TIDMANTO
RNS Number : 4863H
Antofagasta PLC
13 March 2018
NEWS RELEASE, 13 MARCH 2018
PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEARED 2017
Strong earnings growth and improved margins
Antofagasta plc CEO Iván Arriagada said: "We have continued to
invest through the cycle while maintaining our focus on cost
discipline and operating performance. As a result, as copper prices
rose in 2017 Antofagasta had another successful year completing the
development of Encuentro Oxides, meeting our safety target of zero
fatalities and achieving both our production and cost guidance.
"EBITDA increased by 59% to $2.6 billion with operating cash
flow rising to $2.5 billion. Testament to the improved copper
market and our continuing cost management programme, our EBITDA
margin rose to 54% - the highest level since 2012 when the copper
price was 30% higher. As a result of this performance the Board has
recommended a final dividend of 40.6 cents per share which,
combined with the interim dividend, brings the total dividend for
the year to 50.9 cents per share, an increase of 177% on 2016, and
represents a cash payout of 67% of earnings.
"Our priorities for 2018 are continued capital discipline and
the next phase of our growth - notably the review and expected
approval of the Los Pelambres Incremental Expansion project and
progressing expansion plans at Centinela."
HIGHLIGHTS
Financial performance
-- EBITDA(1) for the full year was $2,586.6 million, 59.1%
higher than the previous year as revenue increased by 31.1% on
higher realised metal prices
-- EBITDA margin(2) strengthened to 54.5%, the Group's highest margin since 2012
-- Operating cash flow of $2,495.0 million, up 71.2% compared to
the same period last year on the back of stronger margins and
higher sales
-- Free cash flow(3) for the year of $1,199 million
-- Capital expenditure increased to $899.0 million as planned,
$103.9 million higher than in 2016. The increase partly reflected
increased capitalised stripping costs at Centinela and Antucoya,
and higher sustaining capital expenditure
-- Attributable net debt fell by $458 million to $42 million,
reflecting strong operating cash flow and capital discipline
-- Earnings per share from continuing operations and before
exceptional items of 76.1 cents per share, a 119% increase on
2016
-- Final dividend of 40.6 cents per share declared, bringing the
total dividend for the year to 50.9 cents per share, a 177%
increase compared to 2016 and, at 67%, is above the Company's
minimum payout policy of 35% of underlying net earnings per
share.
Operating performance
-- The Group achieved its goal of zero fatalities during 2017.
-- Group copper production for the full year was 704,300 tonnes,
in line with guidance and 0.7% lower than in 2016. This was due to
the impact of the expected lower grades at Los Pelambres and
Centinela, which was offset by Encuentro Oxides coming into
production in October and following the completion of the ramp-up
at Antucoya in 2016
-- Group cash costs before by-product credits(1) for the full
year were $1.60/lb, 6c/lb higher than last year due to the expected
decline in grades at Los Pelambres and Centinela, higher input
prices and a stronger local currency
-- Group net cash costs(1) for 2017 were $1.25/lb, 4.2% higher
than in 2016, but below guidance reflecting higher than expected
by-product revenues.
Outlook for 2018
-- Group production in 2018 is expected to be 705-740,000 tonnes
of copper, 190-210,000 ounces of gold and 11,500-12,500 tonnes of
molybdenum (as previously announced). Copper production is expected
to grow quarter-by-quarter through the year as grades improve, with
approximately 45% of the year's production expected in the first
half of the year
-- Group cash costs in 2018 before and after by-product credits
are expected to be $1.65/lb and $1.35/lb respectively (as
previously announced) and decrease during the year as quarterly
production increases
-- Cost savings of $100 million targeted under the Cost and
Competitiveness Programme which have been included in the unit cost
guidance figures
-- Capital expenditure for 2018 is estimated at $1.0 billion (as previously announced).
Other
-- Labour negotiations at Los Pelambres, Centinela and Zaldívar
successfully completed. The last of the Group's negotiations for
the year, at Los Pelambres, is currently in mediation the union
members having rejected the last offer from the company on 9(th)
March. Mediation is expected to last one to two weeks from this
date
-- Encuentro Oxides project completed some 5% under budget
-- Los Pelambres Incremental Expansion Phase 1 EIA approved and
capital estimate updated. The project's capital estimate has been
updated with current pricing projections, advanced detailed
engineering and a project execution plan to a revised estimate of
$1.3 billion. This figure includes the concentrator plant expansion
and pre-stripping at $780 million and the desalination plant and
water pipeline at $520 million. The desalination plant will serve
as a back-up water supply for the existing operation in conditions
of severe drought and for both phases of the expansion. The project
is expected to be submitted for approval to the Board during the
second half of 2018 once ancillary permits to the approved EIA are
in place and the 2021 start-up of the project remains
unchanged.
YEARING 31 DECEMBER 2017 2016 %
------------------------------------------------- ------- -------- --------- --------
Group revenue $m 4,749.4 3,621.7 31.1%
EBITDA(1) $m 2,586.6 1,626.1 59.1%
EBITDA margin(1, 2) % 54.5 44.9 21.4%
Underlying Earnings per share (continuing
operations, before exceptional items) cents 76.1 34.7 119.3%
Earnings per share (continuing and discontinued
operations, after exceptional items) cents 76.2 16.0 376.3%
Dividend per share cents 50.9 18.4 176.6%
Cash flow from operations (continuing
& discontinued) $m 2,495.0 1,457.3 71.2%
Capital expenditure(4) $m (899.0) (795.1) 13.1%
Attributable net debt at period end(1) $m (41.6) (499.5) (91.7%)
Average realised copper price $/lb 3.00 2.33 28.8%
--------
Copper sales kt 709.0 698.5(5) 1.5%
Gold sales koz 218.2 271.4 (19.6%)
Molybdenum sales kt 9.6 7.2 33.3%
Cash costs before by-product credits(1) $/lb 1.60 1.54 3.9%
Net cash costs(1) $/lb 1.25 1.20 4.2%
------------------------------------------------- ------- -------- --------- --------
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 28 to the preliminary results announcement
(2) Calculated as EBITDA/Group revenue. If Associates and JVs
revenue is included EBITDA margin was 50.1% in 2017 and 41.1% in
2016.
(3) Cash flow from operations less net interest, tax paid and total capital expenditure
(4) On a cash basis
(5) Includes pre-commercial production sales at Antucoya of 11,800 tonnes.
The 2017 Preliminary Results Presentation is available for
download from the website www.antofagasta.co.uk.
Investors - London Media - London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Andres Vergara avergara@antofagasta.co.uk Will Medvei antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Investors - Santiago Media - Santiago
Francisco Veloso fveloso@aminerals.cl Pablo Orozco porozco@aminerals.cl
Telephone +56 2 2798 7000 Carolina Pica cpica@aminerals.cl
Telephone +56 2 2798 7000
DIRECTORS' COMMENTS FOR THE YEARED 2017
2017 FINANCIAL HIGHLIGHTS
Revenue for the Group in 2017 was $4,749.4 million, 31.1% higher
than in 2016. The increase of $1,127.7 million mainly reflected an
increase in the realised copper price and copper sales volumes, as
well as higher molybdenum revenue offset by lower gold revenue.
EBITDA reflected this increase in revenue, partly offset by the
higher unit cash costs, and increased exploration and evaluation
expenditure and mine closure provision costs. EBITDA increased by
59.1% to $2,586.6 million, at an EBITDA margin of 54.5%.
Earnings per share from continuing operations for the year were
76.1 cents, an increase of 41.4 cents compared with 2016. Cash flow
from operations strengthened by 71.2% to $2,495.0 million, compared
with $1,457.3 million in the previous year.
During the year, copper production decreased by 0.7% to 704,300
tonnes, compared to 2016. This was due to the impact of the
expected lower grades at Los Pelambres and Centinela, which was
offset by Encuentro Oxides coming into production in October and
following the completion of the ramp-up at Antucoya in 2016.
Gold production was 212,400 ounces, 21.6% lower than in 2016,
with lower grades at Los Pelambres and a shift to higher copper
content ores at Centinela. However, molybdenum production was
boosted by 47.9% year on year by higher grades.
The transport division transported 3.5% less tonnage in 2017
than in 2016 following labour disruptions at one of its clients.
This was partially offset by higher road transport volumes and
productivity improvements achieved during the year.
The focus of the Group has been on producing profitable tonnes
by reducing costs, improving productivity and efficiency and
applying innovative solutions to the operating challenges the Group
faces. One of the outcomes of these efforts is more consistent and
reliable delivery, producing 704,300 tonnes of copper at a net cash
cost of $1.25/lb in 2017.
The LME copper price at the beginning of 2017 was $2.51/lb and
rose to end the year at $3.27/lb, averaging $2.80/lb over the whole
year, an increase of 27% compared with 2016. Copper supply came
under pressure during the first half of the year as strikes and
other issues at some of the world's largest mines led to
significant disruptions. However, in the second half of the year
demand was supported by unexpected strength in key markets,
particularly in China. This resulted in the average realised price
of copper being 29.0% higher in 2017 at $3.00/lb. The realised gold
price was $1,280.4/oz in 2017 compared with $1,256.1/oz in 2016,
while the realised molybdenum price increased by 28.3% to
$8.7/lb.
SAFETY
In 2017 Antofagasta achieved its zero fatalities goal and is
determined to continue with this success. It has also continued to
reduce the severity and frequency of accidents and this
demonstrates the value of near-miss reporting, which is one of the
pillars of the Corporate Safety Model which is focused on risk
prevention and operating control.
Focus on Fatal Risks
In line with international best practice, the Group's safety and
health model is based on fatal risk prevention and self-awareness.
This applies to the whole workforce, both employees and
contractors. In 2017 further progress was made in standardising and
simplifying fatal risk prevention and controls. Antofagasta focuses
on 15 fatal risks prevented through 72 critical controls. Employees
and contractors are encouraged to take responsibility for their own
and their colleagues' safety through the continuous verification of
the implementation of critical controls, onsite leadership,
training, awareness initiatives, public recognition of safe conduct
and the use of the best available safety technology.
ENVIRONMENT
Antofagasta seeks to prevent, mitigate and control the impact of
its activities on the environment. The Group remains committed to
achieving sustainable and efficient use of natural resources
throughout the mining cycle, from exploration to site closure and
beyond. The Group had no significant operating incidents with
environmental impact in 2017.
Environmental Management
Antofagasta's mining operations have a total of 54 RCAs listing
some 6,500 environmental commitments. These commitments are now
centrally administered through Antofagasta's updated Environmental
Management System, which is similar to the safety system and
focuses on key risk prevention, specific controls, audits and the
reporting of near-miss incidents. In 2017, Los Pelambres submitted
the Environmental Impact Assessment (EIA) for its Incremental
Expansion project which was approved early in 2018.
COMMUNITIES
Antofagasta contributes to the sustainable development of the
regions and communities in which it operates, creating a shared
vision for development by engaging in effective, participatory and
transparent stakeholder dialogue, as well as recognising
disagreements and opportunities.
During 2017, the Group rolled out engagement programmes at
Centinela and Antucoya based on the Somos Choapa programme that had
been successfully developed for Los Pelambres.
COST CONTROL AND PRODUCTIVITY
The Group achieved mine site savings of $166 million during the
year under its Cost and Competitiveness Programme (CCP), 10% more
than had been targeted and equivalent to $0.11/lb. The target for
2018 is set at an incremental $100 million and the accumulated mine
site saving up to the end of 2017 were $525 million.
Mine site cost savings are being achieved in four areas;
services productivity, operating and maintenance management,
corporate and organisational effectiveness, and energy
efficiency.
FUTURE GROWTH
The Environmental Impact Assessment (EIA) for Phase 1 of the Los
Pelambres Incremental Expansion project was approved in February
2018.
The project's capital estimate has been updated with current
pricing projections, advanced detailed engineering and a project
execution plan to a revised estimate of $1.3 billion. This figure
includes the concentrator plant expansion and pre-stripping at $780
million and the desalination plant and water pipeline at $520
million. The desalination plant will serve as a back-up water
supply for the existing operation in conditions of severe drought
and for both phases of expansion. The project is expected to be
submitted for approval to the Board during the second half of 2018
once ancillary permits to the approved EIA are in place and the
2021 start-up of the project remains unchanged.
The project will increase Los Pelambres' production by 55,000
tonnes of copper a year from 2021. Phase 2 will require further
permitting and will add another 35,000 tonnes of production and
extend the mine life by some 15 years.
The Group is also evaluating two alternatives to expand
production at Centinela. One is to build a new second concentrator
at an estimated cost of $2.7 billion, and the other is to expand
the existing concentrator. Preliminary work has been carried out on
the second option, which has lower capital expenditure and lower
construction and project execution risks than the Second
Concentrator project. More work will be conducted on both options
during 2018 with the intention of the Company being able to select
its preferred alternative by the end of the year. If the expansion
of the existing concentrator is selected a feasibility study will
then need to be completed, which would take some 18 months.
DIVIDS
The Board has recommended a final dividend for the year of 40.6
cents per share, bringing the total dividend for the year to 50.9
cents per share or $502 million. This is an increase of 177% on
last year and represents a total pay-out ratio of 67% 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 2018 is expected to be in the range
of 705-740,000 tonnes, higher than the 704,300 tonnes produced in
2017 as Encuentro Oxides reaches full capacity during the year.
This will be partially offset by lower mined grades. Production is
expected to grow quarter-by-quarter through the year as grades
improve with approximately 45% of the year's production expected to
be produced in the first half of the year.
Group cash costs before by-product credits for 2018 are expected
to be $1.65/lb reflecting some upward pressure on input costs and a
lower percentage contribution from the lowest cost mine, Los
Pelambres. Net cash costs are expected to increase by some 10c/lb
to $1.35/lb.
The copper market is expected to tighten in the second half of
the year and to be in balance or in a slight deficit for the full
year. From 2019 the likelihood of the market being in deficit is
expected to increase as mine supply continues to be affected by the
long-term trend of grade decline and lack of new investment. Given
the lead time between the decision to proceed with the construction
of a reasonable-sized mining operation and it coming into
production, the few projects that have been approved or are
awaiting the final stages of permitting are only expected to come
on-stream in the next decade. In addition, there are an unusually
large number of labour negotiations taking place in Chile and Peru
during 2018. With the backdrop of stronger copper prices, employee
expectations may be raised which could result in some supply
disruptions in the region.
On the demand side, growth will continue to be driven by Chinese
consumption, but the rise in demand from electric vehicles and
renewables will be significant if they develop at the rates many
analysts are expecting.
REVIEW OF OPERATIONS
LOS PELAMBRES
2017 Performance
Operating Performance
EBITDA at Los Pelambres was $1,428 million in 2017, compared
with $921 million in 2016, reflecting increased realised metal
prices.
Production
Copper production was 343,800 tonnes in 2017, which was 3.3%
lower than in 2016. This decrease was primarily due to lower
grades, which dropped from 0.73% to 0.68%. Molybdenum production
for the year was 10,500 tonnes, 47.9% higher than in 2016, due to
higher grades, recoveries and throughput. Gold production was 4.2%
lower in 2017 at 55,400 ounces, compared with 57,800 ounces in
2016.
Costs
Cash costs before by-product credits at $1.44/lb were 5.9%
higher than in 2016, as grades decreased, partially compensated by
higher throughput. Net cash costs in 2017 were $1.02/lb compared
with $1.06/lb in 2016, due to significantly higher credits from
molybdenum sales.
Capital expenditure
Total capital expenditure in 2017 was $236 million, which
included $89 million on mine development. Capital expenditure is
forecast at approximately $365 million in 2018, reflecting the
expected start of construction of the Incremental Expansion project
and higher sustaining capital expenditure compared to 2017.
Environmental Compliance
In October 2016, the Chilean Environmental Superintendency (the
SMA) raised charges against Los Pelambres for delayed or incomplete
compliance with some of its Environmental Approval Resolutions
(RCA) commitments. The company responded by conducting an in-depth
review of its internal processes to understand how these compliance
gaps had occurred and to accelerate implementation of the new
corporate Environmental Management System. The review found that
some smaller and older commitments had been missed by the original
control system, interpretations of other commitments had evolved
over the years, and audit standards had changed. Towards the end of
2017 the SMA accepted the compliance programme proposed by Los
Pelambres and suspended the charges raised in 2016.
Cerro Amarillo
In November 2017, the San Juan Province accepted a plan
presented by Los Pelambres to remove the Cerro Amarillo waste rock
dump and work commenced in December. The execution of the plan is
subject to certain conditions and the approved time for the removal
of 5.5 years can be extended by one year in certain circumstances.
The company made a provision of $50 million during 2017 for the
removal of the waste rock. The removal plan does not represent any
acknowledgment of responsibility by Los Pelambres nor prejudice any
of its rights, since at the time the company started construction
of the waste rock dump it did so in accordance with valid permits
issued by the responsible Chilean government agencies.
Outlook
Production
The forecast production for 2018 is 345-355,000 tonnes of
payable copper (slightly higher than in 2017), 10-11,000 tonnes of
molybdenum and 60-70,000 ounces of gold.
Costs
Cash costs before by-product credits for 2018 are forecast to
increase to approximately $1.50/lb and net cash costs to increase
to approximately $1.10/lb.
CENTINELA
2017 Performance
Operating Performance
EBITDA at Centinela was $859 million, compared with $562 million
in 2016, despite lower production and higher operating costs as the
realised copper price increased by 28% and the realised gold price
rose by 2.1%.
Production
Copper production for the full year 2017 was 228,300 tonnes,
3.3% lower than in 2016 primarily as a result of lower recoveries
and lower grade at Centinela concentrates. This was partly offset
by higher grades in the oxides line and the start of production at
Encuentro Oxides. Copper in concentrate production for the full
year was 163,900 tonnes, 9.1% lower than 2016 mainly reflecting
slightly lower grades and the consequential drop in recoveries.
Gold production was 157,000 ounces, 26.3% lower than in 2016. This
was mainly due to lower grades and recoveries. Copper cathode
production for the year was 64,500 tonnes, 15.6% higher than the
previous year, as grades increased and Encuentro Oxides came into
production in the last quarter of the year.
Costs
Cash costs before by-product credits for the year were $1.81/lb,
3.4%, higher than in 2016, mainly as a result of lower copper
production, higher input prices and the payment of a one-off
signing bonus following the successful conclusion of labour
negotiations with three unions at the operation. The essential
terms of each of the labour agreements were standardised and
allowing the completion of the operational integration of Esperanza
and El Tesoro, which began in 2014 when they were merged as
Centinela. This completion of the integration will bring further
improvements in operating practices at Centinela and will enable
improvements in productivity. Net cash costs for 2017 were $1.36/lb
compared with $1.19/lb in 2016. This increase is due to the
increase in cash costs before by-product credits and lower gold
production.
Capital expenditure
Capital expenditure was $578 million, including $192 million on
Encuentro Oxides and the molybdenum plant and $264 million on mine
development. Total project expenditure on the Encuentro Oxides
project was $605 million, some $30 million under budget.
Total capital expenditure in 2018 is expected to be $515
million, including $280 million on mine development.
Outlook
Production
Production for 2018 is forecast at 230-245,000 tonnes of payable
copper, 130-140,000 ounces of gold and 1,500 tonnes of molybdenum
following the commissioning of the molybdenum plant early in 2018.
While the grade at Centinela Concentrates will be lower than in
2017, Encuentro Oxides will reach full capacity during the year
contributing approximately 50,000 tonnes of payable copper.
Costs
Cash costs before by-products for 2018 are forecast at
approximately $1.90/lb and net cash costs at approximately
$1.50/lb.
ANTUCOYA
2017 Performance
Operating Performance
EBITDA at Antucoya was $207 million compared with $65 million in
2016, reflecting Antucoya's first year of operation at full
capacity.
Production
Production was 80,500 tonnes of copper, 21.6% higher than in
2016, following the completion of the ramp-up in late 2016.
Costs
Cash costs for the year were $1.68/lb, 8.2% lower than in 2016
mainly because of higher production.
Capital expenditure
Capital expenditure was $44 million, including $17 million on
mine development.
Outlook
Production in 2018 is forecast to be approximately 75-80,000
tonnes and cash costs are expected to increase to $1.75/lb. Total
capital expenditure is expected to be approximately $55 million,
which includes $22 million of mine development costs.
ZALDÍVAR
2017 Performance
Operational Performance
Attributable EBITDA was $134 million compared with $85 million
in 2016. During 2017 the company successfully concluded labour
negotiations with the workers union.
Production
Total attributable production in 2017 was 51,700 tonnes of
copper cathodes unchanged from 2016 as, although the grade
increased, recoveries were lower due to the significantly higher
proportion of sulphide ores being processed compared to 2016.
Costs
Cash costs for 2017 were $1.62/lb, 5.2% higher than previous
year mainly because of the impact of the one-off signing bonuses
following the conclusion of the labour negotiations and higher
input prices.
Capital expenditure
Attributable capital expenditure for 2017 was $51 million, which
includes approximately $25 million with respect to mine
development. These amounts are not included in the Group capital
expenditure figures.
Outlook
Attributable copper production in 2018 is forecast to be
approximately 55-60,000 tonnes at a cash cost of $1.70/lb.
Attributable capital expenditure in 2018 is expected to be
approximately $60 million, of which $10 million will be spent on
mine development.
GROWTH PROJECTS AND OPPORTUNITIES
Encuentro Oxides
The Encuentro Oxides deposit is in the Centinela Mining
District. It is expected to produce an average of approximately
43,000 tonnes of copper cathode per year over an eight-year period,
offsetting a natural decline in production due to falling mined
grades at Centinela's existing oxide pits.
The project was completed during 2017 and first production was
in September with full production expected in 2018.
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 therefore acts as a
funded pre-strip for the sulphide deposit, opening up the latter
for development as part of the Centinela expansion project.
During 2017, total expenditure incurred was $153 million
bringing total expenditure on the project to $605 million, some $30
million under budget.
Molybdenum Plant
This project will allow Centinela to produce an average of 2,400
tonnes of molybdenum per year. Completion is expected in early
2018, and the addition of another by-product credit will lower
Centinela's unit net cash costs.
At the end of December 2017, the project achieved 98% progress
(including design, engineering, procurement and construction).
During 2017, total expenditure incurred was $40 million.
Los Pelambres Incremental Expansion
This expansion project is being carried out in two phases in
order to simplify the permitting application process 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, with only relatively simple updates required and an EIA
for the new desalination plant. During this phase, Los Pelambres
will operate at an average throughput of 190,000 tonnes of ore per
day, with the addition of a new grinding and flotation circuit to
mitigate the impact of the harder ore currently being mined, and a
400 litres per second desalination plant and associated pipeline.
Desalinated water will be pumped from the coast to the Mauro
tailings storage facility, where it will connect with the recycling
circuit returning water to the Los Pelambres concentrator
plant.
During 2017 the Group progressed the EIA for the project with
the authorities and provided various submissions associated with
the permitting process. The EIA was approved in February 2018.
The project's capital estimate has been updated with current
pricing projections, advanced detailed engineering and a project
execution plan to a revised estimate of $1.3 billion. This figure
includes the concentrator plant expansion and pre-stripping at $780
million and the desalination plant and water pipeline at $520
million. The desalination plant will serve as a back-up water
supply for the existing operation in conditions of severe drought
and for both Phase and Phase 2 of the expansion. The project is
expected to be submitted for approval to the Board during the
second half of 2018 once ancillary permits to the approved EIA are
in place and the 2021 start-up of the project remains
unchanged.
The project will increase Los Pelambres' production by 55,000
tonnes of copper a year from 2021.
Phase 2
In this phase the Group will seek to increase throughput to
205,000 tonnes of ore per day and to extend the mine's life by 15
years beyond the currently approved 20 years. As part of this
development the Group will submit a new EIA to increase the
capacity of the mine's Mauro tailings storage facility and mine
waste dumps. Work on the environmental baseline study for the new
EIA started in 2017 and the results will be reviewed in late
2018.
Capital expenditure for this phase was estimated in the
pre-feasibility study at approximately $500 million, the majority
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 and should be completed in
2018. However, the project will only proceed following a decision
on Phase 1 and will require the submission of extensive permit
applications, including the new EIA. First production from this
phase would be in 2022 at the earliest and is expected to increase
copper production by 35,000 tonnes per year.
Centinela Expansion
At Centinela the expansion of the existing concentrator and
using its infrastructure (power lines, pipelines, port and other
facilities) is being considered as an alternative to building a new
concentrator.
Centinela Second Concentrator
One alternative under consideration for the expansion of
Centinela is the construction of a second concentrator some 7 km
from Centinela's current concentrator. It is expected to have an
ore throughput capacity of approximately 90,000 tonnes per day,
with annual production of approximately 180,000 tonnes of copper
equivalent, which includes gold and molybdenum as by-products.
Ore will be sourced initially from the Esperanza Sur deposit
and, once mining is completed at Encuentro Oxides, additionally
from Encuentro Sulphides.
The EIA for the project 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 for this $2.7 billion project is due
for completion by the end of 2018, when a decision will be made on
whether to proceed with this project or the expansion of the
existing plant. If approval is given in 2018 first production is
expected in 2022.
However, if the expansion of the existing concentrator is
approved it is likely that the second concentrator will proceed at
a later date.
There is also scope to increase the plant capacity further once
the second concentrator is completed, which could bring throughput
capacity to approximately 150,000 tonnes per day and increase the
plant's production to approximately 250,000 tonnes of copper
equivalent.
Alternative Development Option
As an alternative to the construction of a second concentrator,
the Group is evaluating expanding the existing concentrator and
tailings storage facilities as a lower capital expenditure and
lower construction and project execution risk alternative.
Technical viability, capital cost and financial returns will be
assessed before the completion of the feasibility study for the
second concentrator. The expansion of the existing concentrator
will not preclude the later construction of the second
concentrator.
More work will be conducted on both expansion options during
2018 with the intention of the Company being able to select its
preferred alternative by the end of the year. If the alternative of
expanding the existing concentrator is selected then a full
feasibility study would be required before it is taken to the Board
for approval. This work would delay the date for final project
approval by approximately 18 months.
Twin Metals Minnesota (Twin Metals)
Twin Metals is a wholly-owned copper, nickel and platinum group
metals (PGM) underground mining project in north-eastern Minnesota,
US.
During 2017 the Group commenced preparation of the Mine Plan of
Operations, a pre-requisite for permitting applications. The Group
also undertook further evaluation and optimisation exercises on the
pre-feasibility study completed in 2014, with the aim of completing
an updated pre-feasibility study by the end of 2018.
In December 2017, the US Department of the Interior reaffirmed
Twin Metals' right to renew two federal mineral leases, a right
denied in December 2016 by the Bureau of Land Management (BLM) and
the US Forest Service (USFS). These mineral leases cover part of
the project's mineral resources.
TRANSPORT DIVISION
2017 Performance
During the year, the transport division further optimised its
business under the FCAB Management Model based on the three key
areas of sustainability, productivity and cost management. Tonnage
transported continued in line with the previous year and the
railway renewed an acid transport contract with one of its largest
customers. Seven new locomotives purchased during the year are
scheduled to begin operating in the first half of 2018, and another
five locomotives have been ordered, optimising the fleet and
increasing asset productivity.
Operational performance
The division's EBITDA was $98 million in 2017, compared to $88
million in 2016, reflecting tight cost management and higher sales
from the water business.
Transport tonnage
During 2017 the division transported 6.3 million tonnes,
compared to 6.5 million tonnes in 2016, 3.5% lower mainly due to
labour disruptions at one of the division's clients, partially
offset by higher road transport volumes and productivity
improvements achieved during the year.
Costs
Cost management was focused on optimising the division's
business processes to ensure the lasting competitiveness of its
services through better utilisation of the fleet, organisational
changes and cost savings.
Outlook
The division will continue to develop new business opportunities
and optimise the use of rolling stock and utilisation of the fleet.
Improvements are expected in maintenance, using knowledge gained
from the mining division and best practices from the railway
industry, and benefitting from the seven new locomotives and higher
fleet availability. The implementation of the Competitiveness and
Costs Programme will further keep costs under control.
FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER 2017
Results
Year ended Year ended
31.12.2017 31.12.2016
---------------------------------------
Exceptional
Before items
exceptional (Note
Total items 3) Total
$m $m $m $m
Revenue 4,749.4 3,621.7 - 3,621.7
---------------------------------------- ------------ ------------- ------------ ----------
EBITDA (including results from
associates and joint ventures) 2,586.6 1,626.1 - 1,626.1
---------------------------------------- ------------ ------------- ------------ ----------
Operating costs excluding depreciation (2,318.9) (2,100.0) (241.0) (2,341.0)
Depreciation, loss on disposals
and impairments (589.4) (598.1) (215.6) (813.7)
------------- ------------ ----------
Operating profit from subsidiaries 1,841.1 923.6 (456.6) 467.0
Net share of results from associates
and joint ventures 59.7 23.4 (134.7) (111.3)
Total profit from operations,
associates and joint ventures 1,900.8 947.0 (591.3) 355.7
Net finance expense (70.0) (71.1) - (71.1)
Profit before tax 1,830.8 875.9 (591.3) 284.6
Income tax expense (633.6) (313.5) 204.9 (108.6)
------------- ------------ ----------
Profit from continuing operations 1,197.2 562.4 (386.4) 176.0
============= ============ ==========
Discontinued operations 0.5 38.3 - 38.3
------------- ------------ ----------
Profit for the year 1,197.7 600.7 (386.4) 214.3
============= ============ ==========
Basic earnings per share US cents US cents US cents US cents
From continuing operations 76.1 34.7 (22.6) 12.1
From discontinued operations 0.1 3.9 - 3.9
------------- ------------ ----------
Total continuing and discontinued
operations 76.2 38.6 (22.6) 16.0
============= ============ ==========
At 31 December 2017, the Group had commenced a process to
dispose of Centinela Transmission, the electricity transmission
line supplying Centinela and other external parties. As a result of
this, its net results are shown as a discontinued operation in the
income statement. In the 2016 comparatives the net results of the
Group's former Michilla operation were shown as a discontinued
operation.
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 2016
and 2017:
$m
EBITDA in 2016 1,626.1
Revenue
Increase in copper volumes sold 122.0
Increase in realised copper price 966.4
Decrease in treatment and refining
charges 23.3
--------
Increase in revenue from copper sales 1,111.7
--------
Decrease in gold revenue (61.1)
Decrease in silver revenue (8.3)
Increase in molybdenum revenue 74.5
--------
Increase in revenue from by-products 5.1
--------
Increase in transport division revenue 10.9
--------
Increase in Group revenue 1,127.7
========
Operating costs
Increase in mine operating costs (175.0)
Increase in closure provisions (30.5)
Increase in exploration and evaluation
costs (24.5)
Increase in corporate costs (15.2)
Decrease in other mining division
costs 35.2
--------
Increase in operating costs for mining
division (210.0)
========
Increase in transport division operating
costs (8.9)
Increase in attributable EBITDA relating
to associates and in joint ventures 51.7
--------
Total EBITDA in 2017 2,586.6
========
Revenue
Revenue for the Group in 2017 was $4,749.4 million, 31.1% higher
than in 2016. The increase of $1,127.7 million mainly reflected an
increase in the realised copper price and copper sales volumes, as
well as higher molybdenum revenue offset by lower gold and silver
revenue.
Revenue from the mining division
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
increased by $1,111.7 million, or 32.3%, to $4,578.3 million,
compared with $3,461.5 million in 2016. The increase reflected the
impact of higher realised prices and increased sales volumes.
(i) Realised copper price
The higher average realised copper price resulted in a $966.4
million increase in revenue. The average realised price increased
by 28.5% to $3.00/lb in 2017 (2016 - $2.33/lb), largely reflecting
the 26.7% increase in the LME average market price to $2.80/lb
(2016 - $2.21/lb). In addition, there was a significant positive
provisional pricing adjustment of $309.5 million, mainly reflecting
the increase in the year-end copper price to approximately $3.25/lb
at 31 December 2017, compared with around $2.50/lb at 31 December
2015.
In 2017 revenue also includes a loss of $17.1 million (2016 -
loss of $2.2 million) 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.
Realised copper prices are determined by comparing revenue
(gross of treatment and refining 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
around one month after delivery to the customer in the case of
cathode sales and normally four months 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.
(ii) Copper volumes
Copper sales volumes reflected within revenue increased from
634,100 tonnes in 2016 to 657,700 tonnes in 2017 increasing revenue
by $122.0 million. This increase was mainly due to Antucoya which
achieved commercial production on 1 April 2016, and which therefore
recorded a full 12 months' of sales volumes within revenue in 2017
(80,800 tonnes), compared to only nine months' 2016 (54,900
tonnes).
(iii) Treatment and refining charges
Treatment and refining (TCs/RCs) charges for copper concentrate
decreased by $23.3 million to $277.7 million in 2017 from $301.0
million in 2016, mainly due a decrease in the average TCs/RCs.
Treatment and refining charges are deducted from concentrate sales
when reporting revenue and hence the decrease in these charges has
had a positive 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 $5.1 million or 1.0%
to $505 million in 2017, compared with $499.9 million in 2016. This
overall slight increase reflects higher molybdenum revenue largely
offset by lower gold sales.
Revenue from molybdenum sales (net of roasting charges) was
$168.5 million (2016 - $94.0 million), an increase of $74.5
million. The increase was due to higher sales volumes of 9,600
tonnes (2016 - 7,200 tonnes) and an increased realised price of
$8.7/lb (2016 - $6.8/lb).
Revenue from gold sales (net of treatment and refining charges)
was $278.6 million (2016 - $339.7 million), a decrease of $61.1
million which mainly reflected a decrease in volumes, partly offset
by a higher realised price. Gold sales volumes decreased by 19.6%
from 271,400 ounces in 2016 to 218,200 ounces in 2017, mainly due
to lower grades and recoveries at Centinela. The realised gold
price was $1,280.4/oz in 2017 compared with $1,256.1/oz in 2016,
with the increase reflecting slightly higher market prices.
Revenue from silver sales decreased by $8.3 million to $58.2
million (2016 - $66.2 million). The decrease was due to lower sales
volumes of 3.5 million ounces (2016 - 3.7 million ounces) as well
as a decrease in the realised silver price to $16.8/oz (2016 -
$17.5/oz).
Revenue from the transport division
Revenue from the transport division (FCAB) increased by $10.9
million or 6.8% to $171.1 million, mainly due to increased average
rail tariffs and higher road tonnages.
Operating costs (excluding depreciation, loss on disposals and
impairments)
Operating costs (excluding depreciation, loss on disposals and
impairments) are considered to provide a useful and comparable
indication of the current operational performance of the Group's
businesses, excluding the depreciation of the historic cost of
property, plant & equipment.
The Group's total operating costs (excluding depreciation, loss
on disposals and impairments) amounted to $2,318.9 million (2016 -
$2,100.0 million), an increase of $218.9 million mainly due to
increased costs at the mining division.
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 increased by $210.0 million to
$2,223.1 million in 2017, an increase of 10.4%. Of this increase,
$175.0 million is attributable to higher mine-site operating costs.
This increase in mine-site costs reflected the higher production
volumes in the year, the one-off signing bonus payable following
the successful completion of labour negotiations at Centinela, the
stronger Chilean peso and higher key input prices, partly offset by
cost savings from the Group's Cost and Competitiveness Programme.
As a result, weighted average unit cash costs excluding by-product
credits (which are reported as part of revenue) and refining
charges for concentrates (which are deducted from revenue)
increased from $1.33/lb in 2016 to $1.41/lb in 2017.
The Cost and Competitiveness Programme has been designed to
achieve permanent savings through the application of a structured
process. During the year, $166 million of savings were achieved,
bringing total savings since the start of the programme to $525
million. These permanent savings have been achieved through
organizational simplification, improved productivity of services
and operations, tightened maintenance management and greater energy
efficiency.
Exploration and evaluation costs increased by $24.5 million to
$68.8 million (2016 - $44.3 million). This reflected a general
increase in activity, including with early-stage generative
exploration activity in Chile and drilling work at Los Pelambres.
Costs relating to the mine closure provisions increased by $30.5
million compared with 2016 and corporate costs increased by $15.2
million. These increases were partly offset by a $35.2 million
decrease in other expenses, largely relating to decreased community
expenditure 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 increased by $8.9 million to $95.8
million, mainly reflecting higher diesel prices due to the stronger
Chilean peso and an increase in services provided by third
parties.
EBITDA
EBITDA (earnings before interest, tax, depreciation,
amortisation) increased by $960.5 million or 59.1% to $2,586.6
million (2016 - $1,626.1 million). EBITDA includes the Group's
proportional share of EBITDA from associates and joint
ventures.
EBITDA from the Group's mining increased by 61.8% from $1,538.4
million in 2016 to $2,488.5 million in this year. As explained
above, this was mainly due to the significant increase in revenue,
partly offset by the higher unit cash costs and increased
exploration and evaluation expenditure and mine closure provision
costs.
EBITDA at the transport division increased by $10.4 million to
$98.1 million in 2017, reflecting the increased revenue offset by
higher operating costs explained above.
Depreciation, amortisation and disposals
The depreciation and amortisation charge was largely in-line
with the prior year at $581.1 million (2016 - $578.4 million). In
addition, there were losses on disposals of assets of $8.3 million
(2016 - loss of $19.7 million).
Prior year exceptional impairment provisions
In the 2016, 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.
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries increased in 2017 by 294.2% to $1,841.1 million (2016
- $467.0 million). Of the prior year exceptional impairment
provisions outlined above $456.6 million were recorded within
operating expenses, and therefore excluding the exceptional items
from the prior year figures, the year-on-year increase in operating
profit was $917.5 million or 99.3%.
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures
was a gain of $59.7 million in 2017, compared with a loss of $111.3
million in 2016. The prior year loss was largely a reflection of
the exceptional impairment provisions. Of the total prior year
impairment provision outlined above, $134.7 million were recorded
within the share of results from associates and joint ventures.
Excluding the impact of the exceptional impairment provisions from
the prior year results, the year-on-year increase in the share of
results from associates and joint ventures was $36.3 million or
55.1%. The improvement compared with the prior year mainly
reflected a higher contribution from Zaldívar due to increase in
the profit after tax (on a 50% attributable basis) to $58.5 million
(2016 - $29.5 million).
Net finance expense
Net finance expense in 2017 was $70.0 million, compared with
$71.1 million in 2016.
Year
Year ended ended
31.12.17 31.12.16
$m $m
Investment income 23.8 26.9
Interest expense (91.5) (86.1)
Other finance items (2.3) (11.9)
----------- ----------
Net finance expense (70.0) (71.1)
=========== ==========
Interest income decreased slightly from $26.9 million in 2016 to
$23.8 million in 2017.
Interest expense increased from $86.1 million in 2016 to $91.5
million in 2017. This was mainly due to a full year of interest
charges being expensed at Antucoya this year, compared with only
nine months in 2016 following the achievement of commercial
production on 1 April 2016.This factor was partly offset by the
higher capitalisation of interest cost during this year.
The other finance items were an expense of $2.3 million (2016 -
expense of $11.9 million). This reflected an expense of $11.6
million for the unwinding of the discounting of provisions (2016 -
$10.0 million) and an expense of $7.8 million relating to the time
value element of changes in the fair value of derivative options
(2016 - gain of $1.0 million), largely offset by a $17.1 million
foreign exchange gain (2016 - expense of $2.9 million).
Profit before tax
As a result of the factors set out above, profit before tax
increased by 543.3% to $1,830.8 million (2016 - $284.6 million).
Excluding exceptional items in 2016, profit before tax increased by
$954.8 million or 109.0%
Income tax expense
The tax charge for 2017 was $633.6 million and the effective tax
rate was 34.6%. Excluding the impact of exceptional items in the
prior year, the 2016 tax charge was $313.5 million and the
effective tax rate was 35.8%.
Year-ended Year-ended Year-ended
31.12.2017 31.12.2016 31.12.2016
BEFORE AFTER EXCEPTIONAL
ITEMS EXCEPTIONAL ITEMS
ITEMS
$m % $m % $m %
Profit before tax 1,830.8 875.9 284.6
Tax at the Chilean corporate
rate tax of 25.5% (2016 - 24.0%) (466.9) 25.5 (210.2) 24.0 (68.3) 24.0
Provision against carrying value
of assets (exceptional items) - - - - 63.0 (22.1)
Effect of increase in future
first category tax rates on deferred
tax balances (0.6) - (24.6) 2.8 (24.6) 8.6
Adjustment in respect of prior
years (35.4) 1.9 - - - -
Items not deductible from first
category tax (26.7) 1.5 (23.7) 2.7 (23.7) 8.3
Deduction of mining royalty as
an allowable expense in determination
of first category tax 17.4 (1.0) 8.5 (1.0) 8.5 (2.9)
Credit of tax losses absorbed
from dividends of the year (4.3) 0.2 - - - -
Carry-back tax losses resulting
in credits at historic tax rates - - (5.4) 0.6 (5.4) 1.8
Mining tax (royalty) (78.3) 4.3 (60.1) 6.9 (60.1) 21.1
Withholding taxes (64.8) 3.5 - - - -
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 15.2 (0.8) 5.6 (0.6) 5.6 (1.9)
Reversal of previously unrecognised
tax losses 9.9 (0.5) - - - -
Net other items 0.9 - 0.2 (0.0) 0.2 (0.0)
------------ ------ -------- ------ ---------- --------
Tax expense and effective tax
rate for the year (633.6) 34.6 (313.5) 35.8 (108.6) 38.2
------------ ------ ======== ====== ========== ========
The effective tax rate varied from the statutory rate
principally due to the mining royalty tax (impact of $78.3 million
/ 4.3%), the withholding tax due on remittances of profits from
Chile (impact of $64.8 million / 3.5%), adjustments in respect of
prior years, which relate to adjustments made during the year in
the deferred tax asset base (impact of $35.4 million / 1.9%) and
items not deductible for Chilean corporate tax purposes,
principally the funding of expenses outside of Chile (impact of
$26.7 million / 1.5%), partly offset by the deduction of the mining
royalty tax which is an allowable expense when determining the
Chilean corporate tax charge (impact of $17.4 million / 1.0%) and
the impact of the recognition of the Group's share of profit from
associates and joint ventures, which are included in the Group's
profit before tax net of their respective tax charges (impact of
$15.2 million / 0.8%).
Further details are given in Note 8 to the preliminary results
announcement.
Profit from discontinued operations
At 31 December 2017, the Group had commenced a process to
dispose of Centinela Transmission, the electricity transmission
line supplying Centinela and other external parties. As a result of
this, its net results (a gain of $0.5 million) are shown as a
discontinued operation in the income statement. In the 2016
comparatives the net results of the Group's former Michilla
operation (a gain of $38.3 million) were shown as a discontinued
operation.
Non-controlling interests
Profit for 2017 attributable to non-controlling interests was
$447.0 million (2016 - $56.3 million). Excluding the prior year
exceptional items the profit attributable to non-controlling
interests in 2016 was $220.9 million.
Earnings per share
Year ended Year ended
31.12.17 31.12.16
$ cents $ cents
Including exceptional items
Earnings per share from continuing
operations 76.1 12.1
Earnings per share from discontinued
operations 0.1 3.9
----------- -----------
Earnings per share from continuing
and discontinued operations 76.2 16.0
=========== ===========
Excluding exceptional items
Earnings per share from continuing
operations 76.1 34.7
Earnings per share from discontinued
operations 0.1 3.9
----------- -----------
Earnings per share from continuing
and discontinued operations 76.2 38.6
=========== ===========
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 $750.7 million compared with
$158.0 million in 2016, and total earnings per share from
continuing and discontinued operations was 76.2 cents per share
(2016 - 16.0 cents per share).
Profit from continuing operations and excluding exceptional
items attributable to equity shareholders of the Company was $750.2
million compared with a profit of $341.5 million in 2016, and
earnings per share from continuing operations excluding exceptional
items was 76.1 cents per share (2016 -34.7 cents per share).
Dividends
Dividends per share declared in relation to the period are as
follows:
Year ended Year ended
31.12.17 31.12.16
$ cents $ cents
------------------------------------------ ----------- -----------
Ordinary
------------------------------------------ ----------- -----------
Interim 10.3 3.1
------------------------------------------- ----------- -----------
Final 40.6 15.3
------------------------------------------- ----------- -----------
Total dividends to ordinary shareholders 50.9 18.4
------------------------------------------- ----------- -----------
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 2017 of 40.6 cents
per ordinary share, which amounts to $400.3 million and will be
paid on 25 May 2018 to shareholders on the share register at the
close of business on 27 April 2018.
The Board declared an interim dividend for the first half of
2017 of 10.3 cents per ordinary share, which amounted to $101.5
million and was paid on 6 October 2017 to shareholders on the share
register at the close of business on 8 September 2017.
This gives total dividends proposed in relation to 2017
(including the interim dividend) of 50.9 cents per share or $501.8
million in total, an increase of 176.6% (2016 - 18.4 cents per
ordinary share or $181.4 million in total).
The distributable reserves of Antofagasta plc approximate to the
balance of its retained earnings reserve and can be increased, as
required, by the receipt of dividends from its subsidiaries.
Capital expenditure
Capital expenditure increased by $103.9 million from $795.1
million in 2016 to $899.0 million. The increase partly reflected
increased capitalised stripping costs at Centinela and Antucoya,
and higher capital expenditure at the transport division on
locomotives and rolling stock.
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 2017
the Group had entered into min/max contracts at Centinela and
Antucoya for a notional amount of 30,000 tonnes of copper
production at each operation, covering a period up to 31 December
2018, with an average minimum price of $2.50/lb and an average
maximum price of $3.60/lb.
The Group also periodically uses interest rate swaps to swap
floating rate interest for fixed rate interest. At 31 December 2017
the Group had entered into interest rate swaps at Centinela for a
maximum notional amount of $35 million at a weighted average fixed
rate of 3.372% maturing in August 2018. The Group had also entered
into interest rate swaps in relation to a financing loan at the
FCAB for a maximum notional amount of $60 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
31.12.17 31.12.16
$m $m
Cash flows from continuing and discontinued
operations 2,495.0 1,457.3
Income tax paid (338.4) (272.6)
Net interest paid (44.8) (31.9)
Capital contributions and loans to
associates (45.4) (10.1)
Acquisition of joint ventures - 20.0
Disposal of subsidiaries and joint
ventures 3.1 10.0
Acquisition of mining properties (2.3) (7.0)
Purchases of property, plant and equipment (899.0) (795.1)
Dividends paid to equity holders of
the Company (252.3) (30.6)
Dividends paid to non-controlling
interests (320.0) (260.0)
Dividends from associates 81.8 10.2
Other items 4.3 0.4
------------- -------------
Changes in net debt relating to cash
flows 682.0 90.6
Other non-cash movements (72.2) (149.0)
Exchange 5.5 10.2
------------- -------------
Movement in net debt in the period 615.3 (48.2)
Net debt at the beginning of the year (1,071.7) (1,023.5)
------------- -------------
Net debt at the end of the year (456.4) (1,071.7)
============= =============
Cash flows from continuing and discontinued operations were
$2,495.0 million in 2017 compared with $1,457.3 million in 2016.
This reflected EBITDA from subsidiaries for the year of $2,430.5
million1 (2016 - $1,521.7 million) adjusted for the positive impact
of a net working capital decrease of $12.5 million (2016 - working
capital increase of $73.3 million) and a non-cash increase in
provisions of $52.0 million (2016 - increase of $8.9 million).
The net cash outflow in respect of tax in 2017 was $338.4
million (2016 - $272.6 million). This amount differs from the
current tax charge in the consolidated income statement of $509.8
million because the cash tax payments comprise payments on account
for the current year of $294.0 million based on the prior year's
profit levels, the settlement of outstanding balances in respect of
the previous year's tax charge of $113.7 million and withholding
tax due on remittances of profits from Chile of $62.1 million,
partly offset by the recovery of $131.4 million relating to prior
years.
In 2017 the cash inflow from the disposal of subsidiaries and
joint ventures of $3.1 million related to the disposal of Energia
Andina (2016 - $10.0 million related to the disposal of Minera
Michilla).
Contributions and loans to associates and joint ventures of
$45.4 million relate to the Group's funding of Alto Maipo ($36.0
million accrued at December 2016 and paid in 2017), Tethyan Copper
Company ($9.3 million) and Energia Andina ($0.1 million).
Cash disbursements relating to capital expenditure in 2017 were
$899.0 million compared with $795.1 million in 2016. This included
expenditure of $578.3 million at Centinela (2016 - $534.7 million),
$237.8 million at Los Pelambres (2016 - $215.3 million) and $43.6
million at Antucoya (2016 - $9.4 million).
At 31 December 2017 dividends paid to equity holders of the
Company were $252.3 million (2016 - $30.6 million), which related
to the payment of $101.5 million as the interim dividend declared
in respect of the current year (2016 - $30.6 million) and the final
element of the previous year's dividend of $150.8 million.
Dividends paid by subsidiaries to non-controlling shareholders
were $320.0 million (2016 - $260.0 million).
Financial position
At 31.12.17 At 31.12.16
$m $m
Cash, cash equivalents
and liquid investments 2,252.3 2,048.5
Total borrowings (2,708.7) (3,120.2)
------------ ------------
Net debt at the end
of the period (456.4) (1,071.7)
============ ============
At 31 December 2017 the Group had combined cash, cash
equivalents and liquid investments of $2,252.3 million (31 December
2016 - $2,048.5 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 $2,002.0
million (31 December 2016 - $1,830.2 million).
New borrowings in 2017 were $272.0 million (2016 - $938.8
million), including new short-term borrowings at Los Pelambres of
$242.0 million and Antucoya of $30.0 million. Repayments of
borrowings and finance leasing obligations in 2017 were $759.0
million, relating mainly to repayments at Los Pelambres of $350.7
million, Centinela $150.0 million, Antucoya $223.1 million, the
corporate centre of $3.9 million and the transport division of
$31.3 million.
Total Group borrowings at 31 December 2017 were $2,708.7 million
(at 31 December 2016 - $3,120.2 million). Of this, $2,043.6 million
(at 31 December 2016 - $2,329.7 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 31.12.2016
31.12.2017
----------------------------------------
Notes Before Exceptional Total
exceptional items (Note
items 3)
$m $m $m $m
Revenue 2,5 4,749.4 3,621.7 - 3,621.7
Total operating costs (2,908.3) (2,698.1) (456.6) (3,154.7)
------------ ------------- ------------- ----------
Operating profit from
subsidiaries 2,4 1,841.1 923.6 (456.6) 467.0
Net share of profit/(loss)
from associates and
joint ventures 2,4 59.7 23.4 (134.7) (111.3)
------------ ------------- ------------- ----------
Total profit/(loss)
from operations, associates
and joint ventures 1,900.8 947.0 (591.3) 355.7
Investment income 23.8 26.9 - 26.9
Interest expense (91.5) (86.1) - (86.1)
Other finance items (2.3) (11.9) - (11.9)
------------ ------------- ------------- ----------
Net finance expense 7 (70.0) (71.1) - (71.1)
------------ ------------- ------------- ----------
Profit before tax 1,830.8 875.9 (591.3) 284.6
Income tax expense 8 (633.6) (313.5) 204.9 (108.6)
------------ ------------- ------------- ----------
Profit/(Loss) for the
financial year from
continuing operations 1,197.2 562.4 (386.4) 176.0
============ ============= ============= ==========
Discontinued operations
Profit for the financial
year from discontinued
operations 9 0.5 38.3 - 38.3
------------ ------------- ------------- ----------
Profit/(Loss) for the
year 1,197.7 600.7 (386.4) 214.3
============ ============= ============= ==========
Attributable to:
Non-controlling interests 447.1 220.9 (164.6) 56.3
Profit/(Loss) for the
financial year attributable
to the owners of the
parent 750.6 379.8 (221.8) 158.0
------------ ------------- ------------- ----------
US cents US cents US cents
Basic earnings per
share
From continuing operations 10 76.1 34.7 (22.6) 12.1
From discontinued operations 10 0.1 3.9 - 3.9
------------ ------------- ------------- ----------
Total continuing and
discontinued operations 76.2 38.6 (22.6) 16.0
Consolidated Statement of Comprehensive Income
Year ended Year
ended
31.12.2017 31.12.2016
Notes $m $m
Profit for the financial year 1,197.7 214.3
Items that may be or were subsequently
reclassified to profit or loss:
(Losses) in fair value of cash flow hedges
deferred in reserves (16.8) (3.5)
Share of other comprehensive income of
equity accounted units, net of tax 14 - 4.4
Gains in fair value of available-for-sale
investments 15 1.4 1.7
Tax effects arising on cash flow hedges
deferred in reserves (1.0) 0.6
Losses in fair value of cash flow hedges 6 c)
transferred to the income statement i) 18.0 5.8
Share of other comprehensive income of
equity accounted units transferred to
the income statement - 52.6
Tax effects arising on amounts transferred
to the income statement 0.3 (1.4)
----------- -----------
Total items that may be or were subsequently
reclassified to profit or loss 1.9 60.2
Items that will not be subsequently reclassified
to profit or loss:
Actuarial gains on defined benefit plans 5.7 7.8
Tax on items recognised through OCI which
will not be reclassified to profit or
loss in the future (1.0) (1.3)
----------- -----------
Total Items that will not be subsequently
reclassified to profit or loss 4.7 6.5
Total other comprehensive income 6.6 66.7
Total comprehensive income for the year
period 1,204.3 281.0
=========== ===========
Attributable to:
Non-controlling interests 448.8 24.9
Equity holders of the Company 755.5 256.1
----------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 22) 22) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2017 89.8 199.2 (22.3) 6,548.6 6,815.3 1,694.4 8,509.7
Profit for the year - - - 750.6 750.6 447.1 1,197.7
Other comprehensive
income for the year - - 9.8 (4.9) 4.9 1.7 6.6
Dividends - - - (252.4) (252.4) (320.0) (572.4)
Balance at 31 December
2017 89.8 199.2 (12.5) 7,041.9 7,318.4 1,823.2 9,141.6
========= ========= ========== ========== ======== ============= ========
For the year ended 31 December 2016
Other Retained
reserves earnings Non-
Share Share (note (note Net controlling
capital premium 22) 22) 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
========= ========= ========== ========== ======== ============= ========
Consolidated Balance Sheet
At 31.12.2017 At 31.12.2016
Non-current assets Notes $m $m
Intangible asset 12 150.1 150.1
Property, plant and equipment 13 9,064.3 8,737.5
Other non-current assets 3.5 2.6
Inventories 16 111.1 157.3
Investment in associates and joint
ventures 14 1,069.7 1,086.6
Trade and other receivables 67.0 66.7
Derivative financial instruments 0.2 0.2
Available-for-sale investments 15 6.5 4.6
Deferred tax assets 69.1 82.8
10,541.5 10,288.4
-------------- --------------
Current assets
Inventories 16 483.6 393.4
Trade and other receivables 739.2 735.5
Current tax assets 155.2 255.2
Derivative financial instruments 6 0.1 2.2
Liquid investments 24 1,168.7 1,332.2
Cash and cash equivalents 24 1,083.6 716.3
-------------- --------------
3,630.4 3,434.8
Assets of disposal group classified
as held for sale 9 37.8 -
Total assets 14,209.7 13,723.2
============== ==============
Current liabilities
Short-term borrowings and leases 17 (753.6) (836.8)
Derivative financial instruments 6 (7.1) (2.0)
Trade and other payables (609.0) (595.2)
Current tax liabilities (192.4) (119.4)
(1,562.1) (1,553.4)
-------------- --------------
Non-current liabilities
Medium and long-term borrowings and
leases 17 (1,955.1) (2,283.4)
Derivative financial instruments 6 - (0.5)
Trade and other payables (7.4) (7.9)
Liabilities in relation to joint
ventures 14 (2.0) (3.1)
Post-employment benefit obligations (114.0) (92.2)
Decommissioning & restoration provisions (433.0) (392.1)
Deferred tax liabilities (994.1) (880.9)
-------------- --------------
(3,505.6) (3,660.1)
Liabilities of disposal group classified (0.4) -
as held for sale
-------------- --------------
Total liabilities (5,068.1) (5,213.5)
============== ==============
Net assets 9,141.6 8,509.7
Equity
Share capital 21 89.8 89.8
Share premium 21 199.2 199.2
Other reserves 22 (12.5) (22.3)
Retained earnings 22 7,041.9 6,548.6
Equity attributable to equity holders
of the Company 7,318.4 6,815.3
Non-controlling interests 1,823.2 1,694.4
Total equity 9,141.6 8,509.7
============== ==============
The preliminary information was approved by the Board of
Directors on 12 March 2018.
Consolidated Cash Flow Statement
Year
Year ended ended
31.12.2017 31.12.2016
Notes $m $m
Cash flows from continuing and discontinued
operations 23 2,495.0 1,457.3
Interest paid (59.1) (46.3)
Income tax paid (338.4) (272.6)
Net cash from continuing and discontinued
activities 2,097.5 1,138.4
------------ ------------
Investing activities
Capital contributions and loans to
associates and joint ventures 14 (45.4) (10.1)
Acquisition of joint ventures 14 - 20.0
Dividends from associates 14 81.8 10.2
Disposal of subsidiaries and joint
ventures 3.1 10.0
Acquisition of mining properties (2.3) (7.0)
Cash reclassified as part of disposal (2.2) -
group
Proceeds from sale of property, plant
and equipment 6.9 0.5
Purchases of property, plant and equipment (899.0) (795.1)
Net increase in liquid investments 24 163.5 (408.1)
Interest received 14.3 14.4
Net cash used in investing activities (679.3) (1,165.2)
------------ ------------
Financing activities
Dividends paid to equity holders of
the Company (252.3) (30.6)
Dividends paid to preference shareholders
of the Company (0.1) (0.1)
Dividends paid to non-controlling
interests (320.0) (260.0)
Net proceeds from issue of new borrowings 17 272.0 938.8
Repayments of borrowings 17 (725.5) (693.1)
Repayments of obligations under finance
leases 17 (33.5) (31.3)
Net cash used in financing activities (1,059.4) (76.3)
------------ ------------
Net increase/(decrease) in cash and
cash equivalents 24 358.8 (103.1)
============ ============
Cash and cash equivalents at beginning
of the year 716.3 807.5
Net increase/(decrease) in cash and
cash equivalents 24 358.8 (103.1)
Effect of foreign exchange rate changes 24 8.5 11.9
Cash and cash equivalents at end of
the year 24 1,083.6 716.3
============ ============
Notes
1. General information and accounting policies
a) General information
This preliminary results announcement is for the year ended 31
December 2017. 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 2018.
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 2017 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 23 May 2018. 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 2017 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 Notes 28 and 29 of this preliminary
results announcement is not derived from the statutory accounts for
the years ended 31 December 2017 and 2016 and is accordingly not
covered by the auditor's reports.
b) Significant events during 2017
The Group completed the disposal of its 40% interest in Alto
Maipo in March 2017 for nil consideration. An impairment provision
was recognised in respect of the carrying value of the Group's
investment in Alto Maipo in the 2016 year-end results, and no gain
or loss resulted from the completion of the disposal in the current
period.
Antucoya satisfied the terms of the completion test relating to
its project financing in December 2017, resulting in the release of
the parent guarantees provided by Antofagasta plc and Marubeni
Corporation.
c) Adoption of new accounting standards
The following accounting standards, amendments and
interpretations became effective in the current reporting
period:
- Recognition of Deferred Tax Assets for Unrealised Losses
(Amendments to IAS 12)
- Disclosure Initiative (Amendments to IAS 7)
The application of these standards and interpretations effective
for the first time in the current year has had no material impact
on the amounts reported in these consolidated financial
statements.
d) Accounting standards issued but not yet effective
The following accounting standards, interpretations and
amendments have been issued by the IASB, but are not yet
effective:
New Standards Effective date (Subject to
EU endorsement)
----------------------------------------------- ----------------------------
IFRS 9, Financial instruments Annual periods beginning on
or after January 1, 2018
----------------------------------------------- ----------------------------
IFRS 15, Revenue from Contracts with Customers Annual periods beginning on
or after January 1, 2018
----------------------------------------------- ----------------------------
IFRS 16, Leases Annual periods beginning on
or after January 1, 2019
----------------------------------------------- ----------------------------
IFRS 17, Insurance Contracts Annual periods beginning on
or after January 1, 2021
----------------------------------------------- ----------------------------
Amendments to IFRSs Effective date (Subject to
EU endorsement)
----------------------------------------------- -------------------------------------
Sale or Contribution of Assets between Effective date deferred indefinitely
an Investor and its Associate or Joint
Venture (Amendments to IFRS 10 and IAS
28)
----------------------------------------------- -------------------------------------
Classification and Measurement of Share-based Annual periods beginning on
Payment Transactions (Amendments to IFRS or after January 1, 2018
2)
----------------------------------------------- -------------------------------------
Applying IFRS 9 'Financial Instruments' Deferral approach effective
with IFRS 4 'Insurance Contracts' (Amendments for annual periods beginning
to IFRS 4) on or after 1 January 2018
and only available for three
years after that date
----------------------------------------------- -------------------------------------
Annual Improvements to three IFRS Standards Annual periods beginning on
2014-2016 Cycle or after January 1, 2018
----------------------------------------------- -------------------------------------
IFRS 15 Revenue from Contracts with Customers Annual periods beginning on
or after January 1, 2018
----------------------------------------------- -------------------------------------
Prepayment Features with Negative Compensation Annual periods beginning on
(Amendments to IFRS 9) or after January 1, 2019
----------------------------------------------- -------------------------------------
Long-term Interests in Associates and Annual periods beginning on
Joint Ventures (Amendments to IAS 28) or after January 1, 2019
----------------------------------------------- -------------------------------------
Annual Improvements to IFRS Standards Annual periods beginning on
2015-2017 Cycle or after January 1, 2019
----------------------------------------------- -------------------------------------
New Interpretations Effective date (Subject to
EU endorsement)
---------------------------------------- ----------------------------
IFRIC 22, Foreign Currency Transactions Annual periods beginning on
and Advance Consideration or after January 1, 2018
---------------------------------------- ----------------------------
IFRIC 23, Uncertainty over Income Tax Annual periods beginning on
Treatments or after January 1, 2019
---------------------------------------- ----------------------------
The Group is continuing to evaluate the impact of adopting these
new standards and interpretations. exclude IFRS 15, IFRS 9, IFRS
16.
Adoption of this standard is mandatory in 2018. The standard has
been endorsed by the EU.
IFRS 15 Revenue from Contracts with Customers
The core principle of IFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. The standard introduces a five-step process for applying
this principle, which includes guidance in respect of identifying
the performance obligations under the contract with the customer,
allocating the transaction price between the performance
obligations, and recognising revenue as the entity satisfies the
performance obligations.
The Group has concluded its evaluation of the impact of IFRS 15,
and determined that the only relevant impact for the Group relates
to the shipping of material sold to customers. The Group sells a
significant proportion of its products on Cost, Insurance &
Freight (CIF) Incoterms, which means that the Group is responsible
for shipping the product to a destination port specified by the
customer. Under IAS 18 Revenue the Group recognised the total
contract revenue when the material had been loaded at the port of
loading, at which point the legal title and risks and rewards
relating to the material passed to the customer, as well as
accruing the related shipping costs at that point. Under IFRS 15
the shipping service will represent a separate performance
obligation, and should be recognised separately from the sale of
the material when the shipping service has been provided, along
with the associated costs. The impact of this change in the 2017
comparatives to be included within the 2018 financial statements
will be to increase both 2017 revenues and expenses by
approximately $5 million (less than 0.2% of revenue and expenses),
with no significant impact on net earnings or net assets.
The Group's copper and molybdenum sale contracts generally
provide for provisional pricing of sales at the time of shipment,
with final pricing based on the monthly average London Metal
Exchange ("LME") copper price or the monthly average market
molybdenum price for specified future periods. As explained in more
detail below provisional pricing adjustments to revenue will be
dealt with under IFRS 9 rather than IFRS 15, and therefore the IFRS
15 rules on variable consideration do not apply to the provisional
pricing mechanism of the Group's sales contracts.
The standard will be applied in 2018 with retrospective
restatement of the prior year comparatives.
IFRS 9 Financial Instruments
Adoption of this standard is mandatory in 2018. The standard has
been endorsed by the EU.
The Group has concluded its evaluation of the impact of IFRS 9
and determined that the principal impact of the standard on the
Group relates to its commodity price hedging. Under IAS 39
Financial instruments - recognition and measurement the time value
element of changes in the fair value of derivative options is
excluded from the designated hedging relationship, and is
recognised directly in the income statement within other finance
items. Under IFRS 9 we expect to recognise the time value element
within other comprehensive income rather than the income statement,
therefore reducing income statement volatility. During 2017 an
expense of $7.8 million was recognised within other finance items
in the income statement in respect of the time value element of
derivative options.
IFRS 9 introduces an expected credit loss model for impairment
of financial assets which replaces the incurred loss model used in
IAS 39. This is not expected to have a significant impact on the
Group given our credit risk management processes, and the resulting
very low level of credit losses.
As explained above, the Group's copper and molybdenum sale
contracts generally provide for provisional pricing of sales at the
time of shipment, with final pricing based on the monthly average
London Metal Exchange ("LME") copper price or the monthly average
market molybdenum price for specified future periods. Under IAS 39
the final pricing adjustment mechanism represents an embedded
derivative which is separated from the host contract (the copper or
molybdenum sales contract) and recognised at fair value through
profit or loss. Under IFRS 9 the receivable asset is measured at
fair value through profit or loss which will result in a similar
overall impact on the income statement and balance sheet.
IFRS 16 Leases
Adoption of this standard is mandatory in 2019. The standard has
been endorsed by the EU.
The Group's work on the implementation of the new standard to
date has included an analysis of the main impacts of the standard
on the Group, an estimation of the likely overall impact on the
Group's results and balance sheet, including the impact on the
Group's key financial ratios, and commencing a detailed contract
review process. The detailed contract review process and relevant
staff training will complete during 2018.
The standard will result in most of the Group's existing
operating leases being accounted for similar to finance leases
under the current IAS 17 Leases standard, 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 2017 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 2018 of approximately $150
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 $90 million, an
increase in annual depreciation of approximately $80 million, an
increase in finance costs of less than $15 million, and a net
impact on profit before tax of less than $10 million. The cash flow
from operations figure per the cash flow statement will increase,
as currently all cash payments relating to operating leases are
included within this line, but under IFRS 16 the payments will be
classified either as interest payments or repayment of
borrowings.
The standard will be applied in 2019, and the current
expectation is that it will be applied with retrospective
restatement of the prior year comparatives.
2. Total profit from operations, associates and joint ventures
Year Year
ended ended
31.12.2017 31.12.2016
$m $m
Revenue 4,749.4 3,621.7
Cost of sales (2,356.4) (2,102.6)
Gross profit 2,393.0 1,519.1
Administrative and distribution
expenses (414.1) (479.1)
Provision against carrying
value of assets - (456.6)
Other operating income 26.0 20.2
Other operating expenses (163.8) (136.6)
Operating profit from
subsidiaries 1,841.1 467.0
Equity accounting profit 59.7 23.4
Provision against carrying
value of assets - (134.7)
------------ ------------
Net share of income/(loss)
from associates and
joint ventures 59.7 (111.3)
Total profit from operations,
associates and joint
ventures 1,900.8 355.7
============ ============
Other operating expenses mainly comprise $39.8 million of costs
relating to the decommissioning and restoration provisions (2016 -
$9.3 million), $68.8 million of exploration and evaluation
expenditure (2016 - $44.3 million) and $55.2 million of other
expenses (2016 - $83.0 million).
3. Exceptional items and asset sensitivities
Exceptional items are material items of income and expense which
are non-regular or non-operating and typically non-cash movements.
Profit excluding exceptional items is considered to be a useful
performance measure as it provides an indication of the underlying
earnings of the Group's operations, excluding these one-off items.
There are no exceptional items in the year ended 31 December 2017.
The exceptional items in the year ended 31 December 2016 are shown
in the table below.
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
31.12.2017 31.12.2016 31.12.2017 31.12.2016 31.12.2017 31.12.2016 31.12.2017 31.12.2016
$m $m $m $m $m $m US cents US cents
Before
exceptional
items - 923.6 - 23.4 - 875.9 - 38.6
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 - (111.3) - 284.6 - 16.0
============ =========== =========== =========== =============== =========== =========== ===========
Asset sensitivities
There were no indicators of potential impairment, or reversal of
previous impairments, for the Group's operations at the 2017
year-end, and accordingly no impairment reviews have been
performed. However, in order to provide an indication of the
sensitivities of the recoverable amount of the assets of the
Group's mining operations, a valuation and sensitivity analysis has
been performed.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. Fair value less costs of disposal
reflects the net amount the Group would receive from the sale of
the asset in an orderly transaction between market participants.
For mining assets this would generally be determined based on the
present value of the estimated future cash flows arising from the
continued use, further development or eventual disposal of the
asset. Value in use reflects the expected present value of the
future cash flows which the Group would generate through the
operation of the asset in its current condition, without taking
into account potential enhancements or further development of the
asset. The fair value less costs of disposal valuation will
normally be higher than the value in use valuation, and accordingly
the Group typically applies this valuation estimate in its
impairment or valuation assessments.
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 3.00 usd/lb has
been used in the base valuations. 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.
This valuation exercise demonstrated positive headroom for all
of the Group's mining operations, with the recoverable amount of
the assets in excess of their carrying value. As an additional
down-side sensitivity, a valuation was performed with a 5%
reduction in the long-term copper price. Los Pelambres and Zaldívar
still showed positive headroom in this alternative down-side
scenario, however the Antucoya valuation indicated a potential
deficit of $40 million and the Centinela valuation indicated a
potential deficit of $400 million. This was a simple sensitivity
exercise, looking at an illustrative change in the forecast
long-term copper price in isolation. In reality, a deterioration in
the long-term copper price environment is likely to result in
corresponding improvements in a range of input cost factors, as
well as potential operational changes, which could partly mitigate
these estimated potential sensitivities.
4. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Antucoya
-- Zaldivar
-- Exploration and evaluation
-- Corporate and other items
-- Transport and other transport services
For management purposes, the Group is organised into two
business divisions based on their products - Mining and Transport
and Other Transport Services. The mining division is split further
for management reporting purposes to show results by mine and
exploration activity. Los Pelambres produces primarily copper
concentrate and molybdenum as a by-product. Centinela produces
copper concentrate containing gold as a by-product and copper
cathodes. Antucoya and Zaldivar produce copper cathodes. The
transport division provides rail and road cargo together with a
number of ancillary services. All the operations are based in
Chile. The Exploration and evaluation segment incurs exploration
and evaluation expenses. "Corporate and other items" comprises
costs incurred by the Company, Antofagasta Minerals S.A., the
Group's mining corporate centre and other entities, that are not
allocated to any individual business segment. Consistent with its
internal management reporting, the Group's corporate and other
items are included within the mining division.
The Chief Operating decision-maker monitors the operating
results of the business segments separately for the purpose of
making decisions about resources to be allocated and of assessing
performance.
a) Segment revenues and results
For the year ended 31 December 2017
Los Centinela Antucoya Zaldivar Exploration Corporate Total Railway Total
Pelambres and and other Mining and other
evaluation(2) items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 2,423.9 1,645.8 508.6 - - - 4,578.3 171.1 4,749.4
Operating costs
excluding
depreciation (995.8) (786.4) (301.3) - (68.8) (70.8) (2,223.1) (95.8) (2,318.9)
Depreciation
and
amortisation (205.2) (276.6) (76.1) - - (6.7) (564.6) (16.5) (581.1)
(Loss)/gains
on disposals (5.6) (3.7) - - - 0.9 (8.4) 0.1 (8.3)
---------- ---------- --------- --------- -------------- ---------- ---------- ---------- ----------
Operating
profit/(loss) 1,217.3 579.1 131.2 - (68.8) (76.6) 1,782.2 58.9 1,841.1
Equity
accounting
profit/(loss) - - - 58.5 - (8.2) 50.3 9.4 59.7
Investment
income 4.4 6.2 0.7 - - 11.9 23.2 0.6 23.8
Interest expense (5.8) (24.9) (41.0) - - (17.8) (89.5) (2.0) (91.5)
Other finance
items 6.7 (5.9) (5.8) - - (3.2) (8.2) 5.9 (2.3)
---------- ---------- --------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
before tax 1,222.6 554.5 85.1 58.5 (68.8) (93.9) 1,758.0 72.8 1,830.8
Tax (360.1) (196.8) (1.2) - - (58.6) (616.7) (16.9) (633.6)
---------- ---------- --------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the year
from continuing
operations 862.5 357.7 83.9 58.5 (68.8) (152.5) 1,141.3 55.9 1,197.2
Profit for the
period from
discontinued
operations - - - - - 0.5 0.5 - 0.5
---------- ---------- --------- --------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the year 862.5 357.7 83.9 58.5 (68.8) (152.0) 1,141.8 55.9 1,197.7
Non-controlling
interests (342.1) (93.7) (11.3) - - - (447.1) - (447.1)
Profit/(loss)
for the year
attributable
to owners of
the parent 520.4 264.0 72.6 58.5 (68.8) (152.0) 694.7 55.9 750.6
========== ========== ========= ========= ============== ========== ========== ========== ==========
EBITDA(1) 1,428.1 859.4 207.3 134.2 (68.8) (71.7) 2,488.5 98.1 2,586.6
Additions to non-current
assets
Capital
expenditure 263.6 619.2 78.2 - 8.4 969.4 32.1 1,001.5
Segment assets and
liabilities
Segment assets 3,687.5 5,479.2 1,712.5 - 9.5 1,875.2 12,763.9 376.1 13,140.0
Investment
in associates
and joint
ventures - - - 982.1 - 22.1 1,004.2 65.5 1,069.7
Segment
liabilities (1,387.0) (1,943.0) (960.1) - (4.5) (657.1) (4,951.7) (116.4) (5,068.1)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the period, operating cash used in from exploration
and evaluation segment was $45.6 million
For the year ended 31 December 2016
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation(2) other other
items transport
services
$m $m $m $m $m $m $m $m $m
Revenue 1,845.6 1,338.0 277.9 - - - 3,461.5 160.2 3,621.7
Operating costs
excluding
depreciation (923.8) (775.5) (213.0) - (44.3) (56.5) (2,013.1) (86.9) (2,100.0)
Depreciation
and
amortization (195.7) (299.4) (62.7) - - (5.2) (563.0) (15.4) (578.4)
Loss on
disposals (0.2) (17.1) - - - (0.6) (17.9) (1.8) (19.7)
Provision
against
the carrying
value of assets (241.0) - (215.6) - - - (456.6) - (456.6)
---------- ---------- ----------
Operating
profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Equity
accounting
profit/(loss) 0.4 - - 29.5 - (11.2) 18.7 4.7 23.4
Provision
against
the carrying
value of assets (126.6) - - - - (8.1) (134.7) - (134.7)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Net share of
profit/(loss)
from associates
and joint
ventures (126.2) - - 29.5 - (19.3) (116.0) 4.7 (111.3)
Investment
income 15.7 5.3 0.6 - - 4.7 26.3 0.6 26.9
Interest expense (6.5) (32.0) (30.5) - - (14.6) (83.6) (2.5) (86.1)
Other finance
items (2.7) (5.4) (5.0) - - 3.0 (10.1) (1.8) (11.9)
---------- ---------- ----------
Profit/(loss)
before tax 365.2 213.9 (248.3) 29.5 (44.3) (88.5) 227.5 57.1 284.6
Tax (117.4) (73.3) 94.3 - - 5.3 (91.1) (17.5) (108.6)
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period
from continuing
operations 247.8 140.6 (154.0) 29.5 (44.3) (83.2) 136.4 39.6 176.0
Profit for
the period
from
discontinued
operations - - - - - 38.3 38.3 - 38.3
---------- ---------- ---------- -------------- -------------- ---------- ---------- ---------- ----------
Profit/(loss)
for the period 247.8 140.6 (154.0) 29.5 (44.3) (44.9) 174.7 39.6 214.3
Non-controlling
interests (97.9) (32.8) 74.3 - - 0.1 (56.3) - (56.3)
---------- ---------- ----------
Profit/(loss)
for the period
attributable
to the owners
of the parent 149.9 107.8 (79.7) 29.5 (44.3) (44.8) 118.4 39.6 158.0
========== ========== ========== ============== ============== ========== ========== ========== ==========
EBITDA(1) 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
Additions to non-current
assets
Capital
expenditure 316.6 617.4 27.4 - - 31.0 992.4 16.9 1,009.3
Segment assets and
liabilities
Segment assets 3,606.2 5,008.0 1,740.5 - 9.5 1,945.8 12,310.0 327.2 12,637.2
Investment
in associates
and joint
ventures - - - 983.7 - 25.1 1,008.8 77.8 1,086.6
Segment
liabilities (1,368.2) (1,979.3) (1,085.3) - (4.5) (638.3) (5,075.6) (138.5) (5,214.1)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) During the period, operating cash outflow used in from
exploration and evaluation segment was $22.1 million
b) Entity wide disclosures
Revenue by product
Year
ended Year ended
31.12.2017 31.12.2016
$m $m
Copper
- Los Pelambres 2,149.0 1,627.0
- Centinela concentrates 1,037.0 778.7
- Centinela cathodes 378.6 278.1
- Antucoya 508.6 277.9
Gold
- Los Pelambres 68.7 78.5
- Centinela 209.7 261.2
Molybdenum
- Los Pelambres 168.5 94.0
Silver
- Los Pelambres 37.7 46.1
- Centinela 20.5 20.0
Total Mining 4,578.3 3,461.5
Railway and transport services 171.1 160.2
Water concession
4,749.4 3,621.7
============ ============
Revenue by location of customer
Year ended Year ended
31.12.2017 31.12.2016
$m $m
Europe
- United Kingdom 46.6 -
- Switzerland 835.1 217.7
- Spain 163.5 115.6
- Germany 139.4 38.5
- Rest of Europe 114.2 157.3
Latin America
- Chile 206.9 105.2
- Rest of Latin America 125.2 126.4
North America
- United States 207.4 49.5
Asia Pacific
- Japan 1,698.2 1,483.5
- China 484.8 771.9
- Rest of Asia 728.1 556.1
------------ ------------
4,749.4 3,621.7
============ ============
Information about major customers
In the year ended 31 December 2017 the Group's mining revenue
included $823.4 million related to one large customer that
individually accounted for more than 10% of the Group's revenue
(year ended 31 December 2016 - one large customer representing
$694.7 million).
Non-current assets by location of asset
Year ended Year ended
31.12.2017 31.12.2016
$m $m
- Chile 10,250.2 9,996.3
- USA 215.4 204.4
- Other 0.1 0.1
10,465.7 10,200.8
============ ============
Notes to geographical information
The non-current assets balance disclosed by location of assets
excludes financial instruments, available-for-sale investments and
deferred tax assets.
5. Revenue
Copper and molybdenum concentrate sale agreements and copper
cathode sale agreements generally provide for provisional pricing
of sales at the time of shipment, with final pricing being based on
the monthly average London Metal Exchange copper price or monthly
average molybdenum price for specified future periods. This
normally ranges from one to four months after shipment to the
customer. The provisional pricing mechanism within the sale
agreements is an embedded derivative under IFRS. Gains and losses
from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors
in the balance sheet. The Group determines mark-to-market prices
using forward prices at each period end for copper concentrate and
cathode sales, and period-end month average prices for molybdenum
concentrate sales due to the absence of a futures market in the
market price references for that commodity in the majority of the
Group's contracts.
In addition to mark-to-market and final pricing adjustments,
revenue also includes realised gains and losses relating to
derivative commodity instruments. Details of these realised gains
or losses are shown in the tables below. Further details of
derivative commodity instruments in place at the period end are
given in Note 6.
Copper and molybdenum concentrate sales are stated net of
deductions for tolling charges, as shown in the tables below.
For the year ended 31 December 2017 $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 2,138.9 1,031.1 385.9 502.7 70.4 209.6 173.6
Effects of
pricing
adjustments
to previous
year invoices
Reversal of
mark-to-market
adjustments at
the end
of the
previous year (28.0) (15.3) 0.4 0.6 - 1.3 0.7
Settlement of
sales invoiced
in the
previous year 53.3 37.6 - 0.7 (0.9) (2.2) 2.0
------------ ------------ ---------- --------- ------------ ------------ ------------
Total effect of
adjustments
to previous
year invoices
in the current
period 25.3 22.3 0.4 1.3 (0.9) (0.9) 2.7
------------ ------------ ---------- --------- ------------ ------------
Effects of
pricing
adjustments
to current
period invoices
Settlement of
sales invoiced
in the current
period 110.2 61.7 3.9 5.7 (0.6) 1.5 3.2
Mark-to-market
adjustments
at the end of
the current
period 54.1 20.1 1.7 2.7 - 0.3 4.7
Total effect of
adjustments
to current
period invoices 164.3 81.8 5.6 8.4 (0.6) 1.8 7.9
Total pricing
adjustments 189.6 104.1 6.0 9.7 (1.5) 0.8 10.6
Realised losses
on commodity
derivatives - - (13.3) (3.8) - - -
Revenue before
deducting
tolling charges 2,328.5 1,135.2 378.6 508.6 68.9 210.5 184.2
Tolling charges (179.5) (98.2) - - (0.2) (0.8) (15.7)
Revenue net of
tolling
charges 2,149.0 1,037.0 378.6 508.6 68.7 209.7 168.5
For the year ended 31 December 2016
$m $m $m $m $m $m $m
Los Los Centinela Los
Pelambres Centinela Centinela Antucoya Pelambres Pelambres
Gold 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
The revenue from the individual products shown in the above tables
is reconciled to total 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
four months from shipment date.
At 31.12.2017 At 31.12.2016
Sales Tonnes 160,900 199,900
Average mark-to-market price $/lb 3.28 2.51
Average provisional invoice price $/lb 3.07 2.41
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain
open until settlement occurs is approximately one month from
shipment date.
At 31.12.2017 At 31.12.2016
Sales Tonnes 14,700 13,200
Average mark-to-market price $/lb 3.27 2.51
Average provisional invoice price $/lb 3.14 2.54
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain
open is approximately one month from shipment date.
At 31.12.2017 At 31.12.2016
Sales Ounces 7,100 36,400
Average mark-to-market price $/oz 1,300 1,167
Average provisional invoice price $/oz 1,268 1,203
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is
approximately two months from shipment date.
At 31.12.2017 At 31.12.2016
Sales Tonnes 2,400 1,300
Average mark-to-market price $/lb 9.4 6.6
Average provisional invoice price $/lb 8.5 6.9
As detailed above, the effects of gains and losses from the
marking-to-market of open sales are recognised through adjustments
to revenue in the income statement and to trade debtors in the
balance sheet. The effect of mark-to-market adjustments on the
balance sheet at the end of each period are as follows:
Gain/(loss) on debtors
of period end
mark-to-market adjustments
Year
ended
Year ended
31.12.2017 31.12.2016
$m $m
Los Pelambres - copper concentrate 54.1 28.0
Los Pelambres - molybdenum concentrate 4.7 (0.7)
Centinela - copper concentrate 20.1 15.3
Centinela - gold in concentrate 0.2 (1.3)
Centinela - copper cathodes 1.7 (0.4)
Antucoya - copper cathodes 2.7 (0.6)
83.5 40.3
6. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
Year ended Year ended
31.12.2017 31.12.2016
$m $m
Financial assets
Derivatives in designated hedge accounting
relationships 0.3 2.4
Available-for-sale-investments 6.5 4.6
Loans and receivables at amortised cost
(including cash
and cash equivalents) 1,806.3 1,475.2
Fair value through profit and loss (liquid
investments and mark-to-mark debtors) 1,252.2 1,375.5
Financial liabilities
Derivatives in designated hedge relationships (7.1) (2.5)
Financial liabilities measured at amortised
cost (3,325.1) (3,720.3)
Fair value through profit and loss (mark-to-mark
creditors) - (3.0)
The fair value of financial assets and financial liabilities
carried at amortised cost is not materially different from the
carrying value presented above.
Fair value of financial instruments
An analysis of financial assets and financial liabilities
measured at fair value is presented below:
Level Level Level
1 2 3 Year ended Year ended
31.12.2017 31.12.2016
Recurring fair value measurements
$m $m $m $m $m
Financial assets
Derivatives in designated
hedge accounting relationships - 0.3 - 0.3 2.4
Available-for-sale investments 6.5 - - 6.5 4.6
Fair value through profit
and loss 1,168.7 - - 1,168.7 1,332.2
Debtors mark-to-market - 83.5 - 83.5 43.3
Financial liabilities
Derivatives in designated
hedge relationships - (7.1) - (7.1) (2.5)
Creditors mark-to-market - - - - (3.0)
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting year.
Derivatives in designated hedge accounting relationships are
valued using a discounted cash flow analysis valuation model, which
includes observable credit spreads and using the applicable yield
curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
These are level 2 inputs as described below.
Available-for-sale investments are investments in shares on
active markets and are valued using unadjusted quoted market values
of the shares at the financial reporting date. These are level 1
inputs as described below.
Provisionally priced metal sales for the period are
marked-to-market at the end of the period. Gains and losses from
the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and trade debtors in
the balance sheet. Forward prices at the end of the period are used
for copper sales while period-end average prices are used for
molybdenum concentrate sales. These are level 2 inputs as described
below.
Financial assets measured at fair value through profit and loss
are highly liquid current asset investments that are valued using
market prices at the period end. These are level 1 inputs as
described below.
The inputs to the valuation techniques described above are
categorised into three levels, giving the highest priority to
unadjusted quoted prices in active markets (level 1) and the lowest
priority to unobservable inputs (level 3 inputs):
- Level 1 fair value measurement inputs are unadjusted quoted
prices in active markets for identical assets or liabilities.
- Level 2 fair value measurement inputs are derived from inputs
other than quoted market prices included in level 1 that are
observable for the asset or liability, either directly or
indirectly.
- Level 3 fair value measurement inputs are unobservable inputs for the asset or liability.
The degree to which inputs into the valuation techniques used to
measure the financial assets and liabilities are observable and the
significance of these inputs in the valuation are considered in
determining whether any transfers between levels have occurred. In
the year ended 31 December 2017, there were no transfers between
levels in the hierarchy.
b) Embedded derivatives
As explained in Note 5, copper and molybdenum concentrate sale
agreements and copper cathode sale agreements generally provide for
provisional pricing of sales at the time of shipment, with final
pricing being based on the monthly average London Metal Exchange
copper price or monthly average molybdenum price for specified
future periods. The provisional pricing mechanism within the sale
agreements is an embedded derivative under IFRS. Details of the
provisional pricing arrangements are included in Note 5.
c) Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce its exposure to commodity price, foreign exchange and
interest rate movements. The Group does not use such derivative
instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39
"Financial Instruments: Recognition and Measurement". Changes in
the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows have been
recognised directly in other comprehensive income, with such
amounts subsequently recognised in the income statement in the
period when the hedged item has been recognised in the income
statement within revenue. The time value element of changes in the
fair value of derivative options is excluded from the designated
hedging relationship, and is therefore recognised directly in the
income statement within other finance items.
(i) Mark-to-market adjustments and income statement impact
The balance sheet mark-to-market adjustments in respect of
derivatives at the end of each year, and the total effect on the
income statement and reserves for each year are as follows. The
impact on reserves is shown before tax and non-controlling
interests.
For the year ended 31 December 2017
Impact on Fair value
reserves recorded
Impact on income statement for year on balance
for year ended 31.12.2017 ended 31.12.2017 sheet 31.12.2017
Realised Losses resulting Total Gains resulting Net financial
losses from mark-to-market net from mark-to-market assets/(liability)
adjustments loss adjustments
on hedging on hedging
instruments instruments
$m $m $m $m $m
Commodity derivatives
Centinela (13.3) (4.4) (17.7) - (3.4)
Antucoya (3.8) (3.4) (7.2) - (3.4)
Interest derivatives
Centinela (0.7) - (0.7) 1.0 (0.2)
Railway and
other transport
services (0.2) - (0.2) 0.2 0.2
(18.0) (7.8) (25.8) 1.2 (6.8)
For the year ended 31 December 2016
Fair value
recorded
Impact on on balance
Impact on income statement reserves sheet
Realised Losses resulting Total Gains resulting Net financial
losses from mark-to-market net from mark-to-market asset/(liability)
adjustments loss adjustments
on hedging on hedging
instruments instruments
$m $m $m $m $m
Commodity Derivatives
Centinela (2.2) 1.0 (1.2) - 1.0
Interest Derivatives
Centinela (2.6) - (2.6) 1.8 (1.2)
Railway and other
transport services (1.0) - (1.0) 0.5 -
(5.8) 1.0 (4.8) 2.3 (0.2)
The gains/(losses) recognised in reserves are disclosed before
non-controlling interests and tax.
The net financial asset/(liability) resulting from the balance sheet mark-to-market
adjustments is analysed as follows:
At 31.12.2017 At 31.12.2016
$m $m
Analysed between:
Current assets 0.1 2.2
Non-current
assets 0.2 0.2
Current liabilities (7.1) (2.0)
Non-current
liabilities - (0.5)
(6.8) (0.1)
(ii) Outstanding derivative financial instruments
a) Commodity derivatives
The Group periodically uses commodity derivatives to manage its exposure
to commodity price fluctuations. As at the end of the period the open instruments
details are:
- Min/max instruments At 31.12.2017 For instruments held at 31.12.2017
Weighted average
remaining period Weighted
Copper production from 1 January Covering Weighted average
hedged 2018 a period average cap
tonnes months up to: floor$/lb $/lb
Centinela 30,000 6.5 31.12.2018 2.5 3.6
Antucoya 30,000 6.5 31.12.2018 2.5 3.6
b) Interest derivatives
The Group periodically uses interest derivatives to reduce its exposure
to interest rate movements. As at the end of the year the open instruments
details are:
- Interest rate swaps
The Group has used interest rate swaps to swap the floating rate interest
relating to the Centinela project financing and long-term loans at the
Railway for fixed rate interest. At 31 December 2017 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 35.0 3.372
Railway and
other transport
services 12.08.2014 12.08.2019 60.0 1.634
The actual notional amount hedged depends upon the amount of the related
debt currently outstanding.
7. Net finance expense
Year ended Year ended
31.12.2017 31.12.2016
$m $m
Investment income
Interest receivable 9.2 20.4
Gains on fair value through profit
or loss 14.6 6.5
23.8 26.9
Interest expense
Interest expense (91.4) (86.0)
Preference dividends (0.1) (0.1)
(91.5) (86.1)
Other finance items
Time value effect of options (7.8) 1.0
Unwinding of discount on provisions (11.6) (10.0)
Foreign exchange 17.1 (2.9)
(2.3) (11.9)
Net finance expense (70.0) (71.1)
During 2017, amounts capitalised and consequently not included
within the above table were as follows: Antucoya nil (year ended 31
December 2016 - $9.2 million), $8.8 million at Centinela (year
ended 31 December 2016 - $2.3 million) and $1.3 million at Los
Pelambres (year ended 31 December 2016 - $0.5 million).
8. Taxation
The tax charge for the period comprised the following:
Year ended Year ended
31.12.2017 31.12.2016
$m $m
Current tax charge
Corporate tax (principally first
category tax in Chile) (376.6) (222.1)
Mining tax (royalty) (69.1) (35.3)
Withholding tax (64.8) (3.8)
Exchange gain on corporate tax
balances 0.7 -
(509.8) (261.2)
Deferred tax
Corporate tax (principally first
category tax in Chile) (114.6) (27.5)
Exceptional items - 204.9
Mining tax (royalty) (9.2) (24.8)
(123.8) 152.6
Total tax charge (income tax
expense) (633.6) (108.6)
The rate of first category (i.e. corporate) tax in Chile is
25.5% (2016 - 24%).
In addition to first category tax and the mining tax, the Group
incurs withholding taxes on any remittance of profits from Chile.
Withholding tax is levied on remittances of profits from Chile at
35% less first category (i.e. corporation) tax already paid in
respect of the profits to which the remittances relate.
The Group's mining operations are also subject to a mining tax
(royalty). In 2017 production from Los Pelambres and Centinela
(Tesoro Central and Mirador pit) were subject to a rate of 4% of
taxable operating profit and Centinela concentrates of 5%, and
production from Antucoya, Encuentro (oxides), El Tesoro North East
pit and the run-of-mine processing at Centinela cathodes is subject
to a rate of between 5-14%, depending on the level of operating
profit margin. From 2018 onwards the production from Los Pelambres
will be subject to a rate of between 5-14%, depending on the level
of operating profit margin, and the Tesoro Central and Mirador pits
at Centinela will be subject to a rate of 5%.
Year ended Year ended Year ended
31.12.2017 31.12.2016 (Before Exceptional 31.12.2016 (After Exceptional Items)
Items)
$m % $m % $m %
Profit before tax 1,830.8 - 875.9 - 284.6
Tax at the Chilean
corporate tax rate
of 25.5% (2016 -
24%) (466.9) 25.5 (210.2) 24.0 (68.3) 24.0
Provision against
carrying value of
assets (exceptional
items) - - - - 63.0 (22.1)
Effect of increase in
future first
category tax rates
on deferred tax
balances (0.6) - (24.6) 2.8 (24.6) 8.6
Adjustment in respect
of prior years (35.4) 1.9 - - - -
Items not deductible
from first category
tax (26.7) 1.5 (23.7) 2.7 (23.7) 8.3
Deduction of mining
royalty as an
allowable expense in
determination of
first category tax 17.4 (1.0) 8.5 (1.0) 8.5 (2.9)
Credit of tax losses
absorbed from
dividends of the
year (4.3) 0.2 - - - -
Carry-back tax losses
resulting in credits
at historic tax
rates - - (5.4) 0.6 (5.4) 1.8
Mining Tax (royalty) (78.3) 4.3 (60.1) 6.9 (60.1) 21.1
Withholding tax (64.8) 3.5 - - - -
Withholding tax -
adjustment to
previous year - - (3.8) 0.4 (3.8) 1.3
Tax effect of share
of profit of
associates and joint
ventures 15.2 (0.8) 5.6 (0.6) 5.6 (1.9)
Reversal of
previously
unrecognised tax
losses 9.9 (0.5) - - - -
Net other items 0.9 - 0.2 - 0.2 -
Tax expense and
effective tax rate
for the year (633.6) 34.6 (313.5) 35.8 (108.6) 38.2
The effective tax rate varied from the statutory rate
principally due to the mining royalty tax (impact of $78.3 million
/ 4.3%), the withholding tax due on remittances of profits from
Chile (impact of $64.8 million / 3.5%), adjustments in respect of
prior years, which relate to adjustments made during the year in
the deferred tax asset base (impact of $35.4 million / 1.9%) and
items not deductible for Chilean corporate tax purposes,
principally the funding of expenses outside of Chile (impact of
$26.7 million / 1.5%), partly offset by the deduction of the mining
royalty tax which is an allowable expense when determining the
Chilean corporate tax charge (impact of $17.4 million / 1.0%) and
the impact of the recognition of the Group's share of profit from
associates and joint ventures, which are included in the Group's
profit before tax net of their respective tax charges (impact of
$15.2 million / 0.8%).
The current and deferred tax relating to items that are charged
directly to equity was $1.8 million (31 December 2016 - $2.1
million).
The main factor which is expected to impact the sustainability
of the Group's existing effective tax rate is the increase in the
rate of first category (i.e. corporate) tax in Chile from the 2017
rate of 25.5% to 27% from 2018 onwards.
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
9. Disposal group / Discontinued operation
The individual assets and liabilities of Centinela Transmission
have been reclassified into a disposal group on the balance sheet.
The individual assets and liabilities contained within this
disposal group are as follows:
Year
ended
31.12.2017
$m
Assets of disposal group classified
as held for sale
Property, plant and equipment 33.1
Cash and cash equivalents 2.2
Deferred tax assets 0.2
Trade and other receivables 2.3
Total 37.8
Liabilities of disposal group
classified as held for sale
Trade and other payables (0.1)
Current tax liabilities (0.3)
Total (0.4)
The net results of Centinela Transmission are shown as a discontinued
operation in the income statement. The net results reflect the
following elements:
Revenue 3.4
Total operating costs (2.8)
Profit after tax of discontinued
operations 0.6
Tax (0.1)
Profit from the year from discontinued
operations 0.5
Cash Flow
Operating cash flows 2.2
Investing cash flows -
Financing cash flows -
Total cash flows 2.2
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 $750.6 million
(year ended 31 December 2016 - $158.0 million) and amounted to 76.1
cents and based on 985,856,695 ordinary shares. There was no
potential dilution of ordinary shares in any period.
11. Dividends
The Board has recommended a final dividend of 40.6 cents per
ordinary share or $400.3 million in total (2016 - 151.0). The
interim dividend of 10.3 cents per ordinary share or $101.5 million
in total was paid in October 2017 (2016 interim dividend of 3.1
cents per ordinary share or $30.6 million in total). This gives
total dividends proposed in relation to 2017 (including the interim
dividend) of 50.9 cents per share or $501.8 million in total (2016
- 18.4 cents per ordinary share or $181.4 million in total).
Dividends per share actually paid in the year and recognised as
a deduction from net equity under IFRS were 25.6 cents per ordinary
share or $252.3 million in total (2016 - 3.1 cents per ordinary
share or $30.6 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 +44 370
702 0159.
12. Intangible asset
At 31.12.2017 At 31.12.2016
$m $m
Balance at the beginning
of the year 150.1 150.1
Additions - -
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. These items will be transferred to
the mining properties category within property, plant &
equipment when construction of the Twin Metals project
commences.
13. Property, plant and equipment
Railway
and other
Mining transport At 31.12.2017 At 31.12.2016
$m $m $m $m
Balance at the beginning of
the year 8,576.1 161.4 8,737.5 8,601.1
Additions 910.8 32.1 942.9 921.7
Additions - depreciation capitalized 58.6 - 58.6 87.6
Reclassifications 20.3 - 20.3 3.7
Adjustment to capitalised
decommissioning provisions (3.7) - (3.7) 16.9
Depreciation (565.4) (16.5) (581.9) (578.4)
Depreciation capitalised in
PP&E (58.6) - (58.6) (87.6)
Depreciation capitalised in
inventories (1.4) - (1.4) 8.4
Provision against the carrying
value of assets - - - (215.6)
Asset disposals/write off (15.8) (0.4) (16.2) (20.3)
Transferred to disposal group
classified as held for sale (33.2) - (33.2) -
Balance at the end of the
year 8,824.0 176.6 9.064.3 8,737.5
At 31 December 2017 $60.0 million (31 December 2016 - $79.2
million) of depreciation in respect of assets relating to Los
Pelambres, Centinela and Antucoya has been capitalised within
property, plant and equipment or inventories, and accordingly is
excluded from the depreciation charge recorded in the income
statement as shown in Note 3(a).
At 31 December 2017 the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $174.5 million (31 December 2016 - $196.1
million).
There have been no indicators of potential impairments during
the 2017, and accordingly no impairment reviews have been performed
as at 31 December 2017.
Depreciation capitalised in property, plant and equipment of
$58.6 million related to the depreciation of assets used in
operating stripping activities.
14. Investment in associates and joint ventures
Inversiones El Minera Energía Total Tethyan At At
Hornitos ATI Arrayan Zaldívar Andina Assets Copper 31.12.2017 31.12.2016
$m $m $m $m $m $m $m $m $m
Balance at the
beginning
of the year 71.3 6.5 22.0 983.6 3.2 1,086.6 - 1,086.6 1,149.1
Obligations on
behalf
of JV - - - - - - (3.1) (3.1) (2.5)
Capital
contribution - - - 0.1 0.1 9.3 9.4 47.0
Capital decrease
and
others - - - - - - - (0.6)
Adjustment to
Purchase
price - - - - - - - (45.0)
Disposal - - - (3.1) (3.1) - (3.1) -
Gainsin fair
value
of cash flow
hedges
deferred in
reserves
of associates - - - - - - - 4.4
Provision against
carrying
value of assets - - - - - - - (82.1)
Share of
profit/(loss)
before tax 14.3 (1.5) 0.1 77.5 - 90.4 (8.2) 82.2 36.4
Share of tax (3.7) 0.3 (0.1) (19.0) - (22.5) - (22.5) (13.0)
Share of
income/(loss)
from associate 10.6 (1.2) - 58.5 - 67.9 (8.2) 59.7 23.4
Dividends
received (21.8) - - (60,0) - (81.8) - (81.8) (10.2)
Balance at the
end
of the year 60.1 5.3 22.0 982.1 0.2 1,069.7 - 1,069.7 1,086.6
Obligations on
behalf
of JV - - - - - - (2.0) (2.0) (3.1)
The investments which are included in the $1,067.7 million
balance at 31 December 2017 are set out below:
Investment in associates
(i) The Group's 40% interest in Inversiones Hornitos SA, which
owns the 165MW Hornitos thermoelectric power plant operating in
Mejillones, in Chile's Antofagasta Region. The Group has a 16-year
power purchase agreements with Inversiones Hornitos SA for the
provision of up to 40MW of electricity for Centinela.
(ii) The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.
(iii) The Group's 30% interest in El Arrayan, which operates an
115MW wind-farm project. The Group has a 20-year power purchase
agreements with El Arrayan for the provision of up to 40MW of
electricity for Los Pelambres.
Investment in joint ventures
(iv) The Group's 50% interest in Minera Zaldívar SpA
("Zaldívar"), an open-pit, heap-leach copper mine located in
Northern Chile, which produces approximately 100,000 tonnes of
copper cathodes annually.
(v) The Group's 50.1% interest in Energia Andina, which is a
joint venture with Origin Geothermal Chile Limitada for the
evaluation and development of potential sources of geothermal and
solar energy.
In February 2017 the disposal of Energia Andina's interest in
the Javiera solar power plant was agreed. The terms of the sale
agreement indicated a recoverable value for the interest in Javiera
which was $8.1 million below the carrying value, and accordingly an
impairment provision for this amount was recognised in the 2016
year-end results. The disposal completed in May 2017 with no
further gain or loss arising.
(vi) The Group's 50% interest in Tethyan Copper Company Limited
("Tethyan"), which is a joint venture with Barrick Gold Corporation
over Tethyan's mineral interest in Pakistan, which is now subject
to international arbitration. As the net carrying value of the
interest in Tethyan is negative it is included within non-current
liabilities, as the Group is liable for its share for the joint
ventures obligations.
Summarised financial information for the associates at December
2017 is as follows:
Inversiones
Hornitos ATI El Arrayan Total
31.12.2017 31.12.2017 31.12.2017 31.12.2017
$m $m $m $m
Cash and cash equivalents 12.6 0.8 6.0 19.4
Current assets 37.1 11.7 9.0 57.8
Non-current assets 283.5 127.6 244.0 655.1
Current liabilities (37.2) (31.5) (12.0) (80.7)
Non-current liabilities (161.3) (92.6) (182.0) (435.9)
Revenue 164.7 41.8 33.0 239.5
Profit/(loss) from
continuing operations 26.5 (3.9) 0.1 24.1
Other comprehensive
income - - - -
Total comprehensive
income/(loss) 26.5 (3.9) 0.1 24.1
Summarised financial information for the associates at December
2016 is as follows:
Inversiones Alto
Hornitos ATI El Arrayan Maipo Total
31.12.2016 31.12.2016 31.12.2016 31.12.2016 31.12.2016
$m $m $m $m $m
Cash and cash equivalents 16.0 0.4 3.1 38.9 58.4
Current assets 37.7 13.5 14.0 56.4 121.6
Non-current assets 294.0 138.5 248.7 1,149.1 1,830.3
Current liabilities (25.7) (28.7) (13.3) (115.5) (183.2)
Non-current liabilities (163.0) (104.3) (191.3) (1,070.2) (1,528.8)
Revenue 136.2 46.1 29.1 - 211.4
Profit/(loss) from
continuing operations 16.0 (5.4) (2.0) (0.7) 7.9
Other comprehensive
income - - - 10.3 10.3
Total comprehensive
income/(loss) 16.0 (5.4) (2.0) 9.6 18.2
Summarised financial information for the joint ventures at
December 2017 is as follows:
Minera Energía Tethyan Total
Zaldivar Andina Copper
31.12.2017 31.12.2017 31.12.2017 31.12.2017
$m $m $m $m
Cash and cash equivalent 75.6 0.7 3.2 75.9
Current assets 574.3 0.1 - 572.7
Non-current assets 1,569.7 26.9 0.2 1,570.9
Current liabilities (109.5) (0.6) (7.1) (116.2)
Non-current liabilities (114.6) (26.9) (0.1) (140.7)
Revenue 654.7 - - 649.0
Profit/(loss) after
tax 116.9 (0.5) (16.3) 98.6
Other comprehensive
income - - - -
Total comprehensive
income 116.9 (0.5) (16.3) 98.6
Summarised financial information for the joint ventures at
December 2016 is as follows:
Minera Energía Tethyan Total
Zaldivar Andina Copper
31.12.2016 31.12.2016 31.12.2016 31.12.2016
$m $m $m $m
Cash and cash equivalent 101.7 0.3 1.6 103.6
Current assets 493.7 - 0.1 493.8
Non-current assets 1,592.0 11.4 0.2 1,603.6
Current liabilities (107.6) - (7.8) (115.4)
Non-current liabilities (112.8) - (0.2) (113.0)
Revenue 517.7 - - 517.7
Profit/(loss) after
tax 59.0 (10.8) (21.1) 27.1
Other comprehensive
income - - - -
Total comprehensive
income 59.0 (10.8) (21.1) 27.1
Notes to the summarised financial information
(i) The summarised financial information is based on the amounts
included in the IFRS Financial Statements of the associate or joint
venture (ie. 100% of the results or balances of the associate or
joint venture, rather than the Group's proportionate share), after
the Group's fair value adjustments.
15. Available-for-sale investments
At 31.12.2017 At 31.12.2016
$m $m
Balance at the beginning of the
year 4.6 2.7
Movements in fair value 1.4 1.7
Foreign currency exchange difference 0.5 0.2
Balance at the end of the year 6.5 4.6
Available-for-sale investments represent those investments which
are not subsidiaries, associates or joint ventures and are not held
for trading purposes. The fair value of all equity investments are
based on quoted market prices.
16. Inventories
At At
31.12.2017 31.12.2016
$m $m
Current:
Raw materials and consumables 198.3 189.4
Work in progress 218.7 141.9
Finished goods 66.6 62.1
483.6 393.4
Non-current:
Work in progress 111.1 157.3
111.1 157.3
17. Borrowings and leases
At At 31.12.2016
31.12.2017
$m $m
Los Pelambres
Corporate loans - (17.5)
Short-term loan (i) (242.0) (312.0)
Finance leases (ii) (44.9) (62.2)
Centinela
Project financing (senior debt) (iii) (596.2) (743.8)
Shareholder loan (subordinated
debt) (iv) (194.2) (183.6)
Short-term loan (v) (200.0) (200.0)
Antucoya
Project financing (senior debt) (vi) (423.9) (608.7)
Shareholder loan (subordinated
debt) (vii) (347.5) (330.4)
Short-term loan (viii) (30.0) (30.0)
Finance leases (ix) (42.6) (16.2)
Corporate and other items
Long-term loan (x) (497.4) (497.2)
Finance leases (xi) (26.6) (25.1)
Railway and other transport
services
Long-term loans (xii) (59.6) (89.4)
Finance leases (xiii) (0.8) (1.6)
Preference shares (xiv) (3.0) (2.5)
Total (2.708.7) (3,120.2)
(i) 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 a margin of
between 0.16% - 0.17%.
(ii) Finance leases at Los Pelambres are US dollar denominated,
with an interest of LIBOR six-month rate plus 1.7% with a remaining
duration of 5 years.
(iii) Senior debt at Centinela represents US dollar denominated
syndicated loans. These loans are for a remaining term of 2.7 years
and have an interest rate of LIBOR six-month rate plus 1.0%. 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 some
of the floating rate interest for fixed rate interest. At 31
December 2017 the current notional amount hedged was $35.0
million.
(iv) The long-term subordinated debt is US dollar denominated,
provided to Centinela by Marubeni Corporation with a duration of 5
years and a weighted average interest rate of LIBOR six-month rate
plus 4.25%. Long term subordinated debt provided by Group companies
to Centinela has been eliminated on consolidation.
(v) The short-term loan (PAE) is US dollar denominated,
comprising a range of working capital loans for an average period
of 1 year and with an interest rate of LIBOR six-month rate plus
0.19%.
(vi) Senior debt at Antucoya represents US dollar denominated
syndicated loans. These loans are for a remaining term of 7.5 years
and have an interest rate of LIBOR six-month rate plus 2.49%.
(vii) The long-term subordinated debt is US dollar denominated,
provided to Antucoya by Marubeni Corporate with a duration of 8
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.
(viii) 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 0.19%.
(ix) 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 1.41%.
(x) The long term loan at Corporate (Antofagasta plc) of $500.0
million has an interest rate of LIBOR six-month rate plus 1.5%, and
has a duration of 5 years.
(xi) 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 years and are at fixed rates with
an average interest rate of 5.29%.
(xii) Long-term loans at Railway and other transport services
are US dollar denominated, with a duration of 2 years and 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 2017 the current notional
amount hedged was $60.0 million.
(xiii) 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 5.9%.
(xiv) The preference shares are sterling-denominated and issued
by Antofagasta plc. There were 2 million shares of GBP1 each
authorised, issued and fully paid at 31 December 2017. 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 31.12.2017 At 31.12.2016
$m $m
Short-term borrowings (753.6) (836.8)
Medium and long-term borrowings (1,955.1) (2,283.4)
Total (2,708.7) (3,120.2)
At 31 December 2017 $27.4 million (31 December 2016 - $29.1
million) of the borrowings has fixed rate interest and $2,678.4
million (December 2016 - $3,091.1 million) has floating rate
interest. The Group periodically enters into interest rate
derivative contracts to manage its exposure to interest rates. As
explained in Note 5, these include interest rate swaps which have
the effect of converting $95.0 million of floating rate borrowings
into fixed rate borrowings. Details of any derivative instruments
held by the Group are given in Note 5(c).
18. Post-employment benefit obligation
At At
31.12.2017 31.12.2016
$m $m
Balance at the beginning of the
year (92.2) (86.9)
Current service cost (31.9) (15.5)
Actuarial gains 5.7 7.8
Interest cost (4.5) (4.4)
Charge capitalised - (0.5)
Reclassification - 1.3
Paid in the year 17.0 12.2
Foreign currency exchange difference (8.1) (6.2)
Balance at the end of the year (114.0) (92.2)
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.
19. Decommissioning & restoration and other long term
provisions
At At
31.12.2017 31.12.2016
$m $m
Balance at the beginning of the
year (392.1) (394.0)
Charge to operating profit in
the year (39.8) (9.3)
Unwind of discount to net interest
in the year (7.2) (5.5)
Capitalised adjustment to provision 3.5 (16.9)
Reclassification 0.1 (1.1)
Utilised in the year 2.6 3.7
Disposal - 35.8
Foreign currency exchange difference (0.1) (4.8)
Balance at the end of the year (433.0) (392.1)
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 2026 until
2063 based on current mine plans.
20. Deferred tax assets and liabilities
At At
31.12.2017 31.12.2016
$m $m
Net position at the beginning
of the year (798.1) (951.6)
Charge to tax on profit in year (123.8) (48.7)
Deferred tax recognised directly in equity (1.3) (2.1)
Deferred tax credit relating to exceptional
impairment provisions - 204.9
Reclassification (1.8) 3.0
Disposal - (3.7)
Foreign currency exchange difference - 0.1
Net position at the end of the
year (925.0) (798.1)
Analysed between:
Deferred tax assets 69.1 82.8
Deferred tax liabilities (994.1) (880.9)
Net position (925.0) (798.1)
The deferred tax balance of $925.0 million (2016 - $798.1
million) includes liabilities of $1,041.1 million (2016 - $878.8
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.
21. Share capital and share premium
There was no change in share capital or share premium in the
year ended 2017 or 2016. Details are shown in the Consolidated
Statement of Changes in Equity.
22. Other reserves and retained earnings
At At
31.12.2017 31.12.2016
$m $m
Hedging reserves (1)
At 1 January (8.8) (44.1)
Parent and subsidiaries net cash
flow hedge fair value losses (16.8) (2.4)
Parent and subsidiaries net cash flow hedge
gains transferred to the income statement 18.0 4.1
Share of other comprehensive losses of equity
accounted units, net of tax - 3.1
Share of other comprehensive gains of equity
accounted units, net of tax transferred to
the income statement - 31.6
Reclassification(5) 8.0 -
Tax on the above (0.8) (1.1)
At 31 December (0.4) (8.8)
Available-for-sale revaluation
reserves (2)
At 1 January (11.2) (12.9)
Gains on available-for-sale investment 1.4 1.7
At 31 December (9.8) (11.2)
Foreign currency translation reserves
(3)
At 1 January (2.3) (2.3)
Parent and subsidiaries currency translation - -
and exchange adjustments
Tax on the above - -
At 31 December (2.3) (2.3)
Total other reserves per balance
sheet (12.5) (22.3)
Retained earnings
At 1 January 6,548.6 6,416.4
Parent and subsidiaries' profit
for the period 690.9 269.3
Equity accounted units' profit/(loss)
after tax for the period 59.7 (111.3)
Actuarial gains (4) 5.8 5.1
Reclassification (5) (9.6) -
Tax relating to components of
other comprehensive income (1.1) (0.3)
Total comprehensive income for
the period 7,294.3 6,579.2
Dividends paid (252.4) (30.6)
At 31 December 7,041.9 6,548.6
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognised initially in equity, as described in
Note 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) Actuarial gains or losses relate to long-term employee
benefits.
(5) During the period $8.8 million was reclassified mainly
comprises an $8.8 million reclassification between the hedging
reserve and retained earnings.
23. Reconciliation of profit before tax to net cash inflow from
operating activities
Year ended Year ended
31.12.2017 31.12.2016
$m $m
Profit before tax from continuing
operations 1,830.8 284.6
Profit before tax from discontinued
operations 0.6 35.1
Depreciation and amortization 581.1 578.4
Net loss on disposals 8.3 19.7
Provision against carrying value
of assets - 456.6
Profit on disposal of discontinued
operation (0.6) (35.1)
Net finance expense 70.0 71.1
Share of loss/(profit) from associates
and joint ventures (59.7) 111.3
(Increase)/decrease in inventories (55.0) 3.9
Decrease/(increase) in debtors 5.9 (124.9)
Increase in creditors 61.6 47.7
Increase in provisions 52.0 8.9
Cash flows from continuing and
discontinued operations 2,495.0 1,457.3
24. Analysis of changes in net debt
Movement
Re-classification Fair Amortisation between
At Cash to disposal value New of finance Capitalisation maturity At
01.01.2017 flows group gains leases costs of interest categories Other Exchange 31.12.2017
$m $m $m $m $m $m $m $m $m $m $m
Cash and
cash
equivalents 716.3 361.0 (2.2) - - - - - 8.5 1,083.6
Liquid
investments 1,332.2 (166.1) - 2.6 - - - - - 1,168.7
Total 2,048.5 194.9 (2.2) 2.6 - - - - 8.5 2,252.3
borrowings
due within
one year (814.2) 267.5 - - - - - (185.5) - - (732.2)
borrowings
due after
one year (2,198.4) 186.0 - - - (3.9) (27.8) 185.5 - - (1,858.6)
Finance
leases due
within one
year (22.5) 1.3 - - - - - - (0.2) (0.1) (21.5)
Finance
leases due
after one
year (82.6) 32.2 - - (34.1) - - - (6.6) (2.3) (93.4)
Preference
shares (2.5) 0.1 - - - - - - - (0.6) (3.0)
Total
borrowings (3,120.2) 487.1 - - (34.1) (3.9) (27.8) - (6.8) (3.0) (2,708.7)
Net
(debt)/cash (1,071.7) 682.0 (2.2) 2.6 (34.1) (3.9) (27.8) - (6.8) 5.5 (456.4)
Movement
Re-classification Fair Amortisation between
At Cash to disposal value New of finance Capitalisation maturity At
01.01.2016 flows group gains leases costs of interest categories Other Exchange 31.12.2016
$m $m $m $m $m $m $m $m $m $m $m
Cash and
cash
equivalents 807.5 (113.1) 10.0 - - - - - 11.9 716.3
Liquid
investments 924.1 406.9 - 1.2 - - - - - 1,332.2
Total 1,731.6 293.8 10.0 1.2 - - - - 11.9 2,048.5
borrowings
due within
one year (753.4) - - - - - - - (60.8) - (814.2)
borrowings
due after
one year (1,963.3) (245.7) - - - (19.4) (30.8) - 60.8 - (2,198.4)
Finance
leases due
within one
year (5.5) - - - - - - - (17.1) 0.1 (22.5)
Finance
leases due
after one
year (29.9) 31.2 - - (94.5) - - (4.4) 17.1 (2.1) (82.6)
Preference
shares (3.0) - - - - - - - - 0.5 (2.5)
Total
borrowings (2,755.1) (214.5) - - (94.5) (19.4) (30.8) (4.4) - (1.5) (3,120.2)
Net
(debt)/cash (1,023.5) 79.3 10 1.2 (94.5) (19.4) (30.8) (4.4) - 10.3 (1,071.7)
Net debt
Net debt at the end of each period was as follows:
At At
31.12.2017 31.12.2016
$m $m
Cash, cash equivalents
and liquid investments 2,252.3 2,048.5
Total borrowings (2,708.7) (3,120.2)
Net debt (456.4) (1,071.7)
25. 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 2017 the Group
contribution was $9.3 million (2016 - $10.0 million) to
Tethyan.
The Group has a 50.1% interest in Energía Andina, which is a
joint venture with Origin Energy Geothermal Chile Limitada for the
evaluation and development of potential sources of geothermal and
solar energy. During 2017 the Group contributed $0.1 million (2016
- $1.0 million)
The Group has a 50% interest in Minera Zaldívar, which is a
joint venture with Barrick Gold Corporation. During 2017 the Group
has received dividends from Minera Zaldívar of $60 million (2016 -
nil).
b) Associates
The Group has a 40% interest in Inversiones Hornitos S.A. During
2017 the Group paid $175.2 million (2016 - $112.6 million) to
Inversiones Hornitos in relation to the energy supply contract at
Centinela. During 2017 the Group has received dividends from
Inversiones Hornitos S.A. of $21.8 million (2016 - $10.1
million).
The Group has a 30% interest in Parque Eólico El Arrayán S.A.
("El Arrayán"). During 2017 the Group paid $39.7 million (2016 -
$38.1 million) to El Arrayan in relation to the energy supply at
Los Pelambres.
c) Other related parties
The ultimate parent company of the Group is Metalinvest
Establishment, which is controlled by the E. Abaroa Foundation, in
which members of the Luksic family are interested. The Company's
subsidiaries, in the ordinary course of business, enter into
various sale and purchase transactions with companies also
controlled by members of the Luksic family, including Banco de
Chile S.A., Madeco S.A. and Compañía Cervecerías Unidas S.A., which
are subsidiaries of Quiñenco S.A., a Chilean industrial and
financial conglomerate the shares of which are traded on the
Santiago Stock Exchange. These transactions, all of which were on
normal commercial terms, are in total not considered to be
material.
The Group holds a 51% interest in Antomin 2 Limited ("Antomin
2") and Antomin Investors Limited ("Antomin Investors"), which own
a number of copper exploration properties. The Group originally
acquired its 51% interest in these properties for a nominal
consideration from Mineralinvest Establishment, a company
controlled by the Luksic family, which continues to hold the
remaining 49% of Antomin 2 and Antomin Investors. The Group is
responsible for any exploration costs relating to the properties
held by these entities. During 2017 the Group incurred $0.6 million
(2016 - $1.0 million) of exploration costs at these properties.
Quiñenco SA ("Quiñenco") is a Chilean financial and industrial
conglomerate, the shares of which are traded on the Santiago Stock
Exchange. The Group and Quiñenco are both under the control of the
Luksic family, and three Directors of the Company, Jean-Paul
Luksic, Andronico Luksic and Gonzalo Menéndez, are also directors
of Quiñenco.
The following material transactions took place between the Group
and the Quiñenco group of companies, all of which were on normal
commercial terms:
- the Group earned interest income of $0.6 million (2016 - $0.1
million) during the year on deposits with Banco de Chile SA, a
subsidiary of Quiñenco. Deposit balances at the end of the year
were $18.0 million (2016 - $34.5 million);
- the Group earned interest income of $0.4 million (2016 - $0.3
million) during the year on investments with BanChile Corredores de
Bolsa SA, a subsidiary of Quiñenco. Investment balances at the end
of the year were $16.5 million (2016 - nil);
- the Group made purchases of fuel from ENEX SA, a subsidiary of
Quiñenco, of $185.3 million (2016 - $161.6 million). The balance
due to ENEX SA at the end of the year was nil (2016 - nil).
The transactions which Group companies entered into with related
parties who are not members of the Group are set out below. There
are no guarantees given or received and no provisions for doubtful
debts related to the amount of outstanding balances.
26. Currency translation
Assets and liabilities denominated in foreign currencies are
translated into dollars and sterling at the year-end rates of
exchange. Results denominated in foreign currencies have been
translated into dollars at the average rate for each year.
2017
Year-end rate US$1.3535=GBP1; US$1
= Ch$614.75
Average rates US$1.2878=GBP1; US$1
= Ch$649.19
27. Distribution
The Annual Report and Financial Statements for the year ended 31
December 2017, together with the Notice of the 2018 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 23 May 2018.
28. Alternative performance measures (not subject to audit or
review)
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) Underlying earnings per share
Underlying earnings per share is earnings per share from
continuing operations, excluding exceptional items. This measure is
reconciled to earnings per share from continuing and discontinued
operations (including exceptional items) on the face of the income
statement. This measure is considered to be useful as it provides
an indication of the earnings generated by the on-going businesses
of the Group, excluding the impact of exceptional items which are
non-regular or non-operating in nature.
b) 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 2017
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and
evaluation other other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 1,217.3 579.1 131.2 - (68.8) (76.6) 1,782.2 58.9 1,841.1
Depreciation
and
amortisation 205.2 276.6 76.1 - - 6.7 564.6 16.5 581.1
Profit on
disposals 5.6 3.7 - - (0.9) 8.4 (0.1) 8.3
EBITDA from
subsidiaries 1,428.1 859.4 207.3 - (68.8) (70.8) 2,355.2 75.3 2,430.5
Proportional
share of the
EBITDA from
associates
and JV - - - 134.2 - (0.9) 133.3 22.8 156.1
---------- ----------- ---------- ---------- --------
Total EBITDA 1,428.1 859.4 207.3 134.2 (68.8) (71.7) 2,488.5 98.1 2,586.6
========== =========== ========== ========== ========
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 $m
Operating
profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Depreciation
and
amortisation 195.7 299.4 62.7 - - 5.2 563.0 15.4 578.4
Loss on
disposals 0.2 17.1 - - - 0.6 17.9 1.8 19.7
Provision
against
the carrying
value of
assets 241.0 - 215.6 - - - 456.6 - 456.6
EBITDA from
subsidiaries 921.8 562.5 64.9 - (44.3) (56.5) 1,448.4 73.3 1,521.7
Proportional
share of the
EBITDA from
associates
and JV (0.8) - - 85.1 - 5.7 90.0 14.4 104.4
Total EBITDA 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
========== ========== ======== ============== =========== ========== ========== ========
c) Cash costs
Cash costs are a measure of the cost of operational production
expressed in terms of cents per pound of payable copper
produced.
This is considered to be a useful and relevant measure as it is
a standard industry measure applied by most major copper mining
companies which reflects the direct costs involved in producing
each lb of copper. It therefore allows a straightforward comparison
of the unit production cost of different mines, and allows an
assessment of the position of a mine on the industry cost curve. It
also provides a simple indication of the profitability of a mine
when compared against the price of copper (per lb).
At 31.12.2017 At 31.12.2016
Reconciliation of cash costs excluding
tolling charges and by-product revenues:
Total Group operating costs (Note 4)
($m) 2,908.3 3,154.7
Less:
Total - Depreciation and amortisation
(Note 4) ($m) (581.9) (578.4)
Total - Loss on disposal (Note 4) ($m) (8.3) (19.7)
Total - Provision against the carrying
value of asset (Note 4) ($m) - (456.6)
Elimination of non-mining operations
Corporate and other items - Total operating
cost (Note 4) ($m) (70.8) (56.5)
Exploration and evaluation - Total operating
cost (Note 4) ($m) (68.8) (44.3)
Railway and other transport services
- Total operating cost (Note 4) ($m) (95.8) (86.9)
Closure provision and other expenses
not included within cash costs ($m) (39.8) (53.4)
Total cost relevant to the mining operations'
cash costs ($m) 2,042.9 1,858.9
Copper sales volumes - excluding Antucoya
Q1 2016 and Zaldívar (tonnes)(1) 657,700 634,000
Cash costs excluding tolling charges
and by-product revenues ($/tonne) 3,106 2,932
Cash costs excluding tolling charges
and by-product revenues ($/lb) 1.41 1.33
Reconciliation of cash costs before deducting
by-products:
Tolling charges - copper - Los Pelambres
(Note 5) ($m) 179.5 192.2
Tolling charges - copper - Centinela
(Note 5) ($m) 98.2 108.9
Tolling charges - copper - total ($m) 277.7 301.1
Copper sales volumes - excluding Antucoya
Q1 2016 and Zaldívar (tonnes)(1) 657,700 634,000
Tolling charges ($/tonne) 422 475
Tolling charges ($/lb) 0.19 0.22
Cash costs excluding tolling charges
and by-product revenues ($/lb) 1.41 1.33
Tolling charges ($/b) 0.19 0.21
Cash costs before deducting by-products
(S/lb) 1.60 1.54
(1) 2016 and 2017 includes Zaldivar, 2016 exlcluded Antucoya
Q1.
At 31.12.2017 At 31.12.2016
$m $m
Reconciliation of cash costs (net of
by-products):
Gold revenue - Los Pelambres (Note 4)
($m) 68.7 78.5
Gold revenue - Centinela (Note 4) ($m) 209.7 261.2
Molybdenum revenue - Los Pelambres (Note
4) ($m) 168.5 94.0
Silver revenue - Los Pelambres (Note
4) ($m) 37.7 46.1
Silver revenue - Centinela (Note 4) ($m) 20.5 20.0
Total by-product revenue ($m) 505.1 499.8
Copper sales volumes - excluding Antucoya
Q1 2017 and Zaldívar (tonnes)(1) 657,700 634,000
By-product revenue ($/tonne) 768 788
By-product revenue ($/lb) 0.35 0.35
Cash costs before deducting by-products
(S/lb) 1.60 1.54
By-product revenue ($/lb) (0.35) (0.34)
Cash costs (net of by-products) ($/lb) 1.25 1.20
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.
At December At December
2017 2016
Total Attributable Attributable Total Attributable Attributable
amount share amount amount share amount
$m $m $m $m
Cash, cash equivalents
and liquid investments:
Los Pelambres 241.8 60% 145.1 143.0 60% 85.8
Centinela 353.0 70% 247.1 384.0 70% 268.8
Antucoya 158.9 70% 111.2 152.9 70% 107.0
Corporate 1,441.2 100% 1,441.2 1,328.1 100% 1,328.1
Railway and other transport
services 57.4 100% 57.4 40.5 100% 40.5
Total 2,252.3 2,002.0 2,048.5 1,830.2
Borrowings:
Los Pelambres (Note 17) (286.9) 60% (172.1) (391.7) 60% (235.0)
Centinela (Note 17) (990.4) 70% (693.3) (1,127.4) 70% (789.2)
Antucoya (Note 17) (840.0) 70% (590.8) (985.3) 70% (689.7)
Corporate (Note 17) (527.0) 100% (527.0) (524.8) 100% (524.8)
Railway and other transport
services (Note 17) (60.4) 100% (60.4) (91.0) 100% (91.0)
Total (Note 17) (2,708.7) (2,043.6) (3,120.2) (2,329.7)
Net debt (456.4) (41.6) (1,071.7) (499.5)
29. Production and Sales Statistics (not subject to audit or
review)
a) Production and sales volumes for copper, gold and molybdenum
Production Sales
Year ended Year ended Year ended Year ended
31.12.2017 31.12.2016 31.12.2017 31.12.2016
000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 343.8 355.4 344.8 351.6
Centinela 228.3 236.2 232.2 227.6
Antucoya 80.5 66.2 80.8 66.6
Michilla - - - 0.9
Zaldívar 51.7 51.7 51.3 51.7
Group total 704.3 709.4 709.0 698.5
Gold 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 55.4 57.8 54.3 62.8
Centinela 157.0 213.0 163.9 208.6
Group total 212.4 270.8 218.2 271.4
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 10.5 7.1 9.6 7.2
Silver 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 2,379.7 2,585.8 2.306.4 2,701.9
Centinela 1,202.9 1,313.0 1,231.9 1,159.0
Group total 3,582.6 3,898.8 3,538.3 3,860.9
b) Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold
Cash costs Realised prices
Year ended Year ended Year ended Year ended
31.12.2017 31.12.2016 31.12.2017 31.12.2016
$/lb $/lb $/lb $/lb
Copper
Los Pelambres 1.02 1.06 3.06 2.35
Centinela 1.36 1.19 2.96 2.32
Antucoya 1.68 1.83 2.86 2.30
Zaldivar (attributable
basis - 50%) 1.62 1.55 - -
Group weighted average
(net of by-products) 1.25 1.20 3.00 2.33
Group weighted average
(before deducting by-products) 1.60 1.54
Group weighted average
(before deducting by-products
and excluding tolling
charges from concentrate) 1.41 1.33
Cash costs at Los Pelambres
comprise:
On-site and shipping
costs 1.17 1.09
Tolling charges for concentrates 0.26 0.27
Cash costs before deducting
by-product credits 1.43 1.36
By-product credits (principally
molybdenum) (0.41) (0.30)
Cash costs (net of by-product
credits) 1.02 1.06
Cash costs at Centinela
comprise:
On-site and shipping
costs 1.62 1.53
Tolling charges for concentrates 0.19 0.22
Cash costs before deducting
by-product credits 1.81 1.75
By-product credits (principally
gold) (0.44) (0.56)
Cash costs (net of by-product
credits) 1.36 1.19
LME average copper price 2.80 2.21
Gold $/oz $/oz
Los Pelambres 1,270 1,253
Centinela 1,284 1,257
Group weighted average 1,280 1,256
Market average price 1,258 1,248
Molybdenum $/lb $/lb
Los Pelambres 8.7 6.8
Market average price 8.2 6.5
Silver $/oz $/oz
Los Pelambres 16.7 17.4
Centinela 17.0 17.7
Group weighted average 16.8 17.5
Market average price 17.1 17.1
Notes to the production and sales statistics
(i) For the Group's subsidiaries the production and sales
figures reflect the total amounts produced and sold by the mine,
not the Group's share of each mine. The Group owns 60% of Los
Pelambres, 70% of Centinela and 70% of Antucoya. For the Zaldívar
joint venture the production and sales figures reflect the Group's
proportional 50% share.
(ii) Los Pelambres produces copper and molybdenum concentrates,
Centinela produces copper concentrate and copper cathodes and
Antucoya and Zaldívar produce copper cathodes. The figures for Los
Pelambres and Centinela are expressed in terms of payable metal
contained in concentrate and in cathodes. Los Pelambres and
Centinela are also credited for the gold and silver contained in
the copper concentrate sold. Antucoya and Zaldívar produce cathodes
with no by-products.
(iii) Cash costs are a measure of the cost of operational
production expressed in terms of cents per pound of payable copper
produced. Cash costs are stated net of by-product credits and
include tolling charges for concentrates at Los Pelambres and
Centinela. Cash costs exclude depreciation, financial income and
expenses, hedging gains and losses, exchange gains and losses and
corporate tax for all four operations.
(iv) Realised copper prices are determined by comparing revenue
from copper sales (grossing up for tolling charges for
concentrates) with sales volumes for each mine in the period.
Realised molybdenum and gold prices are calculated on a similar
basis. Realised prices reflect gains and losses on commodity
derivatives, which are included within revenue.
(v) The totals in the tables above may include some small
apparent differences as the specific individual figures have not
been rounded.
(vi) The production information and the cash cost information is
derived from the Group's production report for the fourth quarter
of 2017, published on 24 January 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFWEFEFASESD
(END) Dow Jones Newswires
March 13, 2018 03:01 ET (07:01 GMT)
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