1st Quarter Results
Antofagasta PLC
30 May 2007
Antofagasta plc
Unaudited Results for the First Quarter ended 31 March 2007
London, 30 May 2007
Highlights
Three Three
months months
ended ended
31 March 31 March Full year
2007 2006 Change 2006
US$'m US$'m % US$'m
Group turnover 830.4 748.6 10.9% 3,870.0
======== ======== ========
Group EBITDA 625.0 522.7 19.6% 2,957.3
======== ======== ========
Turnover
Group turnover in the three months ended 31 March 2007 was US$830.4 million
compared with US$748.6 million in the first quarter of 2006, reflecting higher
copper and molybdenum prices.
LME copper prices averaged 269.5 cents per pound compared with 224.3 cents per
pound in the three months ended 31 March 2006. Pricing adjustments on the close
out of provisional sales resulted in an average realised copper price of 297.1
cents per pound as prices improved toward the end of the quarter, compared with
276.3 cents per pound in the comparative period. Market molybdenum prices, which
did not differ significantly from prices realised by Los Pelambres, averaged
US$26.2 per pound in the three months, an increase from the average price of
US$23.0 per pound in Q1 2006.
The volume of copper sold was 106,300 tonnes (three months ended 31 March 2006 -
108,100 tonnes). Production was 105,900 tonnes (three months ended 31 March 2006
- 107,000 tonnes). The marginal reduction was mainly due to the expected
decrease in ore grades at Los Pelambres, partly offset by higher ore throughput.
The overall decrease was also partly offset by improved production at El Tesoro,
where ore grades improved compared with the first quarter of 2006. Molybdenum
sales and production volumes were 2,200 tonnes and 2,100 tonnes respectively
(three months ended 31 March 2006 - both sales and production of 2,000 tonnes).
In the case of both copper and molybdenum, sales volumes vary from the
production volumes reported on 3 May 2007 as a result of timing differences in
shipping and loading schedules.
The transport and water divisions continued to perform well, benefiting in both
cases from increased volumes.
Further details of production and sales volumes and realised prices by mining
operation are given in Note 2, and an analysis of turnover by business segment
is given in Note 3. Further details of the operating performance of each mine
and the rail and water division are also given in the Group's first quarter
production report released on 3 May 2007.
EBITDA
Group EBITDA in the three months ended 31 March 2007 was US$625.0 million,
compared with US$522.7 million in Q1 2006. The improved EBITDA resulted mainly
from the higher realised copper and molybdenum prices in the current period as
explained in connection with turnover above, and the impact in the comparative
period of charges related to the Group's commodity hedging programme, as
discussed below.
As reported on 3 May 2007, weighted average cash costs for the Group's mining
operations, which are stated net of by-product credits, were 35.8 cents per
pound in the three months ended 31 March 2007. This compared with 49.7 cents per
pound in the comparative period in 2006. This decrease was largely the result of
improved by-product credits at Los Pelambres. By-product credits (expressed in
cents per pound of copper produced) improved as a result of lower copper
production at Los Pelambres in this quarter, and the higher molybdenum prices
outlined above.
Weighted average cash costs excluding by-product credits were 93.4 cents per
pound (three months ended 31 March 2006 - 90.9 cents per pound). These costs
include tolling charges and production costs for both copper and molybdenum.
Compared with the same period in 2006, cost increases were mainly due to higher
on-site costs at the Group's mines, largely offset by lower tolling charges at
Los Pelambres (reflecting lower treatment and refining charges and a reduced
impact of price participation with smelters). Cash costs for each mine remain in
line with the Group's initial forecasts for the year. Further details of the
cash costs of each mine are given in the Group's first quarter production report
of 3 May 2007.
The amount recognised in the income statement during the current period in
respect of the Group's commodity hedging programme was a gain of US$1.4 million,
recorded within turnover as the Group has applied hedge accounting provisions of
IAS 39 'Financial Instruments: Recognition and Measurement' with effect from 1
January 2007. During the three months ended 31 March 2006 a charge of US$37.8
million was recognised in respect of commodity hedging, recorded within other
operating expenses. The gain recognised during the current period relates to
those commodity instruments in place at the end of 2006 which matured during the
period.
Further details of cash costs by mining operation are given in Note 2, and an
analysis of EBITDA by business segment is given in Note 3. Additional commodity
hedging has recently been put in place at El Tesoro and Michilla; details of
commodity instruments are given in Note 5.
Basis of Information
The Group turnover and EBITDA figures included in this release for the
three-month period ended 31 March 2007 are presented on a basis consistent with
the accounting policies used in the Group's 2006 Annual Report and Financial
Statements (except in relation to the application by the Group of the hedge
accounting provisions of IAS 39 'Financial Instruments: Recognition and
Measurement' with effect from 1 January 2007 as set out in Note 5) under
International Financial Reporting Standards and Interpretations ('IFRS').
The Group's three mining companies, Los Pelambres, El Tesoro and Michilla, will
today also file quarterly financial statements under Chilean GAAP for the
three-month period ended 31 March 2007 with the Chilean securities regulator,
the Superintendencia de Valores y Seguros de Chile ('SVS'). These filings are in
accordance with mining tax legislation introduced in Chile in 2005 which
required companies that have elected to enter a tax stability regime to publish
quarterly financial information from the 2006 financial year onwards. This
release includes a summary of the Chilean GAAP income statement, balance sheet
and cash flow statement for each of the three mining companies to be filed with
the SVS.
+---------------------------------------+-----------------------------------------+
|Analyst Enquiries - London | Enquiries - Santiago|
+--------------------------------------++-----------------------------------------+
|Antofagasta plc | Antofagasta Minerals S.A.|
+--------------------------------------+------------------------------------------+
|Tel: +44 20 7808 0988 | Tel +562 377 5145|
+--------------------------------------+------------------------------------------+
|www.antofagasta.co.uk | Alejandro Rivera|
+--------------------------------------+------------------------------------------+
|Desmond O'Conor | Email: arivera@aminerals.cl|
+--------------------------------------+------------------------------------------+
|Email: doconor@antofagasta.co.uk | Press Enquiries|
+--------------------------------------+------------------------------------------+
|Hussein Barma | Bankside Consultants|
+--------------------------------------+------------------------------------------+
|Email: hbarma@antofagasta.co.uk | Tel: +44 20 7367 8873|
+--------------------------------------+------------------------------------------+
| | Keith Irons|
+--------------------------------------+------------------------------------------+
| | Email: keith@bankside.com|
+--------------------------------------+------------------------------------------+
| | Oliver Winters|
+--------------------------------------+------------------------------------------+
| | Email: oliver.winters@bankside.com|
+--------------------------------------++-----------------------------------------+
Notes
1. General information and accounting policies
These unaudited first quarter results are for the three-month period ending 31
March 2007. The Group turnover and EBITDA information, including all
comparatives, have been prepared on the basis of the accounting policies set out
in the Group's statutory accounts for the year to 31 December 2006 (except in
relation to the application by the Group of the hedge accounting provisions of
IAS 39 'Financial Instruments: Recognition and Measurement' with effect from 1
January 2007 as set out in Note 5) and in accordance with applicable
International Financial Reporting Standards and Interpretations (IFRS) which
have been endorsed by the European Union.
While the turnover and EBITDA information contained in this three month results
announcement has been computed in accordance with IFRS, this announcement does
not itself contain sufficient information to comply with IFRS. The information
included in this announcement for the three month periods ending 31 March 2006
and 31 March 2007 is unaudited.
The information contained in this announcement for the year ended 31 December
2006 does not constitute statutory accounts. The statutory accounts for that
year have been approved by the Board and reported on by the auditors, and have
been delivered to the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain statements under section 237(2) of
the Companies Act 1985 (regarding adequacy of accounting records and returns) or
under section 237(3) (regarding provision of necessary information and
explanations). The comparative information contained in Note 2 of this
announcement is not derived from the statutory accounts for the year ended 31
December 2006 and is accordingly not covered by the auditors' report.
2. Production and Sales Statistics
(See notes following Note 2(b).)
(a) Production and sales volumes for copper and molybdenum
Production Sales
------------ -------
Three Three Three Three
months months months months
ended ended ended ended
31 March 31 March Full year 31 March 31 March Full year
2007 2006 2006 2007 2006 2006
000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 70.7 74.1 324.2 71.9 75.0 324.8
El Tesoro 23.6 20.8 94.0 22.2 21.9 95.3
Michilla 11.6 12.1 47.3 12.2 11.2 47.7
-------- -------- -------- -------- -------- --------
Group total 105.9 107.0 465.5 106.3 108.1 467.8
======== ======== ======== ======== ======== ========
Molybdenum
Los Pelambres 2.1 2.0 9.8 2.2 2.0 9.9
======== ======== ======== ======== ======== ========
(b) Cash costs per pound of copper produced and realised prices per pound of
copper and molybdenum sold
Cash cost Realised prices
----------- -----------------
Three Three Three Three
months months months months
ended ended ended ended
31 March 31 March Full year 31 March 31 March Full year
2007 2006 2006 2007 2006 2006
US cents US cents US cents US cents US cents US cents
Copper
Los Pelambres 4.2 29.8 16.4 304.8 291.1 335.0
El Tesoro 87.4 79.6 78.6 278.9 242.1 316.4
Michilla 123.1 120.2 126.4 284.8 244.6 318.5
-------- -------- -------- -------- -------- --------
Group weighted average 35.8 49.7 40.2 297.1 276.3 329.5
(net of by-products)
======== ======== ======== ======== ======== ========
Group weighted average 93.4 90.9 95.6
(before deducting
by-products) ======== ======== ========
Cash costs at Los
Pelambres comprise:
On-site and shipping 64.7 54.5 56.4
cost
Tolling charges for 25.7 34.8 39.7
concentrates
-------- -------- --------
Cash costs before 90.4 89.3 96.1
deducting by-product
credits
By-product credits (86.3) (59.5) (79.7)
(principally molybdenum)
-------- -------- --------
Cash costs (net of 4.2 29.8 16.4
by-product credits)
======== ======== ========
LME average 269.5 224.3 305.3
======== ======== ========
US$ US$ US$
Molybdenum
Los Pelambres 27.4 22.5 24.6
======== ======== ========
Market average price 26.2 23.0 24.8
======== ======== ========
Notes to the production and sales statistics
(i) The production and sales figures represent the actual
amounts produced and sold, not the Group's share of each mine. The Group owns
60% of Los Pelambres, 100% of El Tesoro (61% prior to 24 August 2006) and 74.2%
of Michilla.
(ii) Los Pelambres produces copper and molybdenum concentrates,
and the figures for Los Pelambres are expressed in terms of payable metal
contained in concentrate. Los Pelambres is also credited for the gold and silver
contained in the copper concentrate sold. El Tesoro and Michilla 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. Cash costs exclude depreciation, financial income
and expenses, hedging gains and losses, exchange gains and losses and
corporation tax for all three operations. By-product calculations do not take
into account mark-to-market gains for molybdenum at the beginning or end of each
period.
(iv) Realised copper prices are determined by comparing turnover
from copper sales (grossing up for tolling charges for concentrates) with sales
volumes for each mine in the period. Realised molybdenum prices at Los Pelambres
are calculated on a similar basis. In the current period realised prices reflect
gains and losses on commodity derivatives, which are included within turnover.
The classification of these amounts within turnover is due to the application of
the hedge accounting provisions of IAS 39 'Financial Instruments: Recognition
and Measurement' with effect from 1 January 2007. Prior to this point, gains and
losses on commodity derivatives were included in other operating income or
expense, and so are not reflected within the realised price figures for the
comparative periods.
(v) The totals in the tables above may include some small
apparent differences as the specific individual figures have not been rounded.
(vi) The production information in Note 2(a) and the cash cost
information in Note 2(b) is derived from the Group's production report for the
first quarter of 2007 published on 3 May 2007.
3. Turnover and EBITDA analysed by business segment
Turnover EBITDA
---------- --------
Three Three Three Three
months months months months
ended ended ended ended
31 March 31 March Full year 31 March 31 March Full year
2007 2006 2006 2007 2006 2006
US$'m US$'m US$'m US$'m US$'m US$'m
Los Pelambres 574.0 531.1 2,701.3 474.8 439.0 2,297.0
El Tesoro 136.5 116.9 664.8 93.4 61.6 456.0
Michilla 76.6 60.4 334.9 43.6 8.6 158.4
Exploration - - - (5.5) (2.4) (21.5)
Corporate and other - - - (5.1) (3.9) (16.9)
items
-------- -------- -------- -------- -------- --------
Mining 787.1 708.4 3,701.0 601.2 502.9 2,873.0
Railway and other 26.2 23.5 105.3 12.5 8.5 42.9
transport services
Water concession 17.1 16.7 63.7 11.3 11.3 41.4
-------- -------- -------- -------- -------- --------
Group turnover and 830.4 748.6 3,870.0 625.0 522.7 2,957.3
EBITDA ======== ======== ======== ======== ======== ========
Turnover at Los Pelambres by mineral:
Before deducting tolling
charges Tolling charges Net of tolling charges
----------------------------- ----------------- ------------------------
Three Three Three Three Three Three
months months months months months months
ended ended ended ended ended ended
31 March 31 March 31 31 Full 31 31
Full year March March year March March Full year
2007 2006 2006 2007 2006 2006 2007 2006 2006
US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Copper 483.1 481.3 2,399.0 (47.6) (51.8) (254.0) 435.5 429.5 2,145.0
Molybdenum 131.6 99.3 536.4 (4.5) (6.1) (22.6) 127.1 93.2 513.8
Gold and silver 11.6 8.5 43.1 (0.2) (0.1) (0.6) 11.4 8.4 42.5
------ ------ ------- ------ ------ ------ ------ ------ ------
Los Pelambres 626.3 589.1 2,978.5 (52.3) (58.0) (277.2) 574.0 531.1 2,701.3
====== ====== ======= ====== ====== ====== ====== ====== ======
Notes to turnover and EBITDA by business segment
(i) Turnover from Railway and other transport services is
stated after eliminating inter-segmental sales to the mining division of US$2.2
million (three months ended 31 March 2006 - US$2.1 million; full year 2006 -
US$9.6 million).
(ii) Turnover includes the effect of both final pricing and
mark-to-market adjustments to provisionally priced sales of copper and
molybdenum concentrates and copper cathodes. Further details of such adjustments
are given in Note 4.
(iii) In the current period turnover includes realised gains on
commodity derivatives at Michilla of US$1.4 million. The classification of these
amounts within turnover is due to the application of the hedge accounting
provisions of IAS 39 'Financial Instruments: Recognition and Measurement' with
effect from 1 January 2007. Prior to this point, gains and losses on commodity
derivatives were included in other operating income or expense. In the
comparative periods, other operating expense included losses at El Tesoro of
US$17.3 million in the three months ended 31 March 2006 and US$44.8 million in
the 2006 full year, and losses at Michilla of US$20.5 million in the three
months ended 31 March 2006 and US$39.7 million in the 2006 full year. Further
details of such gains or losses are given in Note 5.
(iv) Los Pelambres produces and sells copper and molybdenum
concentrates. It is also credited for the gold and silver content in the copper
concentrate it sells. Turnover by type of metal is analysed below to show
separately the amounts prior to deduction of tolling charges, the tolling
charges involved and the net amounts included in turnover. El Tesoro and
Michilla do not generate by-products from their copper cathode operations.
(v) EBITDA is calculated by adding back depreciation,
amortisation and disposals of plant, property and equipment and any impairment
charges to operating profit from subsidiaries.
4. Embedded derivatives - provisionally priced sales
Copper and molybdenum concentrate sale agreements and copper cathode sale
agreements generally provide for provisional pricing of sales at the time of
shipment, with final pricing being based on the monthly average London Metal
Exchange copper price or monthly average molybdenum price for specified future
periods. This normally ranges from 30 to 180 days after delivery to the
customer.
Under IFRS, both gains and losses from the marking-to-market of open sales are
recognised through adjustments to turnover in the income statement and to trade
debtors in the balance sheet. The Group determines mark-to-market prices using
forward prices at each period end for copper concentrate and cathode sales, and
period-end month average prices for molybdenum concentrate sales due to the
absence of a futures market for that commodity.
The mark-to-market adjustments at the end of each period and the effect on
turnover in the income statement for each period are as follows:
Balance sheet -
------------------
net mark to market effect on debtors
-------------------------------------
At 31.03.07 At 31.03.06 At 31.12.06
US$'m US$'m US$'m
Los Pelambres - copper concentrate 65.1 78.0 (110.1)
Los Pelambres - tolling charges for copper (4.0) (3.7) 7.6
concentrate
Los Pelambres - molybdenum concentrate 6.8 (5.8) (3.9)
El Tesoro - copper cathodes 3.6 3.1 1.3
Michilla - copper cathodes 0.9 1.0 (0.6)
-------- -------- --------
72.4 72.6 (105.7)
======== ======== ========
(a) Copper sales
Three months ended Three months ended Full
year
2006
31 March 2007 31 March 2006
US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Los El Michilla Los El Michilla Los El Michilla
Pelambres Tesoro Pelambres Tesoro Pelambres Tesoro
Copper Copper Copper Copper Copper Copper Copper Copper Copper
concentrate cathodes cathodes concentrate cathodes cathodes concentrate cathodes cathodes
Provisionally 429.7 136.6 76.8 362.9 109.7 56.7 2,175.5 653.1 326.0
invoiced gross
sales
Effects of pricing
adjustments to
previous period
invoices
Reversal of 110.1 (1.3) 0.6 (33.2) (0.2) 0.1 (33.2) (0.2) 0.1
mark-to-market
adjustments at
the end of the
previous period
Settlement of (125.8) (6.6) (3.2) 73.6 1.4 0.8 169.2 2.0 0.6
copper sales
invoiced in
the previous
period
Total effect (15.7) (7.9) (2.6) 40.4 1.2 0.9 136.0 1.8 0.7
of adjustments
to previous
period invoices in
the current period
Effects of
pricing adjustments
to current period
invoices
Settlement of 4.0 4.2 1.5 - 2.9 1.8 197.6 8.6 8.8
copper sales
invoiced in
the current period
Mark-to-market 65.1 3.6 0.9 78.0 3.1 1.0 (110.1) 1.3 (0.6)
adjustments at
the end of the
current period
Total effect 69.1 7.8 2.4 78.0 6.0 2.8 87.5 9.9 8.2
of adjustments
to current
period invoices
------- ------ ------ ------ ------ ------ ------ ------ ------
Turnover 483.1 136.5 76.6 481.3 116.9 60.4 2,399.0 664.8 334.9
before deducting
tolling charges
Tolling charges (47.6) - - (51.8) - - (254.0) - -
------- ------ ------ ------ ------ ------ ------ ------ ------
Turnover net 435.5 136.5 76.6 429.5 116.9 60.4 2,145.0 664.8 334.9
of tolling
charges ======= ====== ====== ====== ====== ====== ====== ====== ======
Copper concentrate
Copper concentrate sales at Los Pelambres have an average settlement period of
approximately four months from shipment date. At 31 March 2007, sales totalling
112,000 tonnes remained open as to price, with an average mark-to-market price
of 311.7 cents per pound compared with an average provisional invoice price of
285.3 cents per pound. At 31 March 2006, sales totalling 113,500 tonnes remained
open as to price, with an average mark-to-market price of 245.3 cents per pound
compared with an average provisional invoice price of 215.1 cents per pound. At
31 December 2006, sales totalling 127,100 tonnes remained open as to price, with
an average mark-to-market price of 287.0 cents per pound compared with an
average provisional invoice price of 326.3 cents per pound.
Tolling charges include a mark-to-market loss for copper concentrate sales open
as to price at 31 March 2007 of US$11.6 million (31 March 2006 - loss of US$3.7
million, 31 December 2006 - gain of US$7.6 million).
Copper cathodes
Copper cathode sales at El Tesoro and Michilla have an average settlement period
of approximately one month from shipment date.
At 31 March 2007, sales totalling 10,900 tonnes remained open as to price, with
an average mark-to-market price of 312.8 cents per pound compared with an
average provisional invoice price of 294.0 cents per pound. At 31 March 2006,
sales totalling 11,400 tonnes remained open as to price, with an average
mark-to-market price of 246.8 cents per pound compared with an average
provisional invoice price of 230.7 cents per pound. At 31 December 2006, sales
totalling 11,600 tonnes remained open as to price, with an average
mark-to-market price of 286.6 cents per pound compared with an average
provisional invoice price of 294.0 cents per pound.
(b) Molybdenum sales
Three Three
months months
ended ended
31.03.07 31.03.06 Year
ended
31.12.06
US$'m US$'m US$'m
Los Los Los
Pelambres Pelambres Pelambres
Molybdenum Molybdenum Molybdenum
concentrate concentrate concentrate
Provisionally invoiced gross 121.8 117.8 547.8
sales
Effects of pricing adjustments to
previous period invoices
Reversal of mark-to-market 2.4 12.6 12.6
adjustments at the end of the
previous period
Settlement of molybdenum sales (1.7) (22.8) (27.5)
invoiced in the previous period
Total effect of adjustments to 0.7 (10.2) (14.9)
previous period invoices in the
current period
Effects of pricing adjustments to
current year invoices
Settlement of molybdenum sales 2.3 (2.5) 5.9
invoiced in the current period
Mark-to-market adjustments at the 6.8 (5.8) (2.4)
end of the current period
Total effect of adjustments to 9.1 (8.3) 3.5
current period invoices
Turnover before deducting tolling 131.6 99.3 536.4
charges
Tolling charges (4.5) (6.1) (22.6)
Turnover net of tolling charges 127.1 93.2 513.8
Molybdenum sales at Los Pelambres have an average settlement period of
approximately three months after shipment date. At 31 March 2007, sales
totalling 1,500 tonnes remained open as to price, with an average mark-to-market
price of US$27.9 per pound compared with an average provisional invoice price of
US$25.9 per pound. At 31 March 2006, sales totalling 1,500 tonnes remained open
as to price, with an average mark-to-market price of US$22.9 per pound compared
with an average provisional invoice price of US$24.1 per pound. At 31 December
2006, sales totalling 2,100 tonnes remained open as to price, with an average
mark-to-market price of US$25.0 per pound compared with an average provisional
invoice price of US$25.5 per pound.
5. Commodity derivatives
The Group periodically uses derivative financial instruments to reduce exposure
to commodity price movements. The Group does not use such derivative instruments
for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39 'Financial
Instruments: Recognition and Measurement' with effect from 1 January 2007. From
that date, changes in the fair value of derivative financial instruments that
are designated and effective as hedges of future cash flows have been recognised
directly in equity, with any ineffective portion recognised immediately in the
income statement. Realised gains and losses on commodity derivatives recognised
in the income statement have been recorded within turnover. Prior to 1 January
2007 derivatives were measured at fair value through the income statement, with
gains or losses on commodity derivatives being recorded within other operating
income or expense.
The balance sheet mark-to-market adjustments at the end of each period and the
total effect of commodity derivatives on operating profit in the income
statement for each period are as follows:
Balance sheet Income statement
Net financial asset/(liability) Total effect
--------------------------------- --------------
At At At Three Three Full year
31.03.07 31.03.06 31.12.06 months months 2006
ended ended
31 March 31 March
2007 2006
US$'m US$'m US$'m US$'m US$'m US$'m
El Tesoro (0.2) (27.5) - - (17.3) (44.8)
Michilla (0.4) (30.8) 7.3 1.4 (20.5) (39.7)
-------- -------- -------- -------- -------- --------
(0.6) (58.3) 7.3 1.4 (37.8) (84.5)
======== ======== ======== ======== ======== ========
The balance sheet mark-to-market effect is stated before taking into account any
payments on account of margin calls.
The US$1.4 million gain recognised within turnover during the three months ended
31 March 2007 related to amounts realised on derivatives which matured in the
period. During the period net mark-to-market losses of US$6.5 million were
recognised within reserves.
The Group had min/max instruments at 31 March 2007 for 10,800 tonnes of copper
production, with a weighted average floor of 281.0 cents per pound and a
weighted average cap of 338.5 cents per pound. These instruments had a weighted
average duration of 4.5 months and a maximum duration of 9 months.
At 31 March 2007, the Group also had futures at Michilla for 10,800 tonnes of
copper production with an average price of US 306.9 cents, a weighted average
duration of 5.5 months and a maximum duration of 9 months. It also had futures
to both buy and sell copper production at El Tesoro, with the effect of swapping
COMEX prices for LME prices without eliminating underlying market price
exposure. These have a weighted average price of US 312.0 cents, a weighted
average duration of 5.5 months and a maximum duration of 10 months.
Between 31 March 2007 and the date of this report the Group has entered into
additional min/max instruments for 85,800 tonnes of copper production (of which
82,400 tonnes relate to El Tesoro and 3,400 tonnes relate to Michilla), covering
a total period up to 31 December 2009. The weighted average period covered by
these instruments calculated with effect from 1 April 2007 is 21 months. The
maximum duration of the individual instruments in place during this period is 12
months. The instruments have a weighted average floor of 261.8 cents per pound
and a weighted average cap of 394.6 cents per pound.
6. Summary of mining companies' Chilean GAAP financial statements
(See notes following Note 6(c)).
The balance sheets, income statements and cash flow statements prepared under
Chilean GAAP and to be filed with the SVS are summarised below.
(a) Balance sheets
Los Los El Tesoro El Tesoro Michilla Michilla
Pelambres Pelambres
At At At At At At
31.03.2007 31.03.2006 31.03.2007 31.03.2006 31.03.2007 31.03.2006
US$'m US$'m US$'m US$'m US$'m US$'m
Cash and cash 761.1 780.7 285.0 40.9 105.0 7.8
equivalents
Trade and other 339.2 248.1 54.2 47.1 22.7 16.4
receivables
Inventories 51.2 46.2 61.9 35.6 16.1 20.9
Current and deferred 11.8 14.8 3.2 22.7 3.0 5.2
tax assets -------- -------- -------- -------- -------- --------
Current assets 1,163.3 1,089.8 404.3 146.3 146.8 50.3
Fixed assets 1,559.7 1,242.2 253.2 264.9 51.7 64.4
Other non-current 150.9 149.4 48.3 61.4 0.9 1.1
assets -------- -------- -------- -------- -------- --------
TOTAL ASSETS 2,873.9 2,481.4 705.8 472.6 199.4 115.8
======== ======== ======== ======== ======== ========
Short term 86.6 87.2 14.6 14.9 - -
borrowings
Trade and other 111.5 65.9 35.9 34.3 18.8 18.3
payables
Current and deferred 112.5 97.8 43.3 35.2 21.8 0.6
tax liabilities -------- -------- -------- -------- -------- --------
Current liabilities 310.6 250.9 93.8 84.4 40.6 18.9
-------- -------- -------- -------- -------- --------
Medium and long term 232.4 313.8 14.0 42.0 - -
borrowings
Trade and other 12.8 11.7 6.4 5.9 7.4 7.6
payables
Deferred tax 141.1 132.4 31.8 27.8 - -
liabilities -------- -------- -------- -------- -------- --------
Non-current 386.3 457.9 52.2 75.7 7.4 7.6
liabilities -------- -------- -------- -------- -------- --------
Total liabilities 696.9 708.8 146.0 160.1 48.0 26.5
-------- -------- -------- -------- -------- --------
Share capital 373.8 373.8 91.0 91.0 78.4 78.4
Reserves 1,803.2 1,398.8 468.8 221.5 73.0 10.9
-------- -------- -------- -------- -------- --------
Total shareholders' 2,177.0 1,772.6 559.8 312.5 151.4 89.3
equity -------- -------- -------- -------- -------- --------
======== ======== ======== ======== ======== ========
TOTAL LIABILITIES 2,873.9 2,481.4 705.8 472.6 199.4 115.8
AND SHAREHOLDERS'
EQUITY
======== ======== ======== ======== ======== ========
(b) Income statements
Los Los El Tesoro El Tesoro Michilla Michilla
Pelambres Pelambres
Three Three Three Three Three Three
months months months months months months
ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March
2007 2006 2007 2006 2007 2006
US$'m US$'m US$'m US$'m US$'m US$'m
Turnover 513.7 490.0 132.9 107.2 77.3 42.1
Operating costs (100.1) (90.4) (44.7) (40.5) (35.3) (31.2)
-------- -------- -------- -------- -------- --------
Operating margin 413.6 399.6 88.2 66.7 42.0 10.9
Administrative and (17.5) (17.8) (6.8) (6.0) (3.4) (3.5)
distribution expenses -------- -------- -------- -------- -------- --------
Operating profit 396.1 381.8 81.4 60.7 38.6 7.4
-------- -------- -------- -------- -------- --------
Other income - 0.1 - 0.3 0.1 0.2
Financial income 8.5 7.1 3.5 - 1.1 0.1
Financial expenses (4.8) (5.4) (0.5) (0.9) (0.1) (0.1)
Other expenses (0.1) (0.2) (0.6) (0.3) - (0.3)
Exchange difference 1.3 2.6 0.3 0.6 - 0.5
-------- -------- -------- -------- -------- --------
Net non-operating income 4.9 4.2 2.7 (0.3) 1.1 0.4
/(expenses) -------- -------- -------- -------- -------- --------
Profit before tax 401.0 386.0 84.1 60.4 39.7 7.8
Income tax expense (74.4) (68.9) (16.5) (11.3) (7.4) (1.5)
-------- -------- -------- -------- -------- --------
Profit for the financial 326.6 317.1 67.6 49.1 32.3 6.3
period ======== ======== ======== ======== ======== ========
(c) Cash flow statements
Los Los El Tesoro El Tesoro Michilla Michilla
Pelambres Pelambres
Three Three Three Three Three Three
months months months months months months
ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March
2007 2006 2007 2006 2007 2006
US$'m US$'m US$'m US$'m US$'m US$'m
Net cash flow from 334.2 367.9 66.6 40.2 37.8 (3.3)
operating activities -------- -------- -------- -------- -------- --------
Investing activities
Additions to fixed (56.0) (146.1) (0.6) (2.8) (2.3) (3.7)
assets
Disposals of fixed - 0.6 - - - -
assets
Other items - - - - - (0.4)
-------- -------- -------- -------- -------- --------
Net cash used in (56.0) (145.5) (0.6) (2.8) (2.3) (4.1)
investing activities -------- -------- -------- -------- -------- --------
Financing activities
Dividends paid - - - - - -
Loans repaid (2.4) (2.4) - - - -
-------- -------- -------- -------- -------- --------
Net cash used in (2.4) (2.4) - - - -
financing activities -------- -------- -------- -------- -------- --------
Net increase in cash and 275.8 220.0 66.0 37.4 35.5 (7.4)
cash equivalents
Cash and cash 485.3 560.7 219.0 3.5 69.5 15.2
equivalents at the
beginning of the period -------- -------- -------- -------- -------- --------
Cash and cash 761.1 780.7 285.0 40.9 105.0 7.8
equivalents at the end ======== ======== ======== ======== ======== ========
of the period
Notes to Chilean GAAP financial statements
(i) The above balance sheets, income statements and cash flow
statements have been derived from the quarterly financial statements of Los
Pelambres, El Tesoro and Michilla to be filed with the SVS in Chile. Certain
detailed lines in the individual statements have been combined for convenience.
(ii) The balance sheets, income statements and cash flow
statements above have been prepared under Chilean GAAP and therefore do not
necessarily equate to the amounts that would be included in the Group's
consolidated financial statements for a corresponding period either as to
measurement or classification.
(iii) The amounts disclosed above represent the full amount for
each company and not the Group's attributable share. The Group owns 60% of Los
Pelambres, 100% of El Tesoro (61% prior to 24 August 2006) and 74.2% of
Michilla.
(iv) A translation into English of the full quarterly financial
statements for each company shown in summary form above will be available on the
Group's website www.antofagasta.co.uk.
7. Reconciliation of Chilean GAAP results to Turnover and EBITDA under IFRS
for individual business segments
(a) Turnover
Los Los El El Michilla Michilla
Pelambres Pelambres Tesoro Tesoro
Three Three Three Three Three Three
months months months months months months
ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March
2007 2006 2007 2006 2007 2006
Notes US$'m US$'m US$'m US$'m US$'m US$'m
Chilean GAAP - Turnover 513.7 490.0 132.9 107.2 77.3 42.1
Mark-to-market of 7(i) 60.3 41.1 3.6 2.9 0.9 1.1
provisionally priced sales
Reclassification of 7(ii) - - - 6.8 (1.6) 17.2
realised (gains)/losses
on commodity derivatives
to other operating
expense/reserves
------- ------- ------- ------- ------- -------
IFRS - Turnover 574.0 531.1 136.5 116.9 76.6 60.4
======= ======= ======= ======= ======= =======
(b) EBITDA
Los Los El El Michilla Michilla
Pelambres Pelambres Tesoro Tesoro
Three Three Three Three Three Three
months months months months months months
ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March
2007 2006 2007 2006 2007 2006
Notes US$'m US$'m US$'m US$'m US$'m US$'m
Chilean GAAP - Operating 396.1 381.8 81.4 60.7 38.6 7.4
profit
Depreciation & amortisation 17.4 16.5 8.7 8.8 4.8 3.5
------- ------- ------- ------- ------- -------
Chilean GAAP - EBITDA 413.5 398.3 90.1 69.5 43.4 10.9
Mark-to-market of 7(i) 60.3 41.1 3.6 2.9 0.9 1.1
provisionally priced sales
Mark-to-market of 7(ii) - - - (10.5) (1.6) (3.3)
financial derivatives
Other IFRS and 7(iii) 1.8 (0.4) (0.3) (0.3) 0.9 (0.1)
consolidation ------- ------- ------- ------- ------- -------
adjustments
IFRS - EBITDA 474.8 439.0 93.4 61.6 43.6 8.6
======= ======= ======= ======= ======= =======
Notes to reconciliation of turnover and EBITDA
(i) Copper and molybdenum concentrate sale agreements and copper cathode sale
agreements generally provide for provisional pricing of sales at the time of
shipment, with final pricing being based on the monthly average London Metal
Exchange copper price or monthly average molybdenum price for specified future
periods. This normally ranges from 30 to 180 days after delivery to the
customer.
Under Chilean GAAP, the Group's accounting treatment is to value sales, which
remain open as to final pricing at the period end, in aggregate at the lower of
provisional invoice prices and mark-to-market prices at the balance sheet date.
The Group determines mark-to-market prices using forward prices at each period
end for copper concentrate and cathode sales, and period-end month average
prices for molybdenum concentrate sales due to the absence of a futures market
for that commodity.
Under IFRS, both gains and losses from the marking-to-market of open sales are
recognised through adjustments to turnover in the income statement and to trade
debtors in the balance sheet. Under IFRS, the Group determines mark-to-market
prices in the same way as under Chilean GAAP.
This results in a GAAP adjustment in cases where the mark-to-market prices are
higher than the provisional invoice prices. For Los Pelambres this results in a
credit of US$53.5 million in respect of copper concentrate sales, and a credit
of US$6.8 million in respect of molybdenum concentrate sales. The adjustment in
respect of El Tesoro is a credit of US$3.6 million, and the adjustment in
respect of Michilla is a credit of US$0.9 million.
(ii) The Group uses derivative financial instruments to reduce exposure to
commodity price movements. The Group does not use such derivative instruments
for trading purposes.
Under Chilean GAAP, such derivatives are held off the balance sheet. Gains or
losses on derivative instruments are matched in the income statement against the
item intended to be hedged. Such gains or losses are reflected by way of
adjustment to turnover.
The Group has applied the hedge accounting provisions of IAS 39 'Financial
Instruments: Recognition and Measurement' with effect from 1 January 2007. From
that date, changes in the fair value of derivative financial instruments that
are designated and effective as hedges of future cash flows have been recognised
directly in equity, with any ineffective portion recognised immediately in the
income statement. Realised gains and losses on commodity derivatives recognised
in the income statement have been recorded within turnover. Prior to 1 January
2007 derivatives were measured at fair value through the income statement, with
gains or losses on commodity derivatives being recorded within other operating
income or expense. For the comparative periods, any amounts included in turnover
under Chilean GAAP were reclassified accordingly.
(iii) Other IFRS and consolidation adjustments are not material either
individually or in aggregate.
This information is provided by RNS
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