TIDMANTO
RNS Number : 3816S
Antofagasta PLC
16 March 2021
NEWS RELEASE, 16 MARCH 2021
PRELIMINARY RESULTS ANNOUNCEMENT FOR
THE YEARED 31 DECEMBER 2020
Strong EBITDA margins and balance sheet
Antofagasta plc CEO Iván Arriagada said: "The year has been
challenging, but we have successfully kept our people safe and
healthy, achieved our production and exceeded our cost targets, and
increased EBITDA by 12.3% to $2.7 billion, yielding a 53% EBITDA
margin. I am proud of how everyone at Antofagasta has worked
together and adjusted to overcome the year's challenges.
"Our resilient operations performed well with high levels of
throughput and our Cost and Competitiveness Programme delivered
benefits of $197 million, nearly double the targeted amount. Our
balance sheet strengthened even further.
"Full year copper production was 733,900 tonnes and net cash
costs were $1.14/lb, reflecting the company's agility in changing
operating conditions.
"In 2021, we will continue to focus on our safety and operating
performance, and we expect copper production to be 730-760,000
tonnes at a net cash cost of $1.25/lb as ore grades increase at
Centinela Concentrates and our operating efficiency remains
high.
"We are delighted that 100% of our mining division's electricity
consumption in 2022 will be from renewable sources.
"The Board has declared a final dividend of 48.5 cents per
share, bringing the total dividend for the year to 54.7 cents per
share, equivalent to a pay-out ratio of 100%. "
HIGHLIGHTS
Financial performance
-- Revenue for the full year was $5,129 million, 3.3% higher
than in 2019 reflecting increases in copper and gold realised
prices, partially offset by the decrease in sales volumes
-- EBITDA(1) was $2,739 million , 12.3% higher than the previous
year on higher revenue and lower unit costs due to the weaker
Chilean peso, lower input costs and continued tight cost
control
-- EBITDA margin(2) increased to 53.4% from 49.1% in 2019
-- Cost and Competitiveness Programme generated benefits of $197
million, nearly double the original target of $100 million
-- Cash flow from operations was $2,431 million, 5.4% lower than
in 2019 as the higher copper price increased working capital
-- Strong balance sheet with net debt of $82 million at the end
of 2020, equivalent to a Net Debt/EBITDA ratio of 0.03 times
-- Capital expenditure increased to $1,307 million(3) , $229
million higher than in 2019 due to increased capital expenditure on
the Los Pelambres Expansion project
-- Underlying earnings per share from continuing operations and
excluding exceptional items(1) of 54.7 cents, 7.5% higher than in
2019 with higher EBITDA offset by higher depreciation and
amortisation, and tax
-- Earnings per share from continuing and discontinued
operations including exceptional items were 50.6 cents , 0.4 cents
lower than in 2019
-- Final dividend of 48.5 cents per share declared, bringing the
total dividend for the year to 54.7 cents per share, equal to 100%
of underlying earnings per share
Operating performance (as previously announced)
-- Safety remains our top priority. T he Group experienced a
record safety performance at all its mining and transport
operations and is now in its third year without any fatalities
-- Copper production for the full year was 733,900 tonnes, 4.7%
lower than 2019 on expected lower grades at Centinela Concentrates,
which will be reversed in 2021
-- Gold production was above guidance at 204,100 ounces , 27.7%
less than in 2019 on expected lower grades at Centinela
-- Molybdenum production in 2020 was 12,600 tonnes , 8.6% higher
than in 2019 and within guidance
-- Cash costs before by-product credits(1) for the full year
were $1.56/lb, 9c/lb lower than last year due to the weaker Chilean
peso, lower input costs and continued tight cost control, partially
offset by lower production
-- Net cash costs(1) for 2020 were $1.14/lb, below guidance and
6.6% lower than in 2019 due to lower cash costs before by-product
credits
2021 Guidance (as previously announced)
-- Guidance assumes that COVID-19 will continue for the whole of 2021
-- Production in 2021 is expected to be 730-760,000 tonnes of
copper, 240-260,000 ounces of gold and 9,500-11,000 tonnes of
molybdenum. The higher copper and gold production compared to 2020
reflects higher grades at Centinela Concentrates
-- Cash costs in 2021 before and after by-product credits are
expected to be $1.65/lb and $1.25/lb respectively
-- Capital expenditure in 2021 is expected to be $1.6 billion(3)
as the rate of expenditure on the Group's growth projects
accelerates following their temporary suspension in 2020 which
deferred some $200 million into 2021, and higher expenditure at the
Los Pelambres Expansion project
Other
-- Separate labour negotiations are currently underway with the
plant and mine unions at Los Pelambres and are expected to be
concluded by the end of March
YEARING 31 DECEMBER 2020 2019 %
------- -------- --------
Revenue $m 5,129.3 4,964.5 3.3
EBITDA(1) $m 2,739.2 2,438.9 12.3
EBITDA margin(1, 2) % 53.4% 49.1% 8.8
Underlying earnings per share(1) (continuing
operations excluding exceptional items) cents 54.7 50.9 7.5
Earnings per share (continuing and discontinued
operations including exceptional items) cents 51.3 50.9 0.8
Dividend per share cents 54.7 17.8 207.3
Cash flow from operations (continuing
and discontinued) $m 2,431.1 2,570.7 (5.4)
Capital expenditure(3) $m 1,307.4 1,078.8 20.1
Net debt at period end(1) $m 82.0 563.4 (85.4)
Average realised copper price $/lb 2.98 2.75 8.4
-------
Copper sales kt 738.5 772.2 (4.4)
Gold sales koz 199.6 288.8 (30.9)
Molybdenum sales kt 12.5 12.1 3.3
Cash costs before by-product credits(1) $/lb 1.56 1.65 (5.5)
Net cash costs(1) $/lb 1.14 1.22 (6.6)
------------------------------------------------- ------- -------- -------- -------
Note: The financial results are prepared in accordance with
IFRS, unless otherwise noted below.
(1) Non IFRS measures. Refer to the alternative performance
measures in Note 31 to the financial statements
(2) Calculated as EBITDA/Revenue. If Associates and JVs revenue
is included the EBITDA margin was 50.4% in 2020 and 45.3% in
2019.
(3) On a cash basis
A recording and copy of the 2020 Full Year Results presentation
is available for download from the Company's website
www.antofagasta.co.uk .
There will be a Q&A video conference call on 16 March 2021
at 12:30pm GMT. Participants can join the conference call here
.
Register on our website to receive our email alerts at
https://www.antofagasta.co.uk/investors/news/email-alerts/
Investors Media - London
- London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Andres Vergara avergara@antofagasta.co.uk
Telephone +44 20 7808 0988 Media - Santiago
Pablo Orozco porozco@aminerals.cl
Carolina cpica@aminerals.cl
Pica
Telephone +56 2 2798 7000
DIRECTORS' COMMENTS FOR THE YEARED 2020
2020 FINANCIAL HIGHLIGHTS
Revenue in 2020 was $5,129.3 million, 3.3% higher than in 2019
reflecting the higher copper and gold realised prices, partially
offset by lower copper and gold sales volumes.
EBITDA increased by 12.3% to $2,739.2 million on higher revenue
and lower unit cash costs compared to 2019. The EBITDA margin also
increased, from 49.1% to 53.4%.
Earnings per share from continuing operations excluding
exceptional items for the year were 54.7 cents, an increase of 3.8
cents or 7.5% compared with 2019 on higher EBITDA partially offset
by higher depreciation and amortisation, and tax.
Cash flow from continuing operations was $2,431.1 million, a
$139.6 million decrease compared to 2019 due to higher working
capital of $216.1 million as receivables increased due to the
higher copper price at the end of the year.
During the year, copper production was 733,900 tonnes, 4.7%
lower compared to 2019, mainly due to lower production at Centinela
Concentrates.
Gold production was 204,100 ounces, 27.7% lower than in 2019, on
expected lower grades at Centinela.
Molybdenum production increased by 8.6% to 12,600 tonnes
compared to 2019, on expected higher grades at Centinela, partially
offset by lower production at Los Pelambres.
The Transport division transported 6.4 million tonnes during
2020, 1.4% lower than in 2019.
The Group's Cost and Competitiveness Programme outperformed the
target of $100 million generating benefits of $197 million during
the year, of which $155 million reflected costs savings and $42
million reflected the value of productivity improvements.
NET DEBT
Net debt at the end of 2020 was $82.0 million, a decrease of
$481.4 million compared to 2019, with Antucoya refinancing $700.0
million of its subordinated debt with equity during the period. The
Net Debt/EBITDA ratio fell from 0.23 times at the end of 2019 to
0.03 times at the end of 2020.
The Company successfully issued its inaugural bond, a $500
million 2.375% note due 2030, which was 12 times oversubscribed.
The financing diversifies the Company's funding sources and
provides access to longer tenors.
DIVIDS
The Board has declared a final dividend for 2020 of 48.5 cents
per share, which together with the interim dividend of 6.2 cents
per share amounts to a total dividend of 54.7 cents per share. This
is equal to a 100% pay-out ratio.
COPPER MARKET IN 2020
2020 was an unusual year for the copper market. At the beginning
of the year the copper price was $2.74/lb and fundamentals were
supportive at this level. However, by March, as it became clear
that the outbreak of COVID-19 in China in late 2019 was escalating
into a pandemic impacting the world economy, the copper price fell
to $2.09/lb. From this low point, China's progress in controlling
the disease and returning to normality stimulated demand for
refined copper, elevating prices by the end of July to $2.90/lb. In
the second half of the year, continued progress in key markets to
control the spread of the pandemic and support economic recovery,
together with encouraging progress on vaccine development, further
strengthened demand so that the copper price ended the year at just
over $3.50/lb.
The pandemic not only impacted demand during the year, it also
affected copper supply with some mining operations temporarily
suspended or operating at lower levels of activity. This meant that
for the full year there was a relatively small surplus. In
addition, visible copper stocks reduced for a second year, this
time by approximately 40,000 tonnes to historically low levels,
while stocks in Chinese bonded warehouses were estimated to have
increased by 120,000 tonnes, reflecting the increased demand for
refined copper in China.
Over the year the LME copper price averaged $2.80/lb, 3% higher
than in 2019. The Group's realised copper price in 2020 was
$2.98/lb, 8.4% higher than in 2019, the realised gold price was
$1,797/oz, 26.9% higher compared with $1,416/oz in 2019, while the
realised molybdenum price was $8.8/lb, a decrease of 18.5% compared
to $10.8/lb in 2019.
COVID-19
The Company is focused on the health and safety of its
employees, contractors and the communities in which it operates.
Although the rate of infections of COVID-19 in Chile fell and the
vaccine rollout is progressing well, the Company remains vigilant
and continues to apply all the health protocols that were put in
place.
The first wave of COVID-19 infections in Chile peaked in June
before declining to much lower levels that continued to the end of
the year when a smaller, second wave began. This seems to have
peaked and is declining at the same time as a vaccination programme
is being rolled out across the country with more than 25% of the
population now vaccinated. Government-imposed restrictions are
being eased but at the Company's operations the COVID-19 protocols
are being maintained and will continue for the foreseeable
future.
The Company continues to operate with approximately two-thirds
of its workforce at its operations, with the balance working from
home or in preventative quarantine.
The workforce at the Los Pelambres Expansion project is now at
approximately 75% of the originally planned numbers and will stay
at this level until the COVID-19 restrictions can be relaxed.
SAFETY AND HEALTH
Antofagasta prioritises the safety and wellbeing of its
people.
The Group has had its best safety performance ever with no
fatalities for a second year and an improved safety performance at
all its mining and transport operations. The Lost Time Injury
Frequency Rate (LTIFR) fell by 15% to 0.86, exceeding the target
for the year and a new record.
Continuous improvement in safety risk management remains central
to the Group's activities.
ENVIRONMENT
Over the past few years, our mining operations have renegotiated
their power purchase agreements (PPAs), switching from conventional
sources - principally coal - to renewables. In July 2020, Zaldívar
became the first of the Group's mining operations to use 100%
renewable energy and by the end of 2020, 19.4% of the Mining
division's energy came from renewable sources.
Zaldívar will be followed by Antucoya, Centinela and Los
Pelambres, and during 2022, the Group expects that its Mining
division's electricity consumption will be supplied exclusively
from renewable sources.
This will allow us to achieve the target set in 2018 to reduce
our greenhouse gas emissions by 300,000 tonnes by 2022. It will
also reduce the Group's energy costs as renewable power in Chile
costs less than conventional power.
The most significant impact of climate change in central Chile,
where Los Pelambres is located, is on water availability. In the
north of Chile our Centinela and Antucoya mines use raw sea water
and in 2020 sea water accounted for 43% of the Mining division's
water consumption. With the completion of Los Pelambres's expanded
desalination plant in 2025, the mine's use of sea and recycled
water will increase to over 95%.
During the year, there were no significant environmental
incidents and no actions were initiated by the authorities that
could result in sanctions.
In 2020, the Company began to implement a programme to comply
with the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) and we expect to report in compliance
with the TCFD in the 2021 Annual Report.
ZALDIVAR WATER PERMIT
An Environmental Impact Assessment (EIA) has been submitted to
extend the mine's life to 2031. The application process was delayed
during 2020 due to COVID-19 and approval is now expected in early
2022. This EIA includes the extension of the water permit from 2025
to 2031 and remediation.
COMMUNITIES
Antofagasta seeks to build sustainable long-term relations with
the communities near its operations, anchored in proactive and
transparent dialogue. The benefits of this engagement for both the
communities and the Group are measured to assess its impact.
In response to the pandemic, the Company rapidly refocused its
social programmes to support nearby communities in containing the
spread of the virus and mitigating its economic impact. In April, a
$6 million COVID Fund was established to finance a three-phase
response: an Emergency Phase, focusing on preventive health
measures; a Recovery Phase to alleviate economic hardship; and a
Normalisation Phase to support communities once the worst of the
pandemic had passed.
REKO DIQ PROJECT'S ARBITRATION
In July 2019 the World Bank Group's International Centre for
Settlement of Investment Disputes (ICSID) awarded $5.84 billion in
damages (compensation and accumulated interest as at the date of
the award) to Tethyan Copper Company Pty Limited (Tethyan), a joint
venture held equally by the Company and Barrick Gold Corporation,
in relation to an arbitration claim filed against the Islamic
Republic of Pakistan (Pakistan) following the unlawful denial of a
mining lease for the Reko Diq project in Pakistan in 2011.
In 2019, Pakistan requested that ICSID annul the award, and this
triggered a provisional stay of enforcement of the award under the
ICSID Convention. In March 2020, ICSID appointed a committee to
consider Pakistan's request for annulment and whether the
provisional stay of enforcement should continue for the duration of
the annulment proceedings. The committee issued a decision in
October partially terminating the stay of enforcement, permitting
Tethyan to enforce 50% of the award plus accrued interest on the
condition that any amounts collected through enforcement of the
award must be put into escrow and returned if the award is
annulled. Tethyan has resumed proceedings to enforce the award in
accordance with the conditions set by the annulment committee. The
committee is expected to issue a decision on Pakistan's annulment
application within the next one to two years.
The proceeds of the award will only be recognised in
Antofagasta's financial statements once they are received by the
Company.
CAPITAL EXPITURE
Capital expenditure in 2020 was $1,307.4 million, of which
$358.2 million was sustaining capital expenditure, $356.7 million
mine development and $559.4 million growth expenditure. Further
information is included in the Review of Operations below.
FUTURE GROWTH
The Group has a pipeline of growth projects which it is
currently advancing through a disciplined process of project
evaluation.
Development of our growth projects at Los Pelambres, Centinela
and Zaldívar was impacted by COVID-19 during the year. Work at the
Los Pelambres Expansion project was already underway when the
pandemic reached Chile and the decision was made to temporarily
suspend part of the project to reduce health risks. The start of
work on the Esperanza Sur pit and the Zaldívar Chloride Leach
projects was delayed for the same reason.
After the initial impact caused by COVID-19, work on all three
projects started in the third quarter, but with workforces
approximately 75% of the originally planned size. All projects are
proceeding with fully integrated COVID-19 health protocols in
place.
With the impact of the initial delay and the revised execution
schedules that incorporate the COVID-19 health protocols, the
projects are now all expected to be completed in 2022.
2021 GUIDANCE
As announced on 20 January 2021, Group production for 2021 is
expected to be 730-760,000 tonnes of copper, 240-260,000 ounces of
gold and 9,500-11,000 tonnes of molybdenum. The higher copper and
gold production compared to 2020 reflects higher grades at
Centinela Concentrates.
Group cash costs in 2021 before and after by-product credits are
expected to be at $1.65/lb and $1.25/lb respectively.
Capital expenditure in 2021 is expected to be $1.6 billion, as
the rate of expenditure on our growth projects accelerates
following their temporary suspension in 2020, which deferred some
$200 million into 2021, and higher costs at the Los Pelambres
Expansion project.
Guidance assumes COVID-19 will remain in place for all of 2021,
limiting transport to and from site and camp accommodation, and
requiring the extensive use of remote working and the
implementation of a full set of health controls at our operations
and offices. Considering the unprecedented situation, further
changes may be required later during the year and we will update
the market as necessary.
MARKET OUTLOOK
In early 2021, sentiment in the copper market is positive
despite a second wave of the pandemic in many countries, as markets
took encouragement from the successful development of several
vaccines and their accelerating rollout.
Demand is expected to recover the volumes lost in 2020, and to
grow further. There is, however, some uncertainty about stimulus
packages in China continuing as strongly as in 2020, but the
economic recovery expected in the USA, Europe and elsewhere in the
world, supported by fiscal stimulus packages, will positively
impact sectors that use copper. In particular, growth is expected
from infrastructure investment and the growth of the electric
vehicles and renewable energies sectors. Additionally, constraints
on the scrap trade due to restrictions in the Chinese market and
supply chain disruptions are also expected to contribute to
increased demand for refined copper.
On the supply side, while production is expected to grow as
several projects are completed, the risk of impact from COVID-19
remains, including the consequences of past and ongoing reductions
in maintenance activity, sustaining capital expenditure and waste
rock stripping.
Overall, the copper market in 2021 is expected to be in deficit
before remaining tightly balanced for the following years as
several large projects are completed.
REVIEW OF OPERATIONS
LOS PELAMBRES
2020 Performance
Operating Performance
Los Pelambres had a strong year with copper production at the
top end of guidance and costs outperforming guidance despite
restrictions due to the pandemic. This confirms its position as a
stable and reliable world-class operation.
EBITDA at Los Pelambres was $1,663 million, compared with $1,384
million in 2019, reflecting higher sales volumes and realised
prices, combined with lower operating costs.
Production
Copper production for the year decreased by 1.0% to 359,600
tonnes. Molybdenum production in 2020 was 10,900 tonnes, slightly
lower than in 2019 as a result of the lower throughput. Gold
production was 60,300 ounces, 1.0% higher than the previous
year.
Costs
Cash costs before by-product credits at $1.27/lb were 9.3%, or
13c/lb, lower than in 2019, reflecting strong cost control during
the year and the weaker Chilean peso. Net cash costs for the full
year were $0.81/lb, or 11.0% lower than in 2019.
Capital expenditure
As a result of the COVID-19 pandemic the Los Pelambres Expansion
project was temporarily suspended from March to August. Work
resumed with approximately 75% of the original planned workforce
on-site and it is assumed that these manpower levels will continue
throughout 2021.
A detailed review of the project schedule and costs, including
those associated with the realised and continued restrictions due
to COVID-19, and changes to the marine works to enable the future
expansion of the desalination plant to 800 l/s was completed. The
revised capital cost estimate is $1.7 billion and completion is
expected in early H2 2022.
Throughput at the plant will increase from the current capacity
of 175,000 tonnes of ore per day to an average of 190,000 tonnes of
ore per day and copper production will increase by 60,000
tonnes.
At the end of 2020, the Los Pelambres Expansion project
(engineering, procurement and construction) was 45% complete.
Capital expenditure during 2020 was $783 million, including $139
million on mine development and $471 million on growth
projects.
Outlook for 2021
The forecast production for 2021 is 340-350,000 tonnes of
copper, 8-9,000 tonnes of molybdenum and 50-60,000 ounces of
gold.
Cash costs before by-product credits are forecast to be
approximately $1.45/lb and net cash costs $1.05/lb as grades
decline in 2021.
CENTINELA
2020 Performance
Operating Performance
Centinela had a solid year in 2020 despite expected lower copper
and gold grades, as throughput increased at both the concentrate
and cathodes lines and cash costs outperformed guidance.
EBITDA at Centinela was $912 million, compared with $960 million
in 2019, on lower copper and gold sales volumes, offset by higher
realised prices and lower unit costs.
Production
Copper production was 246,800 tonnes, 10.8% lower than in 2019
due to the expected lower grades at Centinela Concentrates,
partially offset by the higher production at Centinela Cathodes due
to increased plant throughput during the year.
Production of copper in concentrate was 153,500 tonnes, 21.5%
lower than in 2019 as copper grades decreased to an average of
0.53%. Copper cathode production during the year was 93,300 tonnes,
15.0% higher than in 2019, primarily due to higher throughput and
grades.
Gold production was 143,700 ounces, 35.4% lower than 2019, due
to expected lower grades. Molybdenum production was 1,700 tonnes on
improved grades.
Costs
Cash costs before by-product credits in 2020 were $1.85/lb, 1.1%
higher than in 2019 as a result of the lower copper production
offset by tight cost control, a weaker Chilean Peso and lower input
costs.
By-product credits were $0.58/lb, $0.01/lb higher than in 2019
as lower gold production was offset by a higher realised gold
price.
Net cash costs during the year were $1.27/lb, 0.8% higher than
in 2019.
Capital expenditure
Capital expenditure was $442 million, including $198 million on
mine development.
Pre-stripping started at the Esperanza Sur pit in the third
quarter and is expected to be completed in H1 2022. During 2021 and
2022 autonomous trucks will be acquired to continue mining once the
contracted stripping has been completed.
Outlook for 2021
Production for 2021 is forecast at 270-280,000 tonnes of copper,
190-200,000 ounces of gold and 1,500-2,000 tonnes of molybdenum.
Copper production should increase compared to 2020 as grades
improve at Centinela Concentrates to an expected 0.59%.
Cash costs before by-products are forecast to be approximately
$1.75/lb and net cash costs $1.15/lb.
ANTUCOYA
2020 Performance
Operating Performance
Antucoya improved its operational reliability and consistency
during the year with daily ore throughput increasing by 14.3%
compared to 2019.
EBITDA was $166 million compared with $86 million in 2019,
reflecting higher sales volumes and realised prices, and lower
operating costs.
Production
Antucoya produced 79,300 tonnes, 10.3% higher than the previous
year on higher throughput, partially offset by lower grades and
recoveries.
Costs
Cash costs for 2020 were $1.82/lb, 16.1% lower than in 2019 due
to tight cost control, higher production, the weaker Chilean peso
and lower input prices.
Capital expenditure
Capital expenditure was $42 million, including $19 million on
mine development.
Outlook for 2021
Production is forecast to be 75-80,000 tonnes of copper and cash
costs are expected to be approximately $1.80/lb.
ZALDÍVAR
2020 Performance
Operating Performance
Zaldívar had a challenging 2020 due to lower recoveries compared
to 2019.
Attributable EBITDA was $96 million compared with $113 million
in 2019.
Production
Attributable copper production was 48,200 tonnes, mainly due to
lower recoveries. Ore throughput and grades were slightly lower
than in 2019.
Costs
Cash costs were $1.80/lb, 2.9% higher than in 2019, as lower
production was offset by the weaker exchange rate and lower input
prices.
Capital expenditure
Attributable capital expenditure in 2020 was $74 million,
including approximately $18 million of mine development.
Outlook for 2021
Attributable copper production is forecast to be 45-50,000
tonnes at a cash cost of approximately $1.75/lb.
TRANSPORT DIVISION
2020 Performance
Operating performance
Tonnage transported in 2020 was 1.4% lower than in the previous
year as a result of the impact of COVID-19 on some of the
division's customers, which affected their production levels, and
to a lesser extent, adverse weather conditions.
EBITDA was $61 million, 24.5% lower than in 2019, reflecting the
lower revenue and decreased EBITDA from associates and joint
ventures, partly offset by the lower operating costs.
Costs
Management is focused on optimising the division's business
processes to ensure its long-term competitiveness. The Group's Cost
and Competitiveness Programme continued to be applied at the
division during 2020 to improve its cost structure, revenue stream
and operating standards.
Outlook for 2021
Over the next few years the division will transport an
increasing quantity of bulk materials and is currently
commissioning a project to further increase transport volumes,
particularly of copper concentrates.
The division continues advancing its plans to convert land it
owns in the centre of the city of Antofagasta from industrial to
urban use. This has involved extensive consultation with
communities, neighbours and other stakeholders, and approval of the
project's Environmental Impact Assessment is expected in the first
half of 2021.
GROWTH PROJECTS AND OPPORTUNITIES
Los Pelambres Expansion
This expansion project is divided into two phases.
Phase 1
This phase is designed to optimise throughput within the limits
of the existing operating, environmental and water extraction
permits.
During 2020 the decision was made to change the scope of the
project and double the planned capacity of the desalination plant
that is part of Phase 1 of the project, from 400 l/s to 800 l/s.
The amount of work that can be done on the expansion of the
desalination plant during Phase 1 is limited by what is allowed
under the permits that have already been issued.
Following the change of scope and the delays due to COVID-19 the
project reached 45% overall project completion by the end of the
year and is now expected to be completed in the second half of
2022.
As mining progresses at Los Pelambres ore hardness will
increase. The expansion is designed to compensate for this,
increasing plant throughput from the current capacity of 175,000
tonnes of ore per day to an average of 190,000 tonnes of ore per
day. The plant expansion includes not only the desalination plant
and pumping infrastructure, but also an additional SAG mill, ball
mill and six additional cells in the flotation circuit.
Annual copper production will be increased by an average of
60,000 tonnes per year over 15 years, starting at approximately
40,000 tonnes per year for the first four to five years and 70,000
tonnes for the rest of the period as the hardness of the ore
increases and the benefit of the higher milling capacity is fully
realised.
The 400 l/s desalination plant includes a 62 km pipeline from
the coast to the Mauro tailings storage facility, where it will
connect with the existing recycling circuit that returns water to
the Los Pelambres concentrator plant.
To complete the expansion of the desalination plant to 800 l/s
additional permits will be required, but some preparatory work will
be carried out as part of Phase 1 of the Los Pelambres Expansion
project. The planned investment to enable the future expansion will
be limited to what is allowed under the existing permits and
includes changes to the marine works associated with the inlet and
outlet pipes, expanding the plant footprint and changes in the
piping, cabling and civil works.
The capital cost of the project was revised to $1.7 billion
during the year to include the direct costs related to COVID-19 and
the delay caused by it, and the investment in enabling the future
expansion of the desalination plant.
Phase 2 - Future expansion
Following the decision in 2020 to increase the size of the
desalination plant, Phase 2 of the expansion requires two separate
Environmental Impact Assessment (EIA) applications:
Desalination plant expansion
This project is to protect Los Pelambres from the future impact
of climate change and the deteriorating availability of water in
the region.
The additional works required, beyond those being completed as
part of Phase 1, include the expansion of the desalination plant
and the construction of a new water pipeline from the Mauro
tailings storage facility to the concentrator plant. This project
requires a new EIA application which will be submitted in the first
half of 2021 following the completion of a community consultation
process earlier in the year. The EIA also includes the desalination
plant expansion and two sustaining capital infrastructure projects,
the replacement of the concentrate pipeline, which is approaching
the end of its useful life, and the construction of certain planned
enclosures at the Mauro tailings storage facility. The EIA is
expected to be approved in approximately two years with the project
being completed by 2025 when the desalination plant will be able to
supply Los Pelambres with over 95% of its water needs.
Mine life extension
The current mine life of Los Pelambres is 14 years and is
limited by the capacity of the Mauro tailings storage facility. The
scope of the second EIA will include increasing the capacity of the
tailings storage facility and the mine waste dumps. This will
extend the mine's life by a minimum of 15 years, accessing a larger
portion of Los Pelambres's six billion tonne mineral resources. The
EIA will also include the option to increase throughput to 205,000
tonnes of ore per day, increasing copper production by 35,000
tonnes per year.
Critical studies on tailings and waste storage capacity have
been completed and are now progressing towards the feasibility
study stage. The study will also include repowering the conveyor
that runs from the primary crusher in the pit to the concentrator
plant to support the additional throughput.
The capital expenditure to extend the mine life was estimated in
a pre-feasibility study in 2014 at approximately $500 million, with
most of the expenditure on mining equipment and increasing the
capacity of the concentrator and the Mauro tailings facility.
Community consultation is in its early stages and the EIA
application is expected to be submitted to the authorities during
2022.
Esperanza Sur pit
The Board has approved a pre-stripping contract to open the
Esperanza Sur pit at Centinela. Esperanza Sur is 4 km south of the
Esperanza pit and is close to Centinela's concentrator plant. The
deposit contains 1.4 billion tonnes of reserves with a grade of
0.4% copper, 0.13 g/t of gold and 0.012% of molybdenum.
Stripping was expected to start in early 2020 but was
rescheduled in response to COVID-19 to the third quarter, and is
now expected to be completed in the first half of 2022 at an
unchanged capital cost of $175 million. The stripping cost is being
capitalised and is being carried out by a contractor. Once it is
completed, autonomous trucks operated by Centinela will be used to
mine the deposit.
Opening the Esperanza Sur pit will improve Centinela's
flexibility to supply its concentrator and, over the initial years,
the higher-grade material from the pit will increase production by
some 10-15,000 tonnes of copper per year, compared to how much
would be produced if material was solely supplied from the
Esperanza pit. This greater flexibility will allow Centinela to
smooth and optimise its year-on-year production profile, which has
in the past been variable.
Centinela Second Concentrator
We are currently evaluating the construction of a second
concentrator and tailings deposit some 7 km from the existing
concentrator in two phases.
Phase 1 would have an ore throughput capacity of approximately
90,000 tonnes per day, producing copper, and gold and molybdenum as
by-products, with an annual production of approximately 180,000
tonnes of copper equivalent. Once Phase 1 has been completed and is
operating successfully, a further expansion (Phase 2) is possible
and would involve increasing the capacity of the concentrator to
150,000 tonnes of ore per day with annual production increasing to
250,000 tonnes of copper equivalent, maximising the potential of
Centinela's large resource base.
Ore for the second concentrator would be sourced initially from
the Esperanza Sur deposit and later from Encuentro Sulphides. The
latter lies under the Encuentro Oxides reserves, which are expected
to be depleted by 2026.
The EIA for both phases of the project was approved in 2016 and
the initial feasibility study for Phase 1 was completed during 2020
with further detailed and supplier engineering progressing during
2021 ahead of an expected decision by the Board in H1 2022. The
capital cost estimated in the 2015 pre-feasibility study for Phase
1 was $2.7 billion, which included capitalised stripping, mining
equipment, a concentrator plant, a new tailings storage facility, a
water pipeline and other infrastructure, plus the owner's and other
costs.
In late 2020 a tender process was started to invite third
parties to provide water for Centinela's current operations, by
acquiring the existing water supply system, and building the new
water pipeline. It is expected this process will be completed
during 2021.
Zaldívar Chloride Leach
The start of the project was rescheduled in response to COVID-19
to the third quarter of 2020 and completion is now expected to be
in the first half of 2022.
The project is expected to increase copper recoveries by
approximately 10 percentage points with further upside in
recoveries possible, depending on the type of ore being processed.
This will increase copper production at Zaldívar by approximately
10-15,000 tonnes per annum over the remaining life of the mine.
The project requires an upgrade of the Solvent Extraction (SX)
plant, new reagents facilities and the construction of additional
washing ponds for controlling the chlorine levels, at an estimated
capital cost of $190 million.
As the Group equity accounts for its interest in Zaldívar,
capital expenditure at the operation is not included in Group total
capital expenditure amounts.
Twin Metals Minnesota
In late 2019, Twin Metals Minnesota presented its Mine Plan of
Operations (MPO) to the US Bureau of Land Management (BLM) and a
Scoping Environmental Assessment Worksheet Data Submittal was also
issued to the Minnesota Department of Natural Resources. These
submissions start a multi-year scoping and environmental review
process that will thoroughly evaluate the proposed project.
In June 2020, the BLM issued its Notice of Intent (NOI) to begin
its environmental review, a process that is likely to take several
years. The review process will include additional baseline data
collection, impact analyses and multiple opportunities for public
input. Permitting for the project will follow the environmental
review.
Twin Metals Minnesota is a wholly owned copper, nickel and
platinum group metals (PGM) underground mining project, which holds
the Maturi, Maturi Southwest, Birch Lake and Spruce Road copper,
nickel, cobalt-PGM deposits in north-eastern Minnesota, US. The MPO
design is based on mining and processing 18,000 tonnes of ore per
day for 25 years. The concentrator will produce three saleable
concentrates - copper, nickel and cobalt - PGM.
FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER 2020
Year ended Year ended
31.12.2020 31.12.2019
--------------------------------------- ------------- ------------ ------------ ------------
Before Exceptional
exceptional items
items Total Total
--------------------------------------- ------------- ------------ ------------ ------------
$m $m $m $m
Revenue 5,129.3 - 5,129.3 4,964.5
--------------------------------------- ------------- ------------ ------------ ------------
EBITDA (including share of EBITDA
from associates and joint ventures) 2,739.2 - 2,739.2 2,438.9
--------------------------------------- ------------- ------------ ------------ ------------
Total operating costs (3,537.1) - (3,537.1) (3,588.7)
------------- ------------ ------------ ------------
Operating profit from subsidiaries 1,592.2 - 1,592.2 1,375.8
Net share of results from associates
and joint ventures 5.1 - 5.1 24.4
Impairment of investment in associate - (80.8) (80.8) -
------------- ------------ ------------
Total profit from operations,
associates and joint ventures 1,597.3 (80.8) 1,516.5 1,400.2
Net finance expense (103.4) - (103.4) (51.0)
------------- ------------ ------------
Profit before tax 1,493.9 (80.8) 1,413.1 (1,349.2)
Income tax expense (546.2) 19.7 (526.5) (506.1)
------------- ------------ ------------ ------------
Profit from continuing operations 947.7 (61.1) 886.6 843.1
Profit from discontinued operations 7.3 - 7.3 -
------------- ------------ ------------ ------------
Profit for the year 955.0 (61.1) 893.9 843.1
Attributable to:
------------- ------------ ------------ ------------
Non-controlling interests 408.4 (20.9) 387.5 341.7
Profit attributable to the owners
of the parent 546.6 (40.2) 506.4 501.4
------------- ------------ ------------ ------------
Basic earnings per share cents cents cents cents
From continuing operations 54.7 (4.1) 50.6 50.9
From discontinued operations 0.7 - 0.7 -
------------- ------------ ------------ ------------
Total continuing and discontinued
operations 55.4 (4.1) 51.3 50.9
============= ============ ============ ============
The profit for the financial year attributable to the owners of
the parent (including exceptional items and discontinued
operations) increased from $501.4 million in 2019 to $506.4 million
in the current year. Excluding exceptional items and discontinued
operations the profit attributable to the owners of the parent
increased by $37.9 million to $539.3 million. The full
reconciliation between 2019 and 2020 is as follows:
$m
Profit attributable to the owners of the parent in
2019 501.4
Increase in revenue 164.8
Decrease in total operating costs 51.6
Decrease in net share of profit from associates and
joint ventures (excluding exceptional items) (19.3)
Increase in net finance expenses (52.4)
Increase in income tax expense (40.1)
Increase in non-controlling interests (66.7)
37.9
Profit attributable to the owners of the parent in
2020, excluding exceptional items and discontinued
operations 539.3
Exceptional items - impairment of investment in associate (40.2)
Profit from discontinued operations 7.3
Profit attributable to the owners of the parent in
2020 506.4
=======
COVID-19
The Group's operations were all able to continue to operate
without interruption throughout the year, in part reflecting the
strict COVID-19 related measures which the Group began to implement
from February 2020 onwards. As a result, the Group's production was
within the guidance range for the year. The Group's planning
assumes that COVID-19 related measures will continue to be required
for the rest of 2021.
The Group incurred $40 million of operational expenses
(including the 50% attributable share of Zaldívar's expenditure)
during 2020 in respect of COVID-19 measures, including additional
travel costs for its employees travelling to and from the mine
sites, hygiene supplies and additional costs for third-party
services. The Group also established a $6 million fund to provide
COVID-19 related support to local communities, of which $4 million
has been spent during 2020.
Work on the Group's growth projects at Los Pelambres, Centinela
and Zaldívar was largely suspended in March 2020, but activity was
able to begin increasing during the third quarter of the year. The
Group has capitalised $31 million of additional project costs
during 2020 which are linked to the impact of the COVID-19
situation, mainly relating to additional costs for the third-party
contractors, increased travel costs for employees and project
contractors travelling to the sites and the purchase of hygiene
supplies.
Revenue
The $164.8 million increase in revenue from $4,964.5 million in
2019 to $5,129.3 million in the current year reflected the
following factors:
$m
Revenue in 2019 4,964.5
Increase in realised copper price 348.4
Decrease in copper sales volumes (153.3)
Decrease in treatment and refining charges 69.7
Decrease in gold revenue (50.0)
Decrease in molybdenum revenue (45.1)
Increase in silver revenue 6.2
Decrease in transport division revenue (11.1)
164.8
Revenue in 2020 5,129.3
========
Revenue from the Mining division
Revenue from the Mining division increased by $175.9 million, or
3.7%, to $4,979.9 million, compared with $4,804.0 million in 2019.
The increase reflected a $264.8 million improvement in copper sales
partly offset by a $88.9 million decrease in by-product
revenue.
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
increased by $264.8 million, or 6.5%, to $4,348.2 million, compared
with $4,083.4 million in 2019. The increase reflected the impact of
$348.4 million from higher realised prices and $69.7 million from
lower treatment and refining charges, partly offset by $153.3
million from lower sales volumes.
(i) Realised copper price
The average realised price increased by 8.3% to $2.98/lb in 2020
(2019 - $2.75/lb), resulting in a $348.4 million increase in
revenue. The increase in the realised price reflected the higher
LME average market price, which increased by 2.8% to $2.80/lb in
2020 (2019 - $2.72/lb), and a positive provisional pricing
adjustment of $258.5 million. The provisional pricing adjustment
mainly reflected the increase in the year-end mark-to-market copper
price to $3.52/lb at 31 December 2020, compared with $2.81/lb at 31
December 2019.
Realised copper prices are determined by comparing revenue
(before 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 in 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).
Further details of provisional pricing adjustments are given in
Note 6 to the preliminary results announcement.
(ii) Copper volumes
Copper sales volumes reflected within revenue decreased by 3.5%
from 715,500 tonnes in 2019 to 690,200 tonnes in 2020, decreasing
revenue by $153.3 million. This decrease was due to lower copper
sales volumes at Centinela (40,100 tonnes decrease) mainly as a
result of its decreased production volumes, partly offset by higher
sales volumes at Los Pelambres (9,900 tonnes increase) and at
Antucoya (4,900 tonnes increase).
(iii) Treatment and refining charges
Treatment and refining charges (TC/RCs) for copper concentrate
decreased by $69.7 million to $182.4 million in 2020 from $252.1
million in 2019, reflecting the lower average TC/RC rates as well
as the decrease in the concentrate sales volumes at Centinela.
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 decreased by $88.9 million or
12.3% to $631.7 million in 2020, compared with $720.6 million in
2019.
Revenue from gold sales (net of treatment and refining charges)
was $357.7 million (2019 - $407.7 million), a decrease of $50.0
million which mainly reflected a decrease in volumes partially
offset by a higher realised price. Gold sales volumes decreased by
30.9% from 288,800 ounces in 2019 to 199,600 ounces in 2020, mainly
due to lower grades at Centinela. The realised gold price was
$1,796.8/oz in 2020 compared with $1,416.0/oz in 2019, reflecting
the average market price for 2020 of $1,770.1/oz (2019 -
$1,393,5/oz), plus a provisional pricing adjustment of $3.1
million.
Revenue from molybdenum sales (net of roasting charges) was
$209.5 million (2019 - $254.6 million), a decrease of $45.1
million. The decrease was due to the lower realised price of
$8.8/lb (2019 - $10.8/lb), partially offset by increased sales
volumes of 12,500 tonnes (2019 - 12,100 tonnes).
Revenue from silver sales increased by $6.2 million to $64.5
million (2019 - $58.3 million). The increase was due to a higher
realised silver price of $21.3/oz (2019 - $16.4/oz), partly offset
by lower sales volumes of 3.1 million ounces (2019 - 3.6 million
ounces).
Revenue from the Transport division
Revenue from the Transport division (FCAB) decreased by $11.1
million or 6.9% to $149.4 million (2019 - $160.5 million), mainly
due to the effect of the weaker Chilean peso, and lower sales
volumes of freight transported and industrial water.
Total operating costs
The $51.6 million decrease in total operating costs from
$3,588.7 million in 2019 to $3,537.1 million in the current year
reflected the following factors:
$m
Total operating costs in 2019 3,588.7
Decrease in mine-site operating costs (156.8)
Increase in closure provision and other
mining expenses 24.0
Decrease in exploration and evaluation costs (26.0)
Decrease in corporate costs (6.5)
Decrease in Transport division operating
costs (14.3)
Increase in depreciation, amortisation and
loss on disposals 128.0
(51.6)
Total operating costs in 2020 3,537.1
========
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Mining division
Operating costs (excluding depreciation, loss on disposals and
impairments) at the Mining division decreased by $165.3 million to
$2,390.7 million in 2020, a reduction of 6.5%. Of this decrease,
$156.8 million is attributable to lower mine-site operating costs.
This decrease in mine-site costs reflected lower key input prices,
the weaker Chilean peso, lower sale volumes and cost savings from
the Group's Cost and Competitiveness Programme, partly offset by
the cost impact of the expected lower ore grades at Centinela and
the $33.1 million of mine-site costs incurred related to the
COVID-19 pandemic. On a unit cost basis, weighted average cash
costs excluding by-product credits (which are reported as part of
revenue) and treatment and refining charges for concentrates (which
are deducted from revenue), decreased from $1.49/lb in 2019 to
$1.43/lb in 2020.
The Cost and Competitiveness Programme was implemented to reduce
the Group's cost base and improve its competitiveness within the
industry. During 2020 the programme achieved benefits of $197
million, of which $155 million reflected cost savings and $42
million reflected the value of productivity improvements. Of the
$155 million of cost savings, $125 million related to Los
Pelambres, Centinela and Antucoya, and therefore impacted the
Group's operating costs, and $30 million related to Zaldívar (on a
100% basis) and therefore impacted the share of results from
associates and joint ventures.
Closure provisions and other mining expenses increased by $24.0
million. Exploration and evaluation costs decreased by $26.0
million to $85.1 million (2019 - $111.1 million), reflecting
decreased exploration expenditure principally in respect of the
Encierro and Cachorro projects and less drilling activity in
relation to the reserve and resource estimates at Centinela and
Antucoya. Corporate costs decreased by $6.5 million.
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Transport division
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Transport division decreased by $14.3 million
to $91.4 million (2019 - $105.7 million), mainly due the effect of
the weaker Chilean peso and the lower diesel price, as well as the
lower consumption of materials.
Depreciation, amortisation and disposals
The depreciation and amortisation charge increased by $128.0
million from $927.0 million in 2019 to $1,055.7 million. This
increase is mainly due to higher amortisation of capitalised
stripping costs under IFRIC 20 Stripping Costs in the Production
Phase of a Surface Mine, particularly at Centinela. The loss on
disposal of property, plant & equipment was $6.3 million, a
decrease of $6.4 million (2019 - $12.7 million).
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries increased by $216.4 million or 15.7% in 2020 to
$1,592.2 million (2019 - $1,375.8 million).
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures
was a profit of $5.1 million in 2020, compared to $24.4 million in
2019. This was principally due to the impact of the agreement on 31
March 2020 to dispose of the Group's investment in Hornitos (as
detailed below). In the 2019 full-year Hornitos had generated a net
profit of $10.3 million, but in the first three months of 2020
prior to the disposal agreement Hornitos did not generate a net
profit. In addition, there was $3.9 million higher loss from
Tethyan Copper Company and $3.4 million of lower profits from
Zaldívar.
EBITDA
EBITDA (earnings before interest, tax, depreciation and
amortisation) increased by $300.3 million or 12.3% to $2,739.2
million (2019 - $2,438.9 million). EBITDA includes the Group's
proportional share of EBITDA from associates and joint
ventures.
EBITDA from the Mining division increased by 13.6% from $2,358.1
million in 2019 to $2,678.2 million this year. This reflected the
higher revenue and lower mine-site costs, decreased exploration and
evaluation expenditure and lower corporate costs, partly offset by
higher other mining expenses and lower EBITDA from associates and
joint ventures.
EBITDA at the Transport division decreased by $19.8 million to
$61.0 million in 2020 ($80.8 million - 2019), reflecting the lower
revenue and decreased EBITDA from associates and joint ventures,
partly offset by the lower operating costs.
Commodity price and exchange rate sensitivities
The following sensitivities show the estimated approximate
impact on EBITDA for 2020 of a 10% movement in the average copper,
molybdenum and gold prices and a 10% movement in the average US
dollar / Chilean peso exchange rate.
The impact of the movement in the average commodity prices
reflects the estimated impact on the relevant revenues during 2020,
and the impact of the movement in the average exchange rate
reflects the estimated impact on Chilean peso denominated operating
costs during the year. These estimates do not reflect any impact in
respect of provisional pricing or hedging instruments, any
potential inter-relationship between commodity price and exchange
rate movements, or any impact from the retranslation or changes in
valuations of assets or liabilities held on the balance sheet at
the year-end.
Average market Impact of a
commodity price 10% movement
/ average exchange in the commodity
rate during price / exchange
the year ended rate on EBITDA
31.12.20 for the year
ended 31.12.20
$m
Copper price $2.80/lb 456
Molybdenum price $8.7/lb 24
Gold price $1,770/oz 35
US dollar / Chilean peso exchange
rate 792 123
Net finance expense
Net finance expense increased by $52.4 million to $103.4
million, compared with $51.0 million in 2019.
Year
Year ended ended
31.12.20 31.12.19
$m $m
Investment income 18.9 47.1
Interest expense (77.1) (111.1)
Other finance items (45.2) 13.0
----------- ----------
Net finance expense (103.4) (51.0)
=========== ==========
Interest income decreased from $47.1 million in 2019 to $18.9
million in 2020, mainly due to the decrease in average interest
rates partly offset by the higher average cash balance.
Interest expense decreased slightly from $111.1 million in 2019
to $77.1 million in 2020, reflecting both a decrease in the average
LIBOR rate and also a reduction in the average relevant debt
balances.
Other finance items were a net loss of $45.2 million, compared
with a net gain of $13.0 million in 2019, a variance of $58.2
million. This was mainly due to the foreign exchange impact, which
was a $28.9 million loss in 2020 compared with a $35.8 million gain
in 2019, due to the retranslation of Chilean peso denominated
assets and liabilities.
Profit before tax
As a result of the factors set out above, profit before tax
increased by 4.7% to $1,413.1 million (2019 - $1,349.2
million).
Income tax expense
The tax charge for 2020 excluding exceptional items was $546.2
million (2019 - $506.1 million) and the effective tax rate was
36.6% (2019 - 37.5%). Including exceptional items the tax charge
for 2020 was $526.5 million and the effective rate was 37.3%.
Year ended Year ended Year ended
31.12.2020 31.12.2020 31.12.2019
Excluding Including
exceptional exceptional
items items
$m % $m % $m %
Profit before tax 1,493.9 1,413.1 1,349.2
Tax at the Chilean corporate
rate tax of 27% (403.4) 27.0 (381.5) 27.0 (364.3) 27.0
Exceptional items - impairment
of investment in associate - - (2.2) 0.2 - -
Mining tax (royalty) (101.3) 6.8 (101.3) 7.2 (66.6) 4.9
Deduction of mining royalty
as an allowable expense in
determination of first category
tax 28.1 (1.9) 28.1 (2.0) 19.1 (1.4)
Items not deductible from
first category tax (9.8) 0.7 (9.8) 0.6 (11.9) 0.9
Withholding taxes (70.0) 4.7 (70.0) 5.0 (59.3) 4.4
Tax effect of share of results
of associates and joint ventures 1.4 (0.1) 1.4 (0.1) 4.7 (0.4)
Reversal of previously unrecognised
tax losses / (unrecognised
tax losses) 10.5 (0.7) 10.5 (0.7) (33.0) 2.5
Adjustment in respect of prior
years (1.6) 0.1 (1.6) 0.1 4.3 (0.3)
Net other items (0.1) 0.0 (0.1) 0.0 0.9 (0.1)
------------- ------ -------- ------ --------- --------
Tax expense and effective
tax rate for the period (546.2) 36.6 (526.5) 37.3 (506.1) 37.5
============= ====== ======== ====== ========= ========
The effective tax rate excluding exceptional items of 36.6%
varied from the statutory rate principally due to the mining tax
(royalty) (net impact of $73.2 million / 4.9% including the
deduction of the mining tax (royalty) as an allowable expense in
the determination of first category tax), the withholding tax
relating to the remittance of profits from Chile (impact of $70.0
million / 4.7%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile
(impact of $9.8 million / 0.7%) and adjustments in respect of prior
years (impact of $1.6 million / 0.1%), partly offset by the
reversal of previously unrecognised tax losses (impact of $10.5
million / 0.7%) 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 $1.4 million / 0.1%).
The impact of the exceptional items on the effective tax rate
including exceptional items was $2.2 million / 0.2%.
Exceptional items
On 31 March 2020 the Group agreed to dispose of its 40% interest
in the Hornitos coal-fired power station to ENGIE Energía Chile
S.A. ("ENGIE"), the owner of the remaining 60% holding. This was
part of the value accretive renegotiation of Centinela's power
purchase agreement which as a result will be wholly supplied from
lower cost renewable sources from 2022. Under the terms of the
agreement the Group will dispose of its investment to Engie in 2021
for a nominal consideration and will not be entitled to receive any
further dividend income from Hornitos from the date of the
agreement. Accordingly, the Group no longer has any effective
economic interest in Hornitos from 31 March 2020 onwards and has
therefore recognised an impairment of $80.8 million in respect of
its investment in associates and will no longer recognise any share
of Hornitos' results. The post-tax impact of the impairment is
$61.1 million, of which $40.2 million is attributable to the equity
owners of the Company.
Non-controlling interests
Profit for 2020 attributable to non-controlling interests
(excluding exceptional items) was $408.4 million, compared with
$341.7 million in 2019, an increase of $66.7 million. This
reflected the increase in earnings analysed above.
Earnings per share
Year ended Year ended
31.12.20 31.12.19
$ cents $ cents
Underlying earnings per share (excluding
exceptional items and
discontinued operations) 54.7 50.9
Earnings per share (exceptional items) (4.1) -
Earnings per share (discontinued operations) 0.7 -
----------- -----------
Earnings per share (including exceptional
items and discontinued operations) 51.3 50.9
=========== ===========
Earnings per share calculations are based on 985,856,695
ordinary shares.
As a result of the factors set out above, the underlying profit
attributable to equity shareholders of the Company (excluding
exceptional items and discontinued operations) was $539.3 million
compared with $501.4 million in 2019, giving underlying earnings
per share of 54.7 cents per share (2019 - 50.9 cents per share).
The profit attributable to equity shareholders (including
exceptional items and discontinued operations) was $506.4 million,
resulting in earnings per share of 51.3 cents per share (2019 -
50.9 cents per share).
Dividends
Dividends per share proposed in relation to the period are as
follows:
Year ended Year ended
31.12.20 31.12.19
$ cents $ cents
Ordinary dividends:
Interim 6.2 10.7
Final 48.5 7.1
----------- -----------
Total dividends to ordinary shareholders 54.7 17.8
=========== ===========
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 recommended a final dividend for 2020 of 48.5
cents per ordinary share, which amounts to $478.2 million and will
be paid on 14 May 2021 to shareholders on the share register at the
close of business on 23 April 2021.
The Board declared an interim dividend for the first half of
2020 of 6.2 cents per ordinary share, which amounted to $61.1
million.
This gives total dividends proposed in relation to 2020
(including the interim dividend) of 54.7 cents per share or $539.3
million in total (2019 - 17.8 cents per ordinary share or $175.7
million in total) equivalent to a payout ratio of 100% of
underlying earnings.
Capital expenditure
Capital expenditure increased by $228.6 million from $1,078.8
million in 2019 to $1,307.4 million in the current year, mainly due
to expenditure on the Los Pelambres Expansion project.
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 its exposure to commodity price, foreign exchange and
interest rate movements. The Group does not use such derivative
instruments for speculative trading purposes. At 31 December 2020
the derivative financial instruments in place had a negative fair
value of $36.0 million (2019 - negative $7.3 million).
Cash flows
The key features of the cash flow statement are summarised in
the following table.
Year ended Year ended
31.12.20 31.12.19
$m $m
Cash flows from continuing operations 2,431.1 2,570.7
Income tax paid (319.7) (403.6)
Net interest paid (40.1) (35.3)
Capital contributions and loans to associates (7.2) (1.8)
Purchases of property, plant and equipment (1,307.4) (1,078.8)
Dividends paid to equity holders of the
Company (131.1) (470.3)
Dividends paid to non-controlling interests (280.0) (400.0)
Capital increase from non-controlling 210.0 -
interest
Dividends from associates and joint ventures - 58.0
Other items 2.3 1.8
------------- -------------
Changes in net debt relating to cash
flows 557.9 240.7
Other non-cash movements (68.0) (214.3)
Effects of changes in foreign exchange
rates (8.5) 6.5
------------- -------------
Movement in net debt in the period 481.4 32.9
Net debt at the beginning of the year (563.4) (596.3)
------------- -------------
Net debt at the end of the year (82.0) (563.4)
============= =============
Cash flows from continuing operations were $2,431.1 million in
2020 compared with $2,570.7 million in 2019. This reflected EBITDA
from subsidiaries for the year of $2,647.2 million (2019 - $2,302.8
million) adjusted for the negative impact of a net working capital
increase of $242.5 million (2019 - working capital decrease of
$291.9 million) and a non-cash increase in provisions of $26.4
million (2019 - decrease of $24.0 million).
The working capital increase in 2020 was mainly due to an
increase in receivables, predominantly due to the higher year -end
mark-to-market copper price of $3.52/lb at 31 December 2020,
compared with $2.81/lb at 31 December 2019. The 2019 working
capital decrease was mainly due to the $275 million refund of the
one-off short-term VAT payment which had been made in December 2018
and was refunded to the Group as expected in January 2019.
The net cash outflow in respect of tax in 2020 was $319.7
million (2019 - $403.6 million). This amount differs from the
current tax charge in the consolidated income statement (including
exceptional items) of $515.3 million (2019 - $354.4 million) mainly
because cash tax payments for corporate tax and the mining tax
partly include the settlement of outstanding balances in respect of
the previous year's tax charge of $8.0 million (2019 - $29.5
million), payments withholding tax by $ 54.5 million, payments on
account for the current year based on the prior year's profit
levels of $366.8 million, as well as the recovery of $109.7 million
in 2020 relating to prior years.
Contributions and loans to associates and joint ventures of $7.2
million (2019 - $1.8 million) relate to Tethyan Copper Company.
Capital expenditure in 2020 was $1,307.4 million compared with
$1,078.8 million in 2019. This included expenditure of $782.6
million at Los Pelambres (2019 - $493.8 million), $441.5 million at
Centinela (2019 - $457.6 million), $41.9 million at Antucoya (2019
- $49.9 million), $8.3 million at the corporate centre (2019 -
$15.9 million) and $33.1 million at the Transport divisions (2019 -
$61.6 million). The increase at Los Pelambres reflects expenditure
on the Expansion project.
Dividends paid to equity holders of the Company were $131.1
million (2019 - $470.3 million) of which $70.0 million related to
the payment of the final element of the previous year's dividend
and $61.1 million to the interim dividend declared in respect of
the current year.
Dividends paid by subsidiaries to non-controlling shareholders
were $280.0 million (2019 - $400.0 million).
Dividends received from associates and joint ventures was nil
for 2020 (2019 - $58.0 million) .
A capital contribution of $210.0 million was received from
Marubeni, the minority partner at Antucoya, in order to replace
part of the subordinated debt financing with equity.
Financial position
At 31.12.20 At 31.12.19
$m $m
Cash, cash equivalents
and liquid investments 3,672.8 2,193.4
Total borrowings (3,754.8) (2,756.8)
------------ ------------
Net debt at the end
of the period (82.0) (563.4)
============ ============
At 31 December 2020 the Group had combined cash, cash
equivalents and liquid investments of $3,672.8 million (31 December
2019 - $2,193.4). Excluding the non-controlling interest share in
each partly-owned operation, the Group's attributable share of
cash, cash equivalents and liquid investments was $3,046.9 million
(31 December 2019 - $1,849.7 million).
Total Group borrowings at 31 December 2020 were $3,754.8
million, an increase of $998.0 million on the prior year (31
December 2019 - $2,756.8 million). The increase was mainly due to a
$814.8 million increase of the senior loan at Los Pelambres and
$495.6 million from the bond issue, partly offset by the $210.0
million repayment of the subordinated debt from Antucoya to
Marubeni which was replaced with equity, a $66.0 million repayment
of Antucoya's senior loan and a net decrease of lease liabilities
of $37.4 million.
Excluding the non-controlling interest share in each
partly-owned operation, the Group's attributable share of the
borrowings was $2,805.5 million (31 December 2019 - $2,041.3
million).
This resulted in net debt at 31 December 2020 of $82.0 million
(31 December 2019 - $563.4 million). Excluding the non-controlling
interest share in each partly-owned operation, the Group had an
attributable net cash position of $241.4 million (31 December 2019
- net debt $191.6 million).
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
apply 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
31.12.2020 31.12.2019
------------- ------------ ------------ ------------
Excluding Exceptional
exceptional items
items note
3 Total Total
Notes $m $m $m $m
Revenue 2,6 5,129.3 - 5,129.3 4,964.5
Total operating costs 2 (3,537.1) - (3,537.1) (3,588.7)
------------- ------------ ------------ ------------
Operating profit from subsidiaries 2,5 1,592.2 - 1,592.2 1,375.8
Net share of results from associates
and joint ventures 2,5 5.1 - 5.1 24.4
Impairment of investment in associate 3 - (80.8) (80.8) -
------------- ------------ ------------ ------------
Total profit from operations, associates
and joint ventures 1,597.3 (80.8) 1,516.5 1,400.2
Investment income 18.9 - 18.9 47.1
Interest expense (77.1) - (77.1) (111.1)
Other finance items (45.2) - (45.2) 13.0
------------- ------------ ------------ ------------
Net finance expense 8 (103.4) - (103.4) (51.0)
------------- ------------ ------------ ------------
Profit before tax 1,493.9 (80.8) 1,413.1 1,349.2
Income tax expense 9 (546.2) 19.7 (526.5) (506.1)
------------- ------------ ------------ ------------
Profit from continuing operations 947.7 (61.1) 886.6 843.1
============= ============ ============ ============
Profit from discontinued operations 10 7.3 - 7.3 -
------------- ------------ ------------ ------------
Profit for the year 955.0 (61.1) 893.9 843.1
============= ============ ============ ============
Attributable to:
Non-controlling interests 408.4 (20.9) 387.5 341.7
Equity holders of the Company (net
earnings) 546.6 (40.2) 506.4 501.4
------------- ------------ ------------ ------------
Basic earnings per share
From continuing operations 11 54.7 (4.1) 50.6 50.9
From discontinued operations 11 0.7 - 0.7 -
---- ------ ---- ----
From continuing and discontinued operations 55.4 (4.1) 51.3 50.9
Consolidated Statement of Comprehensive Income
Year ended Year ended
31.12.2020 31.12.2019
Notes $m $m
Profit for the period 893.9 843.1
Items that may be or were subsequently
reclassified to profit or loss:
(Losses)/gains on cash flow hedges - time value (19.2) 0.4
Losses on cash flow hedges - intrinsic value (12.9) (7.7)
Deferred tax effects arising on cash flow hedges
deferred in reserves 2.4 2.0
Losses/(gains) in fair value of cash flow hedges
transferred to the income statement 3.4 (0.8)
Currency translation adjustment 14 0.9 -
------------------------------ ----------------------------
Total items that may be or were subsequently
reclassified to profit or loss (25.4) (6.1)
Items that will not be subsequently reclassified
to profit or loss:
Actuarial gains/(losses) on defined benefit plans 19 9.8 (4.7)
Tax on items recognised through OCI which will
not be reclassified to profit or loss in the
future (2.6) 0.9
Gains in fair value of equity investments 16 5.5 0.3
Share of other comprehensive losses of equity
accounted units, net of tax - (0.3)
------------------------------ ----------------------------
Total Items that will not be subsequently
reclassified to profit or loss 12.7 (3.8)
Total other comprehensive expense (12.7) (9.9)
Total comprehensive income for the period 881.2 833.2
============================== ============================
Attributable to:
Non-controlling interests 383.2 338.6
Equity holders of the Company 498.0 494.6
------------------------------ ----------------------------
Total comprehensive income for the year -
continuing operations 873.9 833.2
Total comprehensive income for the year - 7.3 -
discontinued operations
------------------------------ ----------------------------
881.2 833.2
============================== ============================
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Other Retained
reserves earnings Non-
Share Share (Note (Note Net controlling
capital premium 23) 23) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2020 89.8 199.2 (18.1) 7,112.8 7,383.7 2,017.3 9,401.0
Capital increases from
non-controlling interest
(1) - - - - - 210.0 210.0
Profit for the year - - - 506.4 506.4 387.5 893.9
Other comprehensive
expense for the year - - (12.5) 4.1 (8.4) (4.3) (12.7)
Dividends - - - (131.1) (131.1) (280.0) (411.1)
--------- --------- ---------- ---------- --------- ------------- ----------
Balance at 31 December
2020 89.8 199.2 (30.6) 7,492.2 7,750.6 2,330.5 10,081.1
========= ========= ========== ========== ========= ============= ==========
1. A capital contribution of $210 million was received from
Marubeni, the minority partner at Antucoya, in order to replace
part of Antucoya's subordinated debt financing with equity (see
Notes 18).
For the year ended 31 December 2019
Other Retained
reserves earnings Non-
Share Share (Note (Note Net controlling
capital premium 23) 23) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2019 89.8 199.2 (14.5) 7,084.9 7,359.4 2,078.7 9,438.1
Profit for the year - - - 501.4 501.4 341.7 843.1
Other comprehensive
expense for the year - - (3.6) (3.2) (6.8) (3.1) (9.9)
Dividends - - - (470.3) (470.3) (400.0) (870.3)
--------- ------------- ---------- -------------- --------- ---------------- ---------
Balance at 31 December
2019 89.8 199.2 (18.1) 7,112.8 7,383.7 2,017.3 9,401.0
========= ============= ========== ============== ========= ================ =========
Consolidated Balance Sheet
At 31.12.2020 At 31.12.2019
Non-current assets Notes $m $m
Intangible assets 13 150.1 150.1
Property, plant and
equipment 14 9,851.9 9,556.7
Other non-current
assets 2.6 2.1
Inventories 17 278.1 208.0
Investments in
associates and joint
ventures 15 914.6 1,024.8
Trade and other
receivables 55.9 48.2
Derivative financial
instruments 7 0.3 1.7
Equity investments 16 11.1 5.1
Deferred tax assets 6.4 8.2
-------------------------------------------- ----------------------------------------
11,271.0 11,004.9
-------------------------------------------- ----------------------------------------
Current assets
Inventories 17 592.7 586.4
Trade and other
receivables 1,016.9 682.4
Current tax assets 49.8 140.2
Derivative financial
instruments 7 1.1 3.1
Liquid investments 25 2,426.0 1,539.7
Cash and cash
equivalents 25 1,246.8 653.7
-------------------------------------------- ----------------------------------------
5,333.3 3,605.5
-------------------------------------------- ----------------------------------------
Total assets 16,604.3 14,610.4
============================================ ========================================
Current liabilities
Short-term borrowings
and leases 18 (603.4) (723.9)
Derivative financial
instruments 7 (37.4) (9.6)
Trade and other
payables (808.8) (750.6)
Short-term
decommissioning &
restoration
provisions (22.2) (22.0)
Current tax
liabilities (153.9) (42.8)
-------------------------------------------- ----------------------------------------
(1,625.7) (1,548.9)
-------------------------------------------- ----------------------------------------
Non-current
liabilities
Medium and long-term
borrowings and
leases 18 (3,151.4) (2,032.9)
Derivative financial 7 - (2.5)
instruments
Trade and other
payables (11.0) (8.2)
Liabilities in
relation to joint
ventures 15 (1.1) (1.8)
Post-employment
benefit obligations (123.2) (118.7)
Decommissioning &
restoration
provisions (498.0) (391.2)
Deferred tax
liabilities (1,112.8) (1,105.2)
-------------------------------------------- ----------------------------------------
(4,897.5) (3,660.5)
-------------------------------------------- ----------------------------------------
Total liabilities (6,523.2) (5,209.4)
============================================ ========================================
Net assets 10,081.1 9,401.0
Equity
Share capital 22 89.8 89.8
Share premium 22 199.2 199.2
Other reserves 23 (30.6) (18.1)
Retained earnings 23 7,492.2 7,112.8
-------------------------------------------- ----------------------------------------
Equity attributable
to equity holders of
the Company 7,750.6 7,383.7
Non-controlling
interests 2,330.5 2,017.3
-------------------------------------------- ----------------------------------------
Total equity 10,081.1 9,401.0
============================================ ========================================
The preliminary information was approved by the Board of
Directors on 15 March 2021.
Consolidated Cash Flow Statement
At 31.12.2020 At 31.12.2019
Notes $m $m
Cash flows from operations 24 2,431.1 2,570.7
Interest paid (52.7) (76.3)
Income tax paid (319.7) (403.6)
------------------------------------- -------------------------------------
Net cash generated from
operating activities 2,058.7 2,090.8
------------------------------------- -------------------------------------
Investing activities
Capital contributions and
loan to associates
and joint ventures 15 (7.2) (1.8)
Dividends from associates 15 - 58.0
Acquisition of mining
properties (1.5) (5.2)
Proceeds from sale of
property, plant
and equipment 0.8 1.9
Purchases of property, plant
and equipment (1,305.9) (1,073.6)
Net increase in liquid
investments 25 (886.3) (676.5)
Interest received 12.6 41.0
------------------------------------- -------------------------------------
Net cash used in (2,187.5) (1,656.2)
------------------------------------- -------------------------------------
Financing activities
Dividends paid to equity
holders of the
Company (131.1) (470.3)
Dividends paid to preference
shareholders
of the Company (0.1) (0.1)
Dividends paid to
non-controlling interests (280.0) (400.0)
Capital increase from 210.0 -
non-controlling
interest(1)
Proceeds from issue of new
borrowings 25 2,398.6 741.4
Repayments of borrowings 25 (1,393.8) (588.1)
Repayments of lease
obligations 25 (86.5) (92.5)
Net cash generated from/(used
in) financing
activities 717.1 (809.6)
------------------------------------- -------------------------------------
Net increase / (decrease) in
cash and
cash equivalents 25 588.3 (375.0)
===================================== =====================================
Cash and cash equivalents at
beginning
of the period 653.7 1,034.4
Net increase / (decrease) in
cash and
cash equivalents 25 588.3 (375.0)
Effect of foreign exchange
rate changes 25 4.8 (5.7)
Cash and cash equivalents at
end of the
period 25 1,246.8 653.7
===================================== =====================================
1. A capital contribution of $210 million was received from
Marubeni, the minority partner at Antucoya, in order to replace
part of Antucoya's subordinated debt financing with equity (see
Notes 18).
Notes
1. General information and accounting policies
a) General information
This preliminary results announcement is for the year ended 31
December 2020. 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") and means that the
financial information contained in this preliminary results
announcement has been prepared in accordance with both
international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The Group will send
its full financial statements that comply with IFRS to shareholders
in April 2021.
The financial information contained in this preliminary results
announcement has been prepared on the going concern basis.
Going concern
The Group's business activities, together with those factors
likely to affect its future performance, are set out in the
Directors' Comments, and in particular within the Review of
Operations. Details of the cash flows of the Group during the
period, along with its financial position at the period-end, are
set out in the Financial Review. The financial information
contained in this preliminary results announcement includes details
of the Group's cash, cash equivalents and liquid investment
balances in Note 25, and details of borrowings are set out in Note
18.
When assessing the going concern status of the Group the
Directors have considered in particular its financial position,
including its significant balance of cash, cash equivalents and
liquid investments and the borrowing facilities in place, including
their terms and remaining durations. The Group had a strong
financial position as at 31 December 2020, with combined cash, cash
equivalents and liquid investments of $3,672.8 million. Total
borrowings were $3,754.8 million, resulting in a net debt position
of just $82.0 million. Of the total borrowings, only 16% is
repayable within one year, and 14% repayable between one and two
years. 43% of the borrowings are repayable after more than 5
years.
When assessing the prospects of the Group, the Directors have
considered the Group's copper price forecasts, the Group's expected
production levels, operating cost profile, capital expenditure and
financing plans. This analysis has focused on the existing asset
base of the Group, without factoring in potential development
projects, which is considered appropriate for an assessment of the
Group's ability to manage the impact of a depressed economic
environment. The analysis has only included the draw-down of
existing committed borrowing facilities, and has not assumed that
any new borrowing facilities will be put in place. The Directors
have assessed the principal risks which could impact the prospects
of the Group over the going concern period and consider the most
relevant to be risks to the copper price outlook. Robust down-side
sensitivity analyses have been performed, assessing the impact
of:
-- A significant deterioration in the copper price outlook over the going concern period;
-- A shut-down of the Group's operations for several months as
the result of COVID-19 related issues; and
-- The occurrence of several of the Group's most significant
potential risks within a single year, such as temporary shut-downs
or operational disruption due to issues such as labour strikes or
water availability.
These stress-tests all indicated results which could be managed
in the normal course of business. Based on their assessment of the
Group's prospects and viability, the Directors have formed a
judgement, at the time of approving the financial statements, that
there are no material uncertainties that cast doubt on the Group's
going concern status and that there is a reasonable expectation
that the Group has adequate resources to continue in operational
existence for at least twelve months from the date of approval of
the financial statements. The Directors therefore consider it
appropriate to adopt the going concern basis of accounting in
preparing its financial statements.
Preliminary results announcement
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 2020 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 12 May 2021. 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 2019 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 30, 31 and 32 of this
preliminary results announcement is not derived from the statutory
accounts for the years ended 31 December 2020 and 2019 and is
accordingly not covered by the auditor's reports.
b) Adoption of new accounting standards
Other accounting standards
The following accounting standards, amendments and
interpretations became effective in the current reporting period
but the application of these standards and interpretations had no
material impact on the amounts reported in these condensed
consolidated financial statements:
-- Amendments to References to the Conceptual Framework in IFRS Standards
-- Definition of a Business (Amendments to IFRS 3)
-- Definition of Material (Amendments to IAS 1 and IAS 8)
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
-- Covid-19-Related Rent Concessions (Amendment to IFRS 16)
c) 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 17, Insurance Contracts Annual periods beginning on
or after January 1, 2023
----------------------------
Amendments to IFRSs Effective date (Subject to
EU endorsement)
----------------------------
Classification of Liabilities as Current Annual periods beginning on
or Non-Current (Amendments to IAS 1) or after January 1, 2023
----------------------------
Reference to the Conceptual Framework Annual periods beginning on
(Amendments to IFRS 3) or after January 1, 2022
----------------------------
Property, Plant and Equipment - Proceeds Annual periods beginning on
before Intended Use (Amendments to IAS or after January 1, 2022
16)
----------------------------
Onerous Contract - Cost of Fulfilling Annual periods beginning on
a Contract (Amendments to IAS 37) or after January 1, 2022
----------------------------
Annual Improvements to IFRS Standards Annual periods beginning on
2018-2020 (Amendments to IFRS 1, IFRS or after January 1, 2022
9, IFRS 16 and IAS 41)
----------------------------
The item which is expected to have most relevance to the Group
is the amendment to IAS 16 Property, Plant and Equipment - Proceeds
before intended use. Currently the Group deducts amounts received
from the sale of products during the initial ramp-up of new
projects, before commercial production is achieved, from the
capital cost of the project. Under the amendment to IAS 16 such
amounts will instead be recognised as revenue in the income
statement along with a corresponding allocation of related
operating expenses, which is likely to result in increased revenue
and operating expenses and a higher initial capitalised amount.
2. Total profit from operations, associates and joint ventures
Year
Year ended ended
31.12.2020 31.12.2019
$m $m
Revenue 5,129.3 4,964.5
Cost of sales (2,857.9) (2,963.6)
------------ ------------
Gross profit 2,272.4 2,000.9
Administrative and distribution
expenses (484.6) (445.9)
Other operating income 27.0 28.4
Other operating expenses (222.6) (207.6)
------------ ------------
Operating profit from subsidiaries 1,592.2 1,375.8
------------ ------------
Net share of results from
associates and joint ventures 5.1 24.4
Impairment of investment (80.8) -
in associate
------------ ------------
Total profit from operations,
associates and joint ventures 1,516.5 1,400.2
============ ============
Other operating expenses comprise $85.0 million of exploration
and evaluation expenditure (2019 - $111.0 million), $17.9 million
in respect of the employee severance provision (2019 - $24.8
million), $45.2 million in respect of the closure provision (2019 -
$2.8 million credit) and $74.5 million of other expenses (2019 -
$74.5 million).
3. Exceptional items
Exceptional items are material items of income and expense which
are non-regular or non-operating and typically non-cash
movements.
On 31 March 2020 the Group agreed to dispose of its 40% interest
in Hornitos coal-fired power station to ENGIE Energía Chile S.A.
("ENGIE"), the owner of the remaining 60% interest. This was part
of the value accretive renegotiation of Centinela's power purchase
agreement which as a result will be wholly supplied from lower cost
renewable sources from 2022. Under the terms of the agreement the
Group will dispose of its investment to Engie in 2021 for a nominal
consideration, and will not be entitled to receive any further
dividend income from Hornitos from the date of the agreement.
Accordingly, the Group no longer has any effective economic
interest in the results or assets of Hornitos from 31 March 2020
onwards, and has therefore recognised an impairment of $80.8
million in respect of its investment in associate balance, and will
no longer recognise any share of Hornitos' results. The post-tax
impact of the impairment is $61.1 million, of which $40.2 million
is attributable to the equity owners of the Company.
There were no exceptional items in 2019.
4. Asset sensitivities
Based on an assessment of both qualitative and quantitative
factors, there were no indicators of potential impairment, or
reversal of previous impairments, for the Group's non-current
assets associated with its mining operations at the 2020 year-end,
and accordingly no impairment reviews have been performed. The
quantitative element of the trigger assessment provides an
indication of what the approximate recoverable amount of the
Group's operations would be, were a full impairment test under IAS
36 to be performed. In order to provide an indication of the
sensitivities of the approximate recoverable amount of the Group's
mining operations, a sensitivity analysis has been performed on the
preliminary valuation, prepared as part of the Group's impairment
indicator analysis.
The COVID-19 situation is not expected to have a relevant
negative impact on the future production, operating expenses or
capital projects of the Group's mining operations.
If a full IAS 36 impairment test were to be prepared, which was
not the case as at 31 December 2020, 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.
This impairment indicator 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.
The assumption to which the value of the assets is most
sensitive is the future copper price. The copper 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
$3.10/lb has been used in the base valuations used in the
impairment indicator assessment. As an additional down-side
sensitivity a valuation was performed with a long-term copper price
of $2.90 /lb, reflecting the lower quartile price in the consensus
of analyst forecasts used when assessing the appropriate long-term
price. Los Pelambres, Centinela, and Zaldívar still showed a
positive headroom in this alternative down-side scenario, however
the Antucoya valuation indicated a potential deficit of
approximately $15 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. In particular, given
that copper exports account for over 50% of Chile's exports,
movements in the US dollar/Chilean peso exchange rate are highly
correlated to the copper price, and a decrease in the copper price
is likely to result in a weakening of the Chilean peso, with a
resulting reduction in the Group's operating costs and capital
expenditure. These likely cost reductions, as well as potential
operational changes which could be made in a weaker copper price
environment, could partly mitigate the impact of the
lower copper price modelled in these estimated potential
sensitivities.
In addition to the future copper price, the valuations are
sensitive to the assumptions in respect of the discount rate used
to determine the present value of the future cash flows, future
operating costs, sustaining and development capital expenditure,
and the US dollar/Chilean peso exchange rate. As an additional
down-side sensitivity a valuation was performed with a 10% stronger
long-term Chilean peso exchange rate assumption. Los Pelambres,
Centinela, Antucoya and Zaldívar all still showed a positive
headroom in this alternative down-side scenario. 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 as part of the
impairment indicator assessment.
Climate change aspects relevant to asset sensitivities
The Group is undertaking on-going work to assess and reduce the
Group's exposure to climate risks, in line with the TCFD framework.
During 2020 the Group conducted an initial qualitative assessment
of the potential risks and opportunities and likely business
impacts under two climate change scenarios, and during 2021 will
select the most material risks and opportunities to undergo a
quantitative scenario analysis in order to estimate in more detail
the potential operational and financial impact to our operations.
The following section provides a high-level summary of the way in
which climate change related factors could be relevant to the
sensitivities of the values of the Group's mining operations, based
on the Group's existing analysis.
Relevant aspects of the Group's operations
The following aspects of the Group's mining operations are
particularly relevant when looking at the potential impacts of
climate change on the operational performance and value of the
Group's mining operations:
-- The Group's mining business is focused on copper. The
transition to a low-carbon economy requires many carbon reduction
measures with two major drivers being the increased demand for
renewable energy and the electrification of transportation systems.
As copper is a primary component in these technologies, this is
expected to have a positive impact on copper demand in the medium-
to long-term.
-- The Group has been working to eliminate its involvement with
coal-fired electricity generation. The Group has electricity supply
contracts in place which mean that from 2022 all of the mining
operations' electricity supply will be from renewable sources.
The Group has also held a 40% interest in the Hornitos
coal-fired power station in northern Chile. In March 2020 the Group
agreed to dispose of this interest, recognising a full impairment
of the carrying value of this investment.
-- The Group's sensitivity analysis has identified an increased
risk of drought in the Coquimbo region where Los Pelambres is
situated as one of the principal potential climate related physical
risks for the Group. In the Atacama region where Antucoya,
Centinela and Zaldívar are situated, water scarcity has always been
acute and is expected to remain so. The Group has been focused on
reducing its use of continental fresh water for a number of years,
through the use of sea water and maximising the level of recycling
of water in its operations. Centinela and Antucoya were designed to
operate entirely with raw (i.e. non-desalinated) sea water. Los
Pelambres is currently constructing a desalination plant, and by
2025 this will result in 95% of its water usage coming from
desalinated sea water or recycled water. Zaldívar has submitted an
Environmental Impact Assessment for an extension of its mine life
to 2031 and this includes an application to extend the mine's water
extraction rights from 2025, when they currently expire.
Relevant aspects of the asset sensitivity and valuation
analysis
The nature of the asset sensitivity and valuation analysis
described above means that some level of assessment of potential
future climate-related risks should effectively already be
incorporated into a number of the key assumptions used in this
analysis. As explained above, the Group typically uses a "fair
value less cost to dispose" methodology when performing this
analysis, which reflects the price the Group could expect to
receive from the sale of the asset to an external market
participant. Accordingly, the Group uses assumptions which an
external market participant could reasonably be expected to use
when valuing the asset. Therefore, where possible the Group uses
assumptions which are supported by external market data - in
particular, in respect of the forecasts for the future copper
price, the future US dollar / Chilean peso exchange rate and the
discount rate. This market data should reflect the market's current
best estimate of the risks and opportunities impacting, for
example, the future copper price or comparable mining assets etc -
including within those overall risks and opportunities the market's
current assessment of the probable impact of climate-related
factors.
5. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Antucoya
-- Zaldívar
-- Exploration and evaluation
-- Corporate and other items
-- Transport division
For management purposes, the Group is organised into two
business divisions based on their products - Mining and Transport.
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, molybdenum concentrates and copper cathodes.
Antucoya and Zaldívar produce copper cathodes. The transport
division provides rail and road cargo transport 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 assessing
performance. Segment performance is evaluated based on the
operating profit of each of the segments.
a) Segment revenues and results
For the year ended 31.12.2020
Los Pelambres Centinela Antucoya Zaldívar Exploration Corporate Total Transport Total
and evaluation(2) and other Mining division
items
$m $m $m $m $m $m $m $m $m
Revenue 2,655.1 1,844.5 480.3 - - - 4,979.9 149.4 5,129.3
Operating costs
excluding
depreciation (992.1) (932.8) (314.5) - (85.1) (66.2) (2,390.7) (91.4) (2,482.1)
Depreciation and
amortisation (252.6) (662.9) (94.6) - - (7.8) (1,017.9) (30.8) (1,048.7)
Loss on
disposals (2.5) (1.8) - - - - (4.3) (2.0) (6.3)
------------------------ --------------------- --------------------- ------------- ------------------- -------------------- ------------------ -------------------- ------------------
Operating
profit/(loss) 1,407.9 247.0 71.2 - (85.1) (74.0) 1,567.0 25.2 1,592.2
Equity
accounting
profit /(loss) - - - 12.2 - (6.5) 5.7 (0.6) 5.1
Impairment of
investment
in associate(3) - (95.6) - - - - (95.6) 14.8 (80.8)
------------------------ --------------------- --------------------- ------------- ------------------- -------------------- ------------------ -------------------- ------------------
Net share of
results
from associates
and joint
ventures - (95.6) - 12.2 - (6.5) (89.9) 14.2 (75.7)
Investment
income 4.7 4.3 0.8 - - 9.0 18.8 0.1 18.9
Interest expense (4.3) (24.9) (25.5) - - (20.7) (75.4) (1.7) (77.1)
Other finance
items (26.0) (13.7) (4.0) - - (5.5) (49.2) 4.0 (45.2)
------------------------ --------------------- --------------------- ------------- ------------------- -------------------- ------------------ -------------------- ------------------
Profit/(loss)
before
tax 1,382.3 117.1 42.5 12.2 (85.1) (97.7) 1,371.3 41.8 1,413.1
Tax (435.8) (23.0) (0.3) - - (59.2) (518.3) (8.2) (526.5)
------------------------ --------------------- --------------------- ------------- ------------------- -------------------- ------------------ -------------------- ------------------
Profit/(loss)
for
the year from
continuing
operations 946.5 94.1 42.2 12.2 (85.1) (156.9) 853.0 33.6 886.6
Profit for the
period
from
discontinued
operations - - - - - 7.3 7.3 - 7.3
------------------------ --------------------- --------------------- ------------- ------------------- -------------------- ------------------ -------------------- ------------------
Profit/(loss)
for
the year 946.5 94.1 42.2 12.2 (85.1) (149.6) 860.3 33.6 893.9
Non-controlling
interests 371.5 12.9 3.1 - - - 387.5 - 387.5
Profit/(loss)
for
the period
attributable
to owners of
the
parent 575.0 81.2 39.1 12.2 (85.1) (149.6) 472.8 33.6 506.4
======================== ===================== ===================== ============= =================== ==================== ================== ==================== ==================
EBITDA(1) 1,663.0 911.7 165.8 95.5 (85.1) (72.7) 2,678.2 61.0 2,739.2
Additions to
non-current
assets
Capital
expenditure 827.3 441.8 44.6 - - 8.4 1,322.1 26.2 1,348.3
Segment assets
and
liabilities
Segment assets 5,475.9 5,898.8 1,641.5 - - 2,286.8 15,303.1 386.5 15,689.7
Investments in
associates
and joint
ventures - - - 909.0 - - 909.0 5.6 914.6
Segment
liabilities (2,700.1) (1,823.2) (702.5) - - (1,202.6) (6,428.4) (94.8) (6,523.2)
(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) Operating cash outflow in the exploration and evaluation
segment was $43.1 million
(3) On 31 March 2020 the Group agreed to dispose of its 40%
interest in Hornitos coal-fired power station to ENGIE Energía
Chile S.A. ("ENGIE"), the owner of the remaining 60% interest. This
has resulted in a $80.8 million impairment in respect of the
Group's investment in associate balance.
For the year ended 31 December 2019
Los Pelambres Centinela Antucoya Zaldívar Exploration Corporate Total Transport Total
and evaluation(2) and other Mining division
items
$m $m $m $m $m $m $m $m $m
Revenue 2,363.9 2,007.9 432.2 - - - 4,804.0 160.5 4,964.5
Operating costs
excluding
depreciation (979.8) (1,048.4) (345.9) - (111.1) (70.8) (2,556.0) (105.7) (2,661.7)
Depreciation and
amortisation (258.5) (532.2) (92.2) - - (7.9) (890.8) (23.5) (914.3)
Loss on
disposals (10.5) (1.5) - - - - (12.0) (0.7) (12.7)
-------------- -------------- -------------- ------------------- -------------------------- ------------------------- ------------- --------------- -------------
Operating
profit/(loss) 1,115.1 425.8 (5.9) - (111.1) (78.7) 1,345.2 30.6 1,375.8
Equity
accounting
profit /(loss) - - - 15.5 - (2.5) 13.0 11.4 24.4
Investment
income 11.1 7.9 1.4 - - 26.2 46.6 0.5 47.1
Interest expense (7.7) (36.5) (42.7) - - (21.7) (108.6) (2.5) (111.1)
Other finance
items 8.8 3.4 (0.5) - - 1.8 13.5 (0.5) 13.0
-------------- -------------- -------------- ------------------- -------------------------- ------------------------- ------------- --------------- -------------
Profit/(loss)
before
tax 1,127.3 400.6 (47.7) 15.5 (111.1) (74.9) 1,309.7 39.5 1,349.2
Tax (341.4) (88.5) (0.2) - - (68.2) (498.3) (7.8) (506.1)
-------------- -------------- -------------- ------------------- -------------------------- ------------------------- ------------- --------------- -------------
Profit/(loss)
for
the year from
continuing
operations 785.9 312.1 (47.9) 15.5 (111.1) (143.1) 811.4 31.7 843.1
Non-controlling
interests (309.0) (69.4) 36.7 - - - (341.7) - (341.7)
Profit/(loss)
for
the year
attributable
to owners of
the
parent 476.9 242.7 (11.2) 15.5 (111.1) (143.1) 469.7 31.7 501.4
============== ============== ============== =================== ========================== ========================= ============= =============== =============
EBITDA(1) 1,384.1 959.5 86.3 112.6 (111.1) (73.3) 2,358.1 80.8 2,438.9
Additions to
non-current
assets
Capital
expenditure 573.0 535.9 43.0 - - 16.0 1,167.9 68.6 1,236.5
Segment assets
and liabilities
Segment assets 4,251.2 5,792.2 1,647.1 - - 1,548.8 13,239.3 346.3 13,585.6
Investment in
associates
and joint
ventures - - - 961.8 - - 961.8 63.0 1,024.8
Segment
liabilities (1,696.7) (1,789.6) (933.3) - - (694.0) (5,113.6) (95.8) (5,209.4)
(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) Operating cash outflow in the exploration and evaluation
segment was $43.0 million
b) Entity wide disclosures
Revenue by product(1)
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Copper
- Los Pelambres 2,323.6 2,009.1
- Centinela concentrates 940.4 1,137.7
- Centinela cathodes 603.9 504.4
- Antucoya 480.3 432.2
Gold
- Los Pelambres 106.4 75.2
- Centinela 251.3 332.5
Molybdenum
- Los Pelambres 181.8 249.0
- Centinela 27.7 5.6
Silver
- Los Pelambres 43.3 30.7
- Centinela 21.2 27.6
Total Mining 4,979.9 4,804.0
Transport division 149.4 160.5
------------------------------ --------------------------------
5,129.3 4,964.5
============================== ================================
Revenue by location of customer(1)
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Europe
- United Kingdom 123.3 152.3
- Switzerland 593.5 612.4
- Spain 29.3 158.0
- Germany 116.4 102.7
- Rest of Europe 92.3 85.0
Latin America
- Chile 224.4 213.8
- Rest of Latin America 182.0 95.3
North America
- United States 216.5 88.9
Asia Pacific
- Japan 1,631.1 1,561.5
- China 531.4 517.2
- Singapore 667.5 692.1
- South Korea 353.4 371.2
- Hong Kong 235.7 171.0
- Rest of Asia 132.5 143.1
------------------------------ ------------------------------
5,129.3 4,964.5
============================== ==============================
1 Figures include both revenue from the sale of products and the
associated income from the provision of shipping services.
Information about major customers
In the year ended 31 December 2020 the Group's mining revenue
included $763.4 million related to one large customer that
individually accounted for more than 10% of the Group's revenue
(year ended 31 December 2019 - one large customer representing
$711.9 million).
Non-current assets by location of asset
Year ended
Year ended 31.12.2019
31.12.2020 Restated
$m $m
- Chile 11,092.7 10,818.0
- USA 178.3 176.9
- Other - 0.1
11,271.0 10,995.0
========================= ================
The above amounts reflect non-current assets excluding financial
assets (in particular, derivative financial instruments) and
deferred tax assets. The prior period comparatives have been
restated to exclude financial assets and deferred tax assets,
resulting in a reduction in respect of the assets located in Chile
of $9.9 million as at 31 December 2019.
6. Revenue
Copper and molybdenum concentrate sale contracts and copper
cathode sale contracts 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. For sales contracts which contains provisional pricing
mechanisms the total receivable balance is measured at fair value
through profit or loss. Gains and losses from the mark-to-market of
open sales are recognised through adjustments to revenue in the
income statement and to trade receivables 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
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.
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. The shipping service represents a
separate performance obligation, and is recognised separately from
the sale of the material over time as the shipping service is
provided.
The total revenue from contracts with customers and the impact
of provisional pricing adjustments in respect of concentrate and
cathode sales is as follows:
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Revenue from contracts with customers
Sale of products 4,617.3 4,693.4
Provision of shipping services associated
with the sale of products 95.4 92.9
Transport services 149.4 160.5
Provisional pricing adjustments in
respect of copper, gold and molybdenum 267.2 17.7
Total revenue 5,129.3 4,964.5
============================== ============
The categories of revenue which are principally affected by
different economic factors are the individual product types. A
summary of revenue by product is set out in Note 5.
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 that follow.
Copper, gold and molybdenum concentrate sales are stated net of
deductions for tolling charges, as shown in the tables that
follow.
For the year ended 31 December 2020(1)
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres Los Pelambres
Pelambres
Copper Copper Copper Copper Gold Gold Molybdenum Molybdenum
concentrate concentrate cathodes cathodes in in concentrate concentrate
concentrate concentrate
Provisionally
invoiced
gross sales 2,256.7 949.3 594.8 474.8 104.9 250.6 205.0 31.6
Effects of
pricing
adjustments to
previous
year invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year (29.1) (15.2) (0.4) (0.4) - (1.2) 0.4 -
Settlement of
sales
invoiced in
the previous
year (43.6) (18.7) (0.3) (0.3) 0.2 3.7 (1.5) (0.2)
------------ ------------- ---------- ---------- -------------- -------------- -------------- --------------
Total effect of
adjustments
to previous
year invoices
in the current
period (72.7) (33.9) (0.7) (0.7) 0.2 2.5 (1.1) (0.2)
------------ ------------- ---------- ---------- -------------- -------------- -------------- --------------
Effects of
pricing
adjustments to
current
period invoices
Settlement of
sales
invoiced in
the current
period 194.6 67.0 11.2 7.8 1.5 (2.0) 4.6 2.1
Mark-to-market
adjustments
at the end of
the current
period 58.7 26.8 (0.1) 0.5 - 0.9 (0.2) 0.3
------------ ------------- ---------- ---------- -------------- -------------- -------------- --------------
Total effect of
adjustments
to current
period
invoices 253.3 93.8 11.1 8.3 1.5 (1.1) 4.4 2.4
------------ ------------- ---------- ---------- -------------- -------------- -------------- --------------
Total pricing
adjustments 180.6 59.9 10.4 7.6 1.7 1.4 3.3 2.2
Realised losses
on
commodity
derivatives - - (1.3) (2.1) - - - -
Revenue before
deducting
tolling
charges 2,437.3 1,009.2 603.9 480.3 106.6 252.0 208.3 33.8
Tolling charges (113.6) (68.8) - - (0.2) (0.7) (26.5) (6.1)
Revenue net of
tolling
charges 2,323.7 940.4 603.9 480.3 106.4 251.3 181.8 27.7
============ ============= ========== ========== ============== ============== ============== ==============
The revenue from the individual products shown in the above
table is reconciled to total revenue in Note 5.
(1) Figures include both revenue from the sale of products and
the associated income from the provision of shipping services.
For the year ended 31 December 2019(1)
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Centinela Los Centinela
Pelambres Pelambres Pelambres
Copper Copper Copper Copper Gold Gold Molybdenum Molybdenum
concentrate concentrate cathodes cathodes in in concentrate concentrate
concentrate concentrate
Provisionally
invoiced
gross sales 2,144.9 1,222.3 506.1 434.8 76.2 325.3 298.1 7.4
Effects of
pricing
adjustments to
previous
year invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year 23.6 9.5 0.7 0.7 - (0.7) (0.7) -
Settlement of
sales
invoiced in
the previous
year 0.3 9.9 (1.0) (0.9) (1.3) 1.4 (8.4) -
------------ ------------ ---------- --------- ------------ ------------ ------------ ------------
Total effect of
adjustments
to previous
year invoices
in the current
period 23.9 19.4 (0.3) (0.2) (1.3) 0.7 (9.1) -
------------ ------------ ---------- --------- ------------ ------------ ------------ ------------
Effects of
pricing
adjustments to
current
period invoices
Settlement of
sales
invoiced in
the current
period (41.3) (14.6) (1.8) (2.9) 0.5 6.4 (7.0) (0.8)
Mark-to-market
adjustments
at the end of
the current
period 29.1 15.2 0.4 0.4 - 1.2 (0.4) -
------------ ------------ ---------- --------- ------------ ------------ ------------ ------------
Total effect of
adjustments
to current
period
invoices (12.2) 0.6 (1.4) (2.5) 0.5 7.6 (7.4) (0.8)
------------ ------------ ---------- --------- ------------ ------------ ------------ ------------
Total pricing
adjustments 11.7 20.0 (1.7) (2.7) (0.8) 8.3 (16.5) (0.8)
Realised losses - - - 0.1 - - - -
on
commodity
derivatives
Revenue before
deducting
tolling
charges 2,156.6 1,242.3 504.4 432.2 75.4 333.6 281.6 6.6
Tolling charges (147.5) (104.6) - - (0.2) (1.1) (32.6) (1.0)
Revenue net of
tolling
charges 2,009.1 1,137.7 504.4 432.2 75.2 332.5 249.0 5.6
============ ============ ========== ========= ============ ============ ============ ============
The revenue from the individual products shown in the above
table is reconciled to total revenue in Note 5.
(1) Figures include both revenue from the sale of products and
the associated income from the provision of shipping services.
(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 31.12.2020 At 31.12.2019
Open sales Tonnes 162,300 158,600
Average mark-to-market price $/lb 3.52 2.81
Average provisional invoice
price $/lb 3.28 2.68
(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 31.12.2020 At 31.12.2019
Open sales Tonnes 13,800 12,000
Average mark-to-market price $/lb 3.52 2.80
Average provisional invoice
price $/lb 3.50 2.77
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain
open until settlement is approximately one month from shipment
date.
At 31.12.2020 At 31.12.2019
Open sales Ounces 16,300 21,200
Average mark-to-market price $/oz 1,917 1,542
Average provisional invoice
price $/oz 1,861 1,485
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open
until settlement is approximately two months from shipment
date.
At 31.12.2020 At 31.12.2019
Open sales Tonnes 2,000 1,900
Average mark-to-market price $/lb 9.34 9.20
Average provisional invoice
price $/lb 9.38 9.30
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 receivables 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
31.12.2020 31.12.2019
$m $m
Los Pelambres - copper concentrate 58.7 29.1
Los Pelambres - molybdenum
concentrate (0.2) (0.4)
Centinela - copper concentrate 26.8 15.2
Centinela - molybdenum concentrate 0.3 -
Centinela - gold in concentrate 0.9 1.2
Centinela - copper cathodes (0.1) 0.4
Antucoya - copper cathodes 0.5 0.4
86.9 45.9
================================ ============
7. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
For the year ended 31.12.2020
-----------------------------------------------------------------------------------------
At fair value At fair value Held at amortised Total
through profit through other cost
and loss comprehensive
income
$m $m $m $m
Financial assets
Derivative financial
assets 1.4 - - 1.4
Equity investments - 11.1 - 11.1
Loans and receivables 808.0 - 184.6 992.6
Cash and cash equivalents - - 1,246.8 1,246.8
Liquid investments 2,426.0 - - 2,426.0
---------------- --------------- ----------------------------------------- -----------
3,235.4 11.1 1,431.4 4,677.9
---------------- --------------- ----------------------------------------- -----------
Financial liabilities
Derivative financial
liabilities (37.4) - - (37.4)
Trade and other payables (0.3) - (815.8) (816.1)
Borrowings and leases - - (3,754.8) (3,754.8)
---------------- --------------- ----------------------------------------- -----------
(37.7) - (4,570.6) (4,608.3)
---------------- --------------- ----------------------------------------- -----------
For the year ended 31.12.2019
------------------------------------------------------------------
At fair value At fair value Held at amortised Total
through profit through other cost
and loss comprehensive
income
$m $m $m $m
Financial assets
Derivative financial
assets 4.8 - - 4.8
Equity investments - 5.1 - 5.1
Loans and receivables
(restated(1) ) 571.3 - 97.1 668.4
Cash and cash equivalents - - 653.7 653.7
Liquid investments 1,539.7 - - 1,539.7
---------------- --------------- ------------------ -----------
2,115.8 5.1 750.8 2,871.7
---------------- --------------- ------------------ -----------
Financial liabilities
Derivative financial
liabilities (12.1) - - (12.1)
Trade and other payables (0.4) - (755.9) (756.3)
Borrowings and leases - - (2,756.8) (2,756.8)
---------------- --------------- ------------------ -----------
(12.5) - (3,512.7) (3,525.2)
---------------- --------------- ------------------ -----------
The fair value of the fixed rate bond included within the
"Borrowings and leases" category was $503.5 million at 31 December
2020 compared with its carrying value of $495.6 million. The fair
value of all other financial assets and financial liabilities
carried at amortised cost is not materially different from the
carrying value presented above.
1. The "Loans and receivables" balances for the comparative
periods have been restated to exclude certain amounts which are
outside the scope of the definition of "financial assets" per IAS
32 Financial Instruments: Presentation, resulting in a $62.2
million reduction in the balance as at 31 December 2019.
Fair value of financial instruments
An analysis of financial assets and financial liabilities
measured at fair value is presented below:
For the year ended 31.12.2020
----------------------------------------------------------------------------
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Derivatives financial assets (a) - 1.4 - 1.4
Equity investments (b) 11.1 - - 11.1
Loans and receivables (c) - 808.0 - 808.0
Liquid investment (d) 2,426.0 - - 2,426.0
2,437.1 809.4 - 3,246.5
---------------------- --------------------- ------ ---------------------
Financial liabilities
Derivatives financial liabilities (a) - (37.4) - (37.4)
Trade and other payables - (0.3) - (0.3)
- (37.7) - (37.7)
---------------------- --------------------- ------ ---------------------
For the year ended 31.12.2019
---------------------------------------------------------------------
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Derivatives financial assets (a) - 4.8 - 4.8
Equity investments (b) 5.1 - - 5.1
Loans and receivables (c) - 571.3 - 571.3
Liquid investment (d) 1,539.7 - - 1,539.7
1,544.8 576.1 - 2,120.9
----------------- ------------------- ------ ---------------------
Financial liabilities
Derivatives financial liabilities (a) - (12.1) - (12.1)
Trade and other payables - (0.4) - (0.4)
- (12.5) - (12.5)
----------------- ------------------- ------ ---------------------
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting year.
a) 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. Hedging instruments at
31 December 2020 relate to foreign exchange and commodity
options.
b) Equity 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.
c) 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
receivables 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.
d) Liquid investments 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 2020, there were no transfers between
levels in the hierarchy.
b) Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce exposure to foreign exchange, interest rate and commodity
price movements. The Group does not use such derivative instruments
for trading purposes. The Group has applied the hedge accounting
provisions of IFRS 9 Financial Instruments. The effective portion
of changes in the fair value of derivative financial instruments
that are designated and qualify as hedges of future cash flows have
been recognised directly in equity, with such amounts subsequently
recognised in profit or loss in the period when the hedged item
affects profit or loss. Any ineffective portion is recognised
immediately in profit or loss. Realised gains and losses on
commodity derivatives recognised in profit or loss are recorded
within revenue. The time value element of changes in the fair value
of derivative options is recognised within other comprehensive
income. Derivatives embedded in other financial instruments or
other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host
contracts and the host contracts are not carried at fair value.
Changes in fair value are reported in profit or loss for the
year.
8. Net finance expense
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Investment income
Interest income 3.4 9.8
Fair value through profit or loss 15.5 37.3
-------------------------------- --------------------------------
18.9 47.1
-------------------------------- --------------------------------
Interest expense
Interest expense (77.1) (111.1)
(77.1) (111.1)
-------------------------------- --------------------------------
Other finance items
Unwinding of discount on provisions (16.7) (22.7)
Preference dividends (0.1) (0.1)
Foreign exchange (28.4) 35.8
(45.2) 13.0
-------------------------------- --------------------------------
Net finance expense (103.4) (51.0)
================================ ================================
During 2020, amounts capitalised and consequently not included
within the above table were as follows: $5.7 million at Centinela (
year ended 31 December 2019 - $ 4.7 million) and $21.0 million at
Los Pelambres ( year
ended 31 December 2019 - $12.5 million).
The interest expense shown above includes $9.7 million in
respect of leases (2019 - $13.0 million).
9. Taxation
The tax charge for the period comprised the following:
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Current tax charge
Corporate tax (principally first category
tax in Chile) (353.5) (255.5)
Mining tax (royalty) (106.1) (67.2)
Withholding tax (55.8) (32.4)
Exchange gains on corporate tax balances 0.1 0.7
(515.3) (354.4)
------------------------- --------------------------
Deferred tax
Corporate tax (principally first category
tax in Chile) (1.1) (125.1)
Mining tax (royalty) 4.2 0.6
Withholding tax (14.3) (27.2)
(11.2) (151.7)
------------------------- --------------------------
Total tax charge (income tax expense) (526.5) (506.1)
========================= ==========================
The rate of first category (i.e. corporate) tax in Chile is
27.0% (2019 - 27.0%).
In addition to first category tax and the mining tax, the Group
incurs withholding taxes on any remittance of profits from Chile.
Withholding tax is levied on remittances of profits from Chile at
35% less first category (i.e. corporation) tax already paid in
respect of the profits to which the remittances relate.
The Group's mining operations are also subject to a mining tax
(royalty). Production from Los Pelambres, Antucoya, Encuentro
(oxides), the Tesoro North East pit and the Run-of-Mine processing
at Centinela Cathodes is subject to a rate of between 5-14%,
depending on the level of operating profit margin, and production
from Centinela Concentrates and the Tesoro Central and Mirador pits
is subject to a rate of 5% of taxable operating profit.
Year ended Year ended Year ended
Excluding exceptional items Including exceptional items 31.12.2019
31.12.2020 31.12.2020
$m % $m % $m %
Profit before tax 1,493.9 1,413.1 1,349.2
Tax at the Chilean corporate
tax rate of 27% (403.4) 27.0 (381.5) 27.0 (364.3) 27.0
Impairment of investment in
associate - - (2.2) 0.2 - -
Mining Tax (royalty) (101.3) 6.8 (101.3) 7.2 (66.6) 4.9
Deduction of mining royalty as
an allowable expense in
determination of first
category tax 28.1 (1.9) 28.1 (2.0) 19.1 (1.4)
Items not deductible from
first category tax (9.8) 0.7 (9.8) 0.6 (11.9) 0.9
Adjustment in respect of prior
years (1.6) 0.1 (1.6) 0.1 4.3 (0.3)
Withholding tax (70.0) 4.7 (70.0) 5.0 (59.3) 4.4
Tax effect of share of profit
of associates and joint
ventures 1.4 (0.1) 1.4 (0.1) 4.7 (0.3)
Reversal of previously
unrecognised tax
losses/(unrecognised tax
losses) 10.5 (0.7) 10.5 (0.7) (33.0) 2.4
Net other items (0.1) - (0.1) - 0.9 (0.1)
Tax expense and effective tax
rate for the period (546.2) 36.6 (526.5) 37.3 (506.1) 37.5
The effective tax rate varied from the statutory rate
principally due to the mining tax (royalty) (net impact of $73.2
million / 5.2% including the deduction of the mining tax (royalty)
as an allowable expense in the determination of first category
tax), the withholding tax relating to the remittance of profits
from Chile (impact of $70.0 million / 5.0%), items not deductible
for Chilean corporate tax purposes, principally the funding of
expenses outside of Chile (impact of $9.8 million / 0.6%),
adjustments in respect of prior years (impact of $1.6 million /
0.1%), partly offset by unrecognised tax losses (impact of $10.5
million / 0.7%) 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 $1.4 million / 0.1%).
The impact of the exceptional items on the effective tax rate
including exceptional items was $2.2 million / 0.2%.
The main factors which could impact the sustainability of the
Group's existing effective tax rate are:
-- The level of future distributions made by the Group's Chilean
subsidiaries out of Chile, which could result in increased
withholding tax charges.
-- The impact of expenses which are not deductible for Chilean
first category tax. Some of these expenses are relatively fixed
costs, and so the relative impact of these expenses on the Group's
effective tax rate will vary depending on the Group's total profit
before tax in a particular year.
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
10. Discontinued operation
In 2016 the Group disposed of Minera Michilla SA, with the
profit on disposal, along with the results for that year, being
presented on the "Profit for the period from discontinued
operations" line in the income statement. The Group retained
certain residual options over the Michilla operation, and in
December 2020 the current owner of Michilla paid the Group $10.0
million in order to extinguish those options, resulting in a
post-tax gain for the Group of $7.3 million. Consistent with the
original presentation in 2016, this gain has been reflected on the
"Profit for the period from discontinued operations" line in the
income statement.
11. Earnings per share
Year ended Year ended
31.12.2020 31.12.2019
$m $m
Profit for the year attributable to
equity holders of the Company 506.4 501.4
Number Number
Ordinary shares in issue throughout
each period 985,856,695 985,856,695
Year ended Year ended
31.12.2020 31.12.2019
US cent US cent
Basic earnings per share
From continuing operations 50.6 50.9
From discontinued operations 0.7 -
Total continuing and discontinued
operations 51.3 50.9
Basic earnings per share are calculated as profit after tax and
non-controlling interests, based on 985,856,695 (2019: 985,856,695)
ordinary shares.
There was no potential dilution of earnings per share in either
year set out above, and therefore diluted earnings per share did
not differ from basic earnings per share as disclosed above.
Reconciliation of basic earnings per share from continuing
operations:
Year ended Year ended
31.12.2020 31.12.2019
Profit for the year attributable to
equity
holders of the Company $m 506.4 501.4
Less: profit for discontinued
operations
attributable to equity holders of the
Company $m (7.3) -
Profit from continuing operations $m 499.1 501.4
Ordinary shares Number 985,856,695 985,856,695
Basic earnings per share from
continuing
operations US cent 50.6 50.9
12. Dividends
The Board has recommended a final dividend of 48.5 cents per
ordinary share or $478.2 million in total (2019 - 7.1 cents per
ordinary share or $70.0 million in total). The interim dividend of
6.2 cents per ordinary share or $61.1 million in total was paid on
2 October 2020 (2019 interim dividend of 10.7 cents per ordinary
share or $105.5 million in total). This gives total dividends
proposed in relation to 2020 (including the interim dividend) of
54.7 cents per share or $539.3 million in total (2019 - 17.8 cents
per share or $175.5 million in total).
Dividends per share actually paid in the year and recognised as
a deduction from net equity under IFRS were 13.3 cents per ordinary
share or $131.1 million in total (2019 - 47.7 cents per ordinary
share or $470.2 million in total) being the interim dividend for
the year and the final dividend proposed in respect of the previous
year.
Further details of the currency election timing and process
(including the default currency of payment) are available on the
Antofagasta plc website (www.antofagasta.co.uk) or from the
Company's registrar, Computershare Investor Services PLC on +44 370
702 0159.
13. Intangible asset
At 31.12.2020 At 31.12.2019
$m $m
Balance at the beginning
of the year 150.1 150.1
Balance at the end of
the period 150.1 150.1
The $150.1 million intangible asset reflects the value of Twin
Metals' mining licences assets included within the corporate
segment. These assets are classified as intangible assets as
construction of the related mining operation has not yet commenced.
When construction commences the licences will be transferred from
intangible assets to the mining properties category within
property, plant and equipment. Depreciation of these mining
licences, along with the construction costs of the related mining
operation, will commence when the operation is capable of
commercial production.
14. Property, plant and equipment
Railway
and other
Mining transport At 31.12.2020 At 31.12.2019
$m $m $m $m
Balance at the
beginning of the
year 9,286.3 270.4 9,556.7 9,184.1
Adoption of new
accounting
standards - - - 131.4
Additions 1,322.1 26.2 1,348.3 1,174.4
Additions -
depreciation
capitalized 67.8 - 67.8 62.6
Reclassifications 11.9 6.3 18.2 19.9
Adjustment to
capitalised
decommissioning
provisions 59.3 0.1 59.4 24.8
Depreciation (1,017.9) (30.8) (1,048.7) (914.3)
Depreciation
capitalised in
PP&E (67.8) - (67.8) (62.6)
Depreciation
capitalised in
inventories (74.8) - (74.8) (49.7)
Asset disposals (4.2) (3.0) (7.2) (13.9)
Balance at the end
of the period 9,582.7 269.2 9,851.9 9,556.7
At 31 December 2020 $142.6 million (31 December 2019 - $112.3
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 5.
At 31 December 2020, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $849.5 million (31 December 2019 - $863.3
million).
There have been no indicators of potential impairments during
2020, and accordingly no impairment reviews have been performed as
at 31 December 2020.
Depreciation capitalised in property, plant and equipment of
$67.8 million related to the depreciation of assets used in mine
development (operating stripping) at Centinela, Los Pelambres and
Antucoya (at 31 December 2019 - $62.6 million).
15. Investment in associates and joint ventures
Inversiones Minera Tethyan At 31.12.2020 At 31.12.2019
Hornitos(i) ATI(ii) Zaldívar(iii) Copper(iv)
$m $m $m $m $m $m
Balance at the
beginning of
the year 56.9 6.1 961.8 - 1,024.8 1,056.1
Obligations on
behalf of JV
at the beginning
of the year - - - (1.8) (1.8) (1.0)
Capital
contribution 23.9 - - 7.2 31.1 1.8
Impairment of
investment in
associate (i) (80.8) - - - (80.8) -
Share of
profit/(loss)
before
tax - (0.9) 19.8 (6.5) 12.4 36.5
Share of tax - 0.4 (7.6) - (7.2) (12.1)
Share of
income/(loss) from
associate - (0.5) 12.2 (6.5) 5.2 24.4
Dividend receivable - - (65.0) - (65.0) (58.0)
Balance at the end
of the year - 5.6 909.0 - 914.6 1,024.8
Obligations on
behalf of JV
at the end of the
year - - - (1.1) (1.1) (1.8)
Inversiones Minera Tethyan At At
Hornitos ATI Zaldívar Copper 31.12.2020 31.12.2019
$m $m $m $m $m $m
Share of income/(loss) from
associate - (0.5) 12.2 (6.5) 5.2 24.4
Other comprehensive income
of associates to profit
for the year - - - - - (0.3)
Net share of profit from
associates and joint ventures - (0.5) 12.2 (6.5) 5.2 24.1
The investments which are included in the $913.4 million balance
at 31 December 2020 are set out below:
Investment in associates
(i) On 31 March 2020 the Group agreed to dispose of its 40%
interest in Hornitos coal-fired power station to ENGIE Energía
Chile S.A. ("ENGIE"), the owner of the remaining 60% interest. This
was part of the value accretive renegotiation of Centinela's power
purchase agreement which as a result will be wholly supplied from
lower cost renewable sources from 2022. Under the terms of the
agreement the Group will dispose of its investment to Engie in 2021
for a nominal consideration, and will not be entitled to receive
any further dividend income from Hornitos from the date of the
agreement. Accordingly, the Group no longer has any effective
economic interest in the results or assets of Hornitos from 31
March 2020 onwards, and has therefore recognised an impairment of
$80.8 million in respect of its investment in associate balance,
and will no longer recognise any share of Hornitos' results. The
post-tax impact of the provision is $61.1 million, of which $40.2
million is attributable to the equity owners of the Company.
(ii) The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.
Investment in joint ventures
(iii) The Group's 50% interest in Minera Zaldívar SpA ("Zaldívar").
(iv) The Group's 50% interest in Tethyan Copper Company Limited
("Tethyan"), which is a joint venture with Barrick Gold Corporation
in respect of the Reko Diq project in Pakistan. Tethyan has been
pursuing arbitration claims against the Islamic Republic of
Pakistan ("Pakistan") following the unlawful denial of a mining
lease for the project in 2011. Details in respect of the
arbitration are set out in Note 26.
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 of the joint venture's obligations.
Summarised financial information for the associates at December
2020 is as follows:
ATI Total Total
31.12.2020 31.12.2020 31.12.2019
$m $m $m
Cash and cash equivalents 0.2 0.2 30.1
Current assets 11.3 11.3 39.2
Non-current assets 108.2 108.2 377.6
Current liabilities (19.9) (19.9) (62.1)
Non-current liabilities (83.5) (83.5) (243.9)
Revenue 40.4 40.4 192.1
Profit/(loss) from
continuing operations (1.9) (1.9) 29.4
Other comprehensive
expense - - (0.3)
Total comprehensive
income (1.9) (1.9) 29.1
Summarised financial information for the joint ventures at
December 2020 is as follows:
Minera Tethyan Total Total
Zaldívar Copper
31.12.2020 31.12.2020 31.12.2020 31.12.2019
$m $m $m $m
Cash and cash equivalents 281.0 4.2 285.2 140.4
Current assets 677.2 - 677.2 631.3
Non-current assets 1,856.3 - 1,856.3 1,846.8
Current liabilities (290.0) (6.2) (296.2) (123.8)
Non-current liabilities (670.4) (0.1) (670.5) (518.0)
Revenue 599.3 - 599.3 687.6
Profit/(loss) after
tax 24.3 (12.9) 11.4 47.9
Other comprehensive
expense - - - (0.4)
Total comprehensive
income/(expense) 24.3 (12.9) 11.4 47.5
The above 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.
16. Equity investments
At 31.12.2020 At 31.12.2019
$m $m
Balance at the beginning of the year 5.1 4.7
Movements in fair value 5.5 0.3
Foreign currency exchange difference 0.5 0.1
Balance at the end of the period 11.1 5.1
Equity 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.
17. Inventories
At 31.12.2020 At 31.12.2019
$m $m
Current:
Raw materials and consumables 178.2 219.9
Work in progress 339.3 276.7
Finished goods 75.2 89.8
592.7 586.4
Non-current:
Work in progress 278.1 208.0
Total current and non-current
inventories 870.8 794.4
18. Borrowings and leases
At 31.12.2020 At 31.12.2019
$m $m
Los Pelambres
Senior loan (1,288.1) (469.4)
Leases (91.4) (115.0)
Centinela
Senior loan (496.5) (298.8)
Subordinated debt (203.0) (205.9)
Short-term loan - (200.0)
Leases (78.0) (81.0)
Antucoya
Senior loan (261.1) (325.4)
Subordinated debt (191.5) (391.9)
Short-term loan (75.0) (75.0)
Leases (19.9) (27.7)
Corporate and other items
Senior loan (496.6) (499.2)
Bond (495.6) -
Leases (18.6) (19.3)
Railway and other transport
services
Senior loan (36.5) (44.6)
Leases (0.3) (1.0)
Preference shares (2.7) (2.6)
Total (3,754.8) (2,756.8)
(i) The senior loan at Los Pelambres represents a $1,300 million
US dollar denominated syndicated loan divided in two tranches. The
first tranche has a remaining duration of 5 years and an interest
rate of LIBOR six-month rate plus 1.2%. The second tranche has a
remaining duration of 8 years and an interest rate of LIBOR
six-month rate plus 0.85%. As at 31 December 2020 the loan facility
had been fully drawn-down. The loan is subject to financial
covenants which require that specified net debt to EBITDA and
EBITDA to finance expense ratios are maintained.
(ii) Leases at Los Pelambres are denominated in a mixture of US
dollars and Chilean pesos, with a weighted average interest rate of
5.0% and a remaining duration of 1.5 years.
(iii) The previous Centinela senior loan was repaid in February
2020. A new $500 million senior loan was put in place at that time,
with a remaining duration of 4.2 years and an interest rate of
LIBOR six-month rate plus 0.95%. The loan is subject to financial
covenants which require that specified net debt to EBITDA and
EBITDA to finance expense ratios are maintained.
(iv) The subordinated debt at Centinela is US dollar
denominated, provided to Centinela by Marubeni Corporation with a
remaining duration of 5.5 years and a weighted average interest
rate of LIBOR six-month rate plus 4.5%. Subordinated debt provided
by Group companies to Centinela has been eliminated on
consolidation.
(v) Leases at Centinela are mainly Chilean peso denominated,
with a weighted average interest rate of 5.1% and a remaining
duration of 3 years.
(vi) The senior loan at Antucoya represents a US dollar
denominated syndicated loan, with a remaining duration of 3.9 years
and an interest rate of LIBOR six-month rate plus 1.3%. The loan is
subject to financial covenants which require that specified net
debt to EBITDA and EBITDA to finance expense ratios are
maintained.
(vii) The subordinated debt at Antucoya is US dollar
denominated, provided to Antucoya by Marubeni Corporate with a
remaining duration of 4.5 years and an interest rate of LIBOR
six-month rate plus 3.65%. Subordinated debt provided by Group
companies to Antucoya has been eliminated on consolidation.
(viii) The short- duration loan at Antucoya 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 weighted average spread of 0.53%.
(ix) Leases at Antucoya are denominated in a mixture of US
dollars and Chilean pesos, with a weighted average interest rate of
4.6% and a remaining duration of 3 years.
(x) The previous Corporate (Antofagasta plc) senior loan was
repaid in August 2020. A new $500 million senior loan was put in
place at that time, with an interest rate of LIBOR six-month rate
plus 2.25% and has a remaining duration of 4.7 years.
(xi) Antofagasta plc issued a $500 million corporate bond in
October 2020 with a 10 year tenor and a yield of 2.415%.
(xii) Leases at Corporate and other items are denominated in
Unidades de Fomento (ie inflation-linked Chilean pesos) and have a
remaining duration of 7.2 years and are at fixed rates with an
average interest rate of 5.3%.
(xiii) Long-term loan at The Transport division is US dollar
denominated, with a remaining duration of 4 years and an interest
rate of LIBOR six-month rate plus 1.06%.
(xiv) Leases at the Transport division are mainly in Unidades de
Fomento (ie inflation-linked Chilean pesos), with a weighted
average interest rate of 2.3% and a remaining duration of 1
years.
(xv) 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 2020. 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.
At 31.12.2020 At 31.12.2019
$m $m
Short-term borrowings (603.4) (723.9)
Medium and long-term borrowings (3,151.4) (2,032.9)
Total (3,754.8) (2,756.8)
At 31 December 2020 $673.1 million (31 December 2019 - $199.3
million) of the borrowings has fixed rate interest and $3,079.0
million (December 2019 - $2,554.9 million) has floating rate
interest. The Group periodically enters into interest rate
derivative contracts to manage its exposure to interest rates.
19. Post-employment benefit obligation
At 31.12.2020 At 31.12.2019
$m $m
Balance at the beginning
of the year (118.7) (107.4)
Current service cost (17.9) (24.8)
Actuarial gains/(losses) 9.8 (4.7)
Interest cost (4.9) (4.9)
Paid in the year 14.5 15.3
Foreign currency exchange
difference (6.0) 7.8
Balance at the end of the
year (123.2) (118.7)
The post-employment benefit obligation relates to the provision
for severance indemnities which are payable when an employment
contract comes to an end, in accordance with normal employment
practice in Chile and other countries in which the Group operates.
The severance indemnity obligation is treated as an unfunded
defined benefit plan, and the calculation is based on valuations
performed by an independent actuary.
20. Decommissioning and restoration and other long term
provisions
At 31.12.2020 At 31.12.2019
$m $m
Balance at the beginning
of the year (413.3) (409.8)
Charge to operating profit
in the year (45.2) 2.8
Unwind of discount to
net interest in the year (11.8) (17.8)
Capitalised adjustment
to provision (59.4) (24.8)
Utilised in the year 22.2 30.9
Foreign currency exchange
difference (12.8) 5.5
Balance at the end of
the year (520.2) (413.2)
At 31.12.2020 At 31.12.2019
$m $m
Short-term provisions (22.2) (22.0)
Long-term provisions (498.0) (391.2)
Total (520.2) (413.2)
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
by Sernageomin, the Chilean government agency which regulates the
mining industry in Chile. There have not been any significant
updates to the mining operations closure plans approved by
Sernageomin during the year. During 2019 the Pelambres, Centinela
and Zaldívar balances were updated to reflect new plans approved by
Sernageomin during that year. The provision balance reflects the
present value of the forecast future cash flows expected to be
incurred in line with the closure plans, discounted using Chilean
real interest rates with durations corresponding with the timings
of the closure activities. At 31 December 2020 the real discount
rates ranged from 0.5% to 0.9%. It is estimated that the provision
will be utilised from 2021 until 2068 based on current mine plans,
with approximately 22% of the total provision balance expected to
be utilised between 2021 and 2030, approximately 46% between 2031
and 2040, approximately 9% between 2041 and 2050 and approximately
23% between 2051 and 2068.
21. Deferred tax assets and liabilities
At 31.12.2020 At 31.12.2019
$m $m
Net position at the beginning
of the year (1,097.0) (946.3)
Charge to tax on profit
in year (11.2) (151.8)
Deferred tax recognised
directly in equity 1.7 1.1
Disposal 0.1 -
Net position at the end
of the year (1,106.4) (1,097.0)
Analysed between:
Deferred tax assets 6.4 8.2
Deferred tax liabilities (1,112.8) (1,105.2)
Net position (1,106.4) (1,097.0)
The deferred tax balance of $1,106.4 million (2019 - $1,097.0
million) includes $1,053.4 million (2019 - $1,039.0 million) due in
more than one year. All amounts are shown as non-current on the
face of the balance sheet as required by IAS 12 Income Taxes.
22. Share capital and share premium
There was no change in share capital or share premium in the
year ended 2020 or 2019. Details are shown in the Consolidated
Statement of Changes in Equity.
23. Other reserves and retained earnings
At At
31.12.2020 31.12.2019
$m $m
Hedging reserve (1)
At 1 January (5.0) (1.1)
Parent and subsidiaries' net cash flow hedge
fair value losses (24.2) (4.5)
Parent and subsidiaries' net cash flow hedge
losses / (gains) transferred to the income
statement 3.4 (0.6)
Tax on the above 1.9 1.2
At 31 December (23.9) (5.0)
Equity investment revaluation reserve (2)
At 1 January (10.8) (11.1)
Gains on equity investment 5.5 0.3
At 31 December (5.3) (10.8)
Foreign currency translation reserve (3)
At 1 January (2.3) (2.3)
Currency translation adjustment 0.9 -
At 31 December (1.4) (2.3)
Total other reserves per balance sheet (30.6) (18.1)
Retained earnings
At 1 January 7,112.8 7,084.9
Parent and subsidiaries' profit for the
period 582.1 477.0
Equity accounted units' (loss)/profit after
tax for the period (75.7) 24.4
Actuarial gains/(losses) (4) 4.1 (3.2)
Total comprehensive income for the period 7,623.3 7,583.1
Dividends paid (131.1) (470.3)
At 31 December 7,492.2 7,112.8
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognised initially in equity, as described in
Note 7.
(2) The equity investment revaluation reserves record fair value
gains or losses relating to equity investments, as described in
Note 16.
(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.
(4) 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.
24. Reconciliation of profit before tax to net cash inflow from
operating activities
At 31.12.2020 At 31.12.2019
$m $m
Profit before tax 1,413.1 1,349.2
Depreciation and amortisation 1,048.7 914.3
Net loss on disposals 6.3 12.6
Net finance expense 103.4 51.1
Share of loss/(profit) associates and joint
ventures (exc. exceptional items) (5.1) (24.3)
Impairment of investment in associate 80.8 -
Increase in inventories (13.6) (7.6)
(Increase)/decrease in debtors (259.9) 211.5
Increase in creditors 31.0 88.0
Increase/(decrease) in provisions 26.4 (24.1)
Cash flow generated from operations 2,431.1 2,570.7
25. Analysis of changes in net debt
Movement
Fair Amortisation between
Cash value New of finance Capitalisation maturity At
At 31.12.2019 flows gains leases costs of interest categories Other Exchange 31.12.2020
$m $m $m $m $m $m $m $m $m $m
Cash and
cash
equivalents 653.7 588.3 - - - - - - 4.8 1,246.8
Liquid
investments 1,539.7 887.9 (1.6) - - - - - - 2,426.0
Total 2,193.4 1,476.2 (1.6) - - - - - 4.8 3,672.8
Borrowings
due within
one year (648.4) 200.1 - - - - (88.8) 4.7 2.6 (529.8)
Borrowings
due after
one year (1,861.8) (1,204.9) - - (12.5) (23.4) 88.8 - - (3,013.8)
Leases due
within one
year (75.6) 18.2 - - - - (14.1) (2.1) - (73.6)
Leases due
after one
year (168.4) 68.3 - (33.5) - - 14.1 0.3 (15.7) (134.9)
Preference
shares (2.6) - - - - - - - (0.1) (2.7)
Total
borrowings (2,756.8) (918.3) - (33.5) (12.5) (23.4) - 2.9 (13.2) (3,754.8)
Net
(debt)/cash (563.4) 557.9 (1.6) (33.5) (12.5) (23.4) - 2.9 (8.4) (82.0)
At 31.12.2018 Adoption At 01.01.2019 Cash Fair New Amortisation Capitalisation Other Reclassification Exchange At 31.12.2019
of new flows value leases of finance of interest
accounting gains costs
standards
$m $m $m $m $m $m $m $m $m $m $m
Cash and
cash
equivalents 1,034.4 - 1,034.4 (375.0) - - - - - (5.7) 653.7
Liquid
investments 863.2 - 863.2 676.5 - - - - - - - 1,539.7
Total 1,897.6 - 1,897.6 301.5 - - - - - - (5.7) 2,193.4
Borrowings
due within
one year (607.2) - (607.2) 100.0 - - - - 4.3 (145.5) - (648.4)
Borrowings
due after
one year (1,711.9) - (1,711.9) (253.3) - - (4.5) (37.6) - 145.5 - (1,861.8)
Leases
due within
one year (38.8) - (38.8) 30.0 - - - - (3.3) (63.5) - (75.6)
Leases
due after
one year (133.0) (131.7) (264.7) 62.5 - (45.0) - - 3.5 63.5 11.8 (168.4)
Preference
shares (3.0) - (3.0) - - - - - 0.1 - 0.3 (2.6)
Total
borrowings (2,493.9) (131.7) (2,625.6) (60.8) - (45.0) (4.5) (37.6) 4.6 - 12.1 (2,756.8)
Net
(debt)/cash (596.3) (131.7) (728.0) 240.7 - (45.0) (4.5) (37.6) 4.6 - 6.4 (563.4)
Net debt
Net debt at the end of each period was as follows:
At 31.12.2020 At 31.12.2019
$m $m
Cash, cash equivalents and liquid
investments 3,672.8 2,193.4
Total borrowings (3,754.8) (2,756.8)
Net debt (82.0) (563.4)
26. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
associates and joint ventures are disclosed below.
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.
a) Quiñenco SA
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 two Directors of the Company, Jean-Paul Luksic
and Andronico Luksic, who are also directors of Quiñenco.
The following transactions took place between the Group and the
Quiñenco group of companies, all of which were on normal commercial
terms at market rates:
- the Group earned interest income of $1.7 million (2019 - $4.0
million) during the year on deposits with Banco de Chile SA, a
subsidiary of Quiñenco. Deposit balances at the end of the year
were nil (2019 - $67.9 million);
- the Group earned interest income of $0.3 million (2019 - $0.2
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 nil (2019 - $6.0 million);
- the Group made purchases of fuel from ENEX SA, a subsidiary of
Quiñenco, of $212.6 million (2019 - $159.3 million). The balance
due to ENEX SA at the end of the year was nil (2019 - nil).
- the Group purchased shipping services from Hapag Lloyd, an
associate of Quiñenco, for $7.0 million (2019 - $1.0 million). The
balance due to Hapag Lloyd at the end of the year was nil (2019 -
nil).
b) Compañía de Inversiones Adriático SA
In 2020, the Group leases office space on normal commercial
terms from Compañía de Inversiones Adriático SA, a company in which
members of the Luksic family are interested, at a cost of $0.7
million (2019 - $0.6 million)
c) Antomin 2 Limited and Antomin Investors Limited
The Group holds a 51% interest in Antomin 2 Limited ("Antomin
2") and Antomin Investors Limited ("Antomin Investors"), which own
a number of copper exploration properties. The Group originally
acquired its 51% interest in these properties for a nominal
consideration from Mineral invest Establishment, which continues to
hold the remaining 49% of Antomin 2 and Antomin Investors.
Mineralinvest is owned by the E. Abaroa Foundation, in which
members of the Luksic family are interested. During 2020 t he Group
incurred $0.1 million ( 2019 - $0.1 million ) of exploration costs
at these properties.
d) Tethyan Copper Company Limited
As explained in Note 15, 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 2020 the Group contribution was $7.2 million (2019
- $1.8 million) to Tethyan.
e) Compañía Minera Zaldívar SpA
The Group has a 50% interest in Zaldívar, which is a joint
venture with Barrick Gold Corporation. Antofagasta is the operator
of Zaldívar. The balance due from Zaldívar to group companies at
the end of the year was $0.5 (2019 - 6.0 million). During 2020 the
Group has received dividends of $65.0 million from Zaldívar (2019 -
$50.0 million).
f) Inversiones Hornitos SA
As explained in Note 3, on 31 March 2020 the Group agreed to
dispose of its 40% interest in Hornitos coal-fired power station to
ENGIE Energía Chile S.A. ("ENGIE"), the owner of the remaining 60%
interest. During 2020 the Group paid $128.2 million ( 2019 - $187.7
million) to Inversiones Hornitos in relation to the energy supply
contract at Centinela. During 2020 the Group has not received
dividends from Inversiones Hornitos S.A. ( 2019 - $8.0 million)
.
g) Other related parties
The immediate 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.
27. Tethyan arbitration award
In July 2019 the World Bank Group's International Centre for
Settlement of Investment Disputes ("ICSID") awarded $5.84 billion
in damages (compensation and accumulated interest as at the date of
the award) to Tethyan Copper Company Pty Limited ("Tethyan"), the
joint venture held equally by the Company and Barrick Gold
Corporation, in relation to an arbitration claim filed against the
Islamic Republic of Pakistan ("Pakistan") following the unlawful
denial of a mining lease for the Reko Diq project in Pakistan in
2011.
Damages include compensation of $4.087 billion by reference to
the fair market value of the Reko Diq project at the time of the
mining lease denial, and interest until the date of the award of
$1.753 billion. The Tribunal also awarded Tethyan just under $62
million in costs incurred in enforcing its rights. Compound
interest applies to the compensation and cost awards from 12 July
2019 at a rate of US Prime +1% per annum until the award is
paid.
Later in 2019, Pakistan requested ICSID to annul the award,
triggering a provisional stay of enforcement of the award under the
ICSID Convention. In March 2020, ICSID appointed a committee to
consider Pakistan's request for annulment and whether the
provisional stay of enforcement should continue for the duration of
the annulment proceedings. The Committee issued a decision
partially terminating the stay of enforcement in October,
permitting Tethyan to enforce 50% of the award plus accrued
interest on the condition that any amounts collected through
enforcement of the award must be put into escrow and returned if
the award is annulled. Tethyan has resumed proceedings to enforce
the award in accordance with the conditions set by the Committee.
The Committee is expected to issue a decision on Pakistan's
annulment application within the next one to two years.
It is expected that the proceeds of the award will only be
recognised in Antofagasta's financial statements once they are
received by the Company.
28. Litigation and contingent liabilities
The Group is subject from time to time to legal proceedings,
claims, complaints and investigations arising out of the ordinary
course of business. The Group cannot predict the outcome of
individual legal actions or claims or complaints or investigations.
As a result, the Group may become subject to liabilities that could
affect our business, financial position and reputation. Litigation
is inherently unpredictable and large judgments may at times occur.
The Group may incur, in the future, judgments or enter into
settlements of claims that could lead to material cash outflows.
The Group considers that no material loss to the Group is expected
to result from the legal proceedings, claims, complaints and
investigations that the Group is currently subject to. Provision is
made for all liabilities that are expected to materialise through
legal claims against the Group.
29. Currency translation
Assets and liabilities denominated in foreign currencies are
translated into US dollars and sterling at the year-end rates of
exchange. Results denominated in foreign currencies have been
translated into US dollars at the average rate for each year.
2020
Year-end rate $1.3600=GBP1; $1 = Ch$710.95
Average rates $1.2820=GBP1; $1 = Ch$792.07
30. Distribution
The Annual Report and Financial Statements for the year ended 31
December 2020, together with the Notice of the 2021 Annual General
Meeting, will be posted to all shareholders in April 2021 . The
Annual General Meeting will be held at Cleveland House, 33 King
Street London, SW1Y 6RJ from 2.00 pm on Wednesday 12 May 2021.
Given the constantly evolving nature of the ongoing COVID-19
pandemic, it is unlikely that the Company will be able to welcome
shareholders to the AGM in the usual way. Please refer to the
Notice of the 2021 Annual General Meeting for further
information.
31. 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) EBITDA
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 historical cost of property,
plant & equipment or the particular financing structure adopted
by the business.
At 31 December 2020
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and other
evaluation other transport
items services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 1,407.9 247.0 71.2 - (85.1) (74.0) 1,567.0 25.2 1,592.2
Depreciation
and
amortisation 252.6 662.9 94.6 - - 7.8 1,017.9 30.8 1,048.7
Profit on
disposals 2.5 1.8 - - - - 4.3 2.0 6.3
EBITDA from
subsidiaries 1,663.0 911.7 165.8 - (85.1) (66.2) 2,589.2 58.0 2,647.2
Proportional
share
of the EBITDA
from
associates
and JVs - - - 95.5 - (6.5) 89.0 3.0 92.0
Total EBITDA 1,663.0 911.7 165.8 95.5 (85.1) (72.7) 2,678.2 61.0 2,739.2
At 31 December 2019
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and other and other
evaluation items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 1,115.1 425.8 (5.9) - (111.1) (78.7) 1,345.2 30.6 1,375.8
Depreciation
and
amortisation 258.5 532.2 92.2 - - 7.9 890.8 23.5 914.3
Profit on
disposals 10.5 1.5 - - - - 12.0 0.7 12.7
EBITDA from
subsidiaries 1,384.1 959.5 86.3 - (111.1) (70.8) 2,248.0 54.8 2,302.8
Proportional
share of the
EBITDA from
associates
and
JVs - - - 112.6 - (2.5) 110.1 26.0 136.1
Total EBITDA 1,384.1 959.5 86.3 112.6 (111.1) (73.3) 2,358.1 80.8 2,438.9
c) Net Earnings
Net Earnings represent profit for the period attributable to the
owners of the parent
d) Cash costs
Cash costs are a measure of the cost of operational production
expressed in terms of cents per pound of payable copper
produced.
This is considered to be a useful and relevant measure as it is
a standard industry measure applied by most major copper mining
companies which reflects the direct costs involved in producing
each pound of copper. It therefore allows a straightforward
comparison of the unit production cost of different mines, and
allows an assessment of the position of a mine on the industry cost
curve. It also provides a simple indication of the profitability of
a mine when compared against the price of copper (per lb).
At At
31.12.2020 31.12.2019
Reconciliation of cash costs excluding tolling
charges and by-product revenue:
Total Group operating costs (Note 5) ($m) 3,537.1 3,588.7
Zaldívar operating costs 190.9 224.3
Less:
Total - Depreciation and amortisation (Note 5)
($m) (1,048.7) (914.3)
Total - Loss on disposal (Note 5) ($m) (6.3) (12.7)
Elimination of non-mining operations
Corporate and other items - Total operating cost
(Note 5) ($m) (64.3) (70.8)
Exploration and evaluation - Total operating cost
(Note 5) ($m) (85.1) (111.1)
Railway and other transport services - Total
operating
cost (Note 5) ($m) (91.4) (105.7)
Closure provision and other expenses not included
within cash costs ($m) (105.8) (81.8)
Inventory variation 11.1 3.0
Total cost relevant to the mining operations' cash
costs ($m) 2,337.5 2,519.6
Copper production volumes (tonnes) 733,920 769,970
Cash costs excluding tolling charges and by-product
revenue ($/tonne) 3,185 3,272
Cash costs excluding tolling charges and by-product
revenue ($/lb) 1.43 1.48
At At
31.12.2020 31.12.2019
Reconciliation of cash costs before deducting
by-products:
Tolling charges - copper - Los Pelambres (Note
6) ($m) 113.6 147.5
Tolling charges - copper - Centinela (Note 6) ($m) 68.8 104.6
Tolling charges - copper - total ($m) 182.4 252.1
Copper production volumes (tonnes) 733,920 769,970
Tolling charges ($/tonne) 248.5 327.4
Tolling charges ($/lb) 0.13 0.17
Cash costs excluding tolling charges and by-product
revenue ($/lb) 1.43 1.48
Tolling charges ($/lb) 0.13 0.17
Cash costs before deducting by-products (S/lb) 1.56 1.65
At At
31.12.2020 31.12.2019
Reconciliation of cash costs (net of by-products):
Gold revenue - Los Pelambres (Note 5) ($m) 106.4 75.2
Gold revenue - Centinela (Note 5) ($m) 251.3 332.5
Molybdenum revenue - Los Pelambres (Note 5) ($m) 181.8 248.9
Molybdenum revenue - Centinela (Note 5) ($m) 27.7 5.7
Silver revenue - Los Pelambres (Note 5) ($m) 43.3 30.7
Silver revenue - Centinela (Note 5) ($m) 21.2 27.6
Total by-product revenue ($m) 631.7 720.6
Copper production volumes (tonnes) 733,920 769,970.0
By-product revenue ($/tonne) 860.7 935.9
By-product revenue ($/lb) 0.42 0.43
Cash costs before deducting by-products (S/lb) 1.56 1.65
By-product revenue ($/lb) (0.42) (0.43)
Cash costs (net of by-products) ($/lb) 1.14 1.22
The totals in the tables above may include some small apparent
differences as the specific individual figures have not been
rounded.
e) 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.
December December
2020 2019
Total Attributable Attributable Total Attributable Attributable
amount share amount amount share amount
$m $m $m $m
Cash, cash equivalents
and liquid investments:
Los Pelambres 904.8 60% 542.9 405.5 60% 243.3
Centinela 736.3 70% 515.4 491.6 70% 344.1
Antucoya 143.6 70% 100.5 113.4 70% 79.4
Corporate 1,843.4 100% 1,843.4 1,177.2 100% 1,177.2
Railway and other transport
services 44.7 100% 44.7 5.7 100% 5.7
Total 3,672.8 3,046.9 2,193.4 1,849.7
Borrowings:
Los Pelambres (Note 16) (1,379.5) 60% (827.7) (584.4) 60% (350.6)
Centinela (Note 16) (777.5) 70% (544.2) (785.7) 70% (550.0)
Antucoya (Note 16) (547.5) 70% (383.3) (820.0) 70% (574.0)
Corporate (Note 16) (1,013.5) 100% (1,013.5) (521.1) 100% (521.1)
Railway and other transport
services (Note 16) (36.8) 100% (36.8) (45.6) 100% (45.6)
Total (Note 16) (3,754.8) (2,805.5) (2,756.8) (2,041.3)
Net debt (82.0) 241.4 (563.4) (191.6)
32. 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
31.12.2020 31.12.2019 31.12.2020 31.12.2019
Copper 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 359.6 363.4 366 356.1
Centinela 246.8 276.6 247.7 287.8
Antucoya 79.3 71.9 76.5 71.6
Zaldívar 48.2 58.1 48.3 56.7
Group total 733.9 770.0 738.5 772.2
Gold 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 60.4 59.7 58.4 52.6
Centinela 143.7 222.6 141.2 236.2
Group total 204.1 282.3 199.6 288.8
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 10.9 11.2 10.8 11.8
Centinela 1.7 0.4 1.7 0.3
Group total 12.6 11.6 12.5 12.1
Silver 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 2,073.9 2,141.7 2020.2351 1,889.1
Centinela 1,118.4 1,677.0 1064.3 1,729.2
Group total 3,192.3 3,818.7 3,084.6 3,618.3
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
31.12.2020 31.12.2019 31.12.2020 31.12.2019
$/lb $/lb $/lb $/lb
Copper
Los Pelambres 0.81 0.91 3.02 2.75
Centinela 1.27 1.26 2.95 2.75
Antucoya 1.82 2.17 2.85 2.74
Zaldívar
(attributable
basis - 50%) 1.80 1.75 - -
Group weighted
average (net
of by-products) 1.14 1.22 2.98 2.75
Group weighted
average (before
deducting
by-products) 1.57 1.65
Group weighted
average (before
deducting
by-products and
excluding tolling
charges
from concentrate) 1.43 1.48
Cash costs at Los
Pelambres
comprise:
On-site and
shipping costs 1.10 1.17
Tolling charges for
concentrates 0.18 0.23
Cash costs before
deducting
by-product credits 1.27 1.40
By-product credits
(principally
molybdenum) (0.46) (0.49)
Cash costs (net of
by-product
credits) 0.81 0.91
Cash costs at
Centinela comprise:
On-site and
shipping costs 1.71 1.66
Tolling charges for
concentrates 0.14 0.17
Cash costs before
deducting
by-product credits 1.85 1.83
By-product credits
(principally
gold) (0.58) (0.58)
Cash costs (net of
by-product
credits) 1.27 1.26
LME average copper
price 2.80 2.72
Gold $/oz $/oz
Los Pelambres 1,827 1,434
Centinela 1,784 1,412
Group weighted
average 1,797 1,416
Market average
price 1,770 1,394
Molybdenum $/lb $/lb
Los Pelambres 8.8 10.8
Centinela 8.9 11.1
Group weighted
average 8.8 10.8
Market average
price 8.7 11.4
Silver $/oz $/oz
Los Pelambres 21.7 16.5
Centinela 20.4 16.4
Group weighted
average 21.3 16.4
Market average
price 20.5 16.2
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 Z aldívar 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 2020, published on 20 January 2021 .
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END
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March 16, 2021 03:04 ET (07:04 GMT)
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