 0.9 0.9
Zaldívar 25.9 26.0 51.7 24.3 25.5 51.7
Group total 346.3 323.3 709.4 334.1 309.4 698.4
Gold 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 26.7 29.0 57.8 24.0 32.6 62.8
Centinela 85.5 80.5 213.0 90.6 64.5 208.6
Group total 112.2 109.5 270.8 114.6 97.1 271.4
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 4.5 3.3 7.1 4.3 3.1 7.2
Silver 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 1,137.9 1,286.7 2,585.8 1,040.8 1,392.0 2,701.9
Centinela 626.5 482.0 1,313.0 649.8 356.2 1,159.0
Group total 1,764.4 1,768.7 3,898.8 1,690.6 1,748.2 3,860.9
b) Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold
Cash costs Realised prices
Six months Six months Six months Six months Year
ended ended ended ended ended
30.06.2017 30.06.2016 Year ended 31.12.2016 30.06.2017 30.06.2016 31.12.2016
$/lb $/lb $/lb $/lb $/lb $/lb
Copper
Los Pelambres 1.08 1.02 1.06 2.74 2.18 2.35
Centinela 1.20 1.53 1.19 2.72 2.17 2.32
Antucoya 1.71 1.82 1.83 2.65 2.15 2.30
Michilla - - - - 1.85 -
Zaldivar (attributable
basis - 50%) 1.60 1.50 1.55 - 2.15 -
Group weighted average (net
of by-products) 1.24 1.26 1.20 2.72 2.17 2.33
Group weighted average
(before deducting
by-products) 1.57 1.60 1.54
Group weighted average
(before deducting
by-products and excluding
tolling charges from
concentrate) 1.37 1.38 1.33
Cash costs at Los Pelambres
comprise:
On-site and shipping costs 1.19 1.06 1.09
Tolling charges for
concentrates 0.27 0.26 0.27
Cash costs before deducting
by-product credits 1.45 1.32 1.36
By-product credits
(principally molybdenum) (0.36) (0.30) (0.30)
Cash costs (net of
by-product credits) 1.09 1.02 1.06
Cash costs at Centinela
comprise:
On-site and shipping costs 1.47 1.83 1.53
Tolling charges for
concentrates 0.20 0.22 0.22
Cash costs before deducting
by-product credits 1.67 2.05 1.75
By-product credits
(principally gold) (0.47) (0.53) (0.56)
Cash costs (net of
by-product credits) 1.20 1.52 1.19
LME average copper price 2.61 2.13 2.21
Gold $/oz $/oz $/oz
Los Pelambres 1,259 1,232 1,253
Centinela 1,276 1,316 1,257
Group weighted average 1,272 1,288 1,256
Market average price 1,238 1,219 1,248
Molybdenum $/lb $/lb $/lb
Los Pelambres 8.0 7.4 6.8
Market average price 8.0 6.1 6.5
Silver $/oz $/oz $/oz
Los Pelambres 16.4 16.1 17.4
Centinela 17.0 16.0 17.7
Group weighted average 16.6 16.1 17.5
Market average price 17.3 15.8 17.1
Notes to the production and sales statistics
(i) For the Group's subsidiaries the production and sales
figures reflect the total amounts produced and sold by the mine,
not the Group's share of each mine. The Group owns 60% of Los
Pelambres, 70% of Centinela and 70% of Antucoya. For the Zaldívar
joint venture the production and sales figures reflect the Group's
proportional 50% share.
(ii) Los Pelambres produces copper and molybdenum concentrates,
Centinela produces copper concentrate and copper cathodes and
Antucoya and Zaldívar produce copper cathodes. The figures for Los
Pelambres and Centinela are expressed in terms of payable metal
contained in concentrate and in cathodes. Los Pelambres and
Centinela are also credited for the gold and silver contained in
the copper concentrate sold. Antucoya and Zaldívar produce cathodes
with no by-products.
(iii) Cash costs are a measure of the cost of operational
production expressed in terms of cents per pound of payable copper
produced. Cash costs are stated net of by-product credits and
include tolling charges for concentrates at Los Pelambres and
Centinela. Cash costs exclude depreciation, financial income and
expenses, hedging gains and losses, exchange gains and losses and
corporate tax for all four operations.
(iv) Realised copper prices are determined by comparing revenue
from copper sales (grossing up for tolling charges for
concentrates) with sales volumes for each mine in the period.
Realised molybdenum and gold prices are calculated on a similar
basis. Realised prices reflect gains and losses on commodity
derivatives, which are included within revenue.
(v) The totals in the tables above may include some small
apparent differences as the specific individual figures have not
been rounded.
(vi) The production information and the cash cost information is
derived from the Group's production report for the second quarter
of 2017, published on 26 July 2017.
22. Alternative performance measures
This preliminary results announcement includes a number of
alternative performance measures, in addition to IFRS amounts.
These measures are included because they are considered to provide
relevant and useful additional information to users of the
accounts. Set out below are definitions of these alternative
performance measures, explanations as to why they are considered to
be relevant and useful, and reconciliations to the IFRS
figures.
a) EBTIDA
EBITDA refers to Earnings Before Interest, Tax, Depreciation and
Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
EBITDA is considered to provide a useful and comparable
indication of the current operational earnings performance of the
business, excluding the impact of the historic cost of property,
plant & equipment or the particular financing structure adopted
by the business.
At 30 June 2017
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation other other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 433.1 267.8 42.1 - (22.0) (27.4) 693.6 27.7 721.3
Depreciation
and
amortisation 88.6 152.2 37.8 - - 3.6 282.2 7.8 290.0
Profit on
disposals - - - - - - - (0.1) (0.1)
---------- -------- ---------- --------
EBITDA from
subsidiaries 521.7 420.0 79.9 - (22.0) (23.8) 975.8 35.4 1,011.2
Proportional
share of the
EBITDA from
associates and
JV - - - 56.8 - (0.8) 56.0 12.6 68.6
---------- ----------- ---------- ---------- --------
Total EBITDA 521.7 420.0 79.9 56.8 (22.0) (24.6) 1,031.9 48.0 1,079.8
========== ========== ======== ============== =========== ========== ======== ========== ========
At 30 June 2016
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation other other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 338.5 (38.6) (0.5) - (18.9) (24.6) 255.9 31.7 287.6
Depreciation
and
amortisation 96.7 123.4 16.7 - - 3.2 240.0 7.3 247.3
Loss on
disposals 0.2 - - - - - 0.2 - 0.2
---------- ----------- ----------
EBITDA from
subsidiaries 435.4 84.8 16.2 - (18.9) (21.4) 496.1 39.0 535.1
Proportional
share of the
EBITDA from
associates and
JV - - - 37.1 - (4.6) 32.5 7.5 40.0
---------- ----------- ---------- ---------- ------
Total EBITDA 435.4 84.8 16.2 37.1 (18.9) (26.0) 528.6 46.5 575.1
========== ========== ======== ============== =========== ========== ======= ========== ======
b) Cash costs
Cash costs are a measure of the cost of operational production
expressed in terms of cents per pound of payable copper
produced.
This is considered to be a useful and relevant measure as it is
a standard industry measure applied by most major copper mining
companies which reflects the direct costs involved in producing
each lb of copper. It therefore allows a straightforward comparison
of the unit production cost of different mines, and allows an
assessment of the position of a mine on the industry cost curve. It
also provides a simple indication of the profitability of a mine
when compared against the price of copper (per lb).
At 30.06.2017 At 30.06.2016
$m $m
Reconciliation of cash costs excluding tolling charges and by-product revenues:
Total Group operating costs (Note 4) 1,327.9 1,156.6
Less:
Total - Depreciation and amortisation (Note 4) (290.0) (247.3)
Total - Loss on disposal (Note 4) 0.1 (0.2)
Elimination of non-mining operations
Corporate and other items - Total operating cost (Note 4) (25.3) (21.4)
Exploration and evaluation - Total operating cost (Note 4) (22.0) (18.9)
Railway and other transport services - Total operating cost (Note 4) (45.4) (41.1)
Closure provision and other expenses not included within cash costs (6.9) (3.5)
Total cost relevant to the mining operations' cash costs 938.3 824.2
Copper sales volumes - excluding Antucoya Q1 2016/ and Zaldívar (tonnes) 309,800 271,100
Cash costs excluding tolling charges and by-product revenues ($/tonne) 3,029 3,040
Cash costs excluding tolling charges and by-product revenues ($/lb) 1.37 1.38
Reconciliation of cash costs before deducting by-products:
Tolling charges - copper - Los Pelambres (Note 5) 80.3 93.0
Tolling charges - copper - Centinela (Note 5) 52.0 38.7
Tolling charges - copper - total 132.3 131.7
Copper sales volumes - excluding Antucoya Q1 2016/full year 2015 and Zaldívar
(tonnes) 309,800 271,100
Tolling charges ($/tonne) 427 486
Tolling charges ($/lb) 0.20 0.22
Cash costs excluding tolling charges and by-product revenues ($/lb) 1.37 1.38
Tolling charges ($/b) 0.20 0.22
Cash costs before deducting by-products (S/lb) 1.57 1.60
At 30.06.2017 At 30.06.2016
$m $m
Reconciliation of cash costs (net of by-products):
Gold revenue - Los Pelambres (Note 4) 30.1 40.1
Gold revenue - Centinela (Note 4) 115.1 84.5
Molybdenum revenue - Los Pelambres (Note 4) 68.5 43.8
Silver revenue - Los Pelambres (Note 4) 16.6 21.9
Silver revenue - Centinela (Note 4) 10.8 5.6
Total by-product revenue 241.1 195.9
Copper sales volumes - excluding Antucoya Q1 2016/and Zaldívar tonnes) 309,800 271,100
Tolling charges ($/tonne) 778 723
Tolling charges ($/lb) 0.34 0.34
Cash costs before deducting by-products (S/lb) 1.57 1.60
By-product revenue ($/lb) (0.34) (0.34)
Cash costs (net of by-products) ($/lb) 1.23 1.26
The totals in the tables above may include some small apparent
differences as the specific individual figures have not been
rounded.
c) Attributable cash, cash equivalents & liquid investments, borrowings and net debt
Attributable cash, cash equivalents & liquid investments,
borrowings and net debt reflects the proportion of those balances
which are attributable to the equity holders of the Company, after
deducting the proportion attributable to the non-controlling
interests in the Group's subsidiaries.
This is considered to be a useful and relevant measure as the
majority of the Group's cash tends to be held at the corporate
level and therefore 100% attributable to the equity holders of the
Company, whereas the majority of the Group's borrowings tend to be
at the level of the individual operations, and hence only a
proportion is attributable to the equity holders of the
Company.
June
2017 June 2016
Total Attributable Attributable Total Attributable Attributable amount
amount share amount amount share
$m $m $m $m
Cash, cash
equivalents
and liquid
investments:
Los Pelambres 283.6 60% 170.2 492.0 60% 295.2
Centinela 400.3 70% 276.9 462.7 70% 323.9
Antucoya 178.9 70% 125.2 146.5 70% 102.6
Corporate 1,245.8 100% 1,250.5 1,025.3 100% 1,025.3
Railway and
other
transport
services 57.5 100% 57.5 53.6 100% 53.6
Total 2,166.1 1,880.3 2,180.1 1,800.6
Borrowings:
Los Pelambres
(Note 19) (363.3) 60% (218.0) (381.1) 60% (228.7)
Centinela
(Note 19) (1,058.8) 70% (741.2) (1,196.0) 70% (837.2)
Antucoya
(Note 19) (988.1) 70% (691.7) (994.6) 70% (696.2)
Corporate
(Note 19) (525.2) 100% (525.2) (526.3) 100% (526.3)
Railway and
other
transport
services
(Note 19) (90.3) 100% (90.3) (121.7) 100% (121.7)
Total (Note
19) (3,025.7) (2,266.4) (3,219.7) (2,410.1)
Net debt (859.6) (386.1) (1,023.5) (609.5)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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August 22, 2017 02:00 ET (06:00 GMT)
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