TIDMANTO
RNS Number : 2314H
Antofagasta PLC
16 August 2016
NEWS RELEASE, 16 AUGUST, 2016
HALF YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 JUNE 2016
FURTHER PROGRESS ON COST REDUCTIONS AND IMPROVING MARGINS
Antofagasta plc CEO Iván Arriagada said: "A 24.7% reduction in
operating costs offset the decline in the copper price and lower
sales volumes resulting in EBITDA of $571.6 million, 2.3% higher
than in the same period last year.
"Continued management actions to reduce costs and preserve cash
contributed to our EBITDA margin strengthening to 39.5%, from 26.2%
in the full year 2015. While reducing costs in absolute terms is
important we are focused on achieving improved efficiencies in a
sustainable manner to ensure long-term shareholder value.
"Given the current economic uncertainty we are cautious in our
outlook and remain conservative in our approach to managing
capital. The Board has declared a dividend of 3.1 cents per share
equal to 35% of net earnings at the interim, in line with our
policy to pay a minimum of 35% of full year net earnings which
remains unchanged.
"At Los Pelambres, following the agreement reached with the
Caimanes community in April, the two longstanding court cases
relating to the Mauro tailings dam have recently been resolved.
Although an appeal is possible, it is unlikely to be accepted and
Los Pelambres and the Antofagasta group now move into a new era of
community engagement."
Financial performance
-- Revenue 18.5% lower at $1,448.0 million, on lower copper
prices and sales volumes, and the closure of Michilla at the end of
2015
-- EBITDA (1) increased 2.3% to $571.6 million despite the fall
in revenue, reflecting a 24.7% reduction in operating costs and a
first time EBITDA contribution from Zaldívar and other
associates
-- EBITDA margin (2) strengthened to 39.5%, up from 31.5% in the same period last year
-- Operating cost reductions of $124 million achieved,
contributing to savings of $0.11/lb in cash costs
-- Operating profit and earnings per share fell by 9.2% and 3.3% respectively
-- Operating cash flow generation of $774.1 million in the
period, 4.2% less than in the first half of 2015
-- Capital expenditure of $385.4 million, $276.9 million lower
than in the first half of 2015. Full year expenditure expected to
be lower than original guidance
-- Interim dividend of 3.1 cents per share. Dividend policy to
pay a minimum pay-out ratio of 35% of net earnings for the full
year remains unchanged
-- Group net debt of $1,039.7 million, almost unchanged since the end of 2015
Operational performance
-- Group copper production in H1 2016 was 323,300 tonnes, 6.6%
higher than in the same period last year with the inclusion of
production from Antucoya and attributable production from Zaldívar
offset by the closure of Michilla and lower production from
Centinela
-- Group cash costs before by-product credits were $1.60/lb,
14.9% lower than 2015 primarily due to higher production, improved
cost performance and the weaker Chilean Peso
-- Group net cash costs were $1.26/lb, down 17.6% compared to
2015 reflecting lower cash costs before by-product credits
Outlook
-- Group copper production for the year is expected to be at the
lower end of the 710-740,000 tonnes guided in January and unit
costs $0.05/lb lower with cash costs before by-product credits of
$1.60/lb and net cash costs of $1.30/lb
-- Production for the year is weighted to the second half of the
year with the completion of the Centinela Concentrates expansion
and Antucoya, and an increase in grade at Centinela
Other
-- Outstanding court cases concerning Los Pelambres' Mauro
tailings dam resolved. The company will now proceed with the plans
presented to the courts and the community to invest in future water
supply solutions, additional safety measures, community development
projects and to provide access to benefits for families in the
community.
UNAUDITED RESULTS SIX MONTHS 2016 2015 %ING 30 JUNE
------------------------------- ------- ---------- -------- -------
Group revenue $m 1,448.0 1,775.9 (18.5)
EBITDA (1) $m 571.6 558.7 2.3
Earnings per share cents 8.9 9.2 (3.3)
Dividend per share cents 3.1 3.1 -
Cash flow from operations $m 774.1 807.7 (4.2)
Group net (debt)/cash at
period end $m (1,039.7) 743.6 -
Average realised copper price $/lb 2.17 2.54 (14.6)
-------
Copper sales kt 309.4(3) 290.1 6.7
Gold sales koz 97.1 106.0 (8.4)
Moly sales kt 3.1 4.4 (29.5)
Cash costs before by-product
credits (4) $/lb 1.60 1.88 (14.9)
Net cash costs (4) $/lb 1.26 1.53 (17.6)
------------------------------- ------- ---------- -------- -------
Note: The financial results are prepared in accordance with
IFRS, unless otherwise noted below.
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation and is a non-GAAP measure comprising of 100% of
the EBITDA from the Group's subsidiaries and the Group's
proportional share of the EBITDA of its associates and JVs.
(2) Calculated as EBITDA/Group revenue. If Associates and JVs
revenue is included EBITDA Margin was 35.5% in H1 2016 and 30.8% in
H1 2015.
(3) Includes 37,400 tonnes of sales by Zaldívar, which is equity
accounted, and Antucoya pre commercial production.
(4) Cash cost is a non-GAAP measure used by the mining industry
to express the cost of production in US dollars per pound of copper
produced and is further explained in the notes to the production
and sales statistics in the 2016 half yearly financial report
below.
This announcement contains inside information
Investors Media
- London - London
Andrew Lindsay alindsay@antofagasta.co.uk Carole antofagasta@brunswickgroup.com
Cable
Paresh Bhanderi pbhanderi@antofagasta.co.uk Will Medvei antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors Media
- Santiago - Santiago
Alfredo aatucha@aminerals.cl Pablo porozco@aminerals.cl
Atucha Orozco
Telephone +56 2 2798 7000 Carolina cpica@aminerals.cl
Pica
Telephone +56 2 2798 7000
----------------- ---------------------------- ------------ -------------------------------
DIRECTORS' COMMENTS FOR THE SIX MONTHSED 30 JUNE 2016
FINANCIAL
Group revenue was $1,448.0 million, 18.5% lower than in the same
period last year due to lower copper prices and sales volumes, and
the closure of Michilla at the end of 2015. Revenue from the sale
of by-products was similar to the same period last year as lower
production offset the increase in realised prices.
Despite the fall in revenue, EBITDA increased by 2.3% to $571.6
million reflecting a 24.7% reduction in operating costs and the
inclusion of EBITDA from Zaldívar and other associates for the
first time. This has resulted in earnings per share from continuing
operations for the period of 8.9 cents per share, down 3.3%
compared with the same period last year.
The Board has declared an interim ordinary dividend of 3.1 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 2016 was 323,300
tonnes, 6.6% higher than in the same period last year with the
inclusion of production from Antucoya and attributable production
from Zaldívar, which were not contributing to Group production in
the first half of 2015. This more than offset the loss of
production following the closure of Michilla at the end of
2015.
Group gold production was 109,500 ounces in the first six months
of the year, 3,000 ounces less than in the first half of 2015 as a
result of lower grades at Centinela.
Molybdenum production at Los Pelambres was 3,300 tonnes in the
first half of 2016, compared with 4,700 tonnes in the first six
months of 2015, principally due to lower throughput and grades
Group cash costs before by-product credits in the first half of
2016 were $1.60/lb, a $0.28/lb decrease compared with the same
period last year. This decrease was due to higher production,
improved cost performance, the weaker Chilean Peso and a revised
estimation of stripping costs, which accounted for $0.10/lb of the
decrease.
Net cash costs for the first half of 2016 at $1.26/lb were 17.6%
lower than in the same period last year reflecting the lower cash
costs before by-product credits.
COST AND COMPETITIVENESS PROGRAMME
The Group introduced the Cost and Competitiveness Programme in
2014 with the aim of reducing the cost base and improving the
Group's competitiveness within the industry.
During the first half of 2016, the Group continued to focus on
reducing its operating costs through the Programme and achieved
cost savings of approximately $67 million in mine site costs and
$57 million in corporate, exploration and evaluation expenses. The
target for full year is $160 million.
The Programme focuses on four areas:
-- Services productivity: Improving productivity and quality of contracts while reducing costs
-- Operational and maintenance management: Improving performance
of critical processes and implementation of standardised
maintenance management practices
-- Corporate and organisational effectiveness: Reducing costs
and restructuring the Group's organisational functions
-- Energy efficiency: Optimising energy efficiencies, while
achieving lower contract prices for energy
The Group is implementing changes to the support areas at each
of the operations, including Finance, Human Resources, External
Affairs and Legal, with the objective of simplifying their
organisation, avoiding duplication, creating improved capability to
implement best practices across the Group and focusing operations
on the core activities of sustainability (particularly safety),
production and costs. At the same time operational and maintenance
processes are being strengthened at each site. This standardisation
will result in higher efficiency across the functions whilst
providing the same level of service and quality across the mining
operations.
CEO SUCCESSION
As previously announced Iván Arriagada succeeded Diego Hernández
as CEO of Antofagasta plc on 8 April 2016 having held the position
of CEO of Antofagasta Minerals since February 2015. Since joining
the Group, Iván has led a rigorous cost reduction programme,
focusing on maintaining the Group's healthy balance sheet while
ensuring all of the Group's operations are generating operating
cash flow at current copper prices.
CHANGE IN BASIS OF ESTIMATION OF DEFERRED STRIPPING COSTS
The Group has revised its estimation of deferred stripping costs
in 2016 compared with that used in the original guidance announced
in January 2016. This change has affected Los Pelambres and the
2016 full year cash costs before by-products credits are now
expected to be $1.50/lb. The corresponding increase in capital
expenditure, as mine development, for the year is expected to be
$112 million, with total forecast cash expenditure for 2016,
operating and capital, remaining unchanged.
LABOUR AGREEMENTS
Negotiations are underway with employees at Antucoya and the
supervisors at Los Pelambres and Zaldívar in respect of entering
into new labour agreements for two years or longer. The agreements
at Antucoya and Zaldívar will be the first term agreements under
the Group's operatorship and all of the agreements are expected to
be concluded by the end of the year.
SAFETY
Regrettably there was a fatal accident at Antucoya during the
period and another in the Transport Division in July. A full
investigation has now been completed at Antucoya and actions
identified during the review are being implemented with direct
oversight by senior management. An investigation of the causes and
lessons learned is underway at the Transport Division. The Group
remains committed to achieving zero fatalities and is continually
working to strengthen and deepen the safety culture at all of the
operations under the Group Safety and Health model. The Group
continues to report high-potential near misses, which is a
fundamental preventative measure in improving understanding of the
key risk areas.
Since the start of the year the executive team has visited the
Group's mining operations periodically as part of a safety
leadership programme, demonstrating to employees and contractors
the importance of safety and empowering employees to ensure safety
comes first.
Further information on the Group's effort to support and develop
a safety culture within the business is set out on pages 62-64 of
the 2015 Annual Report and Accounts.
TAX
During the first six months of the year the Effective Tax Rate
(ETR) was 42.7%, higher than the 39.6% in the same period last
year, but lower than the full year rate of 61.8% in 2015. For the
full year this year, the ETR is expected to be in the range of
40-45%, depending on realised metal prices during the rest of the
year. Under the Tax Reform Bill signed in to law in Chile, the
corporate tax rate for the Group has increased to 24% in 2016.
Withholding tax on distributions remains at 35% and allows a rebate
of the corporate tax paid when distributing dividends. Mining tax
(royalties) rates are also unchanged.
DEPRECIATION AND AMORTISATION
Depreciation and amortisation for the first half of 2016 was
$247.3 million compared to the $245.4 million in the first half of
2015 and for the full year it is expected to be broadly similar to
2015.
OUTLOOK
Group copper production for the full year is expected to be at
the lower end of the 710-740,000 tonnes guided in January, and cash
costs before by-product credits and net cash costs are expected to
be $0.05/lb lower at $1.60/lb and $1.30/lb respectively. Production
for the year is weighted to the second half with the Centinela
Concentrates expansion and Antucoya reaching full capacity, and as
the grade at Centinela increases as planned.
The outlook for the short term copper market is expected to
continue to be volatile as national stimulus programmes,
macroeconomic events and movements in the US dollar continue to
dominate the financial markets and affect the price of copper. The
market is also affected by the weak scrap supply where refining
charges for smelters are lower than concentrate TC/RCs with new
supply coming from Peru and elsewhere.
There have been few cuts in mine production so far this year
reflecting the industry's continued success in reducing costs and
the strengthening of the copper price. If prices weaken towards
$2.00/lb or below with conviction then supply cuts can be expected,
but in the meantime supply surpluses are forecast until at least
2018 as demand growth is forecast to remain modest. The outlook
beyond 2018 looks stronger when the market is expected to go into
deficit.
During 2015 the Group consolidated and optimised its asset
portfolio through sales, purchases and closures while also reducing
costs. This year the Group is focusing on completing the Antucoya
ramp-up and the expansion at Centinela Concentrates while
continuing to enhance the efficiency of its operations, with
particularly focus on achieving sustainable improvements in
productivity. On completion of the Group's current capital
programmes, together with the restructuring of its operations, it
will be well positioned to withstand continued weakness in the
copper market and to benefit from its recovery, when it comes.
REVIEW OF OPERATIONS AND PROJECTS
MINING DIVISION
LOS PELAMBRES
Operating profit
Operating profit at Los Pelambres was $338.5 million in the
first half of 2016, compared with $309.8 million in the first six
months of 2015. This increase can be explained by higher sale
volumes and lower operating costs, partially offset by a lower
realised copper price.
Production
Copper production increased 1.6% to 172,100 tonnes in the first
half of 2016 reflecting the impact of improved recoveries as
throughput is lowered to process a higher proportion of harder ore.
In addition, production in the first half of 2015 was disrupted by
community protests which have since been addressed through the
implementation of an improved long term community engagement
plan.
Molybdenum production in the first six months of 2016 at 3,300
tonnes was 29.8% lower than last year, primarily due to lower
grades and lower throughput.
Changes in Estimation Methods of Deferred Stripping
The Group has revised its estimation of deferred stripping costs
at Los Pelambres in 2016 compared with that used in the original
guidance announced in January 2016. The 2016 full year cash costs
before by-products credits are now expected to be $1.50/lb. The
corresponding increase in capital expenditure, as mine development,
for the year is expected to be $112 million, with total forecast
cash expenditure for 2016, operating and capital, remaining
unchanged.
Costs
Cash costs before by-product credits in the first half of the
last year were $1.33/lb, which is $0.34/lb lower than the same
period last year ($0.26/lb before the change in estimation of
deferred stripping) with lower materials movement and lower input
prices being the main contributors.
Net cash costs for the first half of the year were 25.0% lower
than the same period last year at $1.02/lb as a result of lower
onsite costs, as explained above, combined with higher by-product
prices and favourable movements in the Chilean Peso exchange rate,
offset by lower molybdenum production.
Capital expenditure
Capital expenditure, excluding mine development, in the first
six months of 2016 was $43 million and for the 2016 full year is
expected to be approximately $185 million. A further $112 million
will be spent on mine development, of which $52 million was spent
in the first six months.
Resolution of outstanding claims relating to the Mauro tailings
dam
Following recent decisions of the Supreme Court of Chile and the
Court of Appeal of La Serena and an agreement reached with the
Caimanes community in April, outstanding and long-running claims
relating to the Mauro tailings dam have been recently resolved.
The Mauro tailings dam began operating in 2008. Since then,
there have been a series of civil claims filed by some members of
the Caimanes community seeking to stop the dam's operations. Two
claims have been through various courts and stages of appeal over a
number of years: one on the grounds that the Mauro tailings dam
affects the flow and quality of the Pupío stream; the other on the
grounds that the tailings dam wall would not withstand an extreme
seismic event.
Although Los Pelambres has always complied with all applicable
laws, regulations and controls and has successfully defended its
right to continue operating the dam, Los Pelambres has also
committed to understanding and addressing the underlying concerns
expressed by the Caimanes community.
In 2015 and 2016, Los Pelambres engaged in formal and
transparent dialogue process designed to allow Los Pelambres to
better understand community concerns and to share views and
information about its own activities which concluded in an open
consultation process. In May 2016, Los Pelambres reached an
agreement with the Caimanes community which will see Los Pelambres
invest in future water supply solutions, additional safety
measures, community development projects and compensation for the
Caimanes community.
Following on from this agreement, the Supreme Court has recently
accepted a settlement agreement filed by Los Pelambres and the
members of the Caimanes community pursuing the claim that the dam
wall would not withstand extreme seismic events with the
consequence that this longstanding claim has now been
extinguished.
Additionally, the Court of Appeal of La Serena has recently
accepted the plan of works put forward by Los Pelambres to ensure
the operation of the tailings dam does not affect the normal flow
and quality of the Pupío stream. This decision overturns an earlier
ruling from the Civil Court in Los Vilos that was appealed by Los
Pelambres, which had rejected this plan of works and ordered the
demolition of the tailings dam wall. The works performed by Los
Pelambres will also include the additional works set out in the
agreement reached with the Caimanes community.
Further details on other material claims affecting Los Pelambres
can be found in Note 20 to the 2016 half yearly financial report
below.
CENTINELA
Operating profit
In the first six months of 2016 Centinela made an operating loss
of $38.0 million, compared with a $66.3 million profit in the same
period last year. This decrease was due to revenue falling as sales
volumes fell and the realised copper price dropped, offset by lower
operating costs. Sales volumes were, in part, impacted by poor
weather conditions at the end of June that delayed shipments over
the period end.
Production
During the first six months of the year Centinela produced
98,100 tonnes of copper, down 17.1% compared to the same period in
2015 primarily due to significantly lower production of copper
cathodes.
Copper in concentrate production for the first six months of the
year was 6.6% lower compared to 2015 as lower grades and lower
recoveries impacted production despite higher throughput. On
completion of design improvements to the second thickener,
throughput is expected to reach the expanded capacity of 105,000
tonnes of ore per day on a peak basis during the fourth quarter. In
addition, copper grades will be over 0.60% during the second half
of the year as mining moves, as planned, into a higher grade area
of the pit. Throughput will run at the new design capacity on a
continuous basis once the third thickener has been completed.
Compared with the first half of last year, cathode production
during 2016 was 37.8% lower as grades declined, as expected, as
mining moved to the lower grade zones of the Tesoro Central pit and
throughput decreased due to restrictions in the reclamation system.
The restrictions are caused by the high moisture levels of the ore
coming from the current phase of the pit and are expected to
continue until the end of the year.
Gold production for the year to date was 80,500 ounces, 10.7%
lower than the first six months of 2015 with significantly lower
gold grades and lower recoveries.
Costs
For the year to date cash costs before by-product credits were
3.3% lower than in 2015 at $2.06/lb reflecting costs improvements
and lower prices of consumables such as acid and diesel.
Net cash costs for the first half of 2016 were $1.53/lb compared
with $1.67/lb in the first half of 2015. This decrease is mainly
due to the fall in cash costs before by-product credits.
Capital expenditure
Capital expenditure in the first six months of 2016 was $175.3
million. Capital expenditure for the 2016 full year is expected to
be approximately $430 million, which includes approximately $195
million with respect to the Encuentro Oxide project and $53 million
related to the new molybdenum plant. The development of both
projects is proceeding in line with the revised schedule announced
earlier this year with completion expected in 2017. A further $265
million will be spent on mine development for the year, of which
$94.6 million was spent in the first six months of the year.
ANTUCOYA
Operating profit
For the first half of the year the operating loss at Antucoya
was $0.5 million with commercial production being achieved at the
beginning of April 2016 and sales and costs being no longer
capitalised from that point.
Production
Copper production at Antucoya was 27,000 tonnes as the project
ramps up to full capacity of 85,000 tonnes per annum in the second
half of 2016. Improvements to the dust suppression systems are now
being implemented and are expected to be completed by the end of
the year.
Costs
During the second quarter cash costs were $1.82/lb compared with
guidance for the year given in January of $1.80/lb.
Capital expenditure
Capital expenditure in the first six months of 2016 was $7.3
million and for the full year is expected to be approximately $71.4
million, including approximately $5.8 million for the dust
suppression systems.
ZALDÍVAR
Following completion of the acquisition of 50% of Zaldívar in
December 2015, purchase price and other customary adjustments are
now complete and no further sums are payable to Barrick Gold
Corporation. The total acquisition price paid was $950 million.
EBITDA
Attributable EBITDA at Zaldívar was $37.1 million in the first
half of 2016.
Production
Copper production at Zaldívar was 26,000 tonnes on an
attributable basis in the first six months of 2016. During the year
there has been a significant increase in copper recovery through
the use of improved sulphide leaching, following the application of
experience gained at other Group operations.
Costs
Cash costs for the first six months of 2016 were $1.50/lb. Cost
synergies have been realised at Zaldívar with the integration of
the operation into the Group's procurement practices and
contracts.
Capital expenditure
Attributable capital expenditure in the first six months of 2016
was $29.8 million, of which $22.6 million related to mine
development (deferred stripping). Capital expenditure for the 2016
full year is expected to be approximately $55 million, which
includes approximately $25 million with respect to stripping.
GROWTH PROJECTS AND OPPORTUNITIES
The Group seeks to increase copper production in Chile and
abroad through the development of projects and other potential
opportunities. Brownfield development within the Group's Los
Pelambres and Centinela mining districts in Chile remain the
primary focus for maximising value while managing risks associated
with execution.
The Group will complete several projects at Centinela over the
next 18 months that will increase production while reducing unit
costs. At the same time it is advancing its two major expansion
projects at Los Pelambres and Centinela to a stage that they will
be ready for an investment decision to be made on one or both of
them at the end of 2017. However, these projects will only be
advanced if they satisfy the Group's evaluation criteria. The Group
believes investing through the cycle in the right
opportunities.
The Group's exploration and evaluation expenditure in the first
six months of 2016 was $18.9 million in comparison to expenditure
in the same period last year of $56.1 million. The reduction in
expenditure reflects the current prioritisation of cost management
over long-term potential growth through exploration success.
Projects under construction
Encuentro Oxides
The Encuentro Oxides deposit is within 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. This
will enable the plant to return to its full operating capacity of
100,000 tonnes per annum for a number of years once the project is
complete.
The construction budget for the project of $636 million was
approved by the Board at the end of 2014. As of the end of June
2016, the project had achieved over 68% completion (including
design, engineering, procurement and construction) with first
production expected in the second half of 2017.
During the first six months of the year project expenditure was
$88.8 million, bringing the total construction expenditure to $421
million.
Molybdenum Plant
During the first half of the year, the construction of the
Centinela Molybdenum Plant continued with the project achieving 39%
completion (including design, engineering, procurement and
construction) by the end of June 2016. Total capital costs are
expected to be approximately $125 million of which approximately
$32.2 million has been incurred by 30 June 2016. Once completed by
the end of 2017, the plant will produce some 2,400 tonnes of
molybdenum per year, which will contribute to a reduction in
Centinela's net cash costs.
Brownfield growth projects
The Group recognises the importance of capital cost control and
optimising production from existing operations, and manages this by
constantly monitoring the efficiency of its mines, plants and
transport infrastructure. Where possible, it conducts
debottlenecking and incremental plant expansions to increase
throughput and improve overall efficiencies. However, in current
market circumstances the Group has deferred these projects to
reduce expenditure while keeping the project teams active and
focusing on completion of key time-critical feasibility study work,
such as the preparation of Environmental Impact Assessments.
Los Pelambres Incremental Expansion
As previously announced the Group has split the Los Pelambres
Incremental Expansion into two phases to simplify the development
of the project and to conserve development capital in light of
lower commodity prices.
Phase 1
During Phase 1, Los Pelambres will operate at an average
throughput of 190,000 tonnes per day through the addition of a new
grinding and flotation circuit, to mitigate the decline in
throughput resulting from the higher proportion of hard ore being
mined as the pit gets deeper. In addition, the project includes a
400l/s desalination plant and water pipeline as a backup for dry
seasons. Desalinated water will be pumped to the Mauro tailing
storage facility where it will connect with the water recycling
circuit that returns water from the tailings facility to the Los
Pelambres processing plant.
In April 2016 the Group submitted the Environmental Impact
Assessment ("EIA") for Phase 1 to the authorities to begin the
formal permitting application process for the project. This process
will involve a formal dialogue between the Group and the
authorities regarding the scope and scale of the project and is
expected to be completed in 2017. Once the EIA is in place and the
feasibility study is completed towards the end of 2017 the Group
will decide whether to proceed with the project, with consideration
for the then prevailing market conditions.
Capital expenditure for this project is estimated at
approximately $1.1 billion, with some $600 million allocated to the
additional mine fleet, crushing and flotation circuits and the
balance for the desalination plant and water pipeline.
Phase 2
In Phase 2, the Group will increase throughput to 205,000 tonnes
per day and to extend the mine's life beyond the currently approved
22 years. During this phase, a new EIA will be submitted to
increase the capacity of the mine's Mauro tailings storage facility
and the mine waste dumps.
Initial capital expenditure for this phase is estimated to be
approximately $500 million, with the majority of the expenditure
being on mining equipment, further crushing and grinding capacity,
and flotation cells. In addition, the conveyors from the primary
crusher to the concentrator plant will have to be repowered to
support the increased throughput.
The Group is currently advancing the conceptual studies for the
increase in the capacity of the tailing storage facility and the
waste rock dumps in parallel with the Phase 1 feasibility
study.
Greenfield growth projects
Centinela Second Concentrator
The Group continues to evaluate options for the development of
the Centinela Mining District, which is a key region for
longer-term growth containing approximately 7 billion tonnes of
resources and significant options for expansion growth.
The second concentrator will be built some 7 km from Centinela's
current concentrator. It is expected to have an ore throughput
capacity of approximately 90,000 tonnes per day, with annual
production of approximately 140,000 tonnes of copper, 150,000
ounces of gold and 3,000 tonnes of molybdenum. It is currently
planned that ore will first be sourced from the Esperanza Sur
deposit and, once mining at Encuentro Oxides is completed, ore will
also be sourced from Encuentro Sulphides, which lies below the
oxide deposit.
The pre-feasibility study for this $2.7 billion project was
completed at the end of 2015 and the preparation of the feasibility
study is currently underway and is expected to be completed by the
end of 2017. The EIA was submitted in 2015, with the outcome
expected during the second half of 2016.
During the year the Group has completed construction of a pilot
test plant for a high pressure grinding roller (HPGR) system which
is being considered in preference to conventional SAG and ball
mills. The preferred crushing technology will be included in the
feasibility study, which will be completed by the end of 2017. A
decision to proceed with the project will only be made if it is
supported by the market outlook at the time. If approval is granted
at the end of 2017, production would be expected to begin in
2021.
Los Pelambres
Los Pelambres is a world-class deposit with a resource base of
more than three times the quantity of ore planned to be processed
under the current mine plan. These resources could support an
expansion considerably greater than that planned under Phases 1 and
2 of the Incremental Expansion, however, the Group's current focus
remains on the nearer-term.
United States - Twin Metals
Twin Metals Minnesota LLC ("Twin Metals") is a copper, nickel
and platinum group metals ("PGM") underground-mining project which
holds the Maturi, Maturi Southwest and Spruce Road copper-nickel
PGM deposits in Minnesota, USA.
The pre-feasibility study on the project was completed in August
2014 and in November 2014 the Group entered into an agreement to
acquire all of the issued and outstanding shares of its project
partner, Duluth Metals Limited, bringing the Group's ownership in
the project to 100%. The acquisition was completed in early 2015
and further optimisations of the pre-feasibility study are now
being evaluated. The permitting process is complex and is expected
to take at least five years to complete with challenges expected
along the way. The project has significant copper and nickel
resources and is a world-class deposit in terms of size and
potential mine life.
Other exploration and evaluation activities
The Group has an early-stage exploration programme beyond its
existing core Centinela and Los Pelambres mining districts. This
programme is conducted through its in-house exploration team and
partnerships with third parties with the aim of building a
portfolio of longer-term opportunities mainly in Chile and the
Americas, plus select regions in the rest of the world such as
Australia and Zambia. However, in the current depressed market
conditions priority is being given to reducing expenditure rather
than increasing resources. The programme has therefore been
significantly reduced.
The total expenditure on exploration and evaluation during the
first half of 2016 was $18.9 million, 66.3% less than in the
equivalent period last year.
Chile
The Group continues with exploration activities in Chile to
identify prospective targets on the main porphyry copper belts in
the northern and central regions. During the year, the Group
conducted an asset rationalisation to relinquish low priority
tenements and acquire new tenements more closely aligned with the
Group's target areas. Drilling continued at the Cachorro deposit
south of Antucoya and the El Encierro deposit in the third region
of Chile.
International
The Group has an exploration office in Toronto to increase its
exposure to exploration opportunities in a cost-effective manner.
The Group's approach is to partner with experienced junior
exploration companies benefiting from their local expertise and
knowledge while complimenting that with the Group's experience in
exploration and project management. Working in partnership with
selected companies, both public and private, the Group advanced
projects in Argentina, Australia, Canada, Mexico and Zambia during
the first half of the year, while exiting from projects in
Australia, Canada, Finland and Portugal.
Energy Opportunities
Over the last few years, the Group has acquired a series of
minority interests in energy generators and projects as part of its
power supply strategy for its mining operations. The strategy has a
particular focus on renewable energy generation, supporting the
Group's broader aim of increasing the sustainability of its
operations and stability of its energy costs. Over the last five
years the Group has invested some $575 million in power-generating
assets that have a combined installed capacity of 880MW (100%
basis) of which, at the end of June 2016, 349MW, were in operation.
By 2020 some 80% of Los Pelambres energy requirements will be from
sustainable sources.
El Arrayán
The Group has a 30% interest in Parque Eolico El Arrayán SpA
("El Arrayán"), approximately 400 km north of Santiago, which in
2014 commissioned a 115MW wind farm in northern Chile, that now
supplies approximately 20% (40MW) of Los Pelambres' energy
requirements under a 20-year supply contract.
Inversiones Hornitos
The Antofagasta Railway Company ("FCAB") owns a 40% interest in
Inversiones Hornitos SA ("Inversiones Hornitos"), which operates
the 165MW Hornitos thermoelectric power plant in Mejillones, in
Chile's Antofagasta Region. Inversiones Hornitos continues to
supply Centinela under long-term power purchase agreements
("PPAs").
Alto Maipo
Los Pelambres holds a 40% interest in the 531MW Alto Maipo
run-of-river hydroelectric project which is operated by AES Gener
and is in the upper section of the Maipo river, 50 km south-east of
Santiago. Construction is underway and is expected to be completed
in 2019. The Group is contributing its share of the capital cost,
which is currently under review. Once completed, the Alto Maipo
project will supply Los Pelambres with up to 110MW under 20-year
PPA.
Los Pelambres has also signed a 20-year PPA with AES Gener for
the provision of up to 50MW of power which started in 2015 with
power coming from a coal fired power station.
Solar Energy
Los Pelambres has long-term PPAs with two solar power providers
for a total of 50MW of power, approximately 25% of its total energy
requirement. The first of these PPAs came on stream in June 2015
and the second will start in the second half of 2016. These PPAs
provide Los Pelambres with secure supply of renewable energy for a
20-year period at competitive prices.
TRANSPORT DIVISION
Total transport volumes in the first half of 2016 were 3.3
million tonnes, compared to 2.9 million tonnes in the first half of
2015, including 2.7 million tonnes of rail volumes. The 14.9%
increase in volumes was driven by the railway operation with an
additional 0.3 million tonnes of concentrate production from a new
mine and the improved utilisation of the rolling stock fleet to
haul an additional 0.2 million tonnes of acid and copper cathodes.
The truck operation remains focused on supporting the railway
logistics chain.
Operating Costs
Transport unit costs for the first half of 2016 were $10.8/tonne
compared with $14.1/tonne in the first half of 2015. This 23.4%
decrease was primarily due to increased volumes and lower diesel
prices.
Operating profit
The Transport Division generated $31.7 million of operating
profits in the first half of 2016, 29.4% higher than in the first
six months of 2015. The increased profitability is explained by the
improved transport volumes and significantly lower operating
costs.
New Operating Model
During first half of 2016 the Division implemented a new
operating model based on three focus areas; sustainability
(including safety and community relations), productivity
improvements and cost savings.
The model targets a balanced approach between cost savings and
productivity improvements to ensure the sustainable development and
expansion of operations, particularly considering the rail division
operates in the populated areas of the fast growing Antofagasta
Region.
Safety
Sadly, on 23 July one of the Division's trains was involved in a
road traffic accident near to the town of Sierra Gorda. A thorough
investigation is currently underway and actions have already been
taken to safeguard the Division's employees and contractors. The
Division remains committed to achieving zero fatalities and the new
operating model is a further step to achieve this goal.
FINANCIAL REVIEW FOR THE SIX MONTHSED 30 JUNE 2016
Results (unaudited)
Six months Six months Movement Movement
ended ended
30.06.2016 30.06.2015
$m $m $m %
Revenue 1,448.0 1,775.9 (327.9) (18.5)
------------------------------- ----------- ----------- ---------- ---------
EBITDA 571.6 558.7 12.9 2.3
------------------------------- ----------- ----------- ---------- ---------
Depreciation, amortisation
and disposals (247.5) (245.9) (1.6) 0.7
------------------------------- ----------- ----------- ---------- ---------
Net finance expense (17.7) (11.2) (6.5) 58.0
------------------------------- ----------- ----------- ---------- ---------
Profit before tax 276.1 301.4 (25.3) (8.4)
------------------------------- ----------- ----------- ---------- ---------
Income tax expense (118.0) (117.4) (0.6) 0.5
------------------------------- ----------- ----------- ---------- ---------
Profit from continuing
operations 158.1 184.0 (25.9) 14.1
------------------------------- ----------- ----------- ---------- ---------
Profit from discontinued
operations - 619.5 (619.5) (100.0)
------------------------------- ----------- ----------- ---------- ---------
Earnings per share
from continuing operations
(US cents) 8.9 9.2 (0.3) (3.0)
------------------------------- ----------- ----------- ---------- ---------
Earnings per share
from discontinued operations
(US cents) - 62.4 (62.4) (100.0)
------------------------------- ----------- ----------- ---------- ---------
Total earnings per
share from continuing
and discontinued operations
(US cents) 8.9 71.6 (62.7) (87.5)
------------------------------- ----------- ----------- ---------- ---------
Net cash/(debt) (1,039.6) 743.6 (1,783.3) (239.8)
------------------------------- ----------- ----------- ---------- ---------
A detailed segmental analysis of the components of the income
statement is contained in Note 3 to the 2016 half yearly financial
report.
The following table reconciles between EBITDA in the first half
of 2015 and the first half of 2016:
$m
-------------------------------------- --------
EBITDA in the first half
of 2015 558.7
-------------------------------------- --------
Revenue
-------------------------------------- --------
Decrease in copper volumes
sold (101.1)
-------------------------------------- --------
Decrease in copper realised
price (218.0)
-------------------------------------- --------
Increase in tolling charges 1.3
-------------------------------------- --------
Decrease in revenue from
copper concentrate and cathodes (317.8)
-------------------------------------- --------
Decrease in gold revenues (4.5)
-------------------------------------- --------
Increase in silver revenues 4.3
-------------------------------------- --------
Increase in molybdenum revenues (15.9)
-------------------------------------- --------
Decrease in revenue from
by-products (16.1)
-------------------------------------- --------
Increase in transport division
revenue 6.0
-------------------------------------- --------
Decrease in Group revenue (327.9)
-------------------------------------- --------
Operating costs
-------------------------------------- --------
Decrease in mining operational
costs 235.2
-------------------------------------- --------
Decrease in charge for closure
provisions 5.5
-------------------------------------- --------
Decrease in exploration and
evaluation costs 37.2
-------------------------------------- --------
Decrease in other mining
division costs and corporate
costs 20.9
-------------------------------------- --------
Decrease in operating costs
for mining division 298.8
-------------------------------------- --------
Decrease in transport division
operating costs 2.0
-------------------------------------- --------
Decrease in EBITDA from subsidiaries (27.1)
-------------------------------------- --------
EBITDA in the first half
of 2016 531.6
-------------------------------------- --------
EBITDA relating to Zaldivar
(*) 37.1
-------------------------------------- --------
EBITDA relating to other
investment in associates
and in joint ventures (*) 2.9
-------------------------------------- --------
Total EBITDA in the first
half of 2016 571.6
-------------------------------------- --------
(*) attributable
Revenue
Group revenue in the first half of 2016 was $1,448.0 million,
18.5% below the $1,775.9 million achieved in the first half of
2015. The decrease of $327.9 million mainly reflected a decrease in
the realised copper price and lower copper sales volumes, as well
as lower by-product revenues.
Revenue from the mining division
Revenue from copper concentrate and copper cathodes
Revenue from copper concentrate and copper cathode sales
decreased by $317.8 million, or 21.3%, to $1,172.0 million,
compared with $1,489.8 million in first six months of 2015. The
decrease reflected the impact of lower sales volumes and lower
realised prices.
(i) Copper volumes
Copper sales volumes decrease from 290,100 tonnes in the first
half of 2015 to 272,000 tonnes in this period. The decrease in
sales volumes accounted for a decrease of $101.1 million in revenue
from copper concentrate and cathode sales.
(ii) Realised copper prices
The Group's average realised copper price decreased to $2.17/lb
in first six months of 2016 (first six months of 2015 - $2.54/lb).
The level of decrease was lower than the reduction in the average
LME copper price, which decreased to $2.13/lb from $2.69/lb in the
first half of 2015, due to a lower level of negative provisional
pricing adjustments in the current period compared with the prior
year. The decrease in average realised prices led to a $218.0
million reduction in revenue from copper concentrate and cathode
sales.
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 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".
Provisional pricing adjustments increased initially invoiced
sales (before adjusting for tolling charges) by $21.1 million in
first six months of 2016, compared with a decrease of $109.2
million in the first six months of 2015. Further details of
provisional pricing adjustments are given in Note 4 to the 2016
half yearly financial report.
In first six months of 2016 revenue also includes a gain of $0.1
million (first six months of 2015 - loss of $0.1 million), mainly
relating to commodity derivatives which matured during the year.
Further details of hedging activity in the period are given in Note
4(b) to the half yearly financial report.
(iii) Tolling charges
Tolling charges for copper concentrate decreased by $1.3 million
to US$131.7 million in the first six months of 2016 from $133.0
million in the first six months of 2015.
Tolling charges are deducted from concentrate sales in reporting
revenue and hence the decrease in these charges has had a positive
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 decreased by $16.1 million or 7.6% to $195.9
million in the first half of 2016, compared with $212.0 million in
the first half of 2015.
Revenue from gold in concentrate (net of tolling charges) was
$124.6 million (first half of 2015 - $129.1 million), a decrease of
$4.5 million, which mainly reflected a decrease in volumes and
partly offset by a higher realised price. The realised gold price
was $1,288.1/oz in the first half of 2016 compared with $1,222.1/oz
in the first half of 2015, with the increase reflecting higher
market prices. Gold sales volumes decreased from 106,000 ounces in
the first half of 2015 to 97,200 ounces in this period, mainly due
to lower gold ore grades at Centinela.
Revenue from molybdenum (net of roasting charges) was $43.8
million (first half of 2015 - $59.7 million), a decrease of $15.9
million. The decrease was mainly due to lower sales volumes of
3,100 tonnes (first half 2015 - 4,400 tonnes) and partly offset by
increased realised price of $7.4/lb (first half of 2015 -
$7.0/lb).
Revenue from silver increased by $4.3 million to $27.5 million
in the first six month of 2016 (first six months of 2015 - $23.2
million). The increase was due to higher sales volumes of 1.7
million ounces (first half of 2015 - 1.4 million ounces) and partly
offset by decreased realised silver price of $16.1/oz (first half
of 2015 - $16.5/oz).
Revenue from the transport division
Revenue from the transport division (FCAB) increased by $6.0
million or 8.1% to $80.1 million, mainly due to higher tonnages
transported.
Operating costs (excluding depreciation, amortisation and
disposals)
Operating costs (excluding depreciation and amortisation)
amounted to $916.4 million (first half of 2015 - $1,217.2million),
a decrease of $300.8 million. This was mainly due to lower mining
operational costs and reduced exploration, evaluation and corporate
costs.
Operating costs (excluding depreciation and amortisation) at the
mining division
Operating costs at the mining division decreased by $298.8
million to $875.3 million in the first six months of 2016, a
decrease of 25.4%. Of this decrease, $234.5 million is attributable
to lower mining operational costs. As explained above, copper sales
volumes decrease from 290,100 tonnes in the first half of 2015 to
272,000 tonnes in this period.
In addition, 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 $1.66/lb in first half of 2015 to
$1.38/lb in this period.
Exploration and evaluation costs decreased by $37.2 million to
$18.9 million (first half of 2015 - $56.1 million). This reflected
a general decrease in exploration activity, and in particular at
the Centinela District in Chile and the Twin Metals project in the
United States.
The income statement includes a charge for mine closure
rehabilitation of $3.5 million (first half of 2015 - charge of $9.0
million). This mainly reflects lower costs at Michilla and to a
lesser extent Los Pelambres.
Operating costs (excluding depreciation, amortisation and
disposals) at the transport division
Operating costs at the transport division decreased by $2.0
million to $41.1 million, mainly reflecting lower diesel
prices.
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
$12.9 million or 2.3% to $571.6 million in the first six months of
2016 (first six months of 2014 - $558.7 million).
EBITDA includes the Group's proportional share of EBITDA from
associates and joint ventures. Zaldívar contributed $37.1 million
in the first six months of 2016 (first half of 2015 - nil). Other
associates and joint ventures contributed $2.9 million.
EBITDA from the Group's mining subsidiaries decreased by 6.7%
from $527.7 million in the first half of 2015 to $492.6 million in
this period. As explained above, this was mainly due to the
decrease in the revenues resulting from the lower realised copper
price and copper volumes, partly offset by the lower unit cash cost
and lower exploration and evaluation expenses, and corporate
costs.
EBITDA at the transport division increased by $8.0 million to
$39.0 million in the first half of 2016, mainly reflecting the
increased revenue as explained above and lower operating costs.
Depreciation, amortisation and disposals
The depreciation, amortisation and disposals charge was
marginally higher at $247.3 million (first half of 2015 - $245.4
million), with increased depreciation at Los Pelambres and Antucoya
largely offset by reduced depreciation at Centinela.
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries decreased by 3.4% to $293.8 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 $9.7 million (first half of 2015 - loss of
$0.2 million). This mainly reflects the Group's share of results
from Zaldívar.
Net finance expense
Net finance expense in the first half of 2016 was $17.7 million,
compared with a net finance expense of $11.2 million in the first
half of 2015.
Six Six
months months
ended ended
30.06.16 30.06.15
$m $m
--------------------- ---------- ----------
Investment income 13.5 8.8
--------------------- ---------- ----------
Interest expense (32.0) (15.7)
--------------------- ---------- ----------
Other finance items 0.8 (4.2)
--------------------- ---------- ----------
Net finance expense (17.7) (11.1)
--------------------- ---------- ----------
Interest income increased from $8.8 million in first six months
of 2014 to $13.5 million in first six months of 2015.
Interest expense increased from $15.7 million in the first half
of 2015 to $32.0 million in the first half of 2016, mainly due to
the interest expense of Antucoya, which has been expensed since the
start of commercial production on 1 April 2016. Additionally, there
was higher corporate interest expense reflecting a new long-term
loan of $500 million taken out during the period.
Other finance items comprised a gain of $0.8 million (first half
of 2015 - loss of $4.2 million). A loss of $0.3 million (first half
of 2015 - gain of $0.1 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 gains included in finance items were $6.0
million in first half of 2016, compared with a gain of $0.2 million
in first half of 2015. An expense of $4.9 million (first half of
2015 - $4.7 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
decreased by $25.3 million or 8.4% to $276.1 million in the first
half of 2016 compared with $301.4 million in the first half of
2015.
Income tax expense
The tax charge in the first half of 2016 was $118.0 million
(first half of 2015 - $117.8 million) and the effective tax rate
was 42.7% (first half of 2015 - 39.6%).
Six Six
months months
ended Effective ended Effective
30.06.2016 tax 30.06.2015 tax
rate rate
$m % $m %
----------------------------------- ----------- ---------- ----------- ----------
Profit before tax from continuing
operations 276.1 297.3
----------------------------------- ----------- ---------- ----------- ----------
Taxes (Current and deferred)
----------------------------------- ----------- ---------- ----------- ----------
Corporate tax (82.2) 29.8 (79.4) 26.7
----------------------------------- ----------- ---------- ----------- ----------
Royalty (32.8) 11.8 (23.3) 7.8
----------------------------------- ----------- ---------- ----------- ----------
Withholding tax (8.3) 3.0 (14.8) 5.0
----------------------------------- ----------- ---------- ----------- ----------
Exchange rate 5.3 (1.9) (0.3) 0.1
----------------------------------- ----------- ---------- ----------- ----------
Total tax charge (118.0) 42.7 (117.8) 39.6
----------------------------------- ----------- ---------- ----------- ----------
The effective rate of corporate tax was 29.8% compared to the
statutory tax rate of 24.0%. The difference was principally due to
tax losses which under Chilean tax carry-back rules generated a
credit at historic tax rates below the current year statutory rate
(impact of $11.8 million / 4.3%) and the effect of expenses not
deductible for Chilean corporate tax purposes (principally the
funding of expenses outside of Chile) (impact of $8.7 million /
3.1). In addition, the overall effective tax rate reflects the
Chilean mining royalty charge of $32.8 million and a withholding
tax charge of $8.3 million. Further details are given in Note 7 of
the 2016 half yearly financial report.
Profit from discontinued operations
On 2 June 2015 the Group completed the disposal of the water
division and the resulting profit of $615.0 million has been
reflected as a profit from discontinued operations in the prior
year comparative figures.
Non-controlling interests
Profit for the first half of the year attributable to
non-controlling interests was $70.0 million, compared with $93.2
million in the first half of 2015, reflecting the lower profit
attributable to the non-controlling interests as a consequence of
the decrease in the earnings of the mining operations analysed
above.
Earnings per share
Six Six
months months
ended ended
30.06.16 30.06.15
$ cents $ cents
----------------------------------- ---------- ----------
Earnings per share from
continuing operations 8.9 9.2
------------------------------------ ---------- ----------
Earnings per share from
discontinued operations - 62.4
------------------------------------ ---------- ----------
Total earnings per share
from continuing and discontinued
operations 8.9 71.6
------------------------------------ ---------- ----------
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 2016 attributable
to equity shareholders of the Company was $88.1 million compared
with $90.8 million in the first half of 2015. Accordingly, earnings
per share from continuing operations were 8.9 cents in the first
half of 2016 compared with 9.2 cents in first half of 2015, a
decrease of 3.3%. Including the earnings from discontinued
operations, total earnings per share from continuing and
discontinued operations in the first half of 2015 were 71.6
cents.
Dividends
Dividends per share declared in relation to the period are as
follows:
Six Six
months months
ended ended
30.06.16 30.06.15
$ cents $ cents
----------------------------- ---------- ----------
Ordinary - -
----------------------------- ---------- ----------
Interim 3.1 3.1
------------------------------ ---------- ----------
Final - -
----------------------------- ---------- ----------
Total dividends to ordinary
shareholders 3.1 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 based
on net earnings for that year of at least 35%.
The Board has declared an interim dividend for the first half of
2016 of 3.1 cents per ordinary share, which amounts to $30.6
million and will be paid on 30 September 2016 to shareholders on
the Register at the close of business on 9 September 2016.
Capital expenditure
Capital expenditure decreased by $87.0 million from $595.9
million in the first half of 2015 to $508.9 million in the period.
This was mainly due to decreased construction costs at Antucoya
which is now in operation and the Encuentro Oxides project, partly
offset by increased expenditure in respect of Los Pelambres,
relating mainly to capitalised stripping costs. 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 2016 the
Group had entered into min/max contracts at Centinela for a
notional amount of 12,000 tonnes of copper production covering a
period up to 31 December 2016, with an average minimum price of
$2.11/lb and an average maximum price of $2.69/lb. The Group also
periodically uses interest rate swaps to swap the floating rate
interest for fixed rate interest. At 30 June 2016 the Group had
entered into contracts at Centinela for a maximum notional amount
of $105 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 $120 million at 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
30.06.16 30.06.15
$m $m
--------------------------------------- ---------- ----------
Cash flows from continuing
and discontinued operations 774.1 807.7
---------------------------------------- ---------- ----------
Income tax paid (257.5) (191.2)
---------------------------------------- ---------- ----------
Net interest paid (13.6) (10.6)
---------------------------------------- ---------- ----------
Disposal of subsidiary - 947.3
---------------------------------------- ---------- ----------
Capital contribution and
loan to associates (1.0) (39.4)
---------------------------------------- ---------- ----------
Capital increase from non-controlling - -
interest
--------------------------------------- ---------- ----------
Change in ownership interest - -
in subsidiary
--------------------------------------- ---------- ----------
Acquisition of available-for-sale - -
investments
--------------------------------------- ---------- ----------
Purchases of property, plant
and equipment (385.4) (662.3)
---------------------------------------- ---------- ----------
Acquisition of mining properties (7.0) (78.0)
---------------------------------------- ---------- ----------
Proceeds from sale of property, 0.1 -
plant and equipment
--------------------------------------- ---------- ----------
Dividends paid to equity
holders of the Company - (96.6)
---------------------------------------- ---------- ----------
Dividends paid to non-controlling (40.0) -
interests
--------------------------------------- ---------- ----------
Dividends from associates 13.6 6.6
---------------------------------------- ---------- ----------
Other items (115.1) -
--------------------------------------- ---------- ----------
Changes in net cash relating
to cash flows (31.8) 683.5
---------------------------------------- ---------- ----------
Exchange and other non-cash
movements 15.7 61.7
---------------------------------------- ---------- ----------
Movement in net cash in the
period (16.1) 745.2
---------------------------------------- ---------- ----------
Net cash at the beginning
of the year (1,023.5) (1.6)
---------------------------------------- ---------- ----------
Net cash/(debt) at the end
of the year (1,039.6) 743.6
---------------------------------------- ---------- ----------
Cash flows from continuing and discontinued operations were
$774.1 million in the first half of 2016 compared with $807.7
million in the first half of 2015. This reflected EBITDA from
subsidiaries for the period of $531.6 million[1] (first half of
2015 - $558.7 million) adjusted for a net working capital decrease
of $242.5 million (first half of 2015 - decrease of $226.4
million).
Cash tax payments in the first half of 2016 year were $257.5
million (first half of 2015 - $191.2 million), comprising corporate
tax of $255.3 million (first half of 2015 - $165.6 million), mining
tax of $2.2 million (first half of 2015 - $11.7 million) and
withholding tax of $12.9 million (first half of 2015 - $12.9
million). These amounts differ from the current tax charge in the
consolidated income statement of $118.0 million (first half of 2015
- $117.8 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.
At 30 June 2015 the disposal of subsidiary amount of $947.3
million related to the disposal of Aguas de Antofagasta S.A., which
carried out of the Group's water operations.
Contributions and loans to associates and joint ventures of $1.0
million relates to the Group's share of the funding of the costs of
Energia Andina.
Cash disbursements relating to capital expenditure in the first
half of 2016 were $385.4 million compared with $662.3 million in
the first half of 2015. This included expenditure of $7.3 million
at Antucoya (first half of 2015 - $175.4 million), $262.1 million
relating to Centinela (first half of 2015 - $233.6 million) and
$94.4 million relating to Los Pelambres (first half of 2015 -
$101.8 million).
At 30 June 2015 dividends paid to ordinary shareholders of the
Company were $96.6 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 $40 million (first half of 2015 - nil).
Financial position
At 30.06.16 At 30.06.15
$m $m
------------------------- ------------ ------------
Cash, cash equivalents
and liquid investments 2,180.1 3,220.0
--------------------------- ------------ ------------
Total borrowings (3,219.7) (2,476.4)
--------------------------- ------------ ------------
Net cash/(debt)
at the end of the
period (1,039.6) 743.6
--------------------------- ------------ ------------
[1] EBITDA excluding the Group's share of EBITDA from associates
and joint ventures.
At 30 June 2016 the Group had combined cash, cash equivalents
and liquid investments of $2,180.1 million (30 June 2015 - $3,220.0
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 $1,801.8 million (30
June 2014 - $2,785.0 million).
New borrowings in the first half of 2016 were $656.8 million
(first half of 2015 - $357.3 million), including new short-term
borrowings at Los Pelambres of $160.0 million and new long-term
borrowings at Corporate of $496.8 million. Repayments of borrowings
and finance leasing obligations in the first half of 2016 were
$307.2 million, relating mainly to repayments at Los Pelambres of
$229.9 million and Centinela $75.0 million.
Total Group borrowings at 30 June 2016 were $3,219.7 million (at
30 June 2015 - $2,479.4 million). Of this, $2,410.1 million (at 30
June 2015 - $1,754.8 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 down-side 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 2015. 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
ended ended Year ended
30.06.2016 30.06.2015 31.12.2015
(Unaudited) (Unaudited)
Notes $m $m $m
Group revenue 2,3 1,448.0 1,775.9 3,394.6
Total operating costs (1,163.9) (1,463.1) (3,090.2)
----------- ----------- ----------------------------
Operating profit from subsidiaries 2,3 284.1 312.8 304.4
Share of results from associates
and joint ventures 3 9.7 (0.2) (5.8)
----------- ----------- ----------------------------
Total profit from operations, associates
and joint ventures 2,3 293.8 312.6 298.6
Investment income 13.5 8.8 18.1
Interest expense (32.0) (15.6) (33.7)
Other finance items 0.8 (4.4) (23.6)
----------- ----------- ----------------------------
Net finance expense 6 (17.7) (11.2) (39.2)
----------- ----------- ----------------------------
Profit before tax 276.1 301.4 259.4
Income tax expense 7 (118.0) (117.4) (160.4)
----------- ----------- ----------------------------
Profit for the period from continuing
operations 158.1 184.0 99.0
=========== =========== ============================
Discontinued operations
Profit for the period from discontinued
operations 8 - 615.0 602.7
----------- ----------- ----------------------------
Profit for the period 158.1 799.0 701.7
=========== =========== ============================
Attributable to:
Non-controlling interests 70.0 93.2 93.5
Owners of the parent 88.1 705.8 608.2
----------- ----------- ----------------------------
US cents US cents US cents
Basic earnings per share 9
From continuing operations 8.9 9.2 0.6
From discontinued operations - 62.4 61.1
----------- ----------- ----------------------------
Total continuing and discontinued
operations 8.9 71.6 61.7
Condensed Consolidated Statement of Comprehensive Income
Six months Six months
ended ended Year ended
30.06.2016 30.06.2015 31.12.2015
(Unaudited) (Unaudited)
Notes $m $m $m
Profit for the period 158.1 799.0 701.7
Items that may be reclassified subsequently
to profit or loss:
Gains/(losses) in fair value of cash flow
hedges deferred in reserves (3.6) 2.5 1.7
Share of other comprehensive losses of
associates and joint ventures, net of tax (17.5) 0.7 (16.0)
Gains/(losses) in fair value of available-for-sale
investments 13 1.2 (1.3) (3.2)
Currency translation adjustment 8 - (3.9) (1.8)
Deferred tax effects arising on cash flow
hedges deferred in reserves 1.3 (0.3) -
Losses/(gains) in fair value of cash flow
hedges transferred to the income statement 5 3.6 2.5 5.8
Losses in fair value of available-for-sale
investments transferred to income statement 6 - - 1.0
Deferred tax effects arising on amounts
transferred to the income statement (0.9) (0.5) (1.3)
----------- ----------- -----------
Total items that may be reclassified subsequently
to profit or loss (15.9) (0.3) (13.8)
Items that will not be subsequently reclassified
to profit or loss:
Actuarial (losses)/gains on defined benefit
plans (2.3) (5.7) 3.8
Tax on items that will not be reclassified 1.1 0.9 (1.2)
----------- ----------- -----------
Total Items that will not be subsequently
reclassified to profit or loss (1.2) (4.8) 2.6
Total other comprehensive income (17.1) (5.1) (11.2)
Total comprehensive income for the period 141.0 793.9 690.5
=========== =========== ===========
Attributable to:
Non-controlling interests 70.0 93.8 90.9
Owners of the parent 71.0 700.1 599.6
----------- ----------- -----------
Condensed Consolidated Statement of Changes in Equity
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 six months ended 30 June 2015 (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
2015 89.8 199.2 (47.4) 5,932.1 6,173.7 1,861.0 8,034.7
Profit for the
period - - - 705.8 705.8 93.2 799.0
Other comprehensive
expense for the
period - - (4.4) (1.4) (5.8) 0.6 (5.1)
Dividends - - - (96.6) (96.6) (80.0) (176.6)
Balance at 30
June 2015 89.8 199.2 (51.8) 6,540.0 6,777.2 1,874.8 8,652.0
========= ========= ========== ========== ======== ============= ========
For the year ended 31 December 2015 (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
2015 89.8 199.2 (47.4) 5,932.1 6,173.7 1,861.0 8,034.7
Profit for the
year - - - 608.2 608.2 93.5 701.7
Other comprehensive
expense for the
year - - (11.9) 3.3 (8.6) (2.6) (11.2)
Loss of control
in subsidiaries - - - - - (13.3) (13.3)
Capital contribution
from non-controlling
interests - - - - - 14.6 14.6
Dividends - - - (127.2) (127.2) (80.0) (207.2)
Balance at 31
December 2015 89.8 199.2 (59.3) 6,416.4 6,646.1 1.873.2 8,519.3
========= ========= ========== ========== ======== ============= ========
Dividends
Dividends to ordinary shareholders Notes Six Six Year
of the Company months months ended
ended ended 31.12.2015
30.06.2016 30.06.2015
Per share US US US
cents cents cents
Dividends per share proposed
in relation to the period 10
- ordinary dividend (interim) 3.1 3.1 3.1
- ordinary dividend (final) - - -
3.1 3.1 3.1
============ ================== =============
Dividends per share paid in
the period and deducted from
net equity
- ordinary dividend (interim) - - -
- ordinary dividend (final) - 9.8 9.8
- 9.8 9.8
============ ================== =============
In aggregate $m $m $m
Dividends proposed in relation
to the period 10 30.6 30.6 30.6
Dividends paid in the period
and deducted from net equity - 96.6 127.2
============ ================== =============
Condensed Consolidated Balance Sheet
At 30.06.2016 At 30.06.2015 At 31.12.2015
(Unaudited) (Unaudited) (Audited)
Non-current assets Notes $m $m $m
Intangible asset 11 150.1 150.1 150.1
Property, plant and equipment 12 8,799.1 8,535.1 8,601.1
Investment property 2.6 2.2 2.0
Inventories 213.9 233.8 263.9
Investment in associates
and in joint ventures 1,081.3 161.4 1,146.6
Trade and other receivables 308.1 233.9 292.9
Available-for-sale investments 13 4.1 4.5 2.7
Deferred tax assets 150.3 144.6 124.6
10,709.5 9,465.6 10,583.9
-------------- -------------- --------------
Current assets
Inventories 364.7 442.4 297.1
Trade and other receivables 385.9 511.6 604.8
Current tax assets 341.8 129.5 319.5
Derivative financial instruments 5 0.4 0.1 0.2
Liquid investments 19 1,602.4 1,366.8 924.1
Cash and cash equivalents 19 577.7 1,853.2 807.5
-------------- -------------- --------------
3,272.9 4,303.6 2,953.2
Total assets 13,982.4 13,769.2 13,537.1
============== ============== ==============
Current liabilities
Short-term borrowings 15 (813.2) (465.8) (758.9)
Derivative financial instruments 5 (1.9) (2.9) (2.0)
Trade and other payables (464.7) (806.0) (478.9)
Current tax liabilities (25.6) (254.3) (198.8)
(1,305.4) (1,529.0) (1,438.6)
-------------- -------------- --------------
Non-current liabilities
Medium and long-term borrowings 15 (2,406.5) (2,010.6) (1,996.2)
Derivative financial instruments 5 (2.1) (2.8) (1.5)
Trade and other payables (4.5) (3.2) (24.4)
Post-employment benefit obligations (100.1) (102.6) (86.9)
Decommissioning & restoration
and other long term provisions (399.6) (432.3) (394.0)
Deferred tax liabilities (1,143.9) (1,036.7) (1,076.2)
(4,056.7) (3,588.2) (3,579.2)
-------------- -------------- --------------
Total liabilities (5,362.1) (5,117.2) (5,017.8)
============== ============== ==============
Net assets 8,620.3 8,652.0 8,519.3
Equity
Share capital 16 89.8 89.8 89.8
Share premium 16 199.2 199.2 199.2
Other reserves 17 (74.9) (73.4) (59.3)
Retained earnings 17 6,503.0 6,561.6 6,416.4
Equity attributable to owners
of the parent 6,717.1 6,777.2 6,646.1
Non-controlling interests 1,903.2 1,874.8 1,873.2
Total equity 8,620.3 8,652.0 8,519.3
============== ============== ==============
The interim condensed consolidated financial statements were
approved by the Board of Directors on 15 August 2016.
Condensed Consolidated Cash Flow Statement
Six Six
months months
ended ended
Year
ended
30.06.2016 30.06.2015 31.12.2015
(Unaudited) (Unaudited) (Audited)
Notes $m $m $m
Cash flows from operating
activities 18 774.1 807.7 858.3
Interest paid (20.5) (20.2) (38.6)
Income tax paid (257.5) (191.2) (427.1)
Net cash from operating activities 496.1 596.3 392.6
-------------- ------------- ------------
Investing activities
Capital contributions and
loans to associates and joint
ventures (1.0) (39.4) (112.0)
Acquisition of joint ventures 16 - - (972.8)
Dividends from associate 13.6 6.6 12.1
Acquisition of available-for-sale
investments 13 - - (0.2)
Disposal of subsidiaries 8 - 947.3 942.9
Acquisition of mining properties 13 (7.0) (78.0) (78.0)
Proceeds from sale of property
plant and equipment 12 0.1 - 1.6
Purchases of property, plant
and equipment 12 (385.4) (662.3) (1,048.5)
Net (increase)/decrease in
liquid investments (678.3) 162.3 605.0
Interest received 6.9 9.6 11.1
Net cash (used)/from in investing
activities (1,051.1) 346.1 (638.9)
-------------- ------------- ------------
Financing activities
Dividends paid to equity
holders of the Company - (96.6) (127.2)
Dividends paid to preference
shareholders of the Company (0.1) (0.1) (0.2)
Dividends paid to non-controlling
interests (40.0) - (80.0)
Capital increase from non-controlling
interests - - 14.6
Net proceeds from issue of
new borrowings 15 656.8 357.3 725.9
Repayments of borrowings 15 (292.5) (182.9) (276.4)
Repayments of obligations
under finance leases 15 (14.7) (5.7) (11.9)
Net cash generated from financing
activities 309.5 72.0 244.8
-------------- ------------- ------------
Net (decrease)/ increase
in cash and cash equivalents (245.5) 1,014.4 (1.5)
============== ============= ============
Cash and cash equivalents
at beginning of the period 807.5 845.4 845.4
Net (decrease)/increase in
cash and cash equivalents 19 (245.5) 1,014.4 (1.5)
Effect of foreign exchange
rate changes 19 15.7 (6.6) (36.4)
Cash and cash equivalents
at end of the period 19 577.7 1,853.2 807.5
============== ============= ============
Notes
1. General information and accounting policies
a) General information
These June 2016 interim condensed consolidated financial
statements ("the condensed financial statements") are for the six
months ended 30 June 2016. The condensed financial statements are
unaudited.
The information for the year ended 31 December 2015 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
2015 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 2016
The Antucoya operation achieved commercial production in 1 April
2016, and its revenue and costs have accordingly been recognised in
the income statement from that date onwards.
c) Basis of preparation
The annual financial statements of Antofagasta plc for the year
ended 31 December 2015 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 2015 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 2015.
d) Change in estimation
The Group has revised its estimation of deferred stripping costs
which has impacted the amounts capitalised at the Los Pelambres
mine during the first six months of 2016, where $61 million of
deferred stripping costs have been capitalised during the
period.
e) Going concern
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 down-side 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.
f) Adoption of new accounting standards
The following accounting standards, amendments and
interpretations became effective in the current reporting
period:
-- IFRS 14 Regulatory Deferral Accounts
-- IAS 19 Defined Benefit Plans, Employee Contributions (Amendments to IAS 19)
-- Annual improvements 2010 - 2012 Cycle - improvements to six IFRSs
-- Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
-- Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38)
-- Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
-- Equity Method in Separate Financial Statements (Amendments to IAS 27)
-- Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
-- Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 28)
-- Disclosure Initiative (Amendments to IAS 1)
The application of these standards and interpretations effective
for the first time in the current period has had no significant
impact on the amounts reported in these condensed consolidated
financial statements.
Accounting standards issued but not yet effective applied
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
-------------------------------- -------------------------
Amendments to IFRSs Effective date (Subject
to EU endorsement)
---------------------------------- -------------------------
Recognition of Deferred Annual periods beginning
Tax Assets for Unrealized on or after January
Losses (Amendments to IAS 1, 2017
12)
---------------------------------- -------------------------
Disclosure Initiative (Amendments Annual periods beginning
to IAS 7) on or after January
1, 2017
---------------------------------- -------------------------
Annual improvements 2012 Annual periods beginning
- 2014 Cycle - improvements on or after July
to four IFRSs 1, 2016
---------------------------------- -------------------------
The Group is continuing to evaluate the impact of adopting these
new standards and interpretations.
The Group is continuing to evaluate in detail the potential
impact of IFRS 9 Financial Instruments and IFRS 15 Revenue from
contracts with customers but does not currently expect these to
have a material impact. In respect of IFRS 16 Leases the Group is
not yet able to estimate the impact of the new rules on the Group's
financial statements. The Group will make more detailed assessments
of the impact.
2. Total profit from operations, associates and joint ventures
Six Six
months months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Group revenue 1,448.0 1,775.9 3,394.6
Cost of sales (including
depreciation, amortization
and disposal) (936.9) (1,174.8) (2,478.9)
Gross profit 511.1 601.1 915.7
Administrative and distribution
expenses (194.5) (210.6) (455.7)
Other operating income 7.8 6.2 37.6
Other operating expenses (40.3) (83.9) (193.2)
Operating results of the
parents and subsidiaries 284.1 312.8 304.4
Share of income/(loss)
from associates and joint
ventures 9.7 (0.2) (5.8)
Total profit from operations,
associates and joint ventures 293.8 312.6 298.6
============ ============ ============
3. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Michilla
-- Antucoya
-- Zaldivar
-- Exploration and evaluation
-- Railway and other transport services
-- Water concession
-- Corporate and other items
For management purposes, the Group is organised into three
business divisions based on their products - Mining, Railway and
Other Transport Services and the Water concession. The mining
division is split further for management reporting purposes to show
results by mine and exploration activity. Los Pelambres, Centinela
and Antucoya are operating mines, Michilla was placed on care and
maintenance at the end of 2015, Zaldivar, in which the Group has
acquired a 50% stake, was acquired in December 2015. 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. Michilla,
Antucoya and Zaldivar produce copper cathodes. 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 water division produced and
distributed potable water to domestic customers and untreated water
to industrial customers in Chile's Antofagasta Region, this segment
had been disposed of during H1 2015. 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.
Management 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.
Zaldivar, in which the Group has acquired 50% stake in December
2015, has been included as new segment in 2016.
a) Segment revenues and results
For the six months ended 30 June 2016
Los Centinela Michilla 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 $m
Revenue 847.5 449.3 3.8 67.3 - - - 1,367.9 80.1 1,448.0
Cost of
sales (412.1) (363.9) (9.0) (51.1) - (18.9) (20.3) (875.3) (41.1) (916.4)
Depreciation
and
amortization (96.7) (123.4) - (16.7) - - (3.2) (240.0) (7.3) (247.3)
(Loss)/gains
on disposals (0.2) - - - - - - (0.2) - (0.2)
----------------- ---------- ---------- ----------
Operating
profit/(loss) 338.5 (38.0) (5.2) (0.5) - (18.9) (23.5) 252.4 31.7 284.1
Share of
results
from associates
and joint
ventures 1.2 - - - 12.2 - (5.7) 7.7 2.0 9.7
Investment
income 7.6 3.1 0.4 0.2 - - 1.8 13.1 0.4 13.5
Interest
expense (3.0) (15.0) - (9.7) - - (3.0) (30.7) (1.3) (32.0)
Other finance
items 1.1 (4.0) 2.9 0.8 - - 0.9 1.7 (0.9) 0.8
----------------- ---------- ---------- ----------
Profit/(loss)
before tax 345.4 (53.9) (1.9) (9.2) 12.2 (18.9) (29.5) 244.2 31.9 276.1
Tax (91.7) (0.8) 1.8 (11.1) - - (5.7) (107.5) (10.5) (118.0)
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period from
continuing
operations 253.7 (54.7) (0.1) (20.3) 12.2 (18.9) (35.2) 136.7 21.4 158.1
Profit for - - - - - - - - - -
the period
from
discontinued
operations
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the
period 253.7 (54.7) (0.1) (20.3) 12.2 (18.9) (35.2) 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
(Net earnings) 152.1 (33.0) (0.1) (10.4) 12.2 (18.9) (35.2) 66.7 21.4 88.1
================= ========== ========== ========= ========== ========= ============== ========== ========== ========== ==========
Total EBIDTA(1) 435.0 85.4 (5.2) 16.2 37.1 (18.9) (24.5) 525.1 46.5 571.6
================= ========== ========== ========= ========== ========= ============== ========== ========== ========== ==========
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 92.0 2,015.4 - 9.5 1,422.0 12,549.8 351.3 12,901.1
Investment
in associates
and joint
ventures 18.3 - - - - - 991.4 1,009.7 71.6 1,081.3
Segment
liabilities (1,404.1) (2,040.3) (50.3) (1,244.8) - (4.5) (442.7) (5,186.7) (175.4) (5,362.1)
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------
(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 six months ended 30 June 2015
Los Centinela Michilla Antucoya Exploration Corporate Total Railway Water Total
Pelambres and and Mining and concession
evaluation(1) other other
items transport
services
$m $m $m $m $m $m $m $m $m $m
Revenue 918.3 688.4 95.1 - - - 1,701.8 74.1 - 1,775.9
Cost of
sales (521.5) (470.8) (84.5) - (56.1) (41.2) (1,174.1) (43.1) - (1,217.2)
Depreciation
and
amortization (86.3) (151.3) - - - (1.1) (238.7) (6.7) - (245.4)
(Loss)/gain
on disposals (0.7) - - - - - (0.7) 0.2 - (0.5)
----------------- ---------- ---------- ----------- ----------
Operating
profit/(loss) 309.8 66.3 10.6 - (56.1) (42.3) 288.3 24.5 - 312.8
Share of
results
from associates
and joint
ventures (0.9) - - - - (3.5) (4.4) 4.2 - (0.2)
Investment
income 4.6 1.9 0.3 - - 1.6 8.4 0.4 - 8.8
Interest
expense (0.6) (12.7) - - - (0.6) (13.9) (1.7) - (15.6)
Other finance
items (1.3) 2.5 0.5 (1.1) - (2.9) (2.3) (2.1) - (4.4)
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
before
tax 311.6 58.0 11.4 (1.1) (56.1) (47.7) 276.1 25.3 - 301.4
Tax (94.3) (5.9) (2.2) 2.6 - 1.9 (97.9) (19.5) (117.4)
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
period
from continuing
operations 217.3 52.1 9.2 1.5 (56.1) (45.8) 178.2 5.8 - 184.0
(Loss)/profit
for the
period
from
discontinued
operations - - - - - - - (4.5) 619.5 615.0
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
period 217.3 52.1 9.2 1.5 (56.1) (45.8) 178.2 1.3 619.5 799.0
Non-controlling
interests (84.3) (9.7) (0.1) 0.4 - - (93.7) 0.5 - (93.2)
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
period
attributable
to owners
of the
parent
(Net earnings) 133.0 42.4 9.1 1.9 (56.1) (45.8) 84.5 1.8 619.5 705.8
================= ========== ========== ========= ========== ============== ========== ========== ========== =========== ==========
EBITDA 391.1 210.4 10.6 - (56.1) (41.2) 527.7 26.5 - 558.7
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Additions to
non-current
assets
Capital
expenditure 92.8 222.9 - 132.5 - 124.1 572.3 7.2 16.4 595.9
----------------- ---------- ---------- --------- ---------- -------------- ---------- ---------- ---------- ----------- ----------
Segment assets
and liabilities
Segment
assets 3,861.8 5,081.9 174.5 1,787.4 181.7 1,242.2 12,374.5 1,310.0 - 13,607.9
Investment
in associates
and joint
ventures 45.0 - - - - 31.6 76.6 84.7 161.3
Segment
liabilities (1,352.2) (2,004.1) (96.5) (1,073.7) (4.5) (106.8) (4,637.8) (479.4) - (5,117.2)
(1) During the period, operating cash outflow from exploration
and evaluation was $43.5 million
For the year ended 31 December 2015
Los Centinela Michilla Antucoya Zaldivar Exploration Corporate Total Railway Water Total
Pelambres and and Mining and concession
evaluation(1) other other
items transport
services
$m $m $m $m $m $m $m $m $m $m $m
Revenue 1,807.2 1,266.1 168.9 - - - - 3,242.2 152.4 - 3,394.6
Cost of
sales (1,057.9) (1,027.7) (154.8) - - (101.9) (67.6) (2,409.9) (94.0) - (2,503.9)
Depreciation
and
amortization (191.6) (367.6) - - - - (3.1) (562.3) (13.8) - (576.1)
(Loss)/gains
on disposals (2.7) (1.8) 1.3 - - - (4.4) (7.6) (2.6) - (10.2)
----------------- ---------- ---------- ----------- ----------
Operating
profit/(loss) 555.0 (131.0) 15.4 - - (101.9) (75.1) 262.4 42.0 - 304.4
Share of
results
from associates
and joint
ventures (3.7) - - - (2.8) - (7.5) (14.0) 8.2 - (5.8)
Investment
income 10.2 4.3 0.6 - - - 2.2 17.3 0.8 - 18.1
Interest
expense (1.8) (27.1) - - - - (1.8) (30.7) (3.0) - (33.7)
Other finance
items (4.6) (9.7) 0.6 (3.4) - - (7.5) (24.6) 1.0 - (23.6)
----------------- ---------- ---------- ----------- ----------
Profit/(loss)
before tax 555.1 (163.5) 16.6 (3.4) (2.8) (101.9) (89.7) 210.4 49.0 - 259.4
Tax (161.8) 49.6 (6.0) (21.8) - - 1.8 (138.2) (22.2) - (160.4)
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
period from
continuing
operations 393.3 (113.9) 10.6 (25.2) (2.8) (101.9) (87.9) 72.2 26.8 - 99.0
(Loss)/profit
for the
period from
discontinued
operations - - - - - - - - (13.1) 615.8 602.7
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
year 393.3 (113.9) 10.6 (25.2) (2.8) (101.9) (87.9) 72.2 13.7 615.8 701.7
Non-controlling
interests (151.8) 46.5 (0.2) 11.9 - - - (93.6) 0.1 - (93.5)
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the
period
attributable
to owners
of the parent
(Net earnings) 241.5 (67.4) 10.4 (13.3) (2.8) (101.9) (87.9) (21.4) 13.8 615.8 608.2
================= ========== ========== ========= ========== ========= ============== ========== ========== ========== =========== ==========
EBITDA 749.3 238.4 14.1 - - (101.9) (67.6) 832.3 58.4 - 890.7
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
Additions to
non-current
assets
Capital
expenditure 188.3 535.1 - 147.9 - - 111.0 982.3 13.9 16.4 1,012.6
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
Segment assets
and liabilities
Segment
assets 3,753.3 5,013.0 122.7 1,974.4 - - 1,026.4 11,889.8 500.7 - 12,390.5
Investment
in associates
and joint
ventures 33.5 - - - 998.9 - 31.0 1,063.4 83.2 - 1,146.6
Segment
liabilities (1,205.9) (2,068.9) (46.0) (1,185.5) - - (151.6) (4,657.9) (359.9) - (5,017.8)
----------------- ---------- ---------- --------- ---------- --------- -------------- ---------- ---------- ---------- ----------- ----------
(1) During the year, operating cash outflow from exploration and
evaluation was $38.3 million
b) Entity wide disclosures
Revenue by product
Six Six
months months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Copper
- Los Pelambres 741.7 817.0 1,606.7
- Centinela concentrates 245.9 339.7 626.6
- Centinela cathodes 113.3 238.0 432.3
- Michilla 3.8 95.1 168.9
- Antucoya 67.3 - -
Gold
- Los Pelambres 40.1 26.9 60.7
- Centinela 84.5 102.1 191.3
Molybdenum
- Los Pelambres 43.8 59.7 105.3
Silver
- Los Pelambres 21.9 14.7 34.5
- Centinela 5.6 8.5 15.9
------------ ------------ ------------
Total Mining 1,367.9 1,701.8 3,242.2
Railway and transport
services 80.1 74.1 152.4
1,448.0 1,775.9 3,394.6
============ ============ ============
Revenue by location of customer
Six Six
months months
ended ended Year ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Europe
- United Kingdom 0.1 2.7 19.1
- Switzerland 93.5 72.7 175.2
- Spain 48.8 28.7 54.1
- Germany 15.9 63.2 167.0
- Rest of Europe 58.7 46.3 70.6
Latin America
- Chile 101.5 85.6 167.0
- Rest of Latin America 29.4 17.2 74.1
North America
- United States 14.1 61.0 107.3
Asia Pacific
- Japan 613.0 615.7 1,147.0
- China 250.2 444.1 782.4
- Rest of Asia 222.8 338.7 630.8
------------ ------------ ------------
1,448.0 1,775.9 3,394.6
============ ============ ============
Information about major customers
In the first half of 2016 the Group's mining revenue included
$279.2 million related to one large customer that individually
accounted for more than 10% of the Group's revenue (six months
ended 30 June 2015 - one large customer representing $351.0
million; year ended 31 December 2015 - one large customer
representing $426.0 million).
Non-current assets by location of asset
Six Six
months months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
- Chile 10,384.6 9,270.6 10,284.6
- Bolivia - 26.0 -
- USA 170.6 171.2 171.2
- Other (0.1) (1.3) 0.8
10,555.1 9,316.5 10,456.6
============ ============ ============
The non-current assets balance disclosed by location of assets
excludes financial instruments, available-for-sale investments and
deferred tax assets.
4. 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 2016
Los Michilla Antucoya Los Los
Pelambres Centinela Centinela Pelambres Centinela Pelambres
Gold Gold
Copper Copper Copper Copper Copper in 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
(losses)/gains
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 period ended 30 June 2015
Los Michilla Los Los
Pelambres Centinela Centinela Pelambres Centinela Pelambres
Gold Gold
Copper Copper Copper Copper in in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
$m $m $m $m $m $m $m
Provisionally
invoiced
gross sales 978.2 418.2 242.5 97.1 27.0 105.3 80.2
Effects of
pricing
adjustments to
previous year
invoices
Reversal of
mark-to-market
adjustments at
the end of the
previous year 45.5 19.6 1.4 0.4 - 1.8 2.0
Settlement of
sales
invoiced in
the
previous year (101.6) 49.6 (5.7) (2.3) - 3.6 (7.1)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments to
previous year
invoices
in the current
period (56.1) 69.2 (4.3) (1.9) - 5.4 (5.1)
------------ ------------ ---------- --------- ------------ ------------ ------------
Effects of
pricing
adjustments to
current period
invoices
Settlement of
sales
invoiced in
the
current period 14.3 (83.4) 1.2 (0.2) - (6.6) (2.8)
Mark-to-market
adjustments at
the end of the
current period (31.9) (18.9) (1.3) 0.1 - (1.6) (4.2)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments to
current period
invoices (17.6) (102.3) (0.1) (0.1) - (8.2) (7.0)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total pricing
adjustments (73.7) (33.1) (4.4) 2.0 - (2.8) (12.1)
Realised
(losses)/gains
on commodity
derivatives - - (0.1) - - - -
Revenue before
deducting
tolling
charges 904.5 385.1 238.0 95.1 27.0 102.5 68.1
Tolling charges (87.5) (45.4) - - (0.1) (0.4) (8.4)
Revenue net of
tolling
charges 817.0 339.7 238.0 95.1 26.9 102.1 59.7
============ ============ ========== ========= ============ ============ ============
For the year ended 31 December 2015
Los Michilla Los Centinela Los
Pelambres Centinela Centinela Pelambres Pelambres
Gold Gold
Copper Copper Copper Copper in in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
$m $m $m $m $m $m $m
Provisionally
invoiced
gross sales 2,001.6 805.8 443.4 173.3 63.0 200.7 147.0
Effects of
pricing
adjustments to
previous
year invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year 45.5 19.6 1.4 0.4 - 1.8 2.0
Settlement of
sales
invoiced in
the
previous year (100.4) (49.8) (5.6) (2.3) - 3.6 (7.1)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments to
previous
year invoices
in
the current
year (54.9) (30.2) (4.2) (1.9) - 5.4 (5.1)
------------ ------------ ---------- --------- ------------ ------------ ------------
Effects of
pricing
adjustments to
current
year invoices
Settlement of
sales
invoiced in
the
current year (126.7) (47.6) (7.1) (2.6) (2.1) (11.8) (19.8)
Mark-to-market
adjustments
at the end of
the
current year (14.5) (6.2) 0.2 0.1 - (2.2) 1.0
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments to
current
year invoices (141.2) (53.8) (6.9) (2.5) (2.1) (14.0) (18.8)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total pricing
adjustments (196.1) (84.0) (11.1) (4.4) (2.1) (8.6) (23.9)
Realised gains
on
commodity
derivatives - - - - - - -
Revenue before
deducting
tolling
charges 1,805.5 721.8 432.3 168.9 60.9 192.1 123.1
Tolling charges (198.8) (95.2) - - (0.2) (0.8) (17.8)
Revenue net of
tolling
charges 1,606.7 626.6 432.3 168.9 60.7 191.3 105.3
============ ============ ========== ========= ============ ============ ============
The revenue from the individual products shown in
the above tables is reconciled to total Group 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 June 2016 sales totalling 161,400 tonnes remained open as
to price, with an average mark-to-market price of $2.20/lb compared
with an average provisional invoice price of $2.15/lb.
At 30 June 2015 sales totalling 159,000 tonnes remained open as
to price, with an average mark-to-market price of $2.61/lb compared
with an average provisional invoice price of $2.75/lb.
At 31 December 2015, sales totalling 184,400 tonnes remained
open as to price, with an average mark-to-market price of $2.13/lb
compared with an average provisional invoice price of $2.18/lb.
(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 June 2016 sales totalling 5,400 tonnes remained open as to
price, with an average mark-to-market price of $2.15/lb compared
with an average provisional invoice price of $2.07/lb.
At 30 June 2015 sales totalling 13,800 tonnes remained open as
to price, with an average mark-to-market price of $2.61/lb compared
with an average provisional invoice price of $2.66/lb.
At 31 December 2015, sales totalling 7,700 tonnes remained open
as to price, with an average mark-to-market price of $2.13/lb
compared with an average provisional invoice price of $2.12
/lb.
(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 June 2016 sales totalling 34,900 ounces remained open as
to price, with an average mark-to-market price of $1,317/oz
compared with an average provisional invoice price of
$1,251/oz.
At 30 June 2015 sales totalling 58,100 ounces remained open as
to price, with an average mark-to-market price of $1,170/oz
compared with an average provisional invoice price of
$1,197/oz.
At 31 December 2015, sales totalling 50,300 ounces remained open
as to price, with an average mark-to-market price of $1,061/oz
compared with an average provisional invoice price of
$1,105/oz.
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is
approximately two months from shipment date.
At 30 June 2016 sales totalling 1,000 tonnes remained open as to
price, with an average mark-to-market price of $7.9/lb compared
with an average provisional invoice price of $6.9/lb.
At 30 June 2015 sales totalling 2,000 tonnes remained open as to
price, with an average mark-to-market price of $7.0/lb compared
with an average provisional invoice price of $7.9/lb.
At 31 December 2015, sales totalling 1,900 tonnes remained open
as to price, with an average mark-to-market price of $5.1/lb
compared with an average provisional invoice price of $4.8/lb.
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
Year
ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Los Pelambres - copper
concentrate 13.3 (31.9) (14.5)
Los Pelambres - molybdenum
concentrate 2.1 (4.2) 1.0
Centinela - copper concentrate 4.4 (18.9) (6.2)
Centinela - gold in concentrate 2.3 (1.6) (2.2)
Centinela - copper cathodes 0.1 (1.3) 0.2
Antucoya - copper cathodes 1.0 - -
Michilla - copper cathodes - 0.1 0.1
23.2 (57.8) (21.6)
============== ============= ============
5. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
Six
Six months months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Financial assets
Derivatives in designated hedge
accounting relationships 0.4 0.1 0.2
Available-for-sale-investments 4.1 4.5 2.7
Loans and receivables at amortised
cost (including cash
and cash equivalents) 1,271.7 2,598.7 1,703.9
Fair value through profit and
loss (liquid investments and
mark-to-mark debtors) 1,625.6 1,366.8 925.4
Financial liabilities
Derivatives in designated hedge
relationships (4.0) (5.7) (3.5)
Financial liabilities measured
at amortised cost (3,688.9) (3,227.8) (3,235.5)
Fair value through profit and
loss (mark-to-mark creditors) - (57.8) (22.9)
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 Level Level
1 2 3 Six Six
months months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
Recurring fair
value $m $m
measurements $m $m $m $m
Financial assets
Derivatives in
designated
hedge accounting
relationships - 0.4 - 0.4 0.1 0.2
Available-for-sale
investments 4.1 - - 4.1 4.5 2.7
Fair value through
profit
and loss 1,625.6 - - 1,625.6 1,366.8 925.4
Debtors
mark-to-market - 23.2 - 23.2 - 1.3
Financial
liabilities
Derivatives in
designated
hedge
relationships - (4.0) - (4.0) (5.7) (3.5)
Creditors
mark-to-market - - - - (57.8) (22.9)
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting period.
Non-recurring fair value measurements are those that are
required in particular circumstances e.g. when the recoverable
amount of an asset is determined to be fair value less cost to sell
according to IAS 36 Impairment of assets. There were no
non-recurring fair value measurements in the six months ending 30
June 2016.
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 2016 and 30 June 2015, 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 2016
Fair value
recorded
Impact on income Impact on balance
statement on reserves sheet
Realised Losses Total Gains/(losses) Net financial
gains/(losses) resulting net resulting asset/(liability)
from mark-to-market loss from mark-to-market
adjustments adjustments
on hedging on 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 six months ended 30 June 2015
Fair value
recorded
Impact on balance
Impact on income statement on reserves sheet
Realised Losses Total Gains/(losses) Net financial
gains/(losses) resulting net resulting asset/(liability)
from mark-to-market gain/(loss) from mark-to-market
adjustments adjustments
on hedging on hedging
instruments instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela (0.1) - (0.1) (0.1) 0.1
Foreign
Exchange
Derivatives
Antucoya 0.2 - 0.2 3.8 -
Interest
Derivatives
Centinela (1.9) - (1.9) 1.4 (4.6)
Railway
and other
transport
services (0.7) - (0.7) (0.1) (1.1)
-- (2.5) - (2.5) 5.0 (5.6)
================ ===================== ============= ===================== ===================
For the year ended 31 December 2015
Fair
value
recorded
Impact on balance
Impact on income statement on reserves sheet
Realised Losses resulting Total Gains/(losses) Net financial
gains/(losses) from net resulting asset/(liability)
mark-to-market gain/(loss) from
adjustments mark-to-market
on hedging adjustments
instruments on hedging
instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela (0.1) - (0.1) 0.4 0.1
Foreign Exchange
Derivatives
Antucoya 0.2 - 0.2 4.0 -
Interest
Derivatives
Centinela (3.6) - (3.6) (2.9) (2.9)
Railway and
other transport
services (2.3) - (2.3) (0.5) (0.5)
----------------
(5.8) - (5.8) 1.0 (3.3)
================
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 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Analysed between:
Current assets 0.4 0.1 0.2
Current liabilities (1.9) (2.9) (2.0)
Non-current liabilities (2.1) (2.8) (1.5)
(3.6) (5.6) (3.3)
(ii) Outstanding derivative financial instruments
a) Commodity derivatives
The Group periodically uses commodity derivatives to manage its exposure to commodity price
fluctuations.
- Min/max instruments At 30.06.2016 For instruments held at 30.06.2016
Weighted
average
Copper remaining
production period from 1 Weighted Weighted
hedged July 2016 Covering a average floor average cap
tonnes months period up to: US cents/lb US cents/lb
Centinela 12,000 0.6 31.12.2016 465 594
b) Interest derivatives
The Group periodically uses interest derivatives to reduce its exposure to interest rate movements.
- 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 105.0 3.372
Railway and other
transport services 12.08.2014 12.08.2019 120.0 1.634
The actual notional amount hedge depends upon the amount of the related debt currently outstanding.
6. Net finance expense
Six months Six months
ended ended
30.06.2016 30.06.2015 Year ended 31.12.2015
$m $m $m
Investment income
Interest receivable 9.8 6.8 16.7
Fair value through profit
or loss 3.7 2.0 1.4
---------------------
13.5 8.8 18.1
---------------------
Interest expense
Interest expense (31.9) (15.5) (33.5)
Preference dividends (0.1) (0.1) (0.2)
(32.0) (15.6) (33.7)
Other finance items
Time value element of
changes in the fair value
of derivatives options (0.3) 0.1 0.1
Unwinding of discount
on provisions (4.9) (4.7) (9.1)
Impairment of available-for-sale
investments - - (1.0)
Foreign exchange 6.0 0.2 (13.6)
0.8 (4.4) (23.6)
Net finance expense (17.7) (11.2) (39.2)
In the six months ended 30 June 2016, $8.9 million relating to
net interest expense and other finance items at Antucoya (six
months ended 30 June 2015 - $24.0 million; year ended 31 December
2015 - $29.6 million), $19.0 million at Centinela (six months ended
30 June 2015 - $12.7 million; year ended 31 December 2015 - $4.1
million) and $2.0 million at Los Pelambres (six months ended 30
June 2015 - $0.6 million; year ended 31 December 2015 - $1.2
million) was capitalised during the period, and is consequently not
included within the above table.
7. Taxation
The tax charge for the period comprised the following:
Six months Six months
ended ended
30.06.2016 30.06.2015 Year ended 31.12.2015
$m $m $m
Current tax charge
Corporate tax (principally first category tax in Chile) (57.1) (65.3) (41.6)
Mining tax (royalty) (13.2) (12.3) (20.4)
Withholding tax (8.3) (12.9) (12.9)
Exchange gain/(losses) on corporate tax balances 5.3 (0.3) (1.0)
(73.3) (90.8) (75.9)
Deferred tax credit/(charge)
Corporate tax (principally first category tax in Chile) (25.1) (13.7) (69.0)
Mining tax (royalty) (19.6) (11.0) (13.6)
Withholding tax provision - (1.9) (1.9)
(44.7) (26.6) (84.5)
Total tax charge (income tax expense) (118.0) (117.4) (160.4)
The rate of first category (i.e. corporate) tax in Chile is
currently 24% (six months ended 30 June 2015 - 22.5%; year ended 31
December 2015 - 22.5%).
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.
On 29 September 2014 a significant reform of the Chilean system
was enacted into law. This introduced two alternative future
taxation systems - the partially-integrated system (the default
system for the Group's Chilean subsidiaries) or the attributable
system. The Group has been accounting for deferred tax on the basis
that it would apply the default partially-integrated system. On 1
February 2016 a Simplification of the Tax Reform was enacted into
law. This specifies that for entities such as the Group's Chilean
subsidiaries, whose members are corporate entities and not
individual persons, only the partially-integrated system can be
applied. Given that the Group has already been accounting for
deferred tax on the basis that it would apply the default
partially-integrated system this has not resulted in any accounting
impact for the Group.
Under the partially-integrated system the corporate tax rate
will be 25.5% in 2017 and 27% from 2018 onwards. The immediate
shareholders of the Chilean subsidiaries will pay withholding tax
based on the cash distributions made by those subsidiary companies,
as with the current tax system. If the subsidiary company's
shareholders are tax resident in countries with applicable tax
treaties with Chile (as is the case for the Group) the withholding
tax will be 35%, less first category tax at the rate it was paid,
so if the company distributes all of its earnings the total
corporate and withholding tax burden will be 35%.
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, Antucoya and Michilla 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 ended Six months ended Year ended
30.06.2016 30.06.2015 31.12.2015
$m % $m % $m %
Profit before tax 276.1 297.3 259.4
Tax at the Chilean corporate tax rate of 24% (2015 -
22.5%) (66.3) 24.0 (66.9) 22.5 (58.4) 22.5
Effect of increase in future first category tax rates on
deferred tax balances 1.7 (0.6) (11.5) 3.9 (8.9) 3.4
Items not subject to or deductible from first category
tax (8.7) 3.1 (1.0) 0.3 (17.1) 6.6
Carry-back tax losses resulting in credits at historic
tax rates (11.8) 4.3 - - (25.8) 9.9
Mining Tax (royalty) (32.8) 11.8 (23.3) 7.8 (34.0) 13.1
Withholding tax - - (14.8) 5.0 (14.8) 5.7
Withholding tax - adjustment to previous year (8.3) 3.0 - - - -
Tax effect of share of results of associates and joint
ventures 2.3 (0.8) (0.3) 0.1 (0.5) 0.2
Net other items 5.9 (2.1) - - (0.9) 0.3
Tax expense and effective tax rate for the period (118.0) 42.7 (117.8) 39.6 (160.4) 61.8
The tax charge for 2016 was $118.0 million and the effective tax
rate was 42.7 %. In 2016 the effective tax rate varied from the
statutory rate principally due to tax losses which under Chilean
tax carry-back rules generated a credit at historic tax rates below
the current year statutory rate (impact of $11.8 million / 4.3%),
the effect of expenses not deductible for Chilean corporate tax
purposes (principally the funding of expenses outside of Chile)
(impact of $8.7 million / 3.1 %) and the mining tax (impact of
$32.8 million / 11.8 %) and withholding tax charge (impact of $8.3
million / 3.0%).
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
8. Discontinued operations
(i) On 24 April 2015 the Group entered into a sale agreement to
dispose of Aguas de Antofagasta S.A. ("ADASA"), which carried out
of the group's water operations. The disposal was completed on 2
June 2015. On 28 August 2015, the Group disposed of its 100%
interest in Empresa Ferroviaria Andina S.A. ("FCA").The results of
ADASA and FCA for the period prior to disposal as well as the
profit on disposal have been presented on the "Profit for the
period from discontinued operations" line in the income statement,
reflecting the following amounts:
Six months
ended
30.06.2016 Six months ended 30.06.2015 Year ended 31.12.2015
ADASA FCA Total ADASA FCA Total
$m $m $m $m $m $m $m
Turnover - 53.9 10.0 63.9 53.9 12.9 66.8
Total operating costs - (34.9) (14.1) (49.0) (34.9) (20.2) (55.1)
Net finance income - (0.1) - (0.1) (0.1) (0.2) (0.3)
Profit before tax - 18.9 (4.1) 14.8 18.9 (7.5) 11.4
Attributable tax expense - (3.9) (0.4) (4.3) (3.9) - (3.9)
Profit of discontinued operations - 15.0 (4.5) 10.5 15.0 (7.5) 7.5
Profit on disposal of discontinued
operations(1) - 857.6 - 857.6 853.2 (5.6) 847.6
Attributable tax expense(2) - (253.1) - (253.1) (252.4) - (252.4)
Net profit attributable to discontinued
operations (attributable to owners of
the Company) - 619.5 (4.5) 615.0 615.8 (13.1) 602.7
(1) Profit on disposal included a loss of $3.9 million and a
profit of $2.1 million related to the accumulated currency
translation adjustment relating to ADASA and FCA respectively (2015
- $3.9 million and a profit of $2.1 million), which has been
reclassified from translation reserves in other comprehensive
income to the income statement upon disposal.
(2) Tax expense includes $57.2 million (2015 - $57.2 million)
related to withholding tax.
During 2015, Aguas de Antofagasta S.A., contributed $21.7
million to the Group's net cash flow from operating activities,
$19.2 million in respect to net cash used in investing activities
and paid $2.0 million in net cash provided in financing
activities.
During 2015, Empresa Ferroviaria Andina, contributed $2.2
million to the Group's net cash flow from operating activities,
$2.1 million in respect to net cash used in investing activities
and paid $0.1 million in net cash provided in financing
activities.
(ii) Disposal of Aguas de Antofagasta S.A.
On 2 June 2015, the Group disposed of its 100% interest in Aguas
de Antofagasta S.A. ("ADASA").The proceeds on disposal of $967.2
million were received in cash. The gain on disposal of ADASA is
analysed below. No investment was retained in the former
subsidiary.
The net assets of Aguas de Antofagasta S.A. at the date of
disposal were as follows:
At
31.05.2015
Proceeds $m
Cash and cash equivalents 962.8
Asset Disposed of:
Intangibles 113.7
Property, plant and equipment 64.1
Inventories 2.0
Current tax asset 2.5
Trade and other receivables 23.7
Cash and cash equivalents 19.9
Trade payables (18.3)
Borrowings (80.2)
Retirement benefit obligation (2.8)
Long-term provision (1.6)
Deferred tax liabilities (13.4)
Total carrying amount disposed 109.6
Profit on disposal of discontinued operations (before tax) 853.2
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents 962.8
Less: Cash and cash equivalents disposed of (19.9)
942.9
(iii) Disposal of Empresa Ferroviaria Andina S.A.
On 28 August 2015, the Group disposed of its 100% interest in
Empresa Ferroviaria Andina S.A. ("FCA").The consideration of $1.3
million will be received in partial instalments during the next
years. The loss on disposal of FCA is analysed below. No investment
was retained in the former subsidiary.
At
31.08.2015
Proceeds $m
Cash and cash equivalents -
Asset Disposed of:
Property, plant and equipment 20.5
Trade and other receivables 6.6
Cash and cash equivalents 0.5
Other assets 4.6
Trade and other payables (2.7)
Borrowings (4.5)
Retirement benefit obligation (6.1)
Non-controlling interests (13.3)
Total carrying amount disposed 5.6
9. Earnings per share
Basic and diluted earnings per share is calculated on profit
after tax and non-controlling interests giving net earnings of
$88.1 million (six months ended 30 June 2015 - $705.8 million, year
ended 31 December 2015 - $608.2 million) and amounted to 8.9 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 3.1 cents per
ordinary share for the 2016 half year (2015 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 nil per ordinary share (2015 half year - 9.8 cents),
representing the final dividend declared in respect of the previous
year.
The interim dividend will be paid on 30 September 2016 to
ordinary shareholders that are on the register at the close of
business on 9 September 2016. Shareholders can elect (on or before
12 September 2016) 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 15 September 2016). 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 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Balance at the beginning of the period 150.1 118.6 118.6
Additions - -
Acquisition - 150.1 150.1
Disposal - (113.7) (113.7)
Amortisation - (2.4) (2.4)
Foreign currency exchange difference - (2.5) (2.5)
Balance at the end of the period 150.1 150.1 150.1
In January 2015 the Group completed its acquisition of 100% of
Duluth Metals Limited ("Duluth"). The principal asset of Duluth was
its 60% stake in Twin Metals Minnesota Limited ("Twin Metals"), a
company in which the Group held the remaining 40% stake as at
December 2014. This transaction has resulted in the Group
consolidating 100% of the assets and liabilities relating to Twin
Metals with effect from January 2015, including the above $150.1
million intangible asset reflecting the value of Twin Metals'
mining property assets. The mining properties acquired will be
amortised once production commences.
The prior year opening balance of $118.6 related to Aguas de
Antofagasta S.A.'s ("ADASA") 30 year concession to operate the
water rights and facilities in the Antofagasta Region of Chile.
This balance was disposed of as part of the sale of ADASA on 2 June
2015, as disclosed in Note 8.
12. Property, plant and equipment
Mining Railway and other transport At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m $m $m
Balance at the beginning of the
period 8,438.8 162.3 8,601.1 8,213.9 8,213.9
Additions 482.7 5.8 488.5 662.5 1,136.4
Acquisition - - - 20.8 20.8
Adjustment to capitalised
decommissioning provisions - - - - (35.7)
Depreciation (240.0) (7.3) (247.3) (252.5) (590.7)
Depreciation capitalised (42.8) - (42.8) (40.4) (44.9)
Assets derecognized due to loss of
control of subsidiary - - - - (84.6)
Asset disposals (0.3) (0.1) (0.4) (67.8) (12.3)
Foreign currency exchange
difference - - - (1.4) (1.8)
Balance at the end of the period 8,638.4 160.7 8,799.1 8,535.1 8,601.1
At 30 June 2016 $46.8 million (30 June 2015 - $40.4 million; 31
December 2015 - $44.9 million) of depreciation in respect of assets
relating to Los Pelambres, Centinela, Antucoya and Michilla 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 2016 the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $975.1 million (30 June 2015 - $401.7 million; 31
December 2015 - $283.1 million).
There have been no indicators of potential impairments during
the first six months of 2016, and accordingly no impairment reviews
have been performed as at 30 June 2016. The Group performed
impairment reviews in respect of the Centinela and Antucoya
operations at the 2015 year-end. For both Centinela and Antucoya
the recoverable amount indicated by the review was greater than the
carrying value of the assets, and accordingly no impairment charge
was recognised. The following sensitivities in respect of the
valuation estimates of Centinela and Antucoya are still considered
relevant to the assets as at 30 June 2016. The assumptions used in
the impairment review calculations which were considered to be
subject to the most estimation uncertainty were the long-term
copper price and the discount rate. To illustrate the sensitivity
of the valuations of Centinela and Antucoya to negative movements
in these parameters, a 5% decrease in the forecast long-term copper
price would have resulted in an impairment of $375 million at
Centinela and an impairment of $95 million at Antucoya, and an
increase in the discount rate from 8% to 9% would have resulted in
an impairment of $190 million at Centinela and an impairment of $50
million at Antucoya. These are simple sensitivities, looking at
illustrative movements in the long-term copper price and discount
rate in insolation. 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 the above
estimated potential impairment charges.
13. Available-for-sale investments
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Balance at the beginning
of the period 2.7 15.6 15.6
Additions - - 0.2
Reclassification - (9.4) (9.4)
Movements in fair value 1.2 (1.3) (3.2)
Disposal - - (0.2)
Foreign currency exchange
difference 0.2 (0.4) (0.3)
Balance at the end of
the period 4.1 4.5 2.7
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.
The reclassification of $9.4 million is related with the
acquisition of Duluth Metals Limited ("Duluth"). As at 31 December
2014 the Group held 17.2% of Duluth's share capital, with a fair
value of $9.4 million, accounted for as an available for sale
investment. As explained in Note 14, in January 2015 the Group
completed its acquisition of 100% of Duluth. Duluth holds a 60%
stake in Twin Metals Minnesota Limited ("Twin Metals"), a company
in which the Group held a 40% stake as at December 2014.
Accordingly, as a consequence of the acquisition of Duluth the
Group has a 100% interest in Duluth and as a result of this a 100%
interest in Twin Metals. From January 2015 Twin Metals has
therefore been consolidated as a 100% subsidiary of the Group, with
this $9.4 million balance forming part of the total consideration
reflected in the accounting for the acquisition of the
subsidiary.
14. Acquisition of 50% stake in Zaldívar
On 1 December 2015 Antofagasta completed its acquisition of a
50% stake in Compañia Minera Zaldívar SpA ("Zaldivar") from Barrick
Gold Corporation ("Barrick"), pursuant to an agreement entered into
on 30 July 2015. As a result, Antofagasta has become operator of
the Zaldivar mine. Zaldivar is an open-pit, heap-leach copper mine
located in Northern Chile, which produces approximately 100,000
tonnes of copper cathodes annually.
Given that Antofagasta and Barrick have joint control over
Zaldivar, Antofagasta is accounting for its 50% stake in Zaldivar
as a joint venture, using the equity method of accounting.
Total preliminary consideration for the transaction was $1,005.0
million in cash, subject to adjustments based on the net debt and
working capital levels of Zaldivar at the completion date. The net
debt and working capital adjustments were finalised in August 2016
and resulted in a final adjusted consideration of $949.7 million.
Including capitalised acquisition costs of $7.0 million the initial
investment in joint venture balance is therefore $956.7 million.
The allocation of the fair values of the individual assets and
liabilities effectively contained within the overall investment in
joint venture balance will be completed within 12 months of the
acquisition date.
15. Borrowings
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Los Pelambres
Corporate loans (34.6) (69.8) (52.3)
Short-term loan (272.1) (246.0) (312.1)
Finance leases (74.4) (10.1) (7.9)
Centinela
Project financing (senior debt) (817.5) (887.3) (889.8)
Shareholder loan (subordinated debt) (178.5) (170.6) (174.5)
Short-term loan (200.0) - (200.0)
Antucoya
Project financing (senior debt) (567.0) (623.3) (630.2)
Shareholder loan (subordinated debt) (322.7) (282.2) (308.7)
Short-term loan (104.9) - (30.0)
Finance leases - (0.6) -
Corporate and other items
Long-term loan (496.9) - -
Finance leases (26.3) (27.8) (24.6)
Railway and other transport services
Long-term loans (119.2) (148.6) (119.1)
Finance leases (2.5) (2.5) (2.9)
Andino
Bonds - (3.0) -
Short-term loans - (1.5) -
Preference shares (3.1) (3.1) (3.0)
Total (3,219.7) (2,476.4) (2,755.1)
At 30 June 2016 $100.7 million (30 June 2015 - $48.0 million; 31
December 2015 - $30.5 million) of the borrowings has fixed rate
interest and $3,119.1 million (30 June 2015 - $2,428.4 million; 31
December 2015 - $2,724.6 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 $225.0 million of floating rate borrowings into fixed
rate borrowings. Details of any derivative instruments held by the
Group are given in Note 5(c).
During the period de Group entered into a loan agreement of
$500.0 million. This borrowing has variable interest rate of LIBOR
six-months plus 1.5% spread with a duration of five years.
16. Share capital and share premium
There was no change in share capital or share premium in the six
months ended 30 June 2016 or the comparative periods.
17. Other reserves and retained earnings
At At At
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Hedging reserves (1)
At 1 January (44.1) (36.2) (36.2)
Parent and subsidiaries net cash flow hedge fair value gains/(losses) (3.6) 2.5 0.1
Parent and subsidiaries net cash flow hedge gains/(losses) transferred to the
income statement 3.6 2.5 3.5
Share of other comprehensive losses of equity accounted units, net of tax (17.5) (3.9) (10.2)
Tax on the above 0.7 (0.3) (1.3)
At 30 June (60.9) (35.4) (44.1)
Available for sale revaluation reserves (2)
At 1 January (12.9) (10.7) (10.7)
Losses on available for sale investment 1.2 (1.3) (3.2)
Losses on available for sale securities transferred to the income statement - - 1.0
Tax on the above - - -
At 30 June (11.7) (12.0) (12.9)
Foreign currency translation reserves (3)
At 1 January (2.3) (0.5) (0.5)
Parent and subsidiaries currency translation and exchange adjustments - - -
Currency translation reclassified on disposal - (3.9) (1.8)
Tax on the above - - -
At 30 June (2.3) (4.4) (2.3)
Total other reserves per balance sheet (74.9) (51.8) (59.3)
Retained earnings (4)
At 1 January 6,416.4 5,932.1 5,932.1
Parent and subsidiaries profit for the period 78.4 706.0 614.0
Equity accounted units' loss after tax for the period 9.7 (0.2) (5.8)
Actuarial gains/(losses) (5) (1.5) (5.3) 4.5
Tax relating to components of other comprehensive income - 3.9 (1.2)
Total comprehensive income for the period 6,503.0 6,636.5 6,543.6
Change in ownership interest in subsidiaries - - -
Capital increase in non-controlling interest - - -
Dividends paid - (96.6) (127.2)
At 30 June 6,503.0 6,540.0 6,416.4
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognized 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 13.
(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.
18. Reconciliation of profit before tax to net cash inflow from
operating activities
Six months Six months
ended ended
30.06.2016 30.06.2015 Year ended 31.12.2015
$m $m $m
Profit before tax from
continuing and discontinued
operations 276.1 1,173.8 1,118.4
Depreciation and amortisation 247.3 252.5 576.1
Net profit on disposals 0.2 1.3 10.2
Profit on disposal of
discontinued operation - (857.6) (859.0)
Net finance expense 17.7 11.1 39.2
Share of results from
associates and joint ventures (9.7) 0.2 5.8
(Increase)/decrease in
inventories (13.8) (46.0) 60.5
Decrease in debtors 254.4 251.9 137.7
Increase in creditors
and provisions 1.9 20.5 (230.6)
Cash flows from continuing
and discontinued operations 774.1 807.7 858.3
19. Analysis of changes in net (debt)/cash
Cash
At 01.01.2016 flows Other Exchange At 30.06.2016
$m $m $m $m $m
Cash and cash equivalents 807.5 (245.5) - 15.7 577.7
Liquid investments 924.1 678.3 - - 1,602.4
Total cash and cash equivalents and liquid investments 1,731.6 432.8 - 15.7 2,180.1
Bank borrowings due within one year (753.4) 72.2 (107.2) - (788.4)
Bank borrowings due after one year (1,963.3) (496.8) 135.0 - (2,325.1)
Finance leases due within one year (5.5) 13.9 (32.9) (0.3) (24.8)
Finance leases due after one year (29.9) 2.1 (48.5) (2.1) (78.4)
Preference shares (3.0) - (0.1) - (3.1)
Total borrowings (2,755.1) (408.6) (53.7) (2.4) (3,219.8)
Net (debt)/cash (1,023.5) 24.2 (53.7) 13.3 (1,039.7)
Net cash
Net cash at the end of each period was as follows:
Six months Six months
ended ended
30.06.2016 30.06.2015 Year ended 31.12.2015
$m $m $m
Cash, cash equivalents and liquid investments 2,180.1 3,220.0 1,731.6
Total borrowings (3,219.7) (2,476.4) (2,755.1)
(1,039.6) 743.6 (1,023.5)
20. Litigation and Contingent liabilities
Antofagasta plc or its subsidiaries are subject to various
claims which arise in the ordinary course of business. No provision
has been made in the financial statements and 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 - Mauro tailings dam
Two civil claims filed by some members of the Caimanes community
(which is located near the Mauro tailings dam) seeking to stop the
operation of the dam have been ongoing for a number of years.
Following the agreement reached between Los Pelambres and the
Caimanes community in April, one of these claims - a claim in which
the plaintiffs sought demolition of the dam wall on the basis of
the risk that its collapse would pose to the community - was
finally settled before the Supreme Court in August.
In the second claim, the plaintiffs had argued that the tailings
dam affected their alleged water rights and the environment. This
allegation was based on assertions that the dam interfered with the
flow and quality of the water in the Pupío stream, a stream that
passes through the valley in which the dam is built down to the
Caimanes community. This claim was rejected by the trial Court of
Los Vilos in a judgement issued in November 2012, which was then
affirmed by the Court of Appeals of La Serena in August 2013. In
October 2014, the Supreme Court, by a 3-2 majority decision, upheld
the appeal and ordered Los Pelambres to submit back to the trial
Court of Los Vilos, within one month, an implementation plan for
works that would ensure that the operation of the dam did not
affect the normal flow and quality of the waters of the Pupío
stream. That Court decided that the plan submitted by Los Pelambres
was not sufficient to address the requirements of the Supreme Court
order, and that as a consequence Los Pelambres must demolish part,
or all, of the tailings dam wall. Los Pelambres appealed the
Court's decision and in December 2015 the Court of Appeals ordered
that, before it issues its decision, a Court appointed engineer
must review the plan submitted by Los Pelambres and issue a report
explaining whether or not the proposed works are enough to ensure
that the flow of the Pupío stream to the Caimanes community is not
altered by the operation of the tailings dam and, if the proposed
works are not deemed to be sufficient to achieve this purpose, what
additional or other works must be performed by Los Pelambres to
achieve this goal. This report was submitted in June 2016 and
confirmed that the proposed works are sufficient to comply with the
decision of the Supreme Court. The Court of Appeal issued its final
decision earlier in August 2016 accepting the plan of works. Los
Pelambres has six months to submit the final details of the work
plan to the Court, including the additional works set out in the
agreement reached with the Caimanes community. It remains probable
that the claimants in this case will seek leave from the Supreme
Court of Chile to appeal this decision, however the Supreme Court
will need to determine whether or not to accept that appeal in
light of the surrounding circumstances and only if the appeal were
accepted, would the Supreme Court be required to consider anything
more substantive. Taking into account the agreement between Los
Pelambres and the Caimanes community and the report issued by the
independent expert appointed by the Court of Appeal of La Serena,
Los Pelambres does not expect there to be a successful appeal in
this case.
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 this area without making the changes
public.
In February 2012, a binational border commission, established to
clarify the exact position of the Chile/Argentina border,
determined accurately the location of the border in the area of the
Cerro Amarillo Waste Dump, showing 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.
Xstrata Pachón has also filed a criminal complaint before a
different 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 people's
health was in jeopardy from the alleged contamination that the
Cerro Amarillo Waste Dump might generate.
In both cases, Los Pelambres has submitted preliminary
objections to the Argentinian courts.
In the civil case, a final decision on these preliminary
objections is still pending and substantive arguments will not be
made until and unless these preliminary objections are finally
rejected.
In the meantime, and in accordance with a preliminary measure
required by the Federal Court of San Juan, Los Pelambres and the
Province of San Juan executed an agreement in April 2016 by means
of which Los Pelambres has committed itself to perform a
preventative process to isolate any environmental impacts of the
Cerro Amarillo Waste Dump, regularly monitor underground and
surface waters, and undertake other additional actions requested by
the Province.
In the criminal proceedings, in March 2016, the Federal Court of
Appeals of Mendoza held that the Argentinian courts had
jurisdiction to hear this matter and MLP has taken steps to appeal
this decision.
Los Pelambres will exercise all available legal avenues to
defend its position and will continue to take steps to implement
the environmental isolation of the Cerro Amarillo Waste Dump in
accordance with the agreement reached with the Province of San Juan
and the requirements of the Federal Court of San Juan.
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 2016 the Group contribution was nil (six months ended
30 June 2015 - $2.1 million; year ended 31 December 2015 - $4.0
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. The balance due from Energía Andina S.A. to the Group
at during the six months ended 30 June 2016 was nil (six months
ended 30 June 2015 - nil; year ended 31 December 2015 was less than
$0.1 million).
During the six months ended 30 June 2016 the Group contributed
$1.0 million to Energia Andina. (six months ended 30 June 2015
-$0.6 million; year ended 31 December 2015 - $1.3 million).
The Group's 50% interest in Minera Zaldivar which was acquired
on 1 December 2015 (see Note 14), which is a joint venture with
Barrick Gold Corporation. Antofagasta is the operator of Zaldivar
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 2016 The Group paid $70.0 million (six
months ended 30 June 2015 -$62.5 million; 2015 - $130.1 million) to
Inversiones Hornitos in relation to the energy supply contract at
Centinela. During the six months ended 30 June 2016 the Group has
received dividends from Inversiones Hornitos S.A. for $13.6 million
(six months ended 30 June 2015 - $6.6 million; year ended 31
December 2015 - $12.1 million).
The Group has a 30% interest in Parque Eólico El Arrayán S.A.
("El Arrayán"). During the six months ended 30 June 2016 The Group
paid $19.9 million (six months ended 30 June 2015 - $21.9 million;
year ended 31 December 2015 - $42.0 million) to El Arrayan in
relation to the energy supply at Los Pelambres.
The Group has a 40% interest in Alto Maipo SpA ("Alto Maipo").
During the six months ended 30 June 2016 the Group has not made
capital contributions to Alto Maipo. The balance due from Alto
Maipo to the Group at six months ended 30 June 2015 was $235.2
million (Six months ended 30 June 2015 - $164.4 million; year ended
31 December 2015 -$229.7 million) representing loan financing with
an interest rate of LIBOR six-months plus 4.25%.
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 2016
the Group incurred $2.3 million (Six months ended 30 June 2015 -
$2.3 million; year ended 31 December 2015 - $4.2 million) of
exploration work 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
J-P Luksic WM Hayes
Chairman Director
15 August 2016
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 2016. 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 Rules and Transparency Rules 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 2016;
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
Rules and Transparency Rules 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 Rules and Transparency Rules 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 Rules and Transparency Rules 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
Ireland) 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
15 August 2016
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
30.06.2016 30.06.2015 Year ended 31.12.2015 30.06.2016 30.06.2015 Year ended 31.12.2015
000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 172.1 169.4 363.2 173.6 163.4 366.0
Centinela 98.1 118.4 221.1 83.4 110.5 224.4
Antucoya 27.0 - 12.2 26.0 - 9.2
Michilla - 15.6 29.4 0.9 16.2 30.8
Zaldivar 26.0 - 4.4 25.5 - 5.5
Group total 323.3 303.4 630.3 309.4 290.1 635.9
Gold 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 29.0 22.3 51.4 32.6 22.5 53.4
Centinela 80.5 90.1 162.5 64.5 83.5 165.8
Group total 109.5 112.4 213.9 97.1 106.0 219.2
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 3.3 4.7 10.1 3.1 4.4 9.9
Silver 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 1,286.7 1,035.0 2,451.9 1,392.0 899.9 2,281.9
Centinela 482.0 592.6 1,028.5 356.2 537.3 1,055.1
Group total 1,768.7 1,627.6 3,480.3 1,748.2 1,437.2 3,337.0
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
30.06.2016 30.06.2015 Year ended 31.12.2015 30.06.2016 30.06.2015 31.12.2015
$/lb $/lb $/lb $/lb $/lb $/lb
Copper
Los Pelambres 1.02 1.36 1.23 2.18 2.51 2.24
Centinela 1.53 1.67 1.85 2.17 2.56 2.33
Antucoya 1.82 - n/a 2.15 - 2.49
Michilla - 2.25 2.14 1.85 2.67 0.00
Zaldivar (attributable
basis - 50%) 1.50 - 1.73 2.15 - 0.00
Group weighted average (net
of by-products) 1.26 1.53 1.50 2.17 2.54 2.28
Group weighted average
(before deducting
by-products) 1.60 1.88 1.81
Group weighted average
(before deducting
by-products and excluding
tolling charges from
concentrate) 1.38 1.66 1.58
Cash costs at Los Pelambres
comprise:
On-site and shipping costs 1.06 1.40 1.24
Tolling charges for
concentrates 0.26 0.27 0.27
Cash costs before deducting
by-product credits 1.33 1.67 1.51
By-product credits
(principally molybdenum) (0.30) (0.31) (0.28)
Cash costs (net of
by-product credits) 1.02 1.36 1.23
Cash costs at Centinela
comprise:
On-site and shipping costs 1.83 1.94 2.07
Tolling charges for
concentrates 0.22 0.20 0.20
Cash costs before deducting
by-product credits 2.06 2.13 2.27
By-product credits
(principally gold) (0.53) (0.46) (0.42)
Cash costs (net of
by-product credits) 1.53 1.67 1.85
LME average 2.13 2.69 2.50
Gold $/oz $/oz $/oz
Los Pelambres 1,232 1,203 1,141
Centinela 1,316 1,227 1,159
Group weighted average 1,288 1,222 1,155
Market average price 1,219 1,206 1,160
Molybdenum
Los Pelambres 7.4 7.0 5.7
Market average price 6.1 8.0 6.7
Silver $/oz $/oz $/oz
Los Pelambres 16.1 16.4 15.4
Centinela 16.0 16.4 15.4
Group weighted average 16.1 16.5 15.5
Market average price 15.8 15.9 15.4
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, 70% of Antucoya and 99.9% of Michilla.
For the Zaldivar 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, Michilla and Zaldivar 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, Michilla and
Zaldivar 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 2016, published on 27 July 2016.
[1] EBITDA excluding the Group's share of EBITDA from associates
and joint ventures.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFLFMIFMSEIA
(END) Dow Jones Newswires
August 16, 2016 02:00 ET (06:00 GMT)
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