TIDMANTO
RNS Number : 3337Z
Antofagasta PLC
14 March 2017
NEWS RELEASE, 14 MARCH 2017
PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEARED 2016
Delivering profitable growth
Antofagasta plc CEO Iván Arriagada said: "2016 has been a year
of operational delivery for Antofagasta putting us on a stronger
and larger production base from which to grow. The successful
integration of Zaldívar and the ramp-up of Antucoya - alongside the
completion of the expansion of Centinela Concentrates - have
contributed to a 12.5% rise in copper production to 709,400
tonnes.
"But volume increases are not the whole story at Antofagasta. We
are focused on growth through profitable tonnes. A combination of
measures to boost productivity, improve efficiencies and reduce
costs has led to sustainable mine site cost reductions of $176
million in 2016. This performance helped cash flow from operations
increase by 70% to $1.5 billion during the year whilst our EBITDA
margins improved from 28% to 45%. In the medium term we expect to
see a steady shift from a copper market in balance to a slight
deficit, leading to further improvement in prices.
The Board has decided that in view of the Company's improved
performance and the more positive outlook to declare a final
dividend of 15.3 cents per share, bringing the dividend for the
full year to 18.4 cents per share, which represents 53% of
underlying earnings per share, significantly more than the
company's commitment to pay-out a minimum of 35%.
"Antofagasta's cautious approach has served us well in what is a
cyclical industry, providing us with a stable operating base and a
strong balance sheet. As a company we were founded with an
entrepreneurial spirit, one that looks for opportunities where
others do not see them and it is this attitude - combined with a
continued commitment to capital discipline - that informs our
outlook. Consequently, our focus in 2017 is on developing those
projects that offer all our stakeholders the best returns - such as
the incremental expansion at Los Pelambres, which we expect to
approve by the end of the year - and will underpin the continued
success of Antofagasta."
HIGHLIGHTS
Financial performance
-- EBITDA(1) for the full year was $1,626.1 million, 78.7%
higher than the previous year as operating costs (before
exceptional items) fell by 8.1% and revenue increased by 12.3%
-- EBITDA margin(2) strengthened to 44.9%, up from 28.2% in the
same period last year, and 40.8% in first six months of 2016 as
prices and volumes increased in the second half of the year
-- Operating cash flow generation of $1,457.3 million, up 69.8%
compared to same period last year on the back of stronger margins
and higher production
-- Capital expenditure down by 24.2% to $795.1 million, compared
to 2015 as the Antucoya project and Centinela expansion were
completed during the year.
-- Operating cost reduction of $242 million, of which $176
million was achieved under the Cost and Competitiveness Programme
reducing mine site costs by 11c/lb.
-- Exceptional items during the year of $386.4 million after
tax, which includes the previously announced write off of the
Group's interest in Alto Maipo, and an impairment charge against
Antucoya.
-- Earnings per share from continuing operations and before
exceptional items of 34.7 cents per share, a 35.2 cents increase on
2015.
-- Earnings per share from continuing and discontinued
operations after exceptional items of 16.0 cents per share as
reported in the financial statements, compared to 61.7 cents per
share in the previous year.
-- Final dividend of 15.3 cents per share declared, bringing the
total dividend for the year to 18.4 cents per share, a 15.3 cents
per share increase compared to 2015 and, at 53%, is above the
Company's minimum payout policy of 35% of underlying net earnings
per share.
Operating performance
-- Safety. Regrettably there were two fatal accidents during the
year, one at Antucoya and the other in the Transport Division. The
Group remains committed to achieving zero fatalities and reducing
Lost Time Incidents and is continually working to strengthen and
deepen the safety culture at all its operations. In the last five
years the Lost Time Injury Frequency Rate (LTIFR) has fallen by
40%.
-- Group copper production increased to 709,400 tonnes by 12.5%
compared to 2015. This was driven by higher copper production at
Centinela and additional production coming from the Group's new
Antucoya and Zaldívar operations, partly offset by the closure of
Michilla at the end of 2015
-- Group cash costs(1) before by-product credits were $1.54/lb,
27c/lb lower than last year as a result of the successful cost
savings achieved during the year, higher production and the
previously announced change in the estimation method for deferred
stripping costs
-- Group net cash costs(1) were $1.20/lb, 20.0% lower than in
2015. This reflected the lower cash costs before by-product
credits, higher gold production and higher realised prices for gold
and molybdenum, partly offset by lower molybdenum production
Outlook for 2017
-- Group production in 2017 is expected to be 685-720,000 tonnes
of copper (as previously announced), 185-205,000 ounces of gold and
8,500-9,500 tonnes of molybdenum.
-- Group cash cost before by-product credits in 2017 (as
previously announced) are expected to be similar to this year's at
$1.55/lb and net cash cost are expected to be approximately
$1.30/lb.
-- Further cost savings of $140 million under the Cost and
Competitiveness Programme are included in the unit cost guidance
figures
-- Capital expenditure for 2017 is estimated at less than $900
million with some $100 million carried over from 2016
Other
-- Los Pelambres Incremental Expansion feasibility study
completed. High return $1.05 billion investment, increasing copper
production by 55,000 tpa over 15 years from 2020.
-- Long standing court cases at Los Pelambres resolved during
the year, focus now on long term value creation for the company and
all its stakeholders
YEARING 31 DECEMBER 2016 2015 %
------------------------------------------------- ------- --------- ----------- -------
Group revenue $m 3,621.7 3,225.7(3) 12.3
EBITDA (1) $m 1,626.1 910.1(3) 78.7
EBITDA margin (2) % 44.9 28.2(3) 59.2
Underlying Earnings per share (continuing
operations, before exceptional items) cents 34.7 (0.5)(3) -
Earnings per share (continuing and discontinued
operations, after exceptional items) cents 16.0 61.7(4) (74.1)
Dividend per share cents 18.4 3.1 493.5
Cash flow from operations (continuing
& discontinued) $m 1,457.3 858.3 69.8
Capital expenditure (5) $m (795.1) (1,048.5) (24.2)
Attributable net debt at period end(1) $m (499.5) (525.0) (4.9)
Average realised copper price $/lb 2.33 2.28 2.2
-------
Copper sales kt 698.5(6) 635.9 9.8
Gold sales koz 271.4 219.2 23.8
Molybdenum sales kt 7.2 9.9 (27.3)
Cash costs before by-product credits(1) $/lb 1.54 1.81 (14.9)
Net cash costs(1) $/lb 1.20 1.50 (20.0)
------------------------------------------------- ------- --------- ----------- -------
Note: The financial results are prepared in accordance with
IFRS, unless otherwise noted below.
(1) Non IFRS measures. Refer to the alternative performance
measures in Note 31 to the preliminary results announcement
(2) Calculated as EBITDA/Group revenue. If Associates and JVs
revenue is included EBITDA margin was 41.1% in 2016 and 27.3% in
2015.
(3) Restated to exclude Michilla
(4) Includes the sale of the water division
(5) On a cash basis
(6) Includes pre-commercial production sales at Antucoya of 11,800 tonnes.
The 2016 Preliminary Results Presentation is available for
download from the website www.antofagasta.co.uk.
This announcement contains inside information
Investors - London Media - London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Paresh Bhanderi pbhanderi@antofagasta.co.uk Will Medvei antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors - Santiago Media - Santiago
Alfredo Atucha aatucha@aminerals.cl Pablo Orozco porozco@aminerals.cl
Telephone +56 2 2798 7000 Carolina Pica cpica@aminerals.cl
Telephone +56 2 2798 7000
DIRECTORS' COMMENTS FOR THE YEARED 2016
2016 FINANCIAL HIGHLIGHTS
Group revenue in 2016 was $3,621.7 million, 12.3% higher than in
2015. The increase of $396.0 million mainly reflected an increase
in copper sales volumes and the realised copper price, as well as
higher gold and silver revenue. This increase in revenue was
reflected in EBITDA, which coupled with lower cash costs, increased
by 78.7% to $1,626.1 million, generating an EBITDA margin of 44.9%.
Earnings per share from continuing operations for the year were
34.7 cents, before 22.6 cents relating to the impairment provisions
and 3.9 cents relating to discontinued operations, an increase of
35.2 cents compared with 2015. Cash flow from operations
strengthened by 69.8% to $1.5 billion compared with $0.9 billion in
the previous year.
During the year, there was a significant improvement in the
underlying performance of the Group's operations with copper
production increasing by 12.5% to 709,400 tonnes, compared to 2015.
While this was in part driven by higher production at Centinela
Concentrates, it also reflected production capacity being achieved
at Antucoya and the complete integration of Zaldívar, which
contributed its first full year of production. At Los Pelambres
production fell slightly against 2015, primarily due to lower
throughput as a greater proportion of harder ore was processed in
the plant.
Gold production was 270,900 ounces, 26.6% higher than in 2015,
reflecting better grades and throughput at Centinela. Molybdenum
production decreased 3,000 tonnes for the full year as grades and
recoveries fell. The transport division saw increased customer
demand and improved performance of the rolling stock and better
fleet utilisation, all contributing to a 6.3% increase in
transported volume to 6.5 million tonnes.
During the year a significant forecast construction cost overrun
was announced at the Alto Maipo hydroelectric project, in which Los
Pelambres held a non-controlling 40% interest, at a time when long
term electricity prices is Chile had been falling dramatically.
Having reviewed the company's options it was concluded that it
would be best for Antofagasta to dispose of its interest to benefit
from lower future sustainable energy costs for Los Pelambres.
The success of the Group's decision to concentrate efforts in
2016 on operating and capital cost control has been a highlight of
the year. Improved productivity and efficiencies have also begun to
bear fruit with net cash costs decreasing by 20% year-on-year to
$1.20/lb in 2016.
The copper market in 2016 was roughly in balance and, although
the LME price of copper averaged some 11.6% lower than in 2015, it
finished the year at $2.51/lb, 17.8% higher than at the end of the
previous year. This resulted in the average realised price of
copper being 2.2% higher in 2016 at $2.33/lb. The average realised
gold price increased by 8.7% to $1,256/oz, while the realised
molybdenum price increased by 19.3% to $6.8/lb.
CULTURE OF PRODUCTIVITY
Improvements in productivity are key to the long term success of
the Company and are a permanent on-going process that is part of
the culture of Antofagasta.
The Group introduced the Cost and Competitiveness Programme
(CCP) in 2014, with the aim of reducing the cost base and improving
the Group's competitiveness within the industry. Since then, the
Group has achieved savings in mine site costs of $359 million,
approximately $176 million of which were during 2016, some 10% more
than were targeted. The savings in mine site costs are equivalent
to $0.11/lb, and the target for 2017 is set at an incremental $140
million. In addition exploration, evaluation and corporate costs
were reduced by $66 million during the year and total operating
cost savings since 2014 were over $500 million.
Mine site cost savings are being achieved in four areas,
services productivity, operating and maintenance management,
corporate and organisational effectiveness, and energy
efficiency.
COMMUNITY ENGAGEMENT
During 2016, the Group resolved long-standing legal issues with
the Caimanes community, mainly related to the Mauro tailings dam
with the two outstanding court cases being resolved during the
year. This was achieved through a process of open dialogue with the
community, prioritising their needs and clarifying the Company's
commitments. The open forum meetings were monitored by the Chilean
branch of Transparency International to ensure the openness and
fairness of the process. As a result the Company is now proceeding
with the plans agreed with the community and courts as regards the
future water supply solutions, additional safety measures,
community development projects and to provide access to benefits
for families in the community.
OPERATING MODEL
During 2016 the Group began to implement a new operating model
throughout its operations, with the objective of strengthening key
processes and achieving full production commitments. The model
improves operating reliability and releases spare capacity,
resulting in a competitive advantage for the Group's mining
operations. The model focuses on the safety, production and costs
at the operations, prioritising maintenance, strengthening the
production planning and other functional processes, and continuous
improvement to achieve operating excellence. This model will be
imbedded in the operations over the coming years to generate long
term improvements in productivity.
FUTURE GROWTH
The next stage of growth will come from the Los Pelambres
Incremental Expansion project, which is expected to start
construction in 2018, and building a second concentrator at
Centinela, which will together add up to 200,000 tonnes of annual
copper production. The feasibility study for the Los Pelambres
Incremental Expansion has been recently completed and the
feasibility study for the second concentrator at Centinela is
expected to be completed early in 2018 although the start of
construction will depend on market conditions at the time and
sequencing of the project relative to the Los Pelambres
expansion.
The development of the Los Pelambres Incremental Expansion will
be split into two phases. The first will maximise throughput under
the mine's existing environmental and water permits and increase
annual production by 55,000 tonnes of copper at a capital cost of
$1.05 billion. The second will increase throughput to 205,000
tonnes per day. This phasing will simplify the permit application
process and spread the costs of the expansion over a longer
period.
At Centinela the Environmental Impact Assessment for the second
concentrator was granted in late 2016. The feasibility study is
underway and will focus on the first phase of expansion to add some
140,000 tonnes of copper, 150,000 ounces of gold and 2,800 tonnes
of molybdenum annually.
INNOVATION
The Group has made some important progress over 2016 which is
associated to real innovation. The entrepreneurial spirit is a core
element of Antofagasta's character since the early days of the
Michilla mine.
At Centinela the Group commissioned three new paste thickeners
which represent a new water saving technology, on the biggest scale
yet seen in copper mining. They play a big role, not only in
improving efficient use of water, but also in enabling the plant to
operate at the newly increased throughput capacity of 105,000
tonnes per day. Elsewhere the Group has been working on developing
partnerships with technology and specialist engineering companies
to improve training and safety systems.
The most potentially significant project is the research
currently underway to develop a commercial large scale heap
leaching process for sulphide ores, which would have a particularly
important impact on the long term future of Zaldívar. Recent work
is part of a long term programme building on work done at
Michilla.
SAFETY
Safety remains the number one priority for the Group. During the
course of 2016 Antofagasta tragically suffered a fatal accident at
Antucoya in April and at our transport division in July. The Board
and everyone at Antofagasta extend their sincerest condolences, to
the affected families and friends. These fatalities are not
acceptable and the Group is determined to achieve the target of
zero fatalities and to continue to reduce Lost Time Incidents.
While overall safety standards have improved with the Lost Time
Injury Frequency Rate (LTIFR) falling by 40% over the last five
years, the Group is redoubling efforts to ensure that all employees
and contractors live in a culture of safety every day. The Group is
building on the 2016 safety programme, including enhancing Critical
Safety Controls verifications and "near-miss" incidents
reporting.
The executive team continues to visit the Group's mining
operations regularly as part of the safety leadership programme,
demonstrating to employees and contractors the importance of safety
and empowering employees to ensure safety comes first.
DIVIDS
The final dividend for the year is 15.3 cents per share,
bringing the total dividend for the year to 18.4 cents per share or
$182 million. This represents a total pay-out ratio of 53% of
underlying net earnings, significantly in excess of the Company's
policy of paying out a minimum of 35% of underlying net
earnings.
OUTLOOK
Group copper production in 2017 is expected to be in the range
of 685-720,000 tonnes, similar to the 709,400 tonnes produced in
2016. Centinela will be operating at its newly expanded throughput
capacity and the Group will benefit from the first year of full
production from Antucoya and start-up production from Encuentro
Oxides. However, this growth will be offset by lower mined grades
at Centinela and Los Pelambres.
Group cash costs before by-product credits for 2017 are expected
to be almost unchanged at $1.55/lb as further expected savings from
the Cost and Competitiveness Programme and the decrease in unit
costs at Antucoya and Zaldívar are offset by a lower contribution
from the lowest cost mine, Los Pelambres. Net cash costs are
expected to increase by some 10c/lb to $1.30/lb.
This year has started strongly following the upturn in the last
quarter of 2016, bolstered by the continued improvement in
sentiment towards copper and the production problems at some of the
world's largest copper mines. It seems that there is now a
reflationary environment and this is positive for commodities. As
many continue to adjust their forecasts for China, the Group is
confident that consumption there will continue to grow as they
support their power and infrastructure requirements.
The higher level of mine disruptions experienced since the
beginning of the year should keep pressure on refined copper
availability and support the fundamentals for copper in the months
to come. As a result, the Group does not foresee copper returning
to the lows of 2016.
In the medium term the Group expects to see a steady shift from
a market in balance to a slight deficit, leading to a further
improvement in prices. There are wild cards of course, but these
are more likely to be positive for the copper price than negative.
Potential higher demand in the US under the new administration is
one, increased disruptions to supply is another.
REVIEW OF OPERATIONS AND PROJECTS
MINING DIVISION
LOS PELAMBRES
2016 Performance
Operational Performance
EBITDA at Los Pelambres was $921.0 million in 2016, compared
with $749.3 million in 2015, reflecting significantly lower
operating costs. Realised copper prices rose to $2.35/lb from
$2.24/lb, further supporting EBITDA growth.
Production
Copper production was 355,400 tonnes in 2016, which was slightly
below production in 2015 of 363,200 tonnes. This decrease is
primarily due to lower throughput as a greater proportion of harder
ore is processed in the plant, and was only partly offset by higher
mined grades. Molybdenum production for the year was 7,100 tonnes,
29.7% lower than in 2015, due to lower grades and recoveries. Gold
production was 12.5% higher in 2016 at 57,800 ounces, compared with
51,400 ounces in 2015.
Costs
Cash costs before by-product credits at $1.36/lb were 9.3% lower
than in 2015, due to the savings achieved through the Cost and
Competitiveness Programme and changes in the estimating method for
deferred stripping costs. Net cash costs for the full year 2016
were $1.06/lb compared with $1.23/lb in 2015. This decrease is
mainly due to higher realised prices for gold and molybdenum,
slightly offset by lower molybdenum production.
Capital expenditure
Total capital expenditure in 2016 was $215.3 million, which
included $99.4 million on mine development. Capital expenditure is
forecast at approximately $260 million in 2017, reflecting higher
sustaining capital expenditure compared to 2016.
Legal update
Resolution of outstanding claims relating to the Mauro tailings
dam
Following the agreement reached with the Caimanes community in
April 2016, the long-running claims relating to the Mauro tailings
dam were substantively resolved during 2016.
Cerro Amarillo Waste Dump
As previously announced, in 2014 Xstrata Pachón S.A. ("Xstrata
Pachón"), a subsidiary of Glencore plc, filed civil and criminal
claims against Los Pelambres before the Federal Courts of San Juan,
Argentina, alleging that Los Pelambres had unlawfully extended a
waste-rock dump ("Cerro Amarillo Waste Dump") on its property
(which is adjacent to Los Pelambres on the Argentinian side of the
Chile/Argentina border) and that Los Pelambres had violated several
Argentinian laws relating to the misappropriation of land, unlawful
appropriation of water bodies and that people's health was in
jeopardy from the alleged contamination that the Cerro Amarillo
Waste Dump might generate.
Los Pelambres continues to exercise all available legal avenues
to defend its position. In January 2017, Los Pelambres finished
removing truck tyres that had previously been stored on the Cerro
Amarillo Waste Dump - honouring a commitment previously made to the
Province of San Juan in Argentina.
The Cerro Amarillo Waste Dump is a pile of inert waste-rock and
any potential future environmental impact could be easily prevented
with the implementation of an environmental closure plan, which is
the accepted and recommended practice.
Outlook
Production
The forecast production for 2017 is 330-345,000 tonnes of
payable copper (slightly below the 355,400 tonnes produced in
2016), 8,500-9,500 tonnes of molybdenum and 45-55,000 ounces of
gold.
Costs
Cash costs before by-product credits for 2017 are forecast to
increase to approximately $1.45/lb and net cash costs to increase
to approximately $1.15/lb as the mine grades decrease.
CENTINELA
2016 Performance
Operational Performance
EBITDA at Centinela was $562.5 million, compared with $238.4
million in 2015, reflecting higher production and lower operating
costs. The realised copper price was $2.32/lb in 2016, remaining
almost unchanged. The realised gold price rose from $1,159/oz in
2015 to $1,257/oz in 2016.
Production
Copper production for the full year 2016 was 6.8% higher than in
2015, primarily due to higher sulphide grades and the completion of
the concentrator expansion project. This was partly offset by lower
throughput in the Centinela Cathodes plant and the expected
continued decline in oxide grades.
Copper in concentrate production for the full year was 24.2%
higher year-on-year, mainly reflecting expanded throughput capacity
following the installation of new tailings thickeners and
modifications to the grinding and flotation circuits. Higher grades
and slightly higher recoveries also helped increase production
during the year.
Gold production was 213,000 ounces, some 31% higher than in
2015. This was mainly due to higher throughput and grades, as
recoveries remained flat across the two years.
Copper cathode production for the year was 55,800 tonnes, 26.5%
lower than the previous year, as grades declined as expected with
mining moving to the lower grade zones of the Tesoro Central and
Tesoro Noreste pits.
Costs
Cash costs before by-product credits for the year were 22.9%, or
52c/lb, lower than in 2015. Savings achieved through the Cost and
Competitiveness Programme reduced costs by 12c/lb and a further
23c/lb was the result of a change in the estimation method for
deferred stripping costs. The balance was due to higher production.
Net cash costs for 2016 were $1.19/lb compared with $1.85/lb in
2015. This decrease is due to lower cash costs before by-product
credits and higher production and realised prices for gold.
Capital expenditure
Capital expenditure was $534.7 million, including $206.2 million
on Encuentro Oxides and the molybdenum plant and $205.0 million on
mine development. Total capital expenditure in 2017 is expected to
be similar to 2016, including $170 million related to the
construction of the Encuentro Oxides and molybdenum plant projects
and $240 million on mine development.
Outlook
Production
Production for 2017 is forecast at 220-230,000 tonnes of payable
copper and 140-150,000 ounces of gold. This includes 65-70,000
tonnes of cathodes and 155-160,000 tonnes of copper in concentrate.
The construction of the Encuentro Oxides project is expected to
reach completion during 2017 and this will provide feed to
Centinela's SX-EW plant, allowing it to operate at near peak
capacity of 100,000 tonnes per annum from 2018.
Costs
Cash costs before by-products for 2017 are forecast at
approximately $1.75/lb, similar to 2016, and net cash costs at
approximately $1.35/lb.
In 2015, Centinela commenced construction on a separate
molybdenum plant that will produce approximately 2,400 tonnes per
year of molybdenum over the remaining life of the mine.
Commissioning is expected to commence in 2017.
ANTUCOYA
2016 Performance
Operational Performance
EBITDA at Antucoya was $64.9 million as the operation came into
commercial production in April 2016.
Production
The mine began commercial production at the beginning of April
and produced 66,200 tonnes of copper during the year, as expected,
reaching its design capacity in August.
Costs
Cash costs from the start of commercial production were
$1.83/lb.
Capital expenditure
Total pre-financing construction cost of the project has been
$1.9 billion with $9.4 million spent in 2016.
Outlook
In 2017 cathode production is forecast at approximately
80-85,000 tonnes and cash costs are expected to decrease to
$1.60/lb.
Total capital expenditure in 2017 is expected to be
approximately $85 million, which includes $20 million related to
mine development costs.
ZALDÍVAR
2016 Performance
Acquisition
The Group's acquisition of a 50% interest in the Zaldívar mine
from Barrick Gold Corporation was completed in December 2015. Total
consideration for the transaction, after working capital
adjustments, was $950 million.
Production
Total attributable production in 2016 was 51,700 tonnes of
copper cathodes. During the year there has been a significant
increase in copper recovery due to improved sulphide leaching,
using experience gained at other Group operations.
Costs
Cash costs for 2016 were lower than expected at $1.54/lb, partly
because leach recoveries and grades were higher than anticipated
and partly due to synergic savings made during the year following
the mine's merger into the Group.
Capital expenditure
Attributable capital expenditure for the 2016 full year was
$57.5 million, which includes approximately $30 million with
respect to mine development. These amounts are not included in the
Group capital expenditure figures.
Outlook
Attributable copper production in 2017 is forecast to be
approximately 55-60,000 tonnes at a cash cost of $1.50/lb.
Attributable capital expenditure in 2017 is expected to be
approximately $50 million, of which $25 million will be spent on
mine development.
GROWTH PROJECTS AND OPPORTUNITIES
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. Once
the project is completed, it will enable the plant to produce at
full capacity of 100,000 tonnes per annum for a number of years,
helping to offset a natural decline in production due to falling
mined grades at Centinela's existing oxide pits. The project
entails the installation of new crushing and heap-leach facilities
at the Encuentro Oxides deposit, a pipeline to take the leach
solution for processing at the existing SX-EW plant some 17 km
away, and the extension of the sea water pipeline from Centinela to
Encuentro. Higher-grade ore will be crushed and sent to the new
heap-leach facilities, while lower-grade ore will be processed
later on a Run-of-Mine (ROM) leach pad.
This deposit is important for the Group's long-term development,
as Encuentro Oxides sits on top of the much larger Encuentro
Sulphide deposit. The Encuentro Oxides project will therefore act
as a funded pre-strip for the sulphide deposit, opening up the
latter for development as part of the Centinela Second Concentrator
project.
Pre-stripping started in August 2014 and full-scale construction
in early 2015. During 2016, total expenditure incurred was $149.2
million and by the end of the year construction was over 79%
complete, with first production expected in late 2017. The total
construction budget for the project is $636 million.
Centinela
During 2016, work continued on optimising Centinela's
concentrator plant in order to bring the level of throughput to
105,000 tonnes per day. Debottlenecking of the flotation and
concentrate circuit and the installation of two paste thickeners
were completed during the year and the plant achieved its design
capacity in November. The final paste thickener was completed in
early 2017 allowing the plant to produce tailings with a solids
content of approximately 67% on a continuous basis, an improvement
of some four percentage points. The new paste thickeners are the
largest application of this thickened tailings technology in the
world.
Molybdenum Plant
This project will allow Centinela to produce an average of 2,400
tonnes of molybdenum per year. Completion is expected in 2017, and
the addition of another by-product credit will lower Centinela's
unit net cash costs.
Brownfield growth projects
Los Pelambres Incremental Expansion
The expansion project has been split into two phases in order to
smooth its progress, simplify permitting applications and spread
the cost over a longer period.
Phase 1
This phase is designed to optimise throughput within the limits
of the existing operating, environmental and water extraction
permits, which will thus need only relatively simple updates.
During this phase, Los Pelambres will operate at an average
throughput of 190,000 tonnes per day with the addition of a new
grinding and flotation circuit to mitigate the hard ore currently
being mined, and a 400 litres per second desalination plant and
pipeline. Desalinated water will be pumped to the tailings storage
facility at El Mauro where it will connect with the recycling
circuit returning water to the Los Pelambres plant.
During the year the Group submitted the EIA for the desalination
plant to the authorities and expects to receive approvals in late
2017 or early 2018. The feasibility study was completed in early
2017 and detailed engineering will be completed once EIA approvals
are received. The project will be subject to internal review and
should be presented to the Board for construction approval by the
end of 2017. A decision to proceed will be made only in suitable
market conditions and with an approved EIA in place. Production
would commence in 2020 at the earliest. The feasibility study
estimate of the capital expenditure for this project is
approximately $1.05 billion, with some $580 million allocated to
the additional crushing and flotation circuits and the balance to
the desalination plant and water pipeline. The expansion is
estimated to increase copper production by an average of 55,000
tonnes per year over a period of 15 years.
Phase 2
In this phase the Group will seek to increase throughput to
205,000 tonnes per day and to extend the mine's life beyond the
currently approved 21 years. As part of this development a new EIA
must be submitted to increase the capacity of the mine's El Mauro
tailings storage facility and the mine waste dumps. The Group is
preparing to commence the environmental baseline study for the EIA
in 2017. Capital expenditure for this phase is estimated at
approximately $500 million, with the majority of the expenditure
being on mining equipment, additional crushing and grinding
capacity and flotation cells.
The conveyors from the primary crusher to the concentrator plant
will also have to be repowered to support the additional
throughput. Critical studies on tailings and waste storage capacity
are underway in parallel with the Phase 1 feasibility study and
should be completed by the end of 2017. However, the project will
only proceed following a decision on Phase 1 and will require the
submission of various permit applications, including a new EIA.
First production from this phase would be in 2022 at the
earliest.
Greenfield growth projects
Centinela Second Concentrator
The Centinela Mining District is a key area for longer-term
growth and the Group continues to evaluate options for its
development.
The second concentrator will be built some 7 km from Centinela's
current concentrator and 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 2,800 tonnes of molybdenum. Ore will be sourced
initially from the Esperanza Sur deposit and, once mining is
completed at Encuentro Oxides, additionally from Encuentro
Sulphides.
The pre-feasibility study for this $2.7 billion project was
completed at the end of 2015 and the feasibility study is now
underway. The EIA was approved in 2016 and the Group has commenced
applications for the additional permits required for the project
following certain design modifications made during the year. The
feasibility study, which is due for completion in 2017, will
include the testing of a pilot hydraulic roll crushing system that
is being considered in preference to conventional SAG and ball
mills. A decision to proceed with the project will depend on the
market outlook and sequencing of the project relative to the Los
Pelambres project. If approval is granted in 2018, production would
be expected to begin in 2021. The project team continues to review
options for reducing the capital cost of the project. These include
the use of existing infrastructure (power lines, pipelines,
concentrate shipping and other facilities) as well as enhancing the
owner's team, to improve the project execution strategy, management
and control, together with other initiatives.
There is scope to further increase the plant capacity once the
second concentrator is completed. The Group is considering the
possibility and timing of such an expansion, which could bring
throughput capacity to approximately 150,000 tonnes per day and
increase annual production to approximately 200,000 tonnes of
copper, 170,000 ounces of gold and 5,500 tonnes of molybdenum.
Feasibility study work is underway on certain critical early-stage
activities.
United States - Twin Metals
Twin Metals Minnesota LLC (Twin Metals) is a wholly-owned
copper, nickel and platinum group metals (PGM) underground mining
project holding the Maturi, Maturi Southwest, Birch Lake and Spruce
Road copper-nickel-PGM deposits located in north-eastern Minnesota,
USA.
During 2016 the Group undertook evaluation and optimisation
exercises on the pre-feasibility study completed in 2014 and
progressed various activities in preparation for submitting
permitting applications.
As previously announced, on 15 December 2016 Twin Metals was
notified that the relevant U.S. authorities had denied renewal of
two of its long-held federal mining leases. Twin Metals' leases had
been held in good standing by the federal government for more than
50 years, and had been twice renewed without controversy.
Twin Metals has filed a federal lawsuit seeking to secure its
rights to the two federal mineral leases and believes denial of the
leases is inconsistent with federal law, the terms of leases
themselves and the federal government's established precedent in
supporting and renewing the leases over five decades.
While Twin Metals is assessing the impact of the agencies' lease
renewal decision, it will continue progressing the project while
also pursuing legal avenues to protect its contractual mineral
rights.
Other exploration and evaluation activities
The Group has an active early-stage exploration programme beyond
the core locations of the Centinela and Los Pelambres mining
districts. This is managed through its in-house exploration team
and utilises partnerships with third parties to build a portfolio
of longer-term opportunities across Chile and the rest of the
world. In response to the depressed copper market the Group reduced
its exploration and evaluation expenditure from $101.9 million in
2015 to $44.3 million in 2016.
Chile
The Group focuses its exploration activities on the main copper
porphyry belts in northern and central Chile. During the year, as
part of its asset rationalisation programme, the Group relinquished
low priority tenements and acquired new tenements more closely
aligned with its target areas. First stage drilling was initiated
during the year and progressed as planned at targets located in the
second and third regions of Chile.
International
The Group's international exploration strategy is to identify,
secure and evaluate high-quality copper exploration projects in
preferred jurisdictions. During 2016, the Group downgraded
Australia as a target country increasing its focus on the Americas
while refining its portfolio of early-stage exploration projects on
key copper provinces in target countries. Working in partnership
with selected companies, both public and private, the Group drilled
and tested projects in Argentina, Australia, Mexico and Zambia and
exited from projects in Portugal, Finland and Canada. Exploration
efforts in Canada and Australia generated new projects that will be
evaluated during 2017.
The Group's strategy is to partner with experienced junior
exploration companies, funding their exploration programmes to earn
an interest in the projects while benefiting from their local
knowledge and expertise.
TRANSPORT DIVISION
2016 Performance
During the year, FCAB optimised and expanded its business by
integrating and strengthening the three key areas of
sustainability, productivity and cost management. There was a
positive effect on revenue as sales associated with spot services
increased due to higher utilisation of the fleet. The railway
agreed a tonnage increase with one of its largest customers and
reached an important milestone with the purchase of seven new
locomotives, with the object of optimising the fleet and increasing
asset productivity.
Operational performance
The division's EBITDA was $73.3 million in 2016, compared to
$58.4 million in 2015, reflecting tight cost management, which
reduced costs by 7.6% compared to the previous year.
Transport Tonnage
During 2016 the division transported 6.5 million tonnes,
compared to 6.1 million tonnes in 2015. This 6.3% increase was due
to increased customer demand, improved performance of rolling stock
and better fleet utilisation, which allowed more acid and copper
and other concentrates to be transported.
This increase in tonnage transported marks the reversal of a
downward trend since 2013 and further growth is expected in the
medium term.
Costs
Cost management was focused on optimising the division's
business processes to ensure the lasting competitiveness of its
services. This was achieved by better utilisation of the fleet
resulting in greater fuel efficiency, and savings in the use of
third-party services and other organisational changes.
Outlook
The division will also develop new business opportunities and
optimise the use of rolling stock and utilisation of the fleet. One
area of emphasis will be on maintenance, using knowledge gained
from the mining division. Maintenance practice will be strengthened
in order to deliver more consistent fleet availability, thereby
improving operational continuity and budget compliance. This will
ensure a seamlessly integrated fleet and more efficient use of
assets and resources.
In the medium term, copper production in the Antofagasta Region
will change from metallic copper output to concentrate, increasing
the mass to be transported, and declining ore grades will increase
the consumption of bulk supplies. These factors present unique
opportunities for the transport division and will drive revenue
growth in the medium to long term.
FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER 2016
Results
Year ended
Year ended 31.12.2015
31.12.2016 (restated)
--------------------------------------- ------------
Before Exceptional
exceptional items
items (Note 3) Total Total
$m $m $m $m
Revenue 3,621.7 - 3,621.7 3,225.7
---------------------------------------- ------------- ------------ ---------- --- ------------
EBITDA (including results from
associates and joint ventures) 1,626.1 - 1,626.1 910.1
---------------------------------------- ------------- ------------ ---------- --- ------------
Operating costs excluding depreciation (2,100.0) (241.0) (2,341.0) (2,349.1)
Depreciation, loss on disposals
and impairments (598.1) (215.6) (813.7) (587.6)
------------- ------------ ---------- --- ------------
Operating profit from subsidiaries 923.6 (456.6) 467.0 289.0
Net share of results from associates
and joint ventures 23.4 (134.7) (111.3) (5.8)
Total profit from operations,
associates and joint ventures 947.0 (591.3) 355.7 283.2
Net finance expense (71.1) - (71.1) (40.4)
Profit before tax 875.9 (591.3) 284.6 242.8
Income tax expense (313.5) 204.9 (108.6) (154.4)
------------- ------------ ---------- ------------
Profit from continuing operations 562.4 (386.4) 176.0 88.4
============= ============ ========== ============
Discontinued operations 38.3 - 38.3 613.3
------------- ------------ ---------- ------------
Profit for the year 600.7 (386.4) 214.3 701.7
============= ============ ========== ============
Basic earnings per share US cents US cents US cents US cents
From continuing operations 34.7 (22.6) 12.1 (0.5)
From discontinued operations 3.9 - 3.9 62.2
------------- ------------ ---------- ------------
Total continuing and discontinued
operations 38.6 (22.6) 16.0 61.7
============= ============ ========== ============
As a result of the disposal of Michilla in 2016, and the
disposal of Aguas de Antofagasta (the Water division) and Empresa
Ferroviaria Andina (the Bolivian transport operation) in 2015 their
net results are shown in the "Profit from discontinued operations"
line. The 2015 comparatives have been restated to present
Michilla's net result for 2015 in the discontinued operations
line.
A detailed segmental analysis of the components of the income
statement is contained in Note 4 to the preliminary results
announcement.
The following table reconciles the change in EBITDA between 2015
and 2016:
$m
EBITDA in 2015 910.1
Revenue
Increase in copper volumes sold 218.7
Increase in realised copper price 84.5
Increase in tolling charges (7.0)
--------
Increase in revenue from copper sales 296.2
--------
Increase in gold revenue 87.5
Increase in silver revenue 15.9
Decrease in molybdenum revenue (11.4)
--------
Increase in revenue from by-products 92.0
--------
Increase in transport division revenue 7.8
--------
Increase in Group revenue 396.0
========
Operating costs
Decrease in mine operating costs 220.7
Decrease in closure provisions 23.2
Decrease in exploration and evaluation
costs 57.6
Decrease in corporate costs 11.1
Increase in other mining division
costs (70.6)
--------
Decrease in operating costs for mining
division 242.0
========
Decrease in transport division operating
costs 7.1
Increase in EBITDA relating to associates
and in joint ventures (*) 70.9
--------
Total EBITDA in 2016 1,626.1
========
(*) attributable
Revenue
Revenue for the Group in 2016 was $3,621.7 million, 12.3% higher
than in 2015. The increase of $396.0 million mainly reflected an
increase in copper sales volumes and the realised copper price, as
well as higher gold and silver revenue.
Revenue from the mining division
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
increased by $296.0 million, or 11.1%, to $2,961.6 million,
compared with $2,665.6 million in 2015. The increase reflected the
impact of higher sales volumes and slightly higher realised
prices.
(i) Copper volumes
Copper sales volumes reflected within revenue increased from
590,400 tonnes in 2015 to 634,000 tonnes in 2016 increasing revenue
by $218.5 million. This increase was mainly due to Antucoya which
achieved commercial production on 1 April 2016, and which recorded
sales volumes of 54,900 tonnes reflected within revenue from that
point onwards.
(ii) Realised copper prices
The Group's average realised copper price increased by 2.2% to
$2.33/lb in 2016 (2015 - $2.28/lb) despite the market price having
fallen by 11.6%. This was due to a significant year-end positive
price adjustment of $153.6 million with the copper price ending the
year at $2.51/lb, compared with a decrease of $291.2 million in
2015. The increase in the average realised price led to an $84.5
million increase in revenue from copper 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
gains or losses on commodity derivative instruments hedge accounted
for in accordance with IAS 39 "Financial Instruments: Recognition
and Measurements".
Further details of provisional pricing adjustments are given in
Note 5 to the preliminary results announcement.
In 2016 revenue also includes a loss of $2.2 million (2015 -
nil) relating to commodity derivatives which matured during the
year. Further details of hedging activity in the period are given
in Note 6(c) to the preliminary results announcement.
(iii) Tolling charges
Tolling charges for copper concentrate increased by $7.0 million
to $301.0 million in 2016 from $294.0 million in 2015. Tolling
charges are deducted from concentrate sales when reporting revenue
and hence the increase in these charges has had a negative impact
on revenue.
Revenue from molybdenum, gold and other by-product sales
Revenue from by-product sales at Los Pelambres and Centinela
relate mainly to molybdenum and gold and, to a lesser extent,
silver. Revenue from by-products increased by $92.2 million or
22.6% to $499.9 million in 2016, compared with $407.7 million in
2015.
Revenue from gold sales (net of tolling charges) was $339.7
million (2015 - $252.0 million), an increase of $87.7 million,
which mainly reflected an increase in volumes and a higher realised
price. The realised gold price was $1,256.1/oz in 2016 compared
with $1,154.5/oz in 2015, with the increase reflecting higher
market prices. Gold sales volumes increased by 23.8% from 219,200
ounces in 2015 to 271,400 ounces in 2016, mainly due to higher
grades at Centinela.
Revenue from molybdenum sales (net of roasting charges) was
$94.0 million (2015 - $105.3 million), a decrease of $11.3 million.
The decrease was mainly due to lower sales volumes of 7,200 tonnes
(2015 - 9,900 tonnes), partly offset by an increased realised price
of $6.8/lb (2015 - $5.7/lb).
Revenue from silver sales increased by $15.8 million to $66.2
million in 2016 (2015 - $50.4 million). The increase was due to
higher sales volumes of 3.7 million ounces (2015 - 3.3 million
ounces) and an increased realised silver price of $17.5/oz (2015 -
$15.4/oz).
Revenue from the transport division
Revenue from the transport division (FCAB) increased by $7.8
million or 5.1% to $160.2 million, mainly due to higher tonnages
transported.
Operating costs (excluding depreciation, loss on disposals and
impairments)
Operating costs (excluding depreciation, loss on disposals and
impairments) amounted to $2,100.0 million (2015 - $2,349.1
million), a decrease of $249.1 million despite copper sales volumes
having increased by 9.8%. This was mainly due to lower mine
operating costs and reduced exploration & evaluation and
corporate expenditure.
Operating costs (excluding depreciation, loss on disposals and
impairments) at the mining division
Operating costs (excluding depreciation, loss on disposals and
impairments) at the mining division decreased by $242.0 million to
$2,013.1 million in 2016, a decrease of 10.7%. Of this decrease,
$220.7 million is attributable to lower mine-site operating costs.
This reduction in mine-site costs reflected significant cost
savings achieved during the year as well the impact of a revised
estimation of deferred stripping costs, partly offset by additional
costs resulting from the higher production volumes in the year.
Reflecting these decrease costs, weighted average unit cash costs
excluding by-product credits (which are reported as part of
revenue) and tolling charges for concentrates (which are deducted
from revenue) decreased from $1.58/lb in 2015 to $1.33/lb in
2016.
Exploration & evaluation costs decreased by $57.6 million to
$44.3 million (2015 - $101.9 million). This reflected a general
decrease in exploration activity, in particular at the Centinela
District in Chile and the Twin Metals project in the United States.
Corporate costs decreased by $11.1 million compared with 2015, and
costs relating to the mine closure provisions decreased by $23.2
million. These decreases were partly offset by a $70.6 million
increase in other expenses, largely relating to increased community
spend at Los Pelambres.
Operating costs (excluding depreciation and loss on disposals)
at the transport division
Operating costs (excluding depreciation and loss on disposals)
at the transport division decreased by $7.1 million to $86.9
million, mainly reflecting lower diesel prices and a decrease in
services provided by third parties.
EBITDA
EBITDA (earnings before interest, tax, depreciation,
amortisation) increased by $716.0 million or 78.7% to $1,626.1
million in 2016 (2015 - $910.1 million). EBITDA includes the
Group's proportional share of EBITDA from associates and joint
ventures
EBITDA from the Group's mining subsidiaries increased by 73.6%
from $876.6 million in 2015 to $1,521.7 million in this year. As
explained above, this was mainly due to the decrease in revenue,
lower unit cash costs, and lower exploration & evaluation and
corporate costs.
EBITDA at the transport division increased by $8.9 million to
$87.7 million in 2016, reflecting the increased revenue and lower
operating costs explained above.
The Group's proportional share of EBITDA from associates and
joint ventures included $85.1 million from Zaldívar (2015 - $6.8
million) and $19.3 million from other associates and joint ventures
(2015 - $26.7 million).
Depreciation, amortisation and disposals
The depreciation and amortisation charge was largely in-line
with the prior year at $578.4 million (2015 - $576.1 million). In
addition, there were losses on disposals of assets of $19.7 million
(2015 - loss of $11.5 million).
Exceptional impairment provisions
The Group recognised exceptional impairment provisions with a
total impact of $591.3 million before tax. After a corresponding
tax credit of $204.9 million the after tax impact was $386.4
million.
The majority of this relates to the Group's 40% interest in Alto
Maipo SpA ("Alto Maipo"), which is developing two hydroelectric
power stations in Chile. The remaining 60% controlling interest is
held by AES Gener SA ("Gener"). The Group had been reviewing its
options with respect to its investment in Alto Maipo following the
announcement of a significant forecast cost overrun for the
project. In January 2017 the Group entered into an agreement with
Gener to dispose of its stake in Alto Maipo to Gener for a nominal
consideration. Accordingly, an impairment provision of $367.6
million has been recognised in respect of the total carrying value
relating to the project. This impairment provision resulted in a
deferred tax credit of $95.0 million and so the post-tax impact is
$272.6 million.
An impairment review was also conducted in respect of the
Antucoya mine. Following the completion of construction, Antucoya
achieved commercial production in April 2016 and then reached full
production capacity in August 2016. This process was slower than
originally forecast so costs capitalised during the ramp-up period
were greater than originally forecast and net depreciation of the
assets commenced later than originally anticipated. The achievement
of commercial production and full capacity during the year has
allowed a final determination of the total capital cost of the
project, including costs capitalised during the ramp-up to
commercial production, along with an understanding of the actual
operational performance of the mine. The impairment review
determined that the recoverable amount of Antucoya's assets was
below their carrying value, and accordingly an impairment provision
of $215.6 million (on a pre-tax basis) has been reflected in
respect of Antucoya. This impairment provision resulted in a
deferred tax credit of $99.4 million and so the post-tax impact is
$116.2 million.
In addition, the Group's Energia Andina joint venture holds an
investment in the Javiera solar plant in Chile. In February 2017
the disposal of the interest in Javiera was agreed. The terms of
the sale agreement indicate a recoverable value for the interest in
Javiera which is $8.1 million below the carrying value and
accordingly an impairment provision for this amount has been
recognised. The sale agreement is subject to certain closing
conditions, and the transaction is expected to complete during the
first half of 2017.
Further details are given in Note 3 to the preliminary results
announcement.
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries increased in 2016 by 61.6% to $467.0 million. Of the
exceptional impairment provisions outlined above $456.6 million was
recorded within operating expenses, and therefore excluding the
exceptional impairment provisions, operating profit was $923.6
million, a 219.6% increase compared to 2015.
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures
was a loss of $134.7 million in 2016, compared with a loss of $5.8
million in 2015. This was largely a reflection of the exceptional
impairment provisions. Of the total impairment provision outlined
above, $134.7 million was recorded within the share of results from
associates and joint ventures. Excluding the impact of the
exceptional impairment, the share of results from associates and
joint ventures was a profit of $23.5 million (2015 - loss of $5.8
million). The improvement compared with the prior year mainly
reflected a full year's contribution from from Zaldívar.
Net finance expense
Net finance expense in 2016 was $71.1 million, compared with
$40.4 million in 2015.
Year
Year ended ended
31.12.16 31.12.15
$m $m
Investment income 26.9 17.5
Interest expense (86.1) (33.7)
Other finance items (11.9) (24.2)
----------- ----------
Net finance expense (71.1) (40.4)
=========== ==========
Interest income increased from $17.5 million in 2015 to $26.9
million in 2016 due to an increase in operating cash invested as a
result of increased revenue in 2016.
Interest expense increased from $33.7 million in 2015 to $86.1
million in 2016, mainly due to interest charges at Antucoya being
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 loss of $11.9 million (2015 -
loss of $24.2 million) arising mainly from foreign exchange losses
of $2.9 million in 2016, compared with a loss of $14.8 million in
2015.
Profit before tax
As a result of the factors set out above, profit before tax
increased by 17.2% to $284.6 million (2015 - $242.8 million).
Excluding exceptional items, profit before tax was $875.9 million,
a 260.7% increase compared with the prior year.
Income tax expense
The tax charge for 2016 was $108.6 million and the effective tax
rate was 38.2%. The exceptional impairment provisions had an impact
on the overall tax charge and the reconciliation of the effective
tax rate. Excluding these exceptional impairment provisions, the
2016 tax charge was $313.5 million and the effective tax rate was
35.8%.
31.12.2016 31.12.2016 Year ended
BEFORE EXCEPTIONAL AFTER EXCEPTIONAL 31.12.2015
ITEMS ITEMS (Restated)
$m % $m % $m %
Profit before tax 875.9 - 284.6 242.8
Tax at the Chilean corporate
rate tax of 24% (2015 - 22.5%) (210.2) 24.0 (68.3) 24.0 (54.6) 22.5
Provision against carrying value
of assets (exceptional items) - - 63.0 (22.1) - -
Effect of increase in future
first category tax rates on
deferred tax balances (24.6) 2.8 (24.6) 8.6 (8.9) 3.7
Items not deductible from first
category tax (23.7) 2.7 (23.7) 8.3 (21.2) 8.7
Items not subject to first category
tax 8.5 (1.0) 8.5 (2.9) 4.1 (1.7)
Carry-back tax losses resulting
in credits at historic tax rates (5.4) 0.6 (5.4) 1.8 (25.8) 10.6
Mining tax (royalty) (60.1) 6.9 (60.1) 21.1 (31.8) 13.1
Withholding taxes - - - - (14.8) 6.1
Withholding taxes - adjustment
to previous year (3.8) 0.4 (3.8) 1.3 - -
Tax effect of share of results
of associates and joint ventures 5.6 (0.6) 5.6 (1.9) (0.5) 0.2
Net other items 0.2 (0.0) 0.2 (0.0) (0.9) 0.4
----------- -------- ---------- -------- -------- ------
Tax expense and effective tax
rate for the year (313.5) 35.8 (108.6) 38.2 (154.4) 63.6
=========== ======== ========== ======== ======== ======
This effective tax rate (excluding exceptional items) varied
from the statutory rate principally due to the effect of increases
in future first category tax rates on deferred tax balances (impact
of $24.6 million / 2.8%), the effect of expenses not deductible for
Chilean corporate tax purposes (principally the funding of expenses
outside of Chile) and items not subject to first category tax
(impact of $15.2 million / 1.7%), and the mining tax (impact of
$60.1 million / 6.9%).
Further details are given in Note 8 to the preliminary results
announcement.
Profit from discontinued operations
On 30 December 2016 the Group completed the disposal of Minera
Michilla and the resulting profit of $38.3 million has been
reflected as a profit from discontinued operations. In the prior
year a profit from discontinued operations of $613.3 million was
recognised, mainly relating to the disposal of Aguas de Antofagasta
in that year.
Non-controlling interests
Profit for 2016 attributable to non-controlling interests was
$56.3 million (2015 - $93.5 million). Before exceptional items the
profit attributable to non-controlling interests was $220.9
million.
Earnings per share
Year ended Year ended
31.12.16 31.12.15
$ cents $ cents
Total including exceptional items
Earnings per share from continuing
operations 12.1 (0.5)
Earnings per share from discontinued
operations 3.9 62.2
----------- -----------
Total earnings per share from
continuing and discontinued operations 16.0 61.7
=========== ===========
Excluding exceptional items
Earnings per share from continuing
operations 34.7 (0.5)
Earnings per share from discontinued
operations 3.9 62.2
----------- -----------
Total earnings per share from
continuing and discontinued operations 38.6 61.7
=========== ===========
Earnings per share calculations are based on 985,856,695
ordinary shares.
As a result of the factors set out above, profit attributable to
equity shareholders of the Company was $158.0 million compared with
$608.2 million in 2015, and total earnings per share from
continuing and discontinued operations was 16.0 cents per share
(2015 - 61.7 cents per share).
Profit from continuing operations and excluding exceptional
items attributable to equity shareholders of the Company was $341.5
million compared with a loss of $5.1 million in 2015, and earnings
per share from continuing operations excluding exceptional items
was 34.7 cents per share (2015 - loss of 0.5 cents per share).
Dividends
Dividends per share declared in relation to the period are as
follows:
Year ended Year ended
31.12.16 31.12.15
$ cents $ cents
------------------------------------------ ----------- -----------
Ordinary -
------------------------------------------ ----------- -----------
Interim 3.1 3.1
------------------------------------------- ----------- -----------
Final 15.3 -
------------------------------------------ ----------- -----------
Total dividends to ordinary shareholders 18.4 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 underlying 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 underlying net earnings for that year of at
least 35%.
The Board has declared a final dividend of 2016 of 15.3 cents
per ordinary share, which amounts to $150.8 million and will be
paid on 26 May 2017 to shareholders on the share register at the
close of business on 28 April 2017.
The Board declared an interim dividend for the first half of
2016 of 3.1 cents per ordinary share, which amounted to $30.6
million and was paid on 30 September 2016 to shareholders on the
share register at the close of business on 9 September 2016.
This gives total dividends proposed in relation to 2016
(including the interim dividend) of 18.4 cents per share or $181.4
million in total (2015 - 3.1 cents per ordinary share or $30.6
million in total).
Capital expenditure
Capital expenditure decreased by $253.4 million from $1,048.5
million in 2015 to $795.1 million in the year. This was mainly due
to decreased construction costs at Antucoya, which is now in
operation, partly offset by increased expenditure at Los Pelambres,
relating mainly to capitalised stripping costs.
NB: Capital expenditure figures quoted in 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 31 December 2016
the Group had entered into min/max contracts at Centinela for a
notional amount of 72,000 tonnes of copper production covering a
period up to 31 December 2017, with an average minimum price of
$2.25/lb and an average maximum price of $2.84/lb. The Group also
periodically uses interest rate swaps to swap the floating rate
interest for fixed rate interest. At 31 December 2016 the Group had
entered into contracts at Centinela for a maximum notional amount
of $70 million at a weighted average fixed rate of 3.372 % maturing
in August 2018. The Group had also entered into contracts in
relation to a financing loan at the FCAB for a maximum notional
amount of $90 million at a weighted average fixed rate of 1.634%
maturing in August 2019.
Cash flows
The key features of the Group cash flow statement are summarised
in the following table.
Year ended Year ended
31.12.16 31.12.15
$m $m
Cash flows from continuing and discontinued
operations 1,457.3 858.3
Income tax paid (272.6) (427.1)
Net interest paid (31.9) (27.6)
Capital contributions and loans to
associates (10.1) (112.0)
Acquisition of joint ventures 20.0 (972.8)
Disposal of subsidiary 10.0 942.9
Acquisition of mining properties (7.0) (78.0)
Purchases of property, plant and equipment (795.1) (1,048.5)
Dividends paid to equity holders of
the Company (30.6) (127.2)
Dividends paid to non-controlling
interests (260.0) (80.0)
Dividends from associates 10.2 12.1
Other items 0.4 19.1
------------- -------------
Changes in net debt relating to cash
flows 90.6 (1,040.8)
Other non-cash movements (149.0) 50.0
Exchange 10.2 (31.1)
------------- -------------
Movement in net debt in the period (48.2) (1,021.9)
Net debt at the beginning of the year (1,023.5) (1.6)
------------- -------------
Net debt at the end of the year (1,071.7) (1,023.5)
============= =============
Cash flows from continuing and discontinued operations were
$1,457.3 million in 2016 compared with $858.3 million in 2015. This
reflected EBITDA from subsidiaries for the year of $1,521.7
million(1) (2015 - $876.6 million) adjusted for a net working
capital increase of $64.4 million (2015 - working capital increase
of $32.4 million).
Cash tax payments in 2016 were $272.6 million, broadly in line
with the current tax charge for the year of $261.2m. However,
within this amount the payments on account for the current year
were only $186.3m, as they were based on the prior year's profit
levels. In addition to these payments on account there were other
tax payments of $194.6 million, mainly comprising tax relating to
the disposal of Aguas de Antofagasta S.A. in 2015, as well as the
recovery of $108.3 million relating to prior years.
In 2016 the disposal of subsidiary amount of $10.0 million
related to the disposal of Michilla (2015 - $947.3 million related
to the disposal of Aguas de Antofagasta S.A.).
Contributions and loans to associates and joint ventures of
$10.1 million relate to the Group's share of the funding of the
costs of Tethyan Copper Company and Energia Andina.
Cash disbursements relating to capital expenditure in 2016 were
$795.1 million compared with $1,048.5 million in 2015. This
included expenditure of $534.7 million at Centinela (2015 - $559.4
million), $215.3 million at Los Pelambres (2015 - $203.1 million)
and $9.4 million at Antucoya (2015 - $143.4 million).
At 31 December 2016 dividends paid to ordinary shareholders of
the Company were $30.6 million, which related to the payment of the
interim dividend declared in respect of the current year (2015 -
$127.2 million).
Dividends paid by subsidiaries to non-controlling shareholders
were $260.0 million (2015 - $80.0 million).
Financial position
At 31.12.16 At 31.12.15
$m $m
Cash, cash equivalents
and liquid investments 2,048.5 1,731.6
Total borrowings (3,120.2) (2,755.1)
------------ ------------
Net debt at the end
of the period (1,071.7) (1,023.5)
============ ============
At 31 December 2016 the Group had combined cash, cash
equivalents and liquid investments of $2,048.5 million (31 December
2015 - $1,731.6 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 $1,830.2
million (31 December 2015 - $1,410.8 million).
New borrowings in 2016 were $938.8 million (2015 - $725.9
million), including new short-term borrowings at Los Pelambres of
$312.0 million, Centinela of $100.0 million, Antucoya of $30.0
million and new long-term borrowings at Corporate of $496.8
million. Repayments of borrowings and finance leasing obligations
in 2016 were $724.4 million, relating mainly to repayments at Los
Pelambres of $373.1 million, Centinela $250.0 million, Antucoya
$66.1 million and the transport division of $31.5 million.
Total Group borrowings at 31 December 2016 were $3,120.2 million
(at 31 December 2015 - $2,755.1 million). Of this, $2,329.7 million
(at 31 December 2015 - $1,936.2 million) is proportionally
attributable to the Group after excluding the non-controlling
interest shareholdings in partly-owned operations.
Cautionary statement about forward-looking statements
This preliminary results announcement 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.
Consolidated Income Statement
Year ended
Year ended 31.12.2015
31.12.2016 (restated)
--- --------------------------------------- ------------
Before Exceptional
exceptional items
items (Note 3) Total Total
Notes $m $m $m $m
Group revenue 2,5 3,621.7 - 3,621.7 3,225.7
Total operating costs (2,698.1) (456.6) (3,154.7) (2,936.7)
--- ------------- ------------ ---------- ------------
Operating profit from
subsidiaries 2,4 923.6 (456.6) 467.0 289.0
Net share of results from
associates and joint ventures 2,4 23.4 (134.7) (111.3) (5.8)
Total profit from operations,
associates and joint ventures 947.0 (591.3) 355.7 283.2
Investment income 26.9 - 26.9 17.5
Interest expense (86.1) - (86.1) (33.7)
Other finance items (11.9) - (11.9) (24.2)
--- ------------- ------------ ---------- ------------
Net finance expense 7 (71.1) - (71.1) (40.4)
Profit before tax 875.9 (591.3) 284.6 242.8
Income tax expense 8 (313.5) 204.9 (108.6) (154.4)
--- ------------- ------------ ---------- ------------
Profit for the financial
year from continuing operations 562.4 (386.4) 176.0 88.4
=== ============= ============ ========== ============
Discontinued operations
Profit for the financial
year from discontinued
operations 9 38.3 - 38.3 613.3
--- ------------- ------------ ---------- ------------
Profit for the year 600.7 (386.4) 214.3 701.7
=== ============= ============ ========== ============
Attributable to:
--- ------------- ------------ ---------- ------------
Non-controlling interests 220.9 (164.6) 56.3 93.5
Profit for the period
attributable to the owners
of the parent 379.8 (221.8) 158.0 608.2
--- ------------- ------------ ---------- ------------
Basic earnings per share US cents US cents US cents US cents
From continuing operations 10 34.7 (22.6) 12.1 (0.5)
From discontinued operations 10 3.9 - 3.9 62.2
--- ------------- ------------ ---------- ------------
Total continuing and discontinued
operations 38.6 (22.6) 16.0 61.7
Consolidated Statement of Comprehensive Income
Year
Year ended ended
31.12.2016 31.12.2015
Notes $m $m
Profit for the financial year 214.3 701.7
Items that may be or were reclassified
subsequently to profit or loss:
(Losses)/gains in fair value of cash
flow hedges deferred in reserves (3.5) 1.7
Share of other comprehensive income/(losses)
of equity accounted units, net of tax 14 4.4 (16.0)
Gains/(losses) in fair value of available
for sale investments 15 1.7 (3.2)
Currency translation adjustment - (1.8)
Deferred tax effects arising on cash
flow hedges deferred in reserves 0.6 -
Losses in fair value of cash flow hedges
transferred to the income statement 6c)(i) 5.8 5.8
Share of other comprehensive income of
equity accounted units transferred to
the income statement 3 52.6 -
Losses in fair value of available- for-
sale investments transferred to income
statement - 1.0
Deferred tax effects arising on amounts
transferred to the income statement (1.4) (1.3)
------------ ------------
Total items that may be or were reclassified
subsequently to loss 60.2 (13.8)
============ ============
Items that will not be subsequently reclassified
to profit or loss:
Actuarial gains on defined benefit plans 19 7.8 3.8
Tax on items recognized through OCI which
will not be reclassified to profit or
loss in the future (1.3) (1.2)
Total items that will not be subsequently
reclassified to loss 6.5 2.6
Total other comprehensive income 66.7 (11.2)
Total comprehensive income for the year 281.0 690.5
============ ============
Attributable to:
Non-controlling interests 24.9 90.9
Equity holders of the Company 256.1 599.6
------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 23) 23) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2016 89.8 199.2 (59.3) 6,416.4 6,646.1 1,873.2 8,519.3
Profit for the year - - - 158.0 158.0 56.3 214.3
Other comprehensive
income for the year - - 37.0 4.8 41.8 24.9 66.7
Dividends - - - (30.6) (30.6) (260.0) (290.6)
Balance at 31 December
2016 89.8 199.2 (22.3) 6,548.6 6,815.3 1,694.4 8,509.7
========= ========= ========== ========== ======== ============= ========
For the year ended 31 December 2015
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 23) 23) 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)/income 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
========= ========= ========== ========== ======== ============= ========
Consolidated Balance Sheet
At 31.12.2016 At 31.12.2015
Non-current assets Notes $m $m
Intangible assets 12 150.1 150.1
Property, plant and equipment 13 8,737.5 8,601.1
Other non-current assets 2.6 2.0
Inventories 17 157.3 263.9
Investment in associates and joint
ventures 14 1,086.6 1,149.1
Trade and other receivables 66.7 292.9
Derivative financial instruments 0.2 -
Available for sale investments 15 4.6 2.7
Deferred tax assets 21 82.8 124.6
10,288.4 10,586.4
-------------- --------------
Current assets
Inventories 393.4 297.1
Trade and other receivables 736.1 604.8
Current tax assets 255.2 319.5
Derivative financial instruments 6 2.2 0.2
Liquid investments 25 1,332.2 924.1
Cash and cash equivalents 25 716.3 807.5
3,435.4 2,953.2
-------------- --------------
Total assets 13,723.8 13,539.6
============== ==============
Current liabilities
Short-term borrowings 18 (836.8) (758.9)
Derivative financial instruments 6 (2.0) (2.0)
Trade and other payables (595.8) (478.9)
Current tax liabilities (119.4) (198.8)
(1,554.0) (1,438.6)
-------------- --------------
Non-current liabilities
Medium and long-term borrowings 18 (2,283.4) (1,996.2)
Derivative financial instruments 6 (0.5) (1.5)
Trade and other payables (7.9) (24.4)
Liabilities in relation to joint venture 14 (3.1) (2.5)
Post-employment benefit obligations 19 (92.2) (86.9)
Decommissioning & restoration and
other long term provisions 20 (392.1) (394.0)
Deferred tax liabilities 21 (880.9) (1,076.2)
(3,660.1) (3,581.7)
-------------- --------------
Total liabilities (5,214.1) (5,020.3)
============== ==============
Net assets 8,509.7 8,519.3
============== ==============
Equity
Share capital 22 89.8 89.8
Share premium 22 199.2 199.2
Other reserves 23 (22.3) (59.3)
Retained earnings 23 6,548.6 6,416.4
Equity attributable to equity holders
of the Company 6,815.3 6,646.1
Non-controlling interests 1,694.4 1,873.2
-------------- --------------
Total equity 8,509.7 8,519.3
============== ==============
The preliminary information was approved by the Board of
Directors on 13 March 2017.
Consolidated Cash Flow Statement
Year
Year ended ended
31.12.2016 31.12.2015
Notes $m $m
Cash flow from continuing and discontinuing
operations 24 1,457.3 858.3
Interest paid (46.3) (38.6)
Income tax paid (272.6) (427.1)
Net cash from continuing and discontinued
activities 1,138.4 392.6
------------ ------------
Investing activities
Capital contributions and loans to
associates and joint ventures 14 (10.1) (112.0)
Acquisition of joint ventures 14 20.0(1) (972.8)
Dividends from associate 14 10.2 12.1
Acquisition of available for sale
investments 15 - (0.2)
Disposals of subsidiaries 9 10.0 942.9
Acquisition of mining properties 13 (7.0) (78.0)
Proceeds from sale of property plant
and equipment 0.5 1.6
Purchases of property, plant and equipment (795.1) (1,048.5)
Net (increase)/decrease in liquid
investments (408.1) 605.0
Interest received 14.4 11.0
Net cash used in investing activities (1,165.2) (638.9)
------------ ------------
Financing activities
Dividends paid to equity holders of
the Company (30.6) (127.2)
Dividends paid to preference shareholders
of the Company (0.1) (0.2)
Dividends paid to non-controlling
interests (260.0) (80.0)
Capital increase from non-controlling
interests - 14.6
Net proceeds from issue of new borrowings 18 938.8 725.9
Repayments of borrowings 18 (693.1) (276.4)
Repayments of obligations under finance
leases 18 (31.3) (11.9)
Net cash (used in)/from financing
activities (76.3) 244.8
------------ ------------
Net decrease in cash and cash equivalents (103.1) (1.5)
============ ============
Cash and cash equivalents at beginning
of the year 807.5 845.4
Net decrease in cash and cash equivalents 25 (103.1) (1.5)
Effect of foreign exchange rate changes 25 11.9 (36.4)
Cash and cash equivalents at end of
the year 25 716.3 807.5
============ ============
(1) Represents cash refunded to the Group as part of the final
adjustments to the consideration relating to the acquisition of the
50% stake in Zaldivar as detailed in Note 14.
Notes
1. General information and accounting policies
a) General information
This preliminary results announcement is for the year ended 31
December 2016. While the financial information contained in this
preliminary results announcement has been prepared in accordance
with International Financial Reporting Standards ("IFRS"), this
announcement does not itself contain sufficient information to
comply with IFRS. For these purposes, IFRS comprise the Standards
issued by the International Accounting Standards Board ("IASB") and
IFRS Interpretations Committee ("IFRS IC") that have been endorsed
by the European Union. The Group will send its full financial
statements that comply with IFRS to shareholders in April 2017.
The financial information contained in this preliminary results
announcement has been prepared on the going concern basis. Details
of the factors which have been taken into account in assessing the
Group's going concern status are set out within the Financial
Review.
This preliminary results announcement does not constitute the
Group's statutory accounts as defined in section 434 of the
Companies Act 2006 (the "Act") but is derived from those accounts.
The statutory accounts for the year ended 31 December 2016 have
been approved by the Board and will be delivered to the Registrar
of Companies following the Company's Annual General Meeting which
will be held on 24 May 2017. 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).
The information contained in this announcement for the year
ended 31 December 2015 also does not constitute statutory accounts.
A copy of the statutory accounts for that year has been delivered
to the Registrar of Companies. The auditor's report on those
accounts was unqualified, with no matters by way of emphasis, and
did not contain statements under sections 498(2) or (3) of the
Companies Act 2006.
The information contained in Note 30 of this preliminary results
announcement is not derived from the statutory accounts for the
years ended 31 December 2015 and 2016 and is accordingly not
covered by the auditor's reports.
b) Significant events during 2016
The Antucoya operation achieved commercial production on 1 April
2016, and its revenue and costs have accordingly been recognised in
the income statement from that date onwards.
In 2015 Antofagasta acquired a 50% stake in Compañia Minera
Zaldívar SpA ("Zaldívar") from Barrick Gold Corporation. 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.
The Group completed the sale of Minera Michilla SA ("Michilla")
to Haldeman Mining Company S.A. on 30 December 2016. In these
financial statements the net results of Michilla for the twelve
months to December 2016 are shown in the income statement on the
line for "Profit for the period from discontinued operations". The
comparative results for the prior year have been restated in order
to present the comparative net result on the "Profit for the period
from discontinued operations" line.
Impairment charges have been recognised during 2016 in respect
of the investments in Alto Maipo, the property, plant &
equipment of Minera Antucoya SA, and the Energia Andina joint
venture.
The investment in associate balance relating to Tethyan Copper
Company Limited ("Tethyan") is a negative balance $3.1 million. The
negative balance has been recognised because the Group funds the
on-going expenses and liabilities of Tethyan. Given the balance is
negative it has been included within non-current liabilities. The
prior year negative balance of $2.5 million has been reclassified
to non-current liabilities.
c) Change in estimation
The Group has revised its estimation of deferred stripping costs
which has resulted in the capitalisation of $118.1 million of
deferred stripping costs for Los Pelambres mine during 2016.
d) Going concern
Having reassessed the principal risks of the Group, the
Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the annual financial statements
report.
e) Accounting policies
The following International Financial Reporting Standards
(IFRS), amendments and interpretations are effective for the first
time in the current period.
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)
- Annual improvements 2012 - 2014 Cycle - improvements to four
IFRSs
The application of these standards and interpretations effective
for the first time in the current year has had no significant
impact on the amounts reported in these 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
---------------------------------------- -------------------------
IFRIC 22, Foreign Currency Transactions Annual periods beginning
and Advance Consideration on or after January 1,
2018
---------------------------------------- -------------------------
Amendments to IFRSs Effective date (Subject
to EU endorsement)
---------------------------------------- -------------------------
Recognition of Deferred Tax Assets Annual periods beginning
for Unrealized Losses (Amendments on or after January 1,
to IAS 12 2017
---------------------------------------- -------------------------
Disclosure Initiative (Amendments Annual periods beginning
to IAS 7) on or after January 1,
2017
---------------------------------------- -------------------------
Classification and Measurement of Annual periods beginning
Share-based Payment Transactions on or after January 1,
(Amendments to IFRS 2) 2018
---------------------------------------- -------------------------
Applying IFRS 9 'Financial Instruments' Annual periods beginning
with IFRS 4 'Insurance Contracts' on or after January 1,
(Amendments to IFRS 4) 2018
---------------------------------------- -------------------------
Transfers of Investment Property Annual periods beginning
(Amendments to IAS 40) on or after January 1,
2018
---------------------------------------- -------------------------
Annual Improvements to three IFRS Annual periods beginning
Standards 2014-2016 Cycle on or after January 1,
2018
---------------------------------------- -------------------------
The Group is continuing to evaluate in detail the potential
impact of IFRS 9 and IFRIC 22.
In respect of IFRS 15 Revenue from contracts the current
expectation is that the principal impact will relate to situations
where the Group is effectively providing a shipping service to
customers who have purchased copper from the Group, to transport
that copper to a destination port specified by the customer. Such
shipping services will represent a separate performance obligation
and should be accounted for over time separately from the sale of
goods. The impact of recognising shipping revenue over time rather
than at a point in time is not expected to have a material impact
on the financial statements.
IFRS 16 Leases will result in most of the Group's existing
operating leases being accounted for similar to finance leases
under the current IAS 17, resulting in the recognition of
additional assets within property, plant and equipment in respect
of the right of use of the lease assets, and additional lease
liabilities. The operating lease charges currently reflected within
operating expenses (and EBITDA) will be eliminated, and instead
depreciation and finance charges will be recognised in respect of
the lease assets and liabilities. Based on the operating leases in
place at 31 December 2016 it is currently estimated that this would
result in the recognition of additional lease assets within
property, plant & equipment and additional lease liabilities as
at 1 January 2017 of approximately $100 million in each case. It is
also estimated that this would result in a decrease in annual
operating expenses before depreciation (and therefore an increase
in EBITDA) of approximately $75m, an increase in annual
depreciation of approximately $70 million, an increase in finance
costs of less than $15m, and a net impact on profit before tax of
less than $15 million.
2. Total profit from operations, associates and joint ventures
Year ended
Year ended 31.12.2015
31.12.2016 (restated)
$m $m
Group revenue 3,621.7 3,225.7
Cost of sales (2,087.0) (2,349.0)
Gross profit 1,534.7 876.7
Administrative and distribution
expenses (479.1) (437.5)
Provision against carrying value
of assets (456.6) -
Other operating income 20.2 33.9
Other operating expenses (152.2) (184.1)
Operating results from subsidiaries 467.0 289.0
Equity accounting results 23.4 (5.8)
Provision against carrying value
of assets (134.7) -
------------- ------------
Net share of income from associates
and joint ventures (111.3) (5.8)
------------- ------------
Total profit from operations,
associates and joint ventures 355.7 283.2
============= ============
3. Exceptional items and asset sensitivities
Exceptional items are material items of income and expense which
are non-regular or non-operational and typically non-cash
movements. The exceptional items in the year ended 31 December 2016
and their impact on the results are set out below. There were no
exceptional items in 2015.
Operating SHARE OF RESULTS Profit before Earnings per
profit FROM ASSOCIATES tax share
AND JOINT
VENTURES
Year Year Year Year Year Year Year Year
ended ended ended ended ended ended ended ended
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
$m $m $m $m $m $m US cents US cents
Before
exceptional
items 923.6 289.0 23.4 (5.8) 875.9 242.8 38.6 61.7
Provision - - - - - -
against
the carrying
value
of assets
Alto Maipo -
Loan (241.0) - - - (241.0) - 6.3 -
Alto Maipo -
Investment - - (126.6) - (126.6) - 5.8 -
Antucoya -
PP&E (215.6) - - - (215.6) - 10.7 -
Energia
Andina
-
Investment - - (8.1) - (8.1) - (0.2) -
----------- ----------- ----------- ----------- --------------- ----------- ----------- -----------
Total
Provision
against the
carrying
value of
assets (456.6) - (134.7) - (591.3) - (22.6) -
----------- ----------- ----------- ----------- --------------- ----------- ----------- -----------
After
exceptional
items 467.0 289.0 (111.3) (5.8) 284.6 242.8 16.0 61.7
=========== =========== =========== =========== =============== =========== =========== ===========
(i) Alto Maipo
The Group has a 40% interest in Alto Maipo SPA ("Alto Maipo"),
which is developing two run-of-river hydroelectric power stations
located in the upper section of the Maipo River, approximately 50
kilometres to the southeast of Santiago. The remaining 60% interest
is held by AES Gener SA ("Gener"). The Group has been reviewing its
options with respect to its investment in Alto Maipo following the
announcement of a significant forecast cost overrun for the
project. In January 2017 the Group entered into an agreement with
Gener to dispose of its stake in Alto Maipo to Gener for a nominal
consideration. Accordingly, an impairment provision of $367.6
million has been recognised in respect of the total carrying value
relating to the project, comprising the $74.0 million investment in
associate balance and $52.6 million of mark-to-market losses in
respect of derivative financial instruments held by Alto Maipo
previously deferred in reserves, resulting in a $126.6 million loss
reflected on the profit from associates and joint ventures line,
and $241.0 million of loan financing (including accrued interest)
reflected in operating cost. This impairment provision resulted in
a deferred tax credit of $95.0 million and so the post-tax impact
is $272.6 million.
(ii) Antucoya
An impairment review has been conducted for the Antucoya
operation. Following the completion of construction, Antucoya
achieved commercial production in April 2016 and then reached full
production capacity in August 2016. This process was slower than
originally forecast, meaning that the costs capitalised during the
ramp-up period were greater than originally forecast and net
depreciation of the assets commenced later than originally
anticipated. The achievement of commercial production and full
capacity during the year has allowed a final determination of the
total capital cost of the project, including costs capitalised
during the ramp-up to commercial production, along with an
understanding of the actual operational performance of the
mine.
The impairment review determined that the recoverable amount
(fair value less costs of disposal) of Antucoya's assets was $
1,502.3 million, compared with the carrying value of $1,717.9
million, and accordingly an impairment provision of $215.6 million
(on a pre-tax basis) has been reflected in respect of Antucoya.
This impairment provision resulted in a deferred tax credit of
$99.4 million and so the post-tax impact is $116.2 million. All of
the provision has been allocated against Antucoya's property, plant
and equipment.
The key assumptions to which the value of the assets are most
sensitive are future commodity prices, the discount rate used to
determine the present value of the future cash flows, future
operating costs, sustaining and development capital expenditure and
ore reserve estimates. The commodity price forecasts (representing
the Group's estimates of the assumptions that would be used by
independent market participants in valuing the assets) are based on
the forward curve for the short-term and consensus analyst
forecasts including both investment banks and commodity consultants
for the longer-term. A long-term copper price of 300 c/lb has been
used in the calculations. A real post-tax discount rate of 8% has
been used in determining the present value of the forecast future
cash flow from the assets.
To illustrate the sensitivity of the valuation of Antucoya to
negative movements in these parameters, a 5% decrease in the
forecast long-term copper price would result in an increase in the
impairment of $121.0 million, and an increase in the discount rate
from 8% to 9% would result in an increase in the impairment of
$89.0 million. These are simple sensitivities, looking at
illustrative movements in the long-term copper price and discount
rate in 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 these estimated
potential sensitivities.
(iii) Energia Andina
The Group's Energia Andina joint venture holds an investment in
the Javiera solar plant in Chile. In February 2017 the disposal of
the interest in Javiera was agreed. The terms of the sale agreement
indicate a recoverable value for the interest in Javiera which is
$8.1 million below the carrying value, and accordingly an
impairment provision for this amount has been recognised. The terms
of the sale agreement is subject to certain closing conditions, and
the transaction is expected to complete during the first half of
2017.
(iv) Other asset sensitivities
There were no indicators of impairment for the Group's other
mining operations, and accordingly no detailed impairment reviews
have been performed for those operations. However, in order to
provide an indication of the sensitivities of the valuations of
these assets, a sensitivity analysis has been performed. For all of
the other mining operations a valuation exercise using assumptions
consistent with those used in the Antucoya impairment review
confirmed that the recoverable amount of the assets was in excess
of their carrying value. The recoverable amount of the assets still
remained in excess of their carrying value for all of the other
mining operations with either a 5% decrease in the forecast
long-term copper price or an increase in the discount rate from 8%
to 9%.
4. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Michilla (sold in 2016)
-- Antucoya
-- Zaldívar
-- Exploration and evaluation
-- Railway and other transport services
-- Water concession (sold in 2015)
-- Corporate and other items
For management purposes, the Group is organised into two
business divisions based on their products - Mining and Railway and
other transport services. The Group disposed of its Water division
in 2015. The mining division is split further for management
reporting purposes to show results by mine and exploration
activity. Following the completion of construction, the Antucoya
mine achieved commercial production in April 2016. The Group
acquired a 50% stake in the Zaldívar mine in December 2015. The
Michilla mine was placed on care and maintenance at the end of
2015, and was disposed of in December 2016. Los Pelambres produces
primarily copper concentrate and molybdenum as a by-product.
Centinela produces primarily copper concentrate containing gold as
a by-product and copper cathodes. Antucoya and Zaldívar produce
copper cathodes, as did Michilla. The transport division provides
rail cargo (based in Chile and formerly Bolivia) and road cargo
(based in Chile) together with a number of ancillary services
(based in Chile). The water division, which produced and
distributed potable water to domestic customers and untreated water
to industrial customers in Chile's Antofagasta Region, was sold
during 2015. The Exploration and evaluation segment incurs
exploration and evaluation expenses. "Corporate and other items"
comprises costs incurred by the Company, Antofagasta Minerals SA,
the Group's mining corporate centre and other entities, that are
not allocated to any individual business segment. Consistent with
its internal management reporting, the Group's corporate and other
items are included within the mining division.
The Chief Operating decision makers 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 of each of the segments.
a) Segment revenues and results
For the year ended 31 December 2016
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 1,845.6 1,338.0 277.9 - - - 3,461.5 160.2 3,621.7
Operating costs
excluding
depreciation (923.8) (775.5) (213.0) - (44.3) (56.5) (2,013.1) (86.9) (2,100.0)
Depreciation
and
amortisation (195.7) (299.4) (62.7) - - (5.2) (563.0) (15.4) (578.4)
Loss on
disposals (0.2) (17.1) - - - (0.6) (17.9) (1.8) (19.7)
Provision
against
the carrying
value of assets (241.0) - (215.6) - - - (456.6) - (456.6)
---------- ---------- ----------
Operating
profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Equity
accounting
results 0.4 - - 29.5 - (11.2) 18.7 4.7 23.4
Provision
against
the carrying
value of assets (126.6) - - - - (8.1) (134.7) - (134.7)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Net share of
results from
associates
and joint
ventures (126.2) - - 29.5 - (19.3) (116.0) 4.7 (111.3)
Investment
income 15.7 5.3 0.6 - - 4.7 26.3 0.6 26.9
Interest expense (6.5) (32.0) (30.5) - - (14.6) (83.6) (2.5) (86.1)
Other finance
items (2.7) (5.4) (5.0) - - 3.0 (10.1) (1.8) (11.9)
---------- ---------- ----------
Profit/(loss)
before tax 365.2 213.9 (248.3) 29.5 (44.3) (88.5) 227.5 57.1 284.6
Tax (117.4) (73.3) 94.3 - - 5.3 (91.1) (17.5) (108.6)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period
from continuing
operations 247.8 140.6 (154.0) 29.5 (44.3) (83.2) 136.4 39.6 176.0
Profit for
the period
from
discontinued
operations - - - - - 38.3 38.3 - 38.3
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period 247.8 140.6 (154.0) 29.5 (44.3) (44.9) 174.7 39.6 214.3
Non-controlling
interests (97.9) (32.8) 74.3 - - 0.1 (56.3) - (56.3)
---------- ---------- ----------
Profit/(loss)
for the period
attributable
to the owners
of the parent 149.9 107.8 (79.7) 29.5 (44.3) (44.8) 118.4 39.6 158.0
========== ========== ========== ============== ============== ========== ========== ========== ==========
EBITDA(1) 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Additions to non-current
assets
Capital
expenditure 316.6 617.4 27.4 - - 31.0 992.4 16.9 1,009.3
========== ========== ========== ============== ============== ========== ========== ========== ==========
Segment assets and
liabilities
Segment assets 3,606.2 5,008.0 1,740.5 - 9.5 1,867.2 12,231.4 323.0 12,554.4
Deferred tax
assets - - - - - 78.6 78.6 4.2 82.8
Investment
in associates
and joint
ventures - - - 983.7 - 25.1 1,008.8 77.8 1,086.6
Segment
liabilities (1,368.2) (1,979.3) (1,085.3) - (4.5) (638.3) (5,075.6) (138.5) (5,214.1)
========== ========== ========== ============== ============== ========== ========== ========== ==========
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the year, operating cash flow from exploration and
evaluation was $22.1 million
For the year ended 31 December 2015 (Restated)
Los Centinela Michilla Antucoya Zaldívar Exploration Corporate Mining Railway Water Total
Pelambres and and and concession
evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m $m $m
Revenue 1,807.2 1,266.1 - - - - - 3,073.3 152.4 - 3,225.7
Operating cost
excluding
depreciation (1,057.9) (1,027.7) - - - (101.9) (67.6) (2,255.1) (94.0) (2,349.1)
Depreciation
and
amortisation (191.6) (367.6) - - - - (3.1) (562.3) (13.8) - (576.1)
Loss on
disposals (2.7) (1.8) - - - - (4.4) (8.9) (2.6) - (11.5)
---------- ---------- ----------- ----------
Operating
profit/(loss) 555.0 (131.0) - - - (101.9) (75.1) 247.0 42.0 - 289.0
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 - - - - 2.2 16.7 0.8 - 17.5
Interest expense (1.8) (27.1) - - - - (1.8) (30.7) (3.0) - (33.7)
Other finance
items (4.6) (9.7) - (3.4) - - (7.5) (25.2) 1.0 - (24.2)
---------- ---------- ----------- ----------
Profit/(loss)
before tax 555.1 (163.5) - (3.4) (2.8) (101.9) (89.7) 193.8 49.0 - 242.8
Tax (161.8) 49.6 - (21.8) - - 1.8 (132.2) (22.2) - (154.4)
---------- ---------- --------- ---------- -------------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the period
from continuing
operations 393.3 (113.9) - (25.2) (2.8) (101.9) (87.9) 61.6 26.8 - 88.4
Profit/(loss)
for the period
from
discontinued
operations - - 10.6 - - - - 10.6 (13.1) 615.8 613.3
---------- ---------- --------- ---------- -------------- -------------- ---------- ---------- ---------- ----------- ----------
Profit/(loss)
for the period 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 the owners
of the parent 241.5 (67.4) 10.4 (13.3) (2.8) (101.9) (87.9) (21.4) 13.8 615.8 608.2
========== ========== ========= ========== ============== ============== ========== ========== ========== =========== ==========
EBITDA(1) 748.7 238.4 - - 6.8 (101.9) (60.7) 831.3 78.8 - 910.1
---------- ---------- --------- ---------- -------------- -------------- ---------- ---------- ---------- ----------- ----------
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 4,969.5 122.7 1,974.4 - - 950.9 11,770.8 497.6 - 12,268.4
Deferred tax
assets - 43.5 - - - - 78.0 121.5 3.1 - 124.6
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) - - (154.1) (4,660.4) (359.9) - (5,020.3)
========== ========== ========= ========== ============== ============== ========== ========== ========== =========== ==========
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the year, operating cash flow from exploration and
evaluation was $38.3 million
b) Entity wide disclosures
Revenue by product
Year ended
Year
ended 31.12.2015
31.12.2016 (Restated)
$m $m
Copper
- Los Pelambres 1,627.0 1,606.7
- Centinela concentrates 778.7 626.6
- Centinela cathodes 278.1 432.3
- Antucoya 277.9 -
Gold
- Los Pelambres 78.5 60.7
- Centinela 261.2 191.3
Molybdenum
- Los Pelambres 94.0 105.3
Silver
- Los Pelambres 46.1 34.5
- Centinela 20.0 15.9
------------- --- ------------
Total Mining 3,461.5 3,073.3
Railway and transport services 160.2 152.4
3,621.7 3,225.7
============= === ============
Revenue by location of customer
Year ended
Year ended 31.12.2015
31.12.2016 (Restated)
$m $m
Europe
- United Kingdom - 19.1
- Switzerland 217.7 175.2
- Spain 115.6 54.1
- Germany 38.5 167.0
- Rest of Europe 157.3 68.9
Latin America
- Chile 105.2 165.5
- Rest of Latin America 126.4 74.1
North America
- United States 49.5 105.2
Asia Pacific
- Japan 1,483.5 1,147.0
- China 771.9 623.8
- Rest of Asia 556.1 625.8
------------- --- -------------
3,621.7 3,225.7
============= === =============
Information about major customers
In the year ended 31 December 2016 the Group's mining revenues
included $694.7 million related to one large customer that
individually accounted for more than 10% of the Group's revenues
(year ended 31 December 2015 - one large customer representing
$426.0 million).
Non-current assets by location of asset
Year ended Year ended
31.12.2016 31.12.2015
$m $m
- Chile 9,996.3 10,287.1
- USA 204.4 171.2
- Other 0.1 0.8
10,200.8 10,459.1
============ ============
Notes to geographical information
The non-current assets balance disclosed by location of assets
excludes financial instruments, available-for-sale investments and
deferred tax assets.
5. Revenues
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
(including gold by-product sales) 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 year ended 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 31 December 2016 $m $m $m $m $m $m $m
Los Los Centinela Los
Pelambres Centinela Centinela Antucoya Pelambres Pelambres
Gold Gold
Copper Copper Copper Copper in in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
Provisionally
invoiced
gross sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5
Effects of
pricing
adjustments
to previous
year invoices
Reversal of
mark-to-market
adjustments at
the end
of the
previous year 14.5 6.2 (0.2) - - 2.2 (1.0)
Settlement of
sales invoiced
in the
previous year (18.9) (7.8) - - (0.1) (1.0) 1.7
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments
to previous
year invoices
in the current
year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7
------------ ------------ ---------- --------- ------------ ------------ ------------
Effects of
pricing
adjustments
to current year
invoices
Settlement of
sales invoiced
in the current
year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4
Mark-to-market
adjustments
at the end of
the current
year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7)
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments
to current
year invoices 108.5 44.0 3.7 3.7 (0.1) (2.9) 1.7
------------ ------------ ---------- --------- ------------ ------------ ------------
Total pricing
adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4
Realised loss
on commodity
derivatives - - (2.2) - - - -
Revenue before
deducting
tolling
charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9
Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9)
Revenue net of
tolling
charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0
============ ============ ========== ========= ============ ============ ============
For the year ended 31 December 2015 $m $m $m $m $m $m $m
Los Mic Los Centinela Los
Pelambres Centinela Centinela hilla Pelambres Pelambres
Gold Gold
Copper Copper Copper Copper in in Molybdenum
concentrate concentrate cathodes cathodes concentrate concentrate concentrate
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 4.
(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 31.12.2016 At 31.12.2015
Sales Tonnes 199,900 184,400
Average mark-to-market price $/lb 2.51 2.13
Average provisional invoice price $/lb 2.41 2.18
(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 31.12.2016 At 31.12.2015
Sales Tonnes 13,200 7,700
Average mark-to-market price $/lb 2.51 2.13
Average provisional invoice price $/lb 2.54 2.12
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain
open is approximately one month from shipment date.
At 31.12.2016 At 31.12.2015
Sales Ounce 36,400 50,300
Average mark-to-market price $/oz 1,167 1,061
Average provisional invoice price $/oz 1,203 1,105
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is
approximately two months from shipment date.
At 31.12.2016 At 31.12.2015
Sales Tonnes 1,300 1,900
Average mark-to-market price $/lb 6.6 5.1
Average provisional invoice price $/lb 6.9 4.8
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 year are as follows:
Effect on debtors
of year end
mark to market
adjustments
At 31.12.2016 At 31.12.2015
$m $m
Los Pelambres - copper concentrate 28.0 (14.5)
Los Pelambres - molybdenum concentrate (0.7) 1.0
Centinela - copper concentrate 15.3 (6.2)
Centinela - gold in concentrate (1.3) (2.2)
Centinela - copper cathodes (0.4) 0.2
Antucoya - copper cathodes (0.6) -
Michilla - copper cathodes - 0.1
40.3 (21.6)
6. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
At 31.12.2016 At 31.12.2015
$m $m
Financial assets
Derivatives in designated hedge accounting
relationships 2.4 0.2
Available-for-sale-investments 4.6 2.7
Loans and receivables at amortised cost
(including cash
and cash equivalents) 1,519.1 1,703.9
Fair value through profit and loss (liquid
investments and mark-to-mark debtors) 1,375.5 925.4
Financial liabilities
Derivatives in designated hedge relationships (2.5) (3.5)
Financial liabilities measured at amortised
cost (3,725.5) (3,235.5)
Fair value through profit and loss (mark-to-mark
creditors) (3.0) (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 At 31.12.2016 At 31.12.2015
1 2 3
Recurring fair value measurements
$m $m $m $m $m
Financial assets
Derivatives in designated hedge
accounting relationships - 2.4 - 2.4 0.2
Available for sale investments 4.6 - - 4.6 2.7
Fair value through profit and
loss 1,332.2 - - 1,332.2 924.1
Debtors mark-to-market - 43.3 - 43.3 1.3
Financial liabilities
Derivatives in designated hedge
relationships - (2.5) - (2.5) (3.5)
Creditors mark-to-market - (3.0) - (3.0) (22.9)
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting year.
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. The only non-recurring
fair value measurements in the year ended 31 December 2016 was the
impairment relating to Antucoya, with an impact of $215.6 million
(see Note 3).
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 year are
marked-to-market at the end of the year. 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 year are used for copper
sales while year-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 year 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 year ended 31 December 2016 there were no transfers between
levels in the hierarchy.
b) Embedded derivatives
As explained in Note 5, copper and molybdenum concentrate sale
agreements and copper cathode sale agreements generally provide for
provisional pricing of sales at the time of shipment, with final
pricing being based on the monthly average London Metal Exchange
copper price or monthly average molybdenum price for specified
future periods. The provisional pricing mechanism within the sale
agreements is an embedded derivative under IFRS. Details of the
provisional pricing arrangements are included in Note 5.
c) Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce its exposure to commodity price, foreign exchange and
interest rate movements. The Group does not use such derivative
instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39
"Financial Instruments: Recognition and Measurement". Changes in
the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows have been
recognised directly in equity, with such amounts subsequently
recognised in the income statement in the period when the hedged
item affects derivatives recognise in the income statement have
been recorded 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 gains or losses recorded in the income statement or in
reserves during the year, and the fair value recorded on the
balance sheet at the year are as follows. The impact on reserves is
shown before tax and non-controlling interests.
For the year ended 31 December 2016
Impact on
reserves Fair value
for year recorded
Impact on income statement ended at on balance
for year ended 31.12.2016 31.12.2016 sheet 31.12.2016
Realised Gains resulting Total Gains resulting Net financial
gains/(losses) from mark-to-market net from mark-to-market asset/(liability)
adjustments gain/(loss) adjustments
on hedging on hedging
instruments instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela (2.2) 1.0 (1.2) - 1.1
Interest Derivatives
Centinela (2.6) - (2.6) 1.8 (1.2)
Railway and
other transport
services (1.0) - (1.0) 0.5 -
(5.8) 1.0 (4.8) 2.3 (0.1)
For the year ended 31 December 2015
Impact on
reserves Fair value
for year recorded
Impact on income statement ended at on balance
for year ended 31.12.2015 31.12.2015 sheet 31.12.2015
Realised Gains resulting Total Gains/(losses) Net financial
gains/(losses) from mark-to-market net resulting asset/(liability)
adjustments gain/(loss) from mark-to-market
on hedging adjustments
instruments on hedging
instruments
$m $m $m $m $m
Commodity
Derivatives
Centinela (0.1) - (0.1) (0.1) 0.1
Exchange Derivatives
Antucoya 0.2 - 0.2 4.0 -
Interest Derivatives
Centinela (3.6) - (3.6) 3.1 (2.9)
Railway and
other transport
services (2.3) - (2.3) 0.5 (0.5)
(5.8) - (5.8) 7.5 (3.3)
The gains/(losses) recognised in reserves are disclosed before
non-controlling interests and tax.
The net financial liability resulting from the balance sheet mark-to-market
adjustments is analysed as follows:
At At 31.12.2015
31.12.2016
$m $m
Analysed between:
Current assets 2.2 0.2
Non-current 0.2 -
assets
Current liabilities (2.0) (2.0)
Non-current
liabilities (0.5) (1.5)
(0.1) (3.3)
(ii) Outstanding derivative financial instruments
Commodity derivatives
The Group periodically uses commodity derivatives to manage its exposure
to commodity price fluctuations.
- Min-max instruments For instruments held
At 31.12.2016 at 31.12.2016
Weighted average
remaining period Covering
Copper production Average Average from 1 January a period
hedged Min Max 2017 up
000 tonnes $/lb $/lb Months to:
Centinela 72,000 2.25 2.84 12.0 31-12-2017
Exchange derivatives
The Group periodically uses foreign exchange derivatives to reduce its
exposure to fluctuations in the exchange rates influencing operating
costs and the fair value of non-US dollar denominated assets or liabilities.
The Group had no such instruments in place at 31 December 2016.
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 31 December 2016 the Group had entered
into the contracts outlined below.
Weighted
Actual Average
Start Maturity notional Fixed
date date amount Rate
$m %
Centinela 15-02-2011 15-08-2018 70.0 3.372
Railway and
other transport
services 12-08-2014 12-08-2019 90.0 1.634
The actual notional amount hedge depends upon the amount of the related
debt currently outstanding.
7. Net finance expense
Year ended
Year ended 31.12.2015
31.12.2016 (Restated)
$m $m
Investment income
Interest receivable 20.4 16.1
Fair value through profit or loss 6.5 1.4
26.9 17.5
Interest expense
Interest expense (86.0) (33.5)
Preference dividends (0.1) (0.2)
(86.1) (33.7)
Other finance items
Time value effect of derivatives 1.0 0.1
Unwinding of discount on provisions (10.0) (8.5)
Impairment of available for sale
investments - (1.0)
Foreign exchange (2.9) (14.8)
(11.9) (24.2)
Net finance expense (71.1) (40.4)
During 2016, $9.2 million relating to net interest expense and
other finance items at Antucoya (year ended 31 December 2015 -
$29.6 million), $2.3 million at Centinela (year ended 31 December
2015 - $4.1 million) and $0.5 million at Los Pelambres (year ended
31 December 2015 - $1.2 million) was capitalised, and is
consequently not included within the above table.
The fair value through profit or loss line represents the fair
value gains relating to liquid investments.
8. Taxation
The tax charge for the year comprised the following:
Year ended
Year ended 31.12.2015
31.12.2016 (Restated)
$m $m
Current tax charge
Corporate tax (principally first
category tax in Chile) (222.1) (54.8)
Mining tax (royalty) (35.3) (20.4)
Withholding tax (3.8) (12.9)
Exchange losses on corporate
tax balances - (1.0)
(261.2) (89.1)
Deferred tax credit/(charge)
Corporate tax (principally first
category tax in Chile) (27.5) (53.0)
Exceptional items 204.9 -
Mining tax (royalty) (24.8) (10.4)
Withholding tax provision - (1.9)
152.6 (65.3)
Total tax charge (income tax
expense) (108.6) (154.4)
The rate of first category (i.e. corporate) tax in Chile is
currently 24% (2015-22.5%). The rate will increase to 25.5% in 2017
and then 27% from 2018 onwards.
In addition to first category tax the Group incurs withholding
taxes on remittance of profits from Chile. Withholding tax is
levied on remittances of profits from Chile at 35% less first
category (i.e. corporation) tax already paid in respect of the
profits to which the remittances relate.
The Group's mining operations are also subject to a mining tax
(royalty). Production from Los Pelambres and, the Tesoro Central
and Mirador pits at Centinela cathodes are currently subject to a
rate of 4% of taxable operating profit and Centinela concentrates
of 5%, and production from the 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.
31.12.2016 31.12.2016 Year ended
BEFORE AFTER EXCEPTIONAL 31.12.2015
EXCEPTIONAL ITEMS (Restated)
ITEMS
$m % $m % $m %
Profit before tax 875.9 - 284.6 242.8
Tax at the Chilean corporate
rate tax of 24% (2015 - 22.5%) (210.2) 24.0 (68.3) 24.0 (54.6) 22.5
Provision against carrying value
of assets (exceptional items) - - 63.0 (22.1) - -
Effect of increase in future
first category tax rates on
deferred tax balances (24.6) 2.8 (24.6) 8.6 (8.9) 3.7
Items not deductible from first
category tax (23.7) 2.7 (23.7) 8.3 (21.2) 8.7
Items not subject to first category
tax 8.5 (1.0) 8.5 (2.9) 4.1 (1.7)
Carry-back tax losses resulting
in credits at historic tax rates (5.4) 0.6 (5.4) 1.8 (25.8) 10.6
Mining tax (royalty) (60.1) 6.9 (60.1) 21.1 (31.8) 13.1
Withholding taxes - - - - (14.8) 6.1
Withholding taxes - adjustment
to previous year (3.8) 0.4 (3.8) 1.3 - -
Tax effect of share of results
of associates and joint ventures 5.6 (0.6) 5.6 (1.9) (0.5) 0.2
Net other items 0.2 (0.0) 0.2 (0.0) (0.9) 0.4
-------- ---------- -------- -------- ------
Tax expense and effective tax
rate for the year (313.5) 35.8 (108.6) 38.2 (154.4) 63.6
======== ========== ======== ======== ======
The tax charge for 2016 was $108.6 million and the effective tax
rate was 38.2%. The exceptional impairment provisions had an impact
on the overall tax charge and the reconciliation of the effective
tax rate, and accordingly we have presented the tax reconciliation
above both including and excluding the impact of the exceptional
items. Excluding these exceptional impairment provisions, the 2016
tax charge was $313.5 million and the effective tax rate was
35.8%.This effective tax rate varied from the statutory rate
principally due to the effect of increase in future first category
tax rates on deferred tax balances (impact of $24.6 million /
2.8%), the effect of expenses not deductible for Chilean corporate
tax purposes (principally the funding of expenses outside of Chile)
and items not subject to first category tax (impact of $15.2
million / 1.7%) and the mining tax (impact of $60.1 million /
6.9%).
The current and deferred tax relating to items that are charged
directly to equity was $2.1 million (2015 - $1.4 million).
The main factors which are expected to impact the sustainability
of the Group's existing effective tax rate (excluding exceptional
items) is the increase in the rate of first category (i.e.
corporate) tax in Chile from the 2016 rate of 24% to 25.5% in 2017
and then 27% from 2018 onwards.
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
9. Discontinued operations
(i) Profit for the period from discontinued operations
On 30 December 2016 the Group completed the disposal of Minera
Michilla SA ("Michilla").
During 2015 the Group disposed of its Water division, Aguas de
Antofagasta SA ("ADASA") and its transport operation in Bolivia,
Empresa Ferroviaria Andina S.A. ("FCA").
The results of Michilla 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, as were ADASA and FCA in 2015, reflecting the following
amounts:
MICHILLA Year ended ADASA FCA Year ended
31 December MICHILLA 31 December
2016 2015
$m $m $m $m $m $m
Revenues 3.8 3.8 53.9 12.9 168.9 235.7
Total operating costs (10.2) (10.2) (34.9) (20.2) (153.5) (208.6)
Net finance income (1.4) (1.4) (0.1) (0.2) 1.2 0.9
Profit/(loss) before tax (7.8) (7.8) 18.9 (7.5) 16.6 28.0
Attributable tax expense 4.4 4.4 (3.9) - (6.0) (9.9)
Profit/(loss) of discontinued
operations (3.4) (3.4) 15.0 (7.5) 10.6 18.1
Profit/(loss) on disposal
of discontinued operations 42.9 42.9 853.2 (5.6) - 847.6
Attributable tax expense (1.2) (1.2) (252.4) - - (252.4)
Net profit attributable
to discontinued operations
(attributable to owners
of the Company) 38.3 38.3 615.8 (13.1) (10.6) 613.3
During the period, Michilla SA, contributed $13.6 million cash
outflow (2015 - $23.0 million cash inflow) to the Group's net cash
flow from operating activities, nil (2015 - nil) in respect to net
cash used in investing activities and paid nil (2015 - nil) in net
cash provided in financing activities. During 2015 ADASA
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 FCA 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 Minera Michilla SA
On 30 December 2016, the Group disposed of its 100% interest in
Minera Michilla SA ("Michilla").The proceeds on disposal of $54.3
million were received in cash ($52.3 million) and a short-term
receivable ($2.0 million). The gain on disposal of MIC is analysed
below. No investment was retained in the former subsidiary.
The net assets of Michilla at the date of disposal were as
follows:
At
30 December
2016
Proceeds $m
Cash and cash equivalents 52.3
Receivable 2.0
54.3
Asset Disposed of:
Inventories (0.1)
Trade and other receivables (0.7)
Cash and cash equivalents (42.3)
Long-term provision 35.8
Deferred tax liabilities (4.1)
Total carrying amount disposed 11.4
Profit on disposal of discontinued operations 42.9
Loss for the year (3.4)
Total profit on disposal of discontinued operations
(before tax) 39.5
Attributable tax expense (1.2)
Profit on disposal of discontinued operations
(before tax) 38.3
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents 52.3
Less: Cash and cash equivalents disposed of (42.3)
10.0
10. Earnings per share
Basic and diluted earnings per share is calculated on profit
after tax and non-controlling interests giving profit for the
period attributable to the owners of the parent of $158.0 million
(2015 - $608.2 million) and amounted to 16.0 cents and based on
985,856,695 ordinary shares. There was no potential dilution of
ordinary shares in either year.
Profit after tax attributable to the owners of the parent before
exceptional items represents underlying net earnings. In the year
ended 31 December 2016, underlying net earnings were $379.8 million
and resulted in underlying earnings per share of 38.6 cents.
11. Dividends
The Board has recommended a final dividend of 15.3 cents per
ordinary share or $151.0 million in total (2015 - nil). The interim
dividend of 3.1 cents per ordinary share or $30.6 million in total
was paid in September 2016 (2015 interim dividend of 3.1 cents per
ordinary share or $30.6 million in total). This gives total
dividends proposed in relation to 2016 (including the interim
dividend) of 18.4 cents per share or $181.4 million in total (2015
- 3.1 cents per ordinary share or $30.6 million in total).
Dividends per share actually paid in the year and recognised as
a deduction from net equity under IFRS were 3.1 cents per ordinary
share or $30.6 million in total (2015 -12.9 cents per ordinary
share or $127.2 million in total) being the interim dividend for
the year and the final dividend proposed in respect of the previous
year.
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.
12. Intangible assets
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Balance at the beginning
of the year 150.1 118.6
Acquisition - 150.1
Disposal - (113.7)
Amortisation - (2.4)
Foreign currency exchange
difference - (2.5)
Balance at the end of the
year 150.1 150.1
The $150.1 million intangible asset reflects the value of Twin
Metals' mining property assets. The mining properties will be
amortised once production commences.
13. Property, plant and equipment
Railway
and other Year ended Year ended
Mining transport 31.12.2016 31.12.2015
$m $m $m $m
Balance at the beginning of
the year 8,438.8 162.3 8,601.1 8,213.9
Additions 904.8 16.9 921.7 984.3
Additions - depreciation capitalised 87.6 - 87.6 28.3
Reclassification 3.8 (0.1) 3.7 123.8
Acquisition - - - 20.8
Adjustment to capitalised
decommissioning provisions 16.9 - 16.9 (35.7)
Depreciation (563.0) (15.4) (578.4) (590.7)
Depreciation capitalised in
PP&E and in inventories (79.2) - (79.2) (44.9)
Provision against the carrying
value of assets (215.6) - (215.6) -
Assets derecognized due to
loss of control of subsidiary - - - (84.6)
Asset disposals/write off (18.0) (2.3) (20.3) (12.3)
Foreign currency exchange
difference - - - (1.8)
Balance at the end of the
year 8,576.1 161.4 8,737.5 8,601.1
Future capital commitments at 31 December 2016 were $196.1
million (31 December 2015 - $283.1 million) of which $129.8 million
were related to the development of the Encuentro Oxides
project.
Borrowing costs of $12.0 million were capitalised, mainly at
Antucoya (2015 - $60 million). The average interest rate for the
amounts capitalised was 1.1% (2015 - 1.2%).
Reclassifications of $3.7 million are mainly related to the
capitalisation of interest of $9.3 million, depreciation of
machinery used in construction of $14.6 million and other expenses
incurred during the commissioning of Antucoya and credits related
to a refund from a contractor for contract underperformance of
$24.9 million and credits related to sales.
At 31 December 2016, assets capitalised relating to the
decommissioning provision were $147.2 million (at 31 December 2015,
$137.4 million).
Depreciation capitalised in property, plant and equipment of
$87.6 million related to stripping cost depreciation of $64.8 at
Pelambres and Centinela and $22.8 million related to Antucoya
depreciation capitalized during the commissioning period.
14. Investment in associates and joint ventures
Year Year
Inversiones El Alto Minera Energía Tethyan ended ended
Hornitos ATI Arrayan Maipo Zaldívar Andina Copper 31.12.2016 31.12.2015
$m $m $m $m $m $m $m $m $m
Balance at the
beginning
of the year 75.1 8.1 23.2 33.5 998.9 10.3 - 1,149.1 198.1
Obligations on behalf
of JV - - - - - - (2.5) (2.5) -
Capital contribution - - - 36.0 - 1.0 10.0 47.0 48.1
Capital decrease and
others - - (0.9) - 0.3 - - (0.6) -
Adjustment to Purchase
price - - - - (45.0) - - (45.0) 1,001.7
Gains/(losses) in fair
value of cash flow
hedges deferred in
reserves of associates - - 0.3 4.1 - - - 4.4 (16.0)
Fair value of
investment
in associate upon
reclassification
to subsidiary - - - - - - - - (67.4)
Provision against
carrying
value of assets - - - (74.0) - (8.1) - (82.1) -
Share of profit/(loss)
before tax 8.9 (1.9) (1.0) 0.4 41.9 - (10.6) 36.4 (4.4)
Share of tax (2.5) 0.2 0.4 - (12.4) - - (13.0) (1.4)
Share of income/(loss)
from associate 6.4 (1.7) (0.6) 0.4 29.5 - (10.6) 23.4 (5.8)
Dividends received (10.2) - - - - - - (10.2) (12.1)
Balance at the end
of the year 71.3 6.5 22.0 - 983.7 3.2 - 1,086.6 1,149.1
Obligations on behalf
of JV - - - - - - (3.1) (3.1) (2.5)
Share of income/(loss)
from associate 6.4 (1.7) (0.6) 0.4 29.5 - (10.6) 23.4 (5.8)
Provision against
carrying
value of assets
(exceptional
items) - - - (74.0) - (8.1) - (82.1) -
Other comprehensive
income of associates
to profit for the year
(exceptional items) - - - (52.6) - - - (52.6) -
Net share of results
from associates and
joint ventures 6.4 (1.7) (0.6) (126.2) 29.5 (8.1) (10.6) (111.3) (2.5)
The investments which are included in the $1,083.5 million
balance at 31 December 2016 are set out below:
Investment in associates
(i) The Group's 40% interest in Inversiones Hornitos SA, which
owns the 165MW Hornitos thermoelectric power plant operating in
Mejillones, in Chile's Antofagasta Region. The Group has a 16-year
power purchase agreements with Inversiones Hornitos SA for the
provision of up to 40MW of electricity for Centinela.
(ii) The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.
(iii) The Group's 30% interest in El Arrayan, which operates an
115MW wind-farm project. The Group has a 20-year power purchase
agreements with El Arrayan for the provision of up to 40MW of
electricity for Los Pelambres.
(iv) The Group has a 40% interest in Alto Maipo SPA ("Alto
Maipo"), which is developing two run-of-river hydroelectric power
stations located in the upper section of the Maipo River,
approximately 50 kilometres to the southeast of Santiago. The
remaining 60% interest is held by AES Gener SA ("Gener"). As
explained in Note 3, the Group has been reviewing its options with
respect to its investment in Alto Maipo following the announcement
of a significant forecast cost overrun for the project. In January
2017 the Group entered into an agreement with Gener to dispose of
its stake in Alto Maipo to Gener for a nominal consideration.
Accordingly, an impairment provision of $367.6 million has been
recognised in respect of the total carrying value relating to the
project, comprising the $74.0 million investment in associate
balance as shown above, $241.0 million of loan financing (including
accrued interest) and $52.6 million of mark-to-market losses in
respect of derivative financial instruments held by Alto Maipo
previously deferred in reserves.
During 2016 the Group made provision for capital contributions
of $36.0 million (2015 - $42.8 million). During the year the Group
provided nil loan financing (2015 - $63.9 million) to Alto Maipo.
The balance due from Alto Maipo to the Group at 31 December 2016
was nil after provision (2015 - $229.7 million) representing loan
financing with an interest rate of LIBOR six-months plus 4.25%.
During 2016 a fair value loss of $4.1 million (2015 - $14.4 million
loss) was recognised in relation to the mark-to-market of the
derivative financial instruments with this amount deferred in
reserves as it formed part of a designated cash flow hedging
relationship.
The Group has a 20-year power purchase agreement with Alto Maipo
for the provision of up to 110 MW of electricity for Los Pelambres
from the completion date of the project.
Investment in joint ventures
(v) The Group's 50% interest in Minera Zaldívar SpA
("Zaldívar"), was acquired on 1 December 2015 (see Note 16).
Zaldívar is an open-pit, heap-leach copper mine located in Northern
Chile, which produces approximately 100,000 tonnes of copper
cathodes annually.
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 Zaldívar 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 capitalized 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 was also completed during 2016.
(vi) The Group's 50.1% (2014 - 50.1%) interest in Energia
Andina, which is a joint venture with Origin Geothermal Chile
Limitada for the evaluation and development of potential sources of
geothermal and solar energy.
In February 2017 the disposal of the interest in Javiera was
agreed. The terms of the sale agreement indicate a recoverable
value for the interest in Javiera which is $8.1 million below the
carrying value, and accordingly an impairment provision for this
amount has been recognised. The terms of the sale agreement is
subject to certain closing conditions, and the transaction is
expected to complete during the first half of 2017.
(vii) The Group's 50% interest in Tethyan Copper Company Limited
("Tethyan"), which is a joint venture with Barrick Gold Corporation
over Tethyan's mineral interest in Pakistan, which is now subject
to international arbitration. As the net carrying value of the
interest in Tethyan is negative it is included within non-current
liabilities, as the Group is liable for its share for the joint
ventures obligations.
15. Available for sale investments
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Balance at the beginning of the
year 2.7 15.6
Additions - 0.2
Reclassification - (9.4)
Movement in fair value 1.7 (3.2)
Disposal - (0.2)
Foreign currency exchange differences 0.2 (0.3)
Balance at the end of the year 4.6 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.
16. Acquisition of 50% stake in Zaldívar
On 1 December 2015 Antofagasta completed its acquisition of a
50% stake in Compañia Minera Zaldívar SpA ("Zaldívar") from Barrick
Gold Corporation ("Barrick"), pursuant to an agreement entered into
on 30 July 2015. As a result, Antofagasta became operator of the
Zaldívar mine. Zaldívar 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
Zaldívar, Antofagasta is accounting for its 50% stake in Zaldívar
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 Zaldívar 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 capitalized 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 was also completed during 2016.
17. Inventories
Year Year
ended ended
31.12.2016 31.12.2015
$m $m
Current:
Raw materials and consumables 189.4 162.0
Work in progress 141.9 97.7
Finished goods 62.1 37.4
393.4 297.1
Non-current:
Work in progress 157.3 263.9
157.3 263.9
Non-current work-in-progress is expected to be processed more
than 12 months after the balance sheet date.
18. Borrowings
Notes At 31.12.2016 At 31.12.2015
$m $m
Los Pelambres
Corporate loans (i) (17.5) (52.3)
Short-term loan (ii) (312.0) (312.1)
Finance leases (iii) (62.2) (7.9)
Centinela
Corporate loans (iv) (743.8) (889.8)
Shareholder loan (subordinated
debt) (v) (183.6) (174.5)
Short-term loan (vi) (200.0) (200.0)
Antucoya
Project financing (senior debt) (vii) (608.7) (630.2)
Shareholder loan (subordinated
debt) (viii) (330.4) (308.7)
Short-term loan (ix) (30.0) (30.0)
Finance leases (x) (16.2) -
Corporate and other items
Long- term loan (xi) (497.2) -
Finance leases (xii) (25.1) (24.6)
Railway and other transport
services
Long-term loans (xiii) (89.4) (119.1)
Finance leases (xiv) (1.6) (2.9)
Preference shares (xv) (2.5) (3.0)
Total (3,120.2) (2,755.1)
(i) Corporate loans at Los Pelambres are unsecured and US dollar
denominated. These loans have a remaining term of 1 year and have
an interest rate of LIBOR six-month rate plus margins of between
0.9% - 1.6%.
(ii) The short-term loan (PAE) is US dollar denominated,
comprising a working capital loan for an average period of 1 year
and has an interest rate of LIBOR six-month rate plus margin of
between 0.05% - 0.16%.
(iii) Finance leases at Los Pelambres are US dollar denominated,
comprising $62.2 million at an interest of LIBOR six-month rate
plus 3.43% with a remaining duration of 8.4 years.
(iv) Senior debt at Centinela is US dollar denominated,
comprising $743.8 million in respect of syndicated loans. These
loans are for a remaining term of 3.5 years and have an interest
rate of LIBOR six-month rate plus 1%. The loans are subject to
financial covenants which require that specified net debt to EBITDA
and EBITDA to finance expense ratios are maintained.
The Group has used interest rate swaps to swap the floating rate
interest for fixed rate interest. At 31 December 2016 the current
notional amount hedged of the senior debt at Centinela was $70
million.
(v) The long-term subordinated debt is US dollar denominated,
provided to Centinela by Marubeni Corporation with a duration of
5.5 years and weighted average interest rate of LIBOR six-month
rate plus 3.75%. Long term subordinated debt provided by Group
companies to Centinela has been eliminated on consolidation
(vi) The short-term loan (PAE) is US dollar denominated,
comprising a range of working capital loans for an average period
of 1 year and have an interest rate of LIBOR six-month plus margins
of between 0.1% - 0.3%
(vii) Senior debt at Antucoya is US dollar denominated,
comprising $608.7 million in respect of syndicated loans. These
loans are for a remaining term of 10.5 years and have an interest
rate of LIBOR six-month rate plus 1.9%.
(viii) The long-term subordinated debt is US dollar denominated,
provided to Antucoya by Marubeni with duration of 10.5 years and an
interest rate of LIBOR six-month rate plus 3.65%. Long-term
subordinated debt provided by Group companies to Antucoya has been
eliminated on consolidation.
(ix) The short-term loan is US dollar denominated, comprising a
working capital loan for an average period of 1 year and has an
interest rate of LIBOR six-month rate plus 0.9%
(x) Finance leases at Antucoya are US dollar denominated, with a
maximum remaining duration of 7 years and with an average interest
rate of approximately LIBOR six-month rate plus 2.0%.
(xi) The long term loan at Corporate (Antofagasta plc) of $497.2
million has variable interest rate of LIBOR six-month rate plus
1.5% with a duration of five years.
(xii) Finance leases at Corporate and other items are
denominated in Unidades de Fomento (i.e. inflation-linked Chilean
pesos) and have a remaining duration of 11.5 years and are at fixed
rates with an average interest rate of 5.29%.
(xiii) Long-term loans at Railway and other transport services
are US dollar denominated, mainly comprise a loan for $89.4 million
with a duration of 3.5 years and with an interest rate of LIBOR
six-month rate plus 0.48%.The Group has used interest rate swaps to
swap the floating rate interest for fixed rate interest. At 31
December 2016 the current notional amount hedged of the long-term
debt at Railway and other transport services was $90.0 million.
(xiv) Finance leasing at Railway and other transport services
are Chilean peso denominated, with a maximum remaining duration of
1.5 years and with a fixed interest rate of 4.8%
(xv) The preference shares are sterling-denominated and issued
by the Company. There were 2 million shares of GBP1 each
authorised, issued and fully paid at 31 December 2016. The
preference shares are non-redeemable and are entitled to a fixed
cumulative dividend of 5% per annum. On winding up they are
entitled to repayment and any arrears of dividend in priority to
ordinary shareholders, but are not entitled to participate further
in any surplus. Each preference share carries 100 votes in any
general meeting of the Company.
Maturity of borrowings
At 31.12.2016 At 31.12.2015
$m $m
Short-term borrowings (836.8) (758.9)
Medium and long-term borrowings (2,283.4) (1,996.2)
Total (3,120.2) (2,755.1)
At 31 December 2016 $29.1 million (2015 - $38.4 million) of the
borrowings has fixed rate interest and $3,091.1million (2015 -
$2,716.7 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 6,
these include interest rate swaps which have the effect of
converting $160.0 million of floating rate borrowings into fixed
rate borrowings. Details of any derivative instruments held by the
Group are given in Note 6.
19. Post-employment benefit obligation
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Balance at the beginning of the
year (86.9) (103.0)
Current service cost (15.5) (16.6)
Actuarial gains 7.8 2.3
Interest cost (4.4) (4.1)
Charge capitalised (0.5) (3.6)
Reclassification 1.3 (0.3)
Paid in the year 12.2 14.0
Disposal - 8.9
Foreign currency exchange difference (6.2) 15.5
Balance at the end of the year (92.2) (86.9)
The post-employment benefit obligation relates to the provision
for severance indemnities which are payable when an employment
contract comes to an end, in accordance with normal employment
practice in Chile and other countries in which the Group operates.
The severance indemnity obligation is treated as an unfunded
defined benefit plan, and the calculation is based on valuations
performed by an independent actuary.
20. Decommissioning & restoration and other long term
provisions
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Balance at the beginning of the
year (394.0) (434.3)
Charge to operating profit in
the year (9.3) (25.8)
Unwind of discount to net interest
in the year (5.5) (5.0)
Capitalised adjustment to provision (16.9) 35.7
Reclassification (1.1) -
Utilised in the year 3.7 30.1
Disposal 35.8 1.5
Foreign currency exchange difference (4.8) 3.8
Balance at the end of the year (392.1) (394.0)
Decommissioning and restoration costs relate to the Group's
mining operations. Costs are estimated on the basis of a formal
closure plan and are subject to regular independent formal review.
It is estimated that the provision will be utilised from 2024 until
2059 based on current mine plans.
During the year ended 31 December 2016, the decommissioning and
restoration provisions at the Group's mining operations decreased
by a net total of $1.9 million.
21. Deferred tax assets and liabilities
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Net position at the beginning
of the year (951.6) (875.2)
Charge to tax on profit in year (48.7) (83.0)
Deferred tax recognised directly in equity (2.1) 1.4
Deferred tax credit relating to exceptional
impairment provisions 204.9 -
Reclassification 3.0 (0.8)
Disposal (3.7) 8.8
Foreign currency exchange difference 0.1 -
Net position at the end of the
year (798.1) (951.6)
Analysed between:
Deferred tax assets 82.8 124.6
Deferred tax liabilities (880.9) (1,076.2)
Net position (798.1) (951.6)
The deferred tax balance of $798.1 million (2015 - $951.6
million) includes liabilities of $878.8 million (2015 - $965.0
million) due in more than one year. All amounts are shown as
non-current on the face of the balance sheet as required by IAS
12.
22. Share capital and share premium
There was no change in share capital or share premium in the
year ended 2016 or 2015.
23. Other reserves and retained earnings
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Hedging reserves(1)
At 1 January (44.1) (36.2)
Parent and subsidiaries net cash
flow hedge fair value (losses)/gains (2.4) 0.1
Parent and subsidiaries net cash flow hedge
gains transferred to the income statement 4.1 3.5
Share of other comprehensive gains/(losses)
of equity accounted units, net of tax 3.1 (10.2)
Share of other comprehensive gains of equity
accounted units, net of tax transferred to
the income statement 31.6 -
Tax on the above (1.1) (1.3)
At 31 December (8.8) (44.1)
Available for sale revaluation
reserves(2)
At 1 January (12.9) (10.7)
Gain/(losses) on available for
sale investment 1.7 (3.2)
Losses on available for sale securities transferred
to the income statement - 1.0
At 31 December (11.2) (12.9)
Foreign currency translation reserves(3)
At 1 January (2.3) (0.5)
Currency translation reclassified
on disposal - (1.8)
Tax on the above - -
At 31 December (2.3) (2.3)
Total other reserves per balance
sheet (22.3) (59.3)
Retained earnings(4)
At 1 January 6,416.4 5,932.1
Parent and subsidiaries profit for the year 269.3 614.0
Equity accounted units' loss after
tax for the year (111.3) (5.8)
Actuarial gains(5) 5.1 4.5
Tax relating to components of
other comprehensive income (0.3) (1.2)
Total comprehensive income for
the year 6,579.2 6,543.6
Dividends paid (30.6) (127.2)
At 31 December 6,548.6 6,416.4
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognized initially in equity (through other
comprehensive income), as described in note 6.
(2) The available for sale revaluation reserves record fair
value gains or losses relating to available for sale investment, as
described in note 15.
(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 associates and
joint operations.
(5) Actuarial gains or losses relating long - term employee
benefits, as described in note 19.
24. Reconciliation of profit before tax to net cash inflow from
operating activities
Year ended Year ended
31.12.2016 31.12.2015
$m $m
Profit before tax from continuing
operations 284.6 242.8
Profit before tax from discontinued
operations 35.1 875.6
Depreciation and amortisation 578.4 576.1
Net loss on disposals 19.7 10.2
Provision against carrying value
of assets 456.6 -
Profit on disposal of discontinued
operations (35.1) (859.0)
Net finance expense 71.1 39.2
Net share of results from associates
and joint ventures 111.3 5.8
Decrease in inventories 3.9 60.5
(Increase)/decrease in debtors (124.9) 137.7
Increase/(decrease) in creditors
and provisions 56.6 (230.6)
Cash flows from operations 1,457.3 858.3
25. Analysis of changes in net debt
At 1.1.2016 Cash flows Other Exchange At 31.12.2016
$m $m $m $m $m
Cash and cash equivalents 807.5 (103.1) - 11.9 716.3
Liquid investments 924.1 408.1 - - 1,332.2
Total cash and cash equivalents
and liquid investments 1,731.6 305.0 - 11.9 2,048.5
Bank borrowings due within
one year (753.4) 215.0 (275.8) - (814.2)
Bank borrowings due after
one year (1,963.3) (460.7) 225.6 - (2,198.4)
Finance leases due within
one year (5.5) 1.5 (18.5) - (22.5)
Finance leases due after
one year (29.9) 29.7 (80.3) (2.1) (82.6)
Preference shares (3.0) 0.1 (0.1) 0.5 (2.5)
Total borrowings (2,755.1) (214.4) (149.1) (1.6) (3,120.2)
Net debt (1,023.5) 90.6 (149.1) 10.3 (1,071.7)
Net debt
Net debt at the end of each year was as follows:
At 31.12.2016 At 31.12.2015
$m $m
Cash, cash equivalents
and liquid investments 2,048.5 1,731.6
Total borrowings (3,120.2) (2,755.1)
(1,071.7) (1,023.5)
26. Litigation and Contingent liabilities
Antofagasta plc or its subsidiaries is subject to various claims
which arise in the ordinary course of business. None of these
claims are currently expected to result in any material loss to the
Group. Details of the principal claims in existence either during,
or at the end of, the period and the current status of these claims
are set out below:
Los Pelambres - Cerro Amarillo Waste Dump
In 2004, Los Pelambres received all of the required
authorisations from the Chilean government to deposit waste-rock
from its mining activities in its current location (the "Cerro
Amarillo Waste Dump"). According to the then official Chilean maps
(1996), this area was located entirely within Chile. In 2007, Chile
modified the official maps in 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 April 2016, in accordance with a preliminary measure required
by the Federal Court of San Juan, Los Pelambres and the Province of
San Juan entered into an agreement pursuant to which Los Pelambres
agreed to implement 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 November 2016, the Province set aside the agreement.
Notwithstanding this, between November 2016 and January 2017, Los
Pelambres removed the truck tyres that had previously been stored
at the Cerro Amarillo Waste Dump as had been agreed.
In February 2017, at the Province of San Juan's request, Los
Pelambres filed a provisional action plan to close the Cerro
Amarillo Waste Dump with the civil courts, which is currently
subject to review by the parties to the proceedings and the
judge.
In the criminal proceedings, current and former directors and
officers of Los Pelambres are in the process of providing testimony
as named co-defendants in this case.
Twin Metals Minnesota - Federal Mineral Leases MNES-1352 and
MNES-1353
On 8 March 2016, the Solicitor of the Department of the Interior
issued a legal opinion concluding that the Bureau of Land
Management (BLM) has discretion to deny Twin Metals' application
for renewal of federal mineral leases MNES-1352 and MNES-1353. The
United States Forest Service (USFS) declined to consent to renewal
of the leases on 14 December 2016, and BLM rejected Twin Metals'
application to renew the leases the next day.
The BLM's denial relied on the Solicitor's Opinion's conclusion
that it had discretion to deny the renewal, and BLM took the view
that USFS consent was required to renew the leases. According to
BLM, because the USFS refused consent, BLM was required to reject
the lease renewal application.
The USFS decision was based on the potential environmental
impacts of sulphide-ore copper mining in the Boundary Waters
watershed. The USFS decision did not discuss the terms and
conditions of the leases, nor did it address Twin Metals' legal
rights to the leases.
On 12 September 2016, Twin Metals filed a complaint in the U.S.
District Court in Minnesota against the United States, the U.S.
Department of the Interior, Secretary of the Interior Sally Jewell,
Solicitor Hilary C. Tompkins, and BLM. Twin Metals brought claims
under the Quiet Title Act (QTA) and the Administrative Procedure
Act (APA) seeking to secure its rights to the two federal mineral
leases. Following the USFS withholding of consent and BLM's denial
of renewal, Twin Metals filed an amended complaint on 3 January
2017, adding the U.S. Department of Agriculture, Secretary of
Agriculture Thomas J. Vilsack, the USFS, and Chief of the USFS
Thomas L. Tidwell as defendants. The amended complaint seeks
similar relief under the QTA and APA, and also requests that the
court overturn the government's denial of the leases.
The government has not yet responded to the amended
complaint.
27. 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 2016 the Group
contributed $10.0 million (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 SA to the Group
at 31 December 2016 was nil (2015 - nil). During the year ended 31
December 2016 the Group contributed $1.0 million to Energia Andina
(2015 - $1.3 million).
The Group's has a 50% interest in Minera Zaldivar, 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 SA. The
Group paid $112.6 million (2015 - $130.1 million) to Inversiones
Hornitos in relation to the energy supply contract at Centinela.
During 2016 the Group received dividends from Inversiones Hornitos
S.A. for $10.1 million (2015 - $12.1 million).
The Group has a 30% interest in Parque Eólico El Arrayán SA ("El
Arrayán"). The Group paid $38.1 million (2015 - $42.0 million) to
El Arrayan in relation to the energy supply contract at Los
Pelambres. During 2016 were a capital decrease of $0.9 million.
The Group has a 40% interest in Alto Maipo SpA ("Alto Maipo").
During 2016 the Group made provisions for capital contributions to
Alto Maipo of $36 million (2015 - $42.8 million). The balance due
from Alto Maipo to the Group at 31 December 2016 was nil after
provision (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 SA, Madeco SA and Compañía Cervecerías Unidas SA, which are
subsidiaries of Quiñenco SA, 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 year ended 31 December 2016
Group incurred $1.0 million (2015 - $4.2 million) of exploration
work at these properties.
28. Currency translation
Assets and liabilities denominated in foreign currencies are
translated into dollars and sterling at the year ended rates of
exchange. Results denominated in foreign currencies have been
translated into dollars at the average rate for each year.
2016 2015
Year ended rate $1.2185=GBP1; $1 = Ch$669.47 $1.4828=GBP1; $1 = Ch$710.16
Average rates $1.3593=GBP1; $1 = Ch$676.80 $1.5284=GBP1; $1 = Ch$654.47
29. Distribution
The Annual Report and Financial Statements for the year ended 31
December 2016, together with the Notice of the 2017 Annual General
Meeting, will be posted to all shareholders in April 2017. The
Annual General Meeting will be held at Church House Conference
Centre, Dean's Yard, Westminster, London SW1P 3NZ from 10.00 a.m.
on Wednesday 24 May 2017.
30. Production and Sales Statistics (not subject to audit or
review)
See notes following Note 30 (b).
a) Production and sales volumes for copper, gold and molybdenum
Production Sales
Year ended Year ended Year ended Year ended
31.12.2016 31.12.2015 31.12.2016 31.12.2015
000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 355.4 363.2 351.6 366.0
Centinela 236.2 221.1 227.6 224.4
Antucoya 66.2 12.2 66.6 9.2
Michilla - 29.4 0.9 30.8
Zaldivar 51.7 4.4 51.7 5.5
Group total 709.4 630.3 698.5 635.9
Gold 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 57.8 51.4 62.8 53.4
Centinela 213.0 162.5 208.6 165.8
Group total 270.9 213.9 271.4 219.2
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 7.1 10.1 7.2 9.9
Silver 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 2,585.8 2,451.9 2,701.9 2,281.9
Centinela 1,313.0 1,028.5 1,159.0 1,055.1
Group total 3,898.8 3,480.3 3,860.9 3,337.0
b) Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold
Realised
Cash costs prices
Year ended Year ended Year ended Year ended
31.12.2016 31.12.2015 31.12.2016 31.12.2015
$/lb $/lb $/lb $/lb
Copper
Los Pelambres 1.06 1.23 2.35 2.24
Centinela 1.19 1.85 2.32 2.33
Antucoya 1.83 - 2.30 -
Michilla - 2.14 - 2.49
Zaldivar 1.55 1.73 - -
Group weighted average
(net of by-products) 1.20 1.50
Group weighted average
(before deducting by-products) 1.54 1.81
Group weighted average
(before deducting by-products
and excluding tolling
charges from concentrate) 1.33 1.58
Cash costs at Los Pelambres
comprise:
On-site and shipping
costs 1.09 1.24
Tolling charges for concentrates 0.27 0.27
Cash costs before deducting
by-product credits 1.36 1.51
By-product credits (principally
molybdenum) (0.30) (0.28)
Cash costs (net of by-product
credits) 1.06 1.23
Cash costs at Centinela
comprise:
On-site and shipping
costs 1.53 2.07
Tolling charges for concentrates 0.22 0.20
Cash costs before deducting
by-product credits 1.75 2.27
By-product credits (principally
gold) (0.56) (0.42)
Cash costs (net of by-product
credits) 1.19 1.85
LME average 2.21 2.50
$ $
Gold
Los Pelambres 1,253 1,141
Centinela 1,257 1,159
Group weighted average 1,256 1,155
Market average price 1,248 1,160
Molybdenum
Los Pelambres 6.8 5.7
Market average price 6.5 6.7
Silver
Los Pelambres 17.4 15.4
Centinela 17.7 15.4
Group weighted average 17.5 15.5
Market average price 17.1 15.4
Notes to the production and sales statistics
(i) The production and sales figures represent the actual
amounts produced and sold, not the Group's share of each mine. The
Group owns 60% of Los Pelambres, 70% of Centinela, 70% of Antucoya
and owned 99.9% of Michilla prior to disposal.
(ii) Los Pelambres produces copper and molybdenum concentrates,
Centinela produces copper concentrate and copper cathodes and
Antucoya produces copper cathodes. The figures for Los Pelambres,
Centinela and Antucoya 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 produces cathodes with no
by-products, as did Michilla.
(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 in Note 30(a) and the cash cost
information in Note 30(b) are derived from the Group's Q4 2016
production report, published on January 25, 2017.
31. Alternative performance measures
This preliminary results announcement includes a number of
alternative performance measures, in addition to IFRS amounts.
These measures are included because they are considered to provide
relevant and useful additional information to users of the
accounts. Set out below are definitions of these alternative
performance measures, explanations as to why they are considered to
be relevant and useful, and reconciliations to the IFRS
figures.
a) EBTIDA
EBITDA refers to Earnings Before Interest, Tax, Depreciation and
Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
EBITDA is considered to provide a useful and comparable
indication of the current operational earnings performance of the
business, excluding the impact of the historic cost of property,
plant & equipment or the particular financing structure adopted
by the business.
At 31 December 2016
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation other other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Depreciation
and
amortisation 195.7 299.4 62.7 - - 5.2 563.0 15.4 578.4
Loss on
disposals 0.2 17.1 - - - 0.6 17.9 1.8 19.7
Provision
against
the carrying
value of
assets 241.0 - 215.6 - - - 456.6 - 456.6
EBITDA from
subsidiaries 921.8 562.5 64.9 - (44.3) (56.5) 1,448.4 73.3 1,521.7
Proportional
share of the
EBITDA from
associates
and JV (0.8) - - 85.1 - 5.7 90.0 14.4 104.4
Total EBITDA 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
========== ========== ======== ============== =========== ========== ======== ========== ========
At 31 December 2015
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation other other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 555.0 (131.0) - - (101.9) (75.1) 247.0 42.0 289.0
Depreciation
and
amortisation 191.6 367.6 - - - 3.1 562.3 13.8 576.1
Loss on
disposals 2.7 1.8 - - - 4.4 8.9 2.6 11.5
----------
EBITDA from
subsidiaries 749.3 238.4 - - (101.9) (67.6) 818.2 58.4 876.6
Proportional
share of the
EBITDA from
associates
and JV (0.6) - - 6.8 - 6.9 13.1 20.4 33.5
Total EBITDA 748.7 238.4 - 6.8 (101.9) (60.7) 831.3 78.8 910.1
========== ========== ======== ============== =========== ========== ======= ========== ======
b) Cash costs
Cash costs are a measure of the cost of operational production
expressed in terms of cents per pound of payable copper
produced.
This is considered to be a useful and relevant measure as it is
a standard industry measure applied by most major copper mining
companies which reflects the direct costs involved in producing
each lb of copper. It therefore allows a straightforward comparison
of the unit production cost of different mines, and allows an
assessment of the position of a mine on the industry cost curve. It
also provides a simple indication of the profitability of a mine
when compared against the price of copper (per lb).
At 31.12.2016 At 31.12.2015
$m $m
Reconciliation of cash costs excluding
tolling charges and by-product revenues:
Total Group operating cost (Note 4) 3,154.7 2,936.7
Less:
Total - Depreciation and amortisation
(Note 4) (578.4) (576.1)
Total - Loss on disposal (Note 4) (19.7) (11.5)
Total - Provision against the carrying
value of asset (Note 4) (456.6) -
Elimination of non-mining operations
Corporate and other items - Total operating
cost (Note 4) (56.5) (67.6)
Exploration and evaluation - Total operating
cost (Note 4) (44.3) (101.9)
Railway and other transport services
- Total operating cost (Note 4) (86.9) (94.0)
Closure provision and other expenses
not included within cash cost (53.4) (75.4)
Total cost relevant to the mining operations'
cash cost 1,858.9 2,165.0
Copper sales volumes - excluding Antucoya
Q1 2016/full year 2015 & Zaldivar (tonnes) 634,000 621,200
Cash costs excluding tolling charges
and by-product revenues ($ per tonne) 2,932 3,485
Cash costs excluding tolling charges
and by-product revenues ($ per lb) 1.33 1.58
Reconciliation of cash costs before deducting
by-products:
Tolling charges - copper - Los Pelambres
(Note 5) 192,200,000 198,800,000
Tolling charges - copper - Centinela
(Note 5) 108,900,000 95,200,000
Tolling charges - copper - total 301,100,000 294,000,000
Copper sales volumes - excluding Antucoya
Q1 2016/full year 2015 & Zaldivar (tonnes) 634,000 621,200
Tolling charges ($ per tonne) 475 473
Tolling charges ($ per lb) 0.22 0.22
Cash costs excluding tolling charges
and by-product revenues ($ per lb) 1.33 1.58
Tolling charges ($ per lb) 0.22 0.22
Cash costs before deducting by-products
(S per lb) 1.54 1.81
b) Cash costs (continued)
Reconciliation of cash costs (net of
by-products):
Gold revenue - Los Pelambres (Note 4) 78,500,000 60,700,000
Gold revenue - Centinela (Note 4) 261,200,000 191,300,000
Molybdenum revenue - Los Pelambres (Note
4) 94,000,000 105,300,000
Silver revenue - Los Pelambres (Note
4) 46,100,000 34,500,000
Silver revenue - Centinela (Note 4) 20,000,000 15,900,000
Total by-product revenue 499,800,000 407,700,000
Copper sales volumes - excluding Antucoya
Q1 2016/full year 2015 & Zaldivar (tonnes) 634,000 621,200
Tolling charges ($ per tonne) 788 656
Tolling charges ($ per lb) 0.35 0.30
Cash costs before deducting by-products
(S per lb) 1.54 1.81
By-product revenue ($ per lb) (0.35) (0.30)
Cash costs (net of by-products) ($ per
lb) 1.20 1.50
The totals in the tables above may include some small apparent
differences as the specific individual figures have not been
rounded.
c) Attributable cash, cash equivalents & liquid investments, borrowings and net debt
Attributable cash, cash equivalents & liquid investments,
borrowings and net debt reflects the proportion of those balances
which are attributable to the equity holders of the Company, after
deducting the proportion attributable to the non-controlling
interests in the Group's subsidiaries.
This is considered to be a useful and relevant measure as the
majority of the Group's cash tends to be held at the corporate
level and therefore 100% attributable to the equity holders of the
Company, whereas the majority of the Group's borrowings tend to be
at the level of the individual operations, and hence only a
proportion is attributable to the equity holders of the
Company.
2016 2015
Total Attributable Attributable Total Attributable Attributable
amount share amount amount share amount
$m $m $m $m
Cash, cash
equivalents
and liquid
investments:
Los Pelambres 143.0 60% 85.8 248.8 60% 149.3
Centinela 384.0 70% 268.8 598.8 70% 419.1
Antucoya 152.9 70% 107.0 138.6 70% 97.0
Corporate 1,328.1 100% 1,328.1 531.5 100% 531.5
Railway and other
transport
services 40.5 100% 40.5 213.9 100% 213.9
Total (Note 25) 2,048.5 1,830.2 1,731.6 1,410.8
Borrowings:
Los Pelambres
(Note 18) (391.7) 60% (235.0) (372.3) 60% (223.4)
Centinela (Note
18) (1,127.4) 70% (789.2) (1,264.3) 70% (885.0)
Antucoya (Note
18) (985.3) 70% (689.7) (968.9) 70% (678.2)
Corporate (Note
18) (524.8) 100% (524.8) (27.6) 100% (27.6)
Railway and other
transport
services (Note
18) (91.0) 100% (91.0) (122.0) 100% (122.0)
Total (Note 18
and 25) (3,120.2) (2,329.7) (2,755.1) (1,936.2)
Net debt (1,071.7) (499.5) (1,023.5) (525.4)
(1) 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
FR GGUBUWUPMPUW
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