3rd Quarter Results
Antofagasta PLC
29 November 2006
Antofagasta plc
Unaudited Results for the Third Quarter ended 30 September 2006
London, 29 November 2006
Highlights
Nine months Nine months
ended ended
30 30
September September Full year
2006 2005 Change 2005
US$'m US$'m % US$'m
Group turnover 2,980.4 1,752.8 70.0 2,445.3
======== ======== ========
Group EBITDA 2,297.0 1,231.8 86.5 1,674.1
======== ======== ========
Turnover
Group turnover in the nine months ended 30 September 2006 increased by 70.0% to
US$2,980.4 million, compared with US$1,752.8 million in the comparative period
in 2005.
The significant increase was mainly due to higher LME copper prices, which
averaged 299.9 cents per pound compared with 157.5 cents per pound in the nine
months ended 30 September 2005. The Group also benefited from pricing
adjustments on the close out of provisional sales due to the increase in the
copper price during the period, resulting in an average realised copper price of
354.2 cents per pound (nine months ended 30 September 2005 - 170.9 cents per
pound). Market molybdenum prices, which did not differ significantly from prices
realised by Los Pelambres, were lower averaging US$24.5 per pound in the nine
months ended 30 September 2006 (nine months ended 30 September 2005 - US$32.6
per pound).
The volume of copper sold was virtually unchanged at 339,100 tonnes (nine months
ended 30 September 2005 - 341,400 tonnes). Production decreased slightly to
334,300 tonnes (nine months ended September 2005 - 343,400 tonnes) mainly due to
lower processing levels at Los Pelambres and lower ore grades at El Tesoro.
Molybdenum production and sales volumes were both higher at 7,000 tonnes and
6,900 tonnes respectively (nine months ended 30 September 2005 - 6,700 tonnes
and 6,500 tonnes respectively). In the case of both copper and molybdenum, sales
volumes vary from the production volumes reported on 31 October 2006 as a result
of timing differences in shipping and loading schedules.
The transport and water divisions continued to perform well.
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.
EBITDA
Group EBITDA in the nine months ended 30 September 2006 increased by 86.5% to
US$2,297.0 million (nine months ended 30 September 2005 - US$1,231.8 million).
The improved EBITDA resulted from the higher realised copper prices as explained
in connection with turnover above. The benefit of higher copper prices was
partly offset by lower molybdenum prices as set out above, as well as higher
operating and hedging costs as compared with 2005.
As reported on 31 October 2006, weighted average cash costs for the Group's
mining operations, which are stated net of by-product credits, were 41.0 cents
per pound in the nine months ended 30 September 2006. This compared with 4.8
cents per pound in the comparative period in 2005 when Los Pelambres benefited
from exceptionally strong molybdenum prices.
Weighted average cash costs excluding by-product credits were 95.7 cents per
pound (nine months ended 30 September 2005 - 74.5 cents per pound). These costs
include tolling charges and production costs for both copper and molybdenum.
Compared with the same period in 2005, cost increases were mainly due to higher
tolling charges at Los Pelambres (mainly due to price participation with
smelters), general industry pressures and the lower production level at Los
Pelambres and El Tesoro. Nevertheless, with the exception of tolling charges
which have increased due to the copper price, cash costs for each mine remain in
line with the Group's initial forecasts for the year.
Total charges for the Group's commodity hedging programme amounted to US$94.7
million in the nine months ended 30 September 2006, although the additional
charge in the third quarter only amounted to US$5.0 million. This relates to
commodity instruments in place at the end of 2005 and which mature during 2006.
No new hedges were entered during 2006.
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. Details of commodity
instruments are given in Note 5.
Basis of Information
The Group turnover and EBITDA figures included in this release for the
nine-month period ended 30 September 2006 are presented on a basis consistent
with the accounting policies used in the Group's 2005 Annual Report and
Financial Statements 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
nine-month period ended 30 September 2006 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 last year which
requires companies that have elected to enter a new tax stability regime to
publish quarterly financial information from the 2006 financial year. 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.
The Group released its production report for this nine-month period on 31
October 2006.
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
Issued by
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 third quarter results are for the nine-month period ending 30
September 2006. 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 2005 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 nine 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 nine month periods ending 30 September
2005 and 30 September 2006 is unaudited.
The information contained in this announcement for the year ended 31 December
2005 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 2005 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
------------ -------
Nine Nine Nine Nine
months months months months
ended ended ended ended
30 September 30 September Full year 30 September 30 September Full year
2006 2005 2005 2006 2005 2005
000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 230.4 235.9 322.8 233.2 233.5 319.1
El Tesoro 68.4 73.8 98.1 69.6 74.3 96.1
Michilla 35.4 33.7 46.4 36.3 33.6 45.3
-------- -------- -------- -------- -------- --------
Group total 334.3 343.4 467.3 339.1 341.4 460.5
======== ======== ======== ======== ======== ========
Molybdenum
Los Pelambres 7.0 6.7 8.7 6.9 6.5 8.5
======== ======== ======== ======== ======== ========
(b) Cash costs per pound of copper produced and realised prices per pound of
copper and molybdenum sold
Cash cost Realised prices
----------- -----------------
Nine Nine Nine Nine
months months months months
ended ended ended ended
30 September 30 September Full year 30 September 30 September Full year
2006 2005 2005 2006 2005 2005
US cents US cents US cents US cents US cents US cents
Copper
Los Pelambres 17.2 (29.7) (17.1) 369.1 173.2 189.2
El Tesoro 78.3 63.5 66.1 320.5 165.7 175.7
Michilla 123.9 117.3 118.8 322.8 166.0 177.1
-------- -------- -------- -------- -------- --------
Group weighted
average (net of
by-products) 41.0 4.8 13.9 354.2 170.9 185.2
======== ======== ======== ======== ======== ========
Group weighted average
(before deducting
by-products) 95.7 74.5 77.3
======== ======== ========
Cash costs at Los
Pelambres comprise:
On-site and shipping cost 55.9 44.6 47.1
Tolling charges for
concentrates 40.6 27.2 27.6
-------- -------- --------
Cash costs
before deducting
by-product credits 96.5 71.8 74.7
By-product credits
(principally molybdenum) (79.4) (101.5) (91.8)
-------- -------- --------
Cash costs
(net of by-product
credits) 17.2 (29.7) (17.1)
======== ======== ========
LME average 299.9 157.5 167.1
======== ======== ========
US$ US$ US$
Molybdenum
Los Pelambres 25.2 33.7 31.4
======== ======== ========
Market average price 24.5 32.6 32.0
======== ======== ========
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. Realised prices do not take into account
gains and losses (including those arising from fair value adjustments) on
commodity derivatives which are included in other operating income or expense as
the Group has not yet adopted the hedge accounting provisions of IAS 39
'Financial Instruments: Recognition and Measurement'.
(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
third quarter of 2006 published on 31 October 2006.
3. Turnover and EBITDA analysed by business segment
Turnover EBITDA
---------- --------
Nine Nine Nine Nine
months months months months
ended ended ended ended
30 September 30 September Full year 30 September 30 September Full year
2006 2005 2005 2006 2005 2005
US$'m US$'m US$'m US$'m US$'m US$'m
Los Pelambres 2,103.7 1,251.5 1,749.8 1,812.0 1,027.1 1,420.5
El Tesoro 491.8 271.5 372.2 329.6 158.3 203.2
Michilla 258.3 123.0 177.1 110.3 14.5 16.3
Exploration - - - (14.9) (14.2) (22.4)
Corporate and
other items - - - (8.0) (11.1) (15.6)
-------- -------- -------- -------- -------- --------
Mining 2,853.8 1,646.0 2,299.1 2,229.0 1,174.6 1,602.0
Railway and other
transport services 79.5 68.3 92.5 32.4 30.1 38.2
Water concession 47.1 38.5 53.7 35.6 27.1 33.9
-------- -------- -------- -------- -------- --------
Group turnover
and EBITDA 2,980.4 1,752.8 2,445.3 2,297.0 1,231.8 1,674.1
======== ======== ======== ======== ======== ========
Turnover at Los Pelambres by mineral:
Before deducting tolling charges Tolling charges Net of tolling charges
----------------------------- ----------------- ------------------------
Nine Nine Nine Nine Nine Nine
months months months months months months
ended ended ended ended ended ended
30 30 Full 30 30 Full 30 30 Full
September September year September September year September September year
2006 2005 2005 2006 2005 2005 2006 2005 2005
US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Copper 1,897.7 891.5 1,331.0 (192.5) (116.8) (166.9) 1,705.2 774.7 1,164.1
Molybdenum 383.1 482.4 588.4 (16.0) (22.0) (25.6) 367.1 460.4 562.8
Gold and silver 31.9 16.8 23.4 (0.5) (0.4) (0.5) 31.4 16.4 22.9
------- ------- ------ ------- ------- ------ ------- ------- ------
Los Pelambres 2,312.7 1.390.7 1,942.8 (209.0) (139.2) (193.0) 2,103.7 1,251.5 1,749.8
======= ======= ====== ======= ======= ====== ======= ======= ======
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$6.8
million (nine months ended 30 September 2005 - US$6.3 million; full year 2005 -
US$8.8 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) Turnover does not include the effect of gains and losses on
commodity derivatives, which are included as part of operating profit in other
operating income or expense. 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.
(vi) EBITDA is stated after deducting losses on commodity
derivatives (including both losses realised in each period and period-end
mark-to-market adjustments) at El Tesoro of US$46.9 million (nine months ended
30 September 2005 - US$10.5 million; full year 2005 - US$24.8 million); and
Michilla of US$47.8 million (30 September 2005 - US$19.5 million; full year 2005
- US$43.8 million). Further details are given in Note 5.
4. Embedded derivatives - provisionally priced sales
Copper and molybdenum concentrate sale agreements and copper cathode sale
agreements generally provide for provisional pricing of sales at the time of
shipment, with final pricing being based on the monthly average London Metal
Exchange copper price or monthly average molybdenum price for specified future
periods. This normally ranges from 30 to 180 days after delivery to the
customer.
Under IFRS, both gains and losses from the marking-to-market of open sales are
recognised through adjustments to turnover in the income statement and to trade
debtors in the balance sheet. The Group determines mark-to-market prices using
forward prices at each period end for copper concentrate and cathode sales, and
period-end month average prices for molybdenum concentrate sales due to the
absence of a futures market for that commodity.
The mark-to-market adjustments at the end of each period and the effect on
turnover in the income statement for each period are as follows:
Balance sheet - Income statement -
net mark to market effect on debtors net mark to market effect on turnover
Nine months Nine months Full year
ended ended 2005
30 September 30 September
At 30.09.06 At 30.09.05 At 31.12.05 2006 2005
US$'m US$'m US$'m US$'m US$'m US$'m
Los Pelambres
- copper concentrate (2.7) 16.2 33.2 (35.9) (1.4) 15.6
Los Pelambres
- molybdenum concentrate 7.0 5.3 (12.6) 19.6 (27.6) (45.5)
El Tesoro -
copper cathodes 0.1 0.2 0.2 (0.1) (0.6) (0.6)
Michilla -
copper cathodes (0.1) - (0.1) - (0.4) (0.5)
-------- -------- -------- -------- -------- --------
4.3 21.7 20.7 (16.4) (30.0) (31.0)
======== ======== ======== ======== ======== ========
(a) Copper concentrate sales at Los Pelambres
Revenues in the nine months to 30 September 2006 included total positive pricing
adjustments of US$368.0 million, representing the difference between reported
revenues and initially invoiced amounts. This comprised actual pricing
adjustments compared with initial provisionally invoiced prices of US$403.9
million (of which US$169.2 million related to sales of concentrate open at 31
December 2005 and US$234.7 million related to sales of concentrate during 2006),
together with net mark-to-market adjustments of US$35.9 million as disclosed
above. At 30 September 2006, copper concentrate sales at Los Pelambres totalling
117,300 tonnes remained open as to price, with an average mark-to-market price
of 342.4 cents per pound.
(b) Molybdenum concentrate sales at Los Pelambres
Revenues in the nine months to 30 September 2006 included total negative pricing
adjustments of US$0.1 million, representing the difference between reported
revenues and initially invoiced amounts. This comprised negative actual pricing
adjustments compared with initial provisionally invoiced prices of US$19.7
million (of which a negative adjustment of US$27.5 million related to sales of
concentrate open at 31 December 2005 and a positive adjustment of US$7.8 million
related to sales of concentrate during 2006) together with net positive
mark-to-market adjustments of US$19.6 million as disclosed above. At 30
September 2006, molybdenum concentrate sales at Los Pelambres totalling 1,723.7
tonnes remained open as to price, with an average mark-to-market price of
US$27.6 per pound.
5. Commodity derivatives
The Group periodically uses derivative financial instruments to reduce exposure
to commodity price movements. The Group does not use such derivative instruments
for speculative trading purposes. The Group has not yet adopted the hedge
accounting provisions of IAS 39 'Financial Instruments: Recognition and
Measurement'. Accordingly, under IFRS, derivatives are measured at each balance
sheet date at fair value. Gains and losses arising from changes in fair value
are included in the income statement for the year, within operating profit and
EBITDA.
The mark-to-market adjustments at the end of each period and the effect on
operating profit and net finance costs in the income statement for each period
are as follows:
Balance sheet - Income statement
net mark to market effect on creditors net mark to market effect on EBITDA
--------------------------------------- -------------------------------------
At 30.09.06 At 30.09.05 At 31.12.05 Nine months Nine months Full year
ended ended 2005
30 September 30 September
2006 2005
US$'m US$'m US$'m US$'m US$'m US$'m
El Tesoro (19.5) (10.0) (17.0) (2.5) (10.0) (17.0)
Michilla (8.9) (15.5) (27.5) 18.6 (15.7) (27.7)
-------- -------- -------- -------- -------- --------
(28.4) (25.5) (44.5) 16.1 (25.7) (44.7)
======== ======== ======== ======== ======== ========
The balance sheet mark-to-market effect is stated before taking into account any
payments on account of margin calls.
During the nine months ended 30 September 2006, the amount charged to operating
profit on commodity derivatives was US$94.7 million, comprising US$46.9 million
at El Tesoro and US$47.8 million at Michilla. This comprised losses on
derivatives which matured in the nine months ended 30 September 2006 of US$110.8
million and net mark-to-market gains in the period of US$16.1 million.
The Group had min/max instruments at 30 September 2006 for 6,450 tonnes of
copper production, with a weighted average floor of 113.0 cents per pound and a
weighted average cap of 140.9 cents per pound. These instruments covered a
period of 3 months.
6. Summary of mining companies' Chilean GAAP financial statements
(See notes following Note 6(c)).
The balance sheets, income statements and cash flow statements prepared under
Chilean GAAP and to be filed with the SVS are summarised below.
(a) Balance sheets
Los Pelambres El Tesoro Michilla
At At At
30.09.2006 30.09.2006 30.09.2006
US$'m US$'m US$'m
Cash and cash equivalents 539.2 116.7 36.4
Trade and other receivables 420.3 65.0 19.8
Inventories 46.9 51.4 2.3
Current and deferred tax assets 6.5 2.9 17.9
---------- ---------- ----------
Current assets 1,012.9 236.0 76.4
Fixed assets 1,406.2 259.6 59.2
Other non-current assets 149.8 54.7 0.6
---------- ---------- ----------
TOTAL ASSETS 2,568.9 550.3 136.2
========== ========== ==========
Short term borrowings 87.4 14.6 -
Trade and other payables 116.4 37.2 21.4
Current and deferred tax
liabilities 92.1 29.3 10.6
---------- ---------- ----------
Current liabilities 295.9 81.1 32.0
---------- ---------- ----------
Medium and long term
borrowings 273.1 21.0 -
Trade and other payables 13.9 6.2 7.5
Deferred tax liabilities 135.9 30.3 -
---------- ---------- ----------
Non-current liabilities 422.9 57.5 7.5
---------- ---------- ----------
Total liabilities 718.8 138.6 39.5
---------- ---------- ----------
Share capital 373.8 91.0 78.4
Reserves 1,476.3 320.7 18.3
---------- ---------- ----------
Total shareholders' equity 1,850.1 411.7 96.7
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,568.9 550.3 136.2
========== ========== ==========
(b) Income statements
Los Pelambres El Tesoro Michilla
Nine months Nine months Nine months
ended ended ended
30 September 30 September 30 September
2006 2006 2006
US$'m US$'m US$'m
Turnover 2,130.0 447.6 192.0
Operating costs (288.8) (129.1) (102.9)
---------- ---------- ----------
Operating margin 1,841.2 318.5 89.1
Administrative and
distribution
expenses (54.3) (20.2) (11.9)
---------- ---------- ----------
Operating profit 1,786.9 298.3 77.2
---------- ---------- ----------
Other income 0.7 0.2 0.3
Financial income 26.8 1.8 1.2
Financial expenses (16.4) (2.4) (0.2)
Other expenses (1.4) (1.1) (0.4)
Exchange difference 1.1 2.2 0.8
---------- ---------- ----------
Net non-operating income 10.8 0.7 1.7
---------- ---------- ----------
Profit before tax 1,797.7 299.0 78.9
Income tax expense (333.1) (55.8) (15.2)
---------- ---------- ----------
Profit for the financial period 1,464.6 243.2 63.7
========== ========== ==========
(c) Cash flow statements
Los Pelambres El Tesoro Michilla
Nine months Nine months Nine months
ended ended ended
30 September 30 September 30 September
2006 2006 2006
US$'m US$'m US$'m
Net cash flow from
operating activities 1,435.1 238.1 79.5
---------- ---------- ----------
Investing activities
Additions to fixed assets (344.9) (8.9) (8.2)
Disposals of fixed assets 1.4 - -
Other items - - (0.1)
---------- ---------- ----------
Net cash used in
investing activities (343.5) (8.9) (8.3)
---------- ---------- ----------
Financing activities
Dividends paid (1,070.0) (95.0) (50.0)
Loans repaid (43.1) (21.0) -
---------- ---------- ----------
Net cash used in
financing activities (1,113.1) (116.0) (50.0)
---------- ---------- ----------
Net increase in
cash and cash equivalents (21.5) 113.2 21.2
Cash and cash equivalents
at the beginning of the period 560.7 3.5 15.2
---------- ---------- ----------
Cash and cash equivalents
at the end of the period 539.2 116.7 36.4
========== ========== ==========
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 Pelambres El Tesoro Michilla
Nine months Nine months Nine months
ended ended ended
30 September 30 September 30 September
2006 2006 2006
Notes US$'m US$'m US$'m
Chilean GAAP - Turnover 2,130.0 447.6 192.0
Mark-to-market of
provisionally priced sales 7(i) (26.2) (0.2) (0.1)
Reclassification of realised
losses on commodity
derivatives to
other operating expense 7(ii) - 44.4 66.4
---------- ---------- ----------
IFRS - Turnover 2,103.7 491.8 258.3
========== ========== ==========
(b) EBITDA
Los Pelambres El Tesoro Michilla
Nine months Nine months Nine months
ended ended ended
30 September 30 September 30 September
2006 2006 2006
Notes US$'m US$'m US$'m
Chilean GAAP - Operating profit 1,786.9 298.3 77.2
Depreciation & amortisation 52.6 29.5 13.6
---------- ---------- ----------
Chilean GAAP - EBITDA 1,839.5 327.8 90.9
Mark-to-market
of provisionally
priced sales 7(i) (26.2) (0.2) (0.1)
Mark-to-market
of financial derivatives 7(ii) 0.3 (2.5) 18.6
Other IFRS and
consolidation adjustments 7(iii) (1.6) 4.5 0.9
---------- ---------- ----------
IFRS - EBITDA 1,812.0 329.6 110.3
========== ========== ==========
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
charge of US$33.2 million in respect of copper concentrate sales, and a credit
of US$7.0 million in respect of molybdenum concentrate sales. The adjustment in
respect of El Tesoro is a charge of US$0.2 million, and the adjustment in
respect of Michilla is a charge of US$0.1 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.
To date, the Group has not yet adopted the hedge accounting provisions of IAS 39
'Financial Instruments: Recognition and Measurement', although this decision
will be kept under review. Accordingly, under IFRS, derivatives are initially
measured at cost including transaction costs (which may be nil), and measured at
subsequent reporting dates at fair value. Gains and losses arising from changes
in fair value, or from derivatives which mature or are liquidated in the period,
are included in the income statement for the period as part of other operating
income or expense. Any amounts included in turnover under Chilean GAAP are
reclassified accordingly.
(iii) Other IFRS and consolidation adjustments are not material either
individually or in aggregate.
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