Interim Results
Antofagasta PLC
02 September 2003
ANTOFAGASTA PLC
2 September 2003
Interim Results Announcement
for the six months ended 30 June 2003
HIGHLIGHTS
• Turnover of US$471.9 million (2002 - US$418.7 million).
• Operating cash flow of US$206.2 million (2002 - US$148.8 million).
• Profit before tax of US$138.1 million (2002 - US$94.8 million).
• Earnings per share of 34.0 cents (2002 - 26.6 cents).
• Interim dividend of 11 cents per share (2002 -10 cents per share)*.
• Proposed demerger of investment in Quinenco via dividend in specie of
shares in Andsberg Limited.
* The interim dividend is paid in either sterling or US dollars. A conversion
rate of £1=US$1.595 will be applied to the interim dividend giving shareholders
who receive dividends in sterling an interim dividend of 6.8966 pence.
The Group increased copper production by 7% per cent from 210,900 tonnes in the
first half of 2002 to 225,100 tonnes this period. Group weighted average cash
costs were 4% lower at 37.6 cents per pound (2002 half year - 39.2 cents). LME
copper prices also improved in the period, averaging 74.9 cents per pound
compared with 71.9 cents in the first half of 2002. These factors, together
with continued strong by-product sales of molybdenum at Los Pelambres, enabled
the Group to increase profit before tax from US$94.8 million last period to
US$138.1 million, and earnings per share rose from 26.6 cents to 34.0 cents.
Jean-Paul Luksic, CEO of the mining division, commented 'This has been another
excellent set of results for Antofagasta, with pre-tax profits up 46% compared
with the first half of last year. The proposal to demerge the holding in
Quinenco will allow Antofagasta to focus on its core mining and transportation
activities and, as a low cost producer, the Group should continue to benefit
from any further improvement in copper prices.'
Antofagasta is a Chilean-based mining Group listed in the United Kingdom. In
addition to copper mining, its interests include rail and road transport
operations.
Enquiries - London Enquiries - Santiago
Antofagasta plc Antofagasta Minerals S.A.
Tel: +44 20 7382 7862 Tel +562 377 5145
Alejandro Rivera
Philip Adeane Chief Financial Officer
Managing Director Email: arivera@aminerals.cl
Email: nwakefield@antofagasta.co.uk
Enquiries - Press
Hussein Barma Keith Irons
Chief Financial Officer Email: keith@bankside.com
Email: hbarma@antofagasta.co.uk Tel: +44 20 7444 4155
DIRECTORS' COMMENTS FOR THE HALF YEAR TO 30 JUNE 2003
The Group's copper production during the period increased by 7% to 225,100
tonnes compared with 210,900 tonnes in the first six months of 2002. Group
weighted average cash costs were 4% lower at 37.6 cents per pound (2002 half
year - 39.2 cents). LME copper prices also improved in the period, averaging
74.9 cents per pound compared with 71.9 cents in the first half of 2002. These
factors, together with continued strong by-product sales of molybdenum at Los
Pelambres, enabled the Group to increase profit before tax from US$94.8 million
last period to US$138.1 million, and earnings per share rose from 26.6 cents to
34.0 cents.
Proposed Demerger
In order to focus on its core mining and transportation activities, the Group
has announced a proposal to demerge its holding in Quinenco S.A. via a special
dividend to ordinary shareholders of shares in Andsberg Limited, a wholly owned
subsidiary of the Group. Andsberg is an unlisted Jersey registered holding
company which has as its principal ultimate asset the Group's 33.6% interest in
Quinenco.
Under the terms of the proposed demerger, ordinary shareholders will receive, by
way of dividend in specie, one share in Andsberg for every ordinary share held
in Antofagasta plc at the record date, which is expected to be 1 October 2003.
The Andsberg shares will carry a redemption right until 30 October 2003 at a
fixed price of US$1.11 per Andsberg share.
The proposed demerger is subject to shareholder approval at an Extraordinary
General Meeting to be held on 1 October 2003.
Interim Review of Operations
Los Pelambres
Los Pelambres produced 155,200 tonnes of payable copper compared with 144,800
tonnes in the 2002 first half. The increase was due mainly to higher throughput
at the plant which averaged 111,300 tonnes per day (tpd) of ore compared with
107,100 tpd in the first six months of 2002, as a result of the continuing
optimisation programme. In addition, the ore grade improved from 0.86% to
0.90%.
Cash costs, which include by-product credits, were further reduced to 31.5 cents
per pound (2002 half year - 35.4 cents) mainly as a result of lower treatment
and refining charges which were 3 cents per pound lower. Los Pelambres
continued to benefit from high molybdenum prices, which averaged US$4.60 per
pound in the period compared with US$3.40 per pound in the 2002 half year.
Higher prices more than compensated for the drop in molybdenum production from
4,400 tonnes in the first half of 2002 to 3,800 tonnes this period, and as a
result, by-product credits were 12.9 cents per pound of copper produced (2002
half year - 12.4 cents).
The combination of improved copper prices, lower cash costs and higher
production volumes enabled Los Pelambres to increase operating profits by 38% to
US$116.2 million compared with US$84.5 million. Los Pelambres also continued to
benefit from positive adjustments on final settlement of concentrate sales,
reflecting the improvement in the copper price since the year-end. Revenues in
this period included positive adjustments of US$8.8 million relating to sales
open at 31 December 2002 (2002 half year - positive adjustments of US$10.5
million relating to 2001 sales).
Los Pelambres has again reduced its project borrowings with a further principal
repayment in June of US$43.7 million. A total of US$285.6 million of the
original US$946 million project borrowings have now been repaid since operations
began in 2000. In June, Los Pelambres also declared a dividend of US$43.7
million paid to its shareholders in July, and the Group's share amounted to
US$26.2 million. Los Pelambres is also continuing with the Environmental Impact
Study, announced in May, to mine additional reserves and to enable a potential
future expansion of its concentrator.
Processing levels should increase in the second half of this year, reaching
120,000 tpd by the year end when the installation of a permanent pebble crusher
completes the current optimisation programme. Total production of payable
copper is expected to reach 325,000 tonnes this year. Molybdenum prices are
currently trading at over US$5.50 per pound, and should this level be
maintained, cash costs for the year would remain below 35 cents per pound,
compared with an original forecast of 37 cents.
El Tesoro
El Tesoro produced 45,500 tonnes of cathodes in the period to June 2003 compared
with 40,600 in the 2002 first half, mainly resulting from improved recoveries
and better ore grades. Cash costs in the first six months of this year were
41.0 cents per pound (2002 half year - 39.7 cents per pound). Higher production
together with improved copper prices enabled El Tesoro to contribute US$26.2
million to operating profit compared to US$20.9 million in the first half of
2002.
El Tesoro continued to repay its project borrowings with principal repayments
totalling US$28.1 million in February and August this year following the
refinancing arrangements in 2002. The balance now outstanding after these
instalments is US$156.6 million.
El Tesoro obtained certification from the London Metal Exchange (LME) in July to
have its cathodes listed as Grade A quality under the MET brand, enabling them
to be traded as a standard commodity on the LME.
With cathode production ahead of budget in the first half of this year, El
Tesoro now expects to produce 90,000 tonnes this year at cash costs of around 41
cents per pound, compared with an original forecast of 85,000 tonnes.
Michilla
Michilla produced 24,400 tonnes of cathodes to 30 June compared with 25,500
tonnes in the first half of 2002. The lower production was mainly due to
difficulties encountered in the first quarter when modifications were made to
increase the capacity of the crusher line; these difficulties have now been
resolved and cathode production in the second quarter returned to expected
levels.
Cash costs averaged 69.9 cents per pound this period compared to 60.3 cents per
pound in the first six months of last year. The higher costs resulted partly
from the disruption to production at the start of the year, but also from the
higher waste-to-ore ratio and lower ore grade expected under the current phase
of the mine plan. Although the increase in cash costs were partly compensated
by improved copper prices, Michilla's operating loss was US$4.4 million compared
with an operating loss of US$1.1 million in the first half of 2002.
Nevertheless, Michilla remains cash positive, and EBITDA (earnings before
interest, tax, depreciation and amortisation) was US$3.9 million (2002 half year
- US$7.2 million).
Cash costs in the second half are expected to be lower as the waste-to-ore ratio
improves. Forecast production for the year is 52,000 tonnes at cash costs of
around 67 cents. A development plan to extend the mine life from 2007 to 2012
through the incorporation of additional reserves is being considered.
Exploration
The Group spent US$1.5 million in the six months to June 2003, mainly in the
Sierra Gorda district around El Tesoro in Chile. A total of 28,246 metres was
drilled to identify further oxide and sulphide deposits to complement the
Esperanza project. Drilling is continuing at a number of sites in Southern Peru
near Cuzco, where Antofagasta has a joint-venture exploration programme with
CVRD.
Railway and Other Transport Services
Rail tonnages were virtually unchanged at 2.1 million tons (2002 half year - 2.1
million tons), and turnover was also similar at US$35.7 million (2002 half year
- US$35.5 million). Freight from existing customers and marginal expansions
from mines in the region should enable rail tonnages to be maintained. In
October, the Railway will start shipping cathodes from Chuquicamata to the new
port at Mejillones, under a renewed freight contract with Codelco. Train Ltda.,
the road subsidiary, continued to perform well with transport volumes also at
similar levels to last year. The Railway is currently evaluating further
opportunities in the area including the concession from ESSAN, the water utility
company in the Antofagasta region.
Investments
The Group's 33.6% holding in Quinenco S.A., a diversified industrial and
financial group listed in Santiago and New York, is accounted for on a dividends
received basis. Quinenco reported a loss after tax and minorities of US$105.0
million in 2002 when its businesses suffered from the difficult economic
conditions in Latin America, and accordingly has not paid a dividend in 2003.
In 2002, the Group received a dividend of US$3.2 million. The market value of
the Group's investment in Quinenco was US$214.1 million at 30 June 2003.
As explained, the Group has announced a proposal, which is subject to
shareholder approval, to demerge its holding in Quinenco via a special dividend
in specie to ordinary shareholders of shares in Andsberg Limited.
Dividends
An interim dividend of 11 cents (2002 interim - 10 cents) will be paid on 10
October 2003 to ordinary shareholders on the register at the close of business
on 12 September 2003. Dividends are payable in either US dollars or sterling,
and shareholders who receive dividends in sterling will be paid an interim
dividend of 6.8966 pence per share, based on an exchange rate of £1=US$1.595.
Further details are given in Note 9 to the Interim Report.
As explained above, the Group has also proposed a special dividend in specie of
shares in Andsberg Limited. Under the proposal, ordinary shareholders will
receive one share in Andsberg for every ordinary share held in Antofagasta plc
at the record date for this special dividend, which is expected to be 1 October
2003. The Andsberg shares will carry a redemption right until 30 October 2003
at a fixed price of US$1.11 per Andsberg share. The proposed demerger is subject
to shareholder approval at an Extraordinary General Meeting to be held on 1
October 2003.
Current Trading Prospects
There are some recent signs of improvement in copper consumption in the United
States and Japan and demand in China and other Asian countries remains strong,
although the market continues to be affected by weak demand in Europe. LME
stocks have steadily declined from a peak of 980,000 tonnes in May 2002 to an
approximate level of 620,000 tonnes by the end of August this year. Copper
prices have recently reached the 80 cent-level and, although markets remain
volatile, most commentators are cautiously optimistic that prices should
steadily improve from the levels of recent years, when prices averaged around 70
cents.
The Group expects to maintain its performance in the second half of 2003, with
annual copper production forecast to be around 460,000 tonnes and cash costs
expected to remain under 40 cents per pound. As a low cost producer, the Group
remains well-placed to continue to benefit from any further improvement in
copper prices.
2 September 2003
FINANCIAL COMMENTARY FOR THE HALF YEAR TO 30 JUNE 2003
Results
Turnover increased from US$418.7 million in the 2002 half-year to US$471.9
million this period. Turnover from the mining division increased by US$52.8
million. This was mainly due to the combination of increased shipments of
copper as a result of higher production at Los Pelambres and El Tesoro and
better realised copper prices at all three mines following the improvement in
the LME average for the period. By-product revenues at Los Pelambres remained
at similar levels to the 2002 first-half, as higher molybdenum prices
compensated for a decrease in the volume of molybdenum produced. Revenues at
the transport division were similar to the 2002 half-year.
Operating profits were US$153.2 million (2002 half year - US$112.6 million).
Operating profits at the mining division increased by US$32.4 million. This
reflected the combined effect of higher production and improved copper prices,
together with lower cash costs at Los Pelambres compared to the first six months
of 2002. Consequently, operating profit increased by US$31.7 million at Los
Pelambres and US$5.3 million at El Tesoro. Michilla's operating loss increased
however by US$3.3 million as the benefits of a higher copper price were
outweighed by higher cash costs. Operating profit at the transport division
included other operating income of US$6.5 million for the cancellation of a
contract for additional tonnages. Excluding this, operating profit at the
transport division remained at similar levels. Operating profit is stated after
depreciation and disposal of fixed assets, giving EBITDA (earnings before
interest, tax, depreciation and amortisation) for the Group of US$218.6 million
(2002 half year - US$175.6 million).
The Group did not receive a dividend from Quinenco this period, and income from
other fixed asset investments amounted to US$0.1 million. In the first six
months of 2002, dividend income was US$3.2 million which related almost entirely
to Quinenco.
Interest costs relate mainly to the project loans which financed the Los
Pelambres and El Tesoro mines. Net interest expense was US$15.2 million,
compared with net interest expense of US$21.0 million in the 2002 half year, as
the Group benefited from lower market interest rates and regular principal
repayments.
As a result of these factors profit before tax for the period was US$138.1
million compared to US$94.8 million in the first six months of 2002.
Tax amounted to US$30.0 million (2002 half year - US$16.8 million), representing
an effective tax rate (including deferred tax) of 21.7% (2002 half year -
17.7%), compared with the present statutory Chilean tax rate of 16.5% (2002 -
16%). The effective tax rate is higher than the statutory rate partly because
deferred tax is measured at the rates expected to apply in the period in which
timing differences are expected to reverse. Legislative changes at the end of
2001 increased the tax rate progressively to reach 17% in 2004. Additionally,
the tax charge in the first six months of 2003 include provision for the payment
of certain withholding taxes.
Earnings per share were 34.0 cents compared with 26.6 cents for the
corresponding period last year, reflecting the higher profit after tax and
minority interests.
Cash Flows
Net cash inflow from operating activities was US$206.2 million in the first six
months of 2003 compared with US$148.8 million in the same period last year,
reflecting the improved operating results adjusted for depreciation and normal
working capital movements.
Net capital expenditure and financial investment was US$42.6 million in the
period. Of this amount, US$28.4 million related to Los Pelambres, which
included expenditures in respect of the optimisation programme to increase ore
throughput to 120,000 tonnes per day. Net capital expenditures in the first
half of 2002 amounted to US$33.6 million.
Cash and Debt
At 30 June 2003, the Group had cash and deposits of US$302.4 million (2002 -
US$240.5 million). Excluding the minority share in each partly-owned operation,
the Group's share of this balance was US$253.1 million (2002 - US$207.4
million).
Total Group debt at 30 June 2003 was US$906.3 million (2002 - US$1,032.5
million); of this, US$532.9 million (2002 - US$604.9 million) is proportionally
attributable to the Group after excluding the minority share of partly-owned
operations. The decrease in debt is mainly due to continued principal repayments
at Los Pelambres and El Tesoro. At 30 June 2003, the total borrowings of
US$906.3 million included US$660.4 million under the Los Pelambres non-recourse
project financing arrangements of which 40% is attributable to minority
shareholders and US$172.4 million under the El Tesoro non-recourse project
financing arrangements of which 39% is attributable to minority shareholders.
Balance Sheet
Shareholders' funds increased from US$960.4 million at the beginning of the year
to US$1,007.1 million, relating mainly to profit after tax and minorities for
the period less the interim dividend declared.
Minority interests increased from US$314.3 million at the beginning of the year
to US$337.2 million, principally reflecting the minority's share of profit after
tax less the minority's share of the dividend declared by Los Pelambres in the
period.
2 September 2003
Consolidated Profit and Loss Account
Notes Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Turnover 3 471.9 418.7 863.1
3,5
Operating profit 153.2 112.6 213.9
Income from other fixed asset 0.1 3.2 3.2
investments
Net interest payable 6 (15.2) (21.0) (40.3)
Profit on ordinary activities before tax 138.1 94.8 176.8
Tax on profit on ordinary activities 7 (30.0) (16.8) (29.9)
Profit on ordinary activities after tax 108.1 78.0 146.9
Minority interests - equity (40.9) (25.5) (50.1)
Profit for the financial period 67.2 52.5 96.8
Dividends
Preference - non equity (0.1) (0.1) (0.2)
Ordinary - equity 9 (21.7) (19.7) (55.2)
Transferred to reserves 45.4 32.7 41.4
Earnings per share 8 34.0c 26.6c 49.0c
Dividends per ordinary share 9 11.0c 10.0c 28.0c
Turnover and profit are derived from continuing operations.
Other recognised gains and losses
Other recognised gains and losses in the period (translation differences)
amounted to a gain of US$1.3 million (2002 half year - a loss of US$1.5
million), and are shown in Note 14 together with other movements in
shareholders' funds.
Consolidated Balance Sheet
Unaudited Unaudited Audited
Notes 30.6.03 30.6.02 31.12.02
US$'m US$'m US$'m
Fixed assets
Tangible fixed assets 10 1,808.9 1,879.5 1,830.3
Other investments 11 187.9 185.5 187.4
1,996.8 2,065.0 2,017.7
Current assets
Stocks 57.7 55.7 57.5
Debtors 129.6 127.0 130.7
Current asset investments (including time deposits) 298.1 237.5 249.0
Cash at bank and in hand 4.3 3.0 3.4
489.7 423.2 440.6
Creditors - amounts falling due within one year
Trade and other creditors (96.8) (79.5) (87.5)
Loans 12 (127.7) (117.8) (124.0)
Dividends payable (21.7) (19.7) (35.5)
(246.2) (217.0) (247.0)
Net current assets 243.5 206.2 193.6
Total assets less current liabilities 2,240.3 2,271.2 2,211.3
Creditors - amounts falling due after more than one
year
Loans 12 (778.6) (914.7) (841.3)
Provisions for liabilities and charges 13 (117.4) (83.5) (95.3)
1,344.3 1,273.0 1,274.7
Capital and reserves 1(a)
Preference share capital called up - non-equity 3.3 3.1 3.2
Ordinary share capital called up - equity 16.2 15.0 15.8
Share premium - equity 279.1 258.5 271.7
Reserves - equity 708.5 683.9 669.7
Shareholders' funds - including non-equity interests 14 1,007.1 960.5 960.4
Minority interests - equity 337.2 312.5 314.3
1,344.3 1,273.0 1,274.7
Approved by the Board of Directors on 2 September 2003
P J Adeane, Director.
Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Net cash inflow from operating 15 206.2 148.8 350.3
activities
Dividends received from other fixed asset investments 0.1 3.2 3.2
Interest received 2.1 4.0 7.0
Interest paid (17.2) (24.2) (46.0)
Dividends paid to minority interests (0.2) (0.2) (40.7)
Preference dividends paid (0.1) (0.1) (0.2)
Net cash outflow from returns on investment and servicing of finance (15.3) (17.3) (76.7)
Tax paid (2.6) (3.1) (5.5)
Purchase of tangible fixed assets (42.6) (35.0) (66.8)
Purchase of fixed asset investments (0.5) - (1.8)
Sale of tangible fixed assets 0.4 1.4 1.3
Sale of fixed asset investments 0.1 - -
Net cash outflow from capital expenditure and financial investment (42.6) (33.6) (67.3)
Equity dividends paid (36.4) (49.6) (69.8)
Cash inflow before management of liquid resources and financing 109.3 45.2 131.0
Management of liquid resources - Net (increase)/decrease in time deposits (49.0) 8.9 (3.1)
New loans drawn down 0.4 28.7 210.0
Repayment of amounts borrowed (58.8) (55.7) (304.8)
Repayment of principal element of finance leases (1.6) (0.9) (2.0)
Repayment of other creditors on refinancing of supplier - (29.9) (29.9)
credit
Net cash outflow from financing (60.0) (57.8) (126.7)
Net cash inflow/(outflow) in the 16 0.3 (3.7) 1.2
period
Notes
1 Reporting currency and accounting policies
a) Reporting currency
The functional reporting currency of the Group is US dollars, the
principal currency in which the Group operates and in which assets and
liabilities are held. Share capital is denominated in sterling and, for the
purposes of reporting in US dollars, share capital and share premium are
translated at the period end rate of exchange. As explained in Note 9, dividends
are paid in either US dollars or sterling.
b) Accounting policies
The profit and loss account, balance sheet and cash flow statement for
the half year to 30 June 2003 have been prepared on the basis of the accounting
policies set out in the Group's statutory accounts for the year to 31 December
2002.
2 Production and sales statistics (neither audited nor
reviewed)
(See notes following Note 2(d).)
a) Copper production volumes
Half year to Half year to Year to
30.6.03 30.6.02 31.12.02
'000 tonnes '000 tonnes '000 tonnes
Los Pelambres 155.2 144.8 324.6
El Tesoro 45.5 40.6 84.3
Michilla 24.4 25.5 51.8
Group total 225.1 210.9 460.7
b) Copper sales volumes
Half year to Half year to Year to
30.6.03 30.6.02 31.12.02
'000 tonnes '000 tonnes '000 tonnes
Los Pelambres 160.8 144.6 318.2
El Tesoro 45.3 40.9 83.4
Michilla 23.9 24.1 51.6
Group total 230.0 209.6 453.2
c) Cash costs per pound
Half year to Half year to Year to
30.6.03 30.6.02 31.12.02
cents cents cents
Los Pelambres 31.5 35.4 34.9
El Tesoro 41.0 39.7 40.8
Michilla 69.9 60.3 61.4
Group weighted average 37.6 39.2 38.9
d) LME and realised copper price per
pound
Half year to Half year to Year to
30.6.03 30.6.02 31.12.02
cents cents cents
Los Pelambres 77.6 74.8 71.2
El Tesoro 76.9 73.6 72.0
Michilla 77.6 73.4 73.2
Group weighted average 77.5 74.4 71.6
LME average 74.9 71.9 70.7
Notes to the production and sales statistics
(i) The production and
sales figures represent the actual volumes produced and sold, not the Group's
attributable share of each mine. The Group owns 60% of Los Pelambres, 61% of El
Tesoro and 74.2% of Michilla.
(ii) Los Pelambres produces
copper concentrate, and the figures for Los Pelambres are expressed in terms of
payable copper contained in concentrate. El Tesoro and Michilla produce copper
cathodes.
(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 include by-product credits and
exclude depreciation, financial income and expenses, exchange gains and losses
and corporation tax.
(iv) Realised copper prices
are determined by comparing turnover from copper sales with sales volumes for
each mine in the period.
(v) The individual figures
are sometimes more specific than the rounded numbers shown; hence small
differences may appear in the totals.
3 Segmental analysis
a) Turnover by geographical destination
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
UK 8.6 12.4 14.0
Rest of Europe 143.2 99.9 241.8
Chile 68.9 59.1 120.7
Rest of Latin America 23.6 31.6 61.2
North America 29.9 21.2 50.8
Asia Pacific / other 197.7 194.5 374.6
471.9 418.7 863.1
b) Turnover by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 318.7 278.0 576.7
El Tesoro 76.6 66.4 132.8
Michilla 40.9 39.0 83.2
Mining 436.2 383.4 792.7
Railway and other transport services 35.7 35.3 70.4
471.9 418.7 863.1
Notes to turnover by operation
(i) Turnover from Railway and other transport
services is stated after eliminating inter-segmental sales to the mining
division of US$2.4 million (2002 half year - US$2.3 million).
(ii) Los Pelambres produces and sells copper and
molybdenum concentrates. It is also credited for the gold and silver content in
the copper concentrate it sells. Turnover by type of metal is analysed below.
El Tesoro and Michilla do not have by-products from their copper cathode
operations.
Los Pelambres turnover by type of metal Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Copper 274.9 238.5 499.3
Molybdenum 39.6 32.3 65.3
Gold and silver 4.2 7.2 12.1
318.7 278.0 576.7
c) Earnings before interest, tax, depreciation and
amortisation (EBITDA) by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 159.6 125.6 256.2
El Tesoro 36.0 30.5 58.9
Michilla 3.9 7.2 13.6
Exploration (1.5) (1.6) (2.8)
Corporate and other (4.0) (2.3) (8.2)
Mining 194.0 159.4 317.7
Railway and other transport services 24.6 16.2 32.0
218.6 175.6 349.7
EBITDA is calculated by adding back depreciation, amortisation and the
non-exceptional loss on disposal of fixed assets (see Note 3(d)) to operating
profit (see Note 3(e)).
As explained in Note 3(e), the Railway and other transport services division
includes other operating income of US$6.5 million.
d) Depreciation and amortisation by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 43.0 41.2 84.9
El Tesoro 9.7 9.6 19.8
Michilla 8.2 8.3 16.8
Corporate and other 0.2 0.5 1.0
Mining 61.1 59.6 122.5
Railway and other transport services 3.7 3.5 6.2
Total depreciation and amortisation 64.8 63.1 128.7
Loss/(profit) on disposal of fixed assets included in operating profit 0.6 (0.1) 7.1
65.4 63.0 135.8
e) Operating profit/(loss) by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 116.2 84.5 165.9
El Tesoro 26.2 20.9 36.4
Michilla (4.4) (1.1) (3.4)
Exploration (1.5) (1.6) (2.8)
Corporate and other (4.2) (2.8) (8.0)
Mining 132.3 99.9 188.1
Railway and other transport services 20.9 12.7 25.8
153.2 112.6 213.9
Operating profit at the Railway and other transport services division includes
other operating income of US$6.5 million for the cancellation of a contract for
additional tonnages by a customer.
f) Capital expenditure by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 28.4 21.2 43.8
El Tesoro 6.1 3.5 7.5
Michilla 4.0 4.4 6.9
Corporate and other 0.1 - 0.1
Mining 38.6 29.1 58.3
Railway and other transport services 4.1 5.1 6.1
42.7 34.2 64.4
Capital expenditure represents purchase of tangible fixed assets stated on an
accruals basis (see Note 10) and may therefore differ from the amount included
in the cash flow statement.
g) Net assets by operation
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres 1,255.9 1,342.4 1,297.3
El Tesoro 344.4 353.5 354.6
Michilla 79.4 95.4 84.1
Corporate and other 2.0 9.2 7.2
Mining 1,681.7 1,800.5 1,743.2
Railway and other transport services 100.3 98.7 92.5
Operating net assets 1,782.0 1,899.2 1,835.7
Other fixed asset investments 187.9 185.5 187.4
Net debt (603.9) (792.0) (712.9)
Group dividend (21.7) (19.7) (35.5)
Net assets 1,344.3 1,273.0 1,274.7
Net assets are stated before deducting minority interests.
4 Provisional pricing and commodity hedging
a) Provisional pricing
Copper concentrate agreements generally provide for provisional pricing at the
time of shipment with final pricing settlement based on the average LME copper
price for specified future periods. Copper revenues on provisionally priced
tonnages are adjusted monthly until final settlement. Sales volumes are also
adjusted on the final metallurgical content of the concentrate.
Revenues in the six months to 30 June 2003 included positive adjustments to
sales of concentrates open at 31 December 2002 totalling US$8.8 million.
Revenues in the six months to 30 June 2002 included positive adjustments to
sales of concentrates open at 31 December 2001 totalling US$10.5 million.
At 30 June 2003, copper sales totalling 66,040 tonnes remained to be finally
priced, and were recorded at that date at an average price of 74.9 cents. At 30
June 2002, copper sales totalling 67,540 tonnes remained to be finally priced,
and were recorded at that date at an average price of 72.8 cents.
b) Commodity hedging
The Group periodically enters into commodity hedging contracts to manage its
exposure to the copper price. Turnover for the mining division for the six
months to 30 June 2003 included gains of US$1.9 million relating to commodity
hedging activities. Turnover for the first six months of 2002 included losses
of US$1.0 million relating to commodity hedging.
At 30 June 2003, the Group had hedged 41,400 tonnes of copper production using
futures with a price of 77.6 cents per pound and an outstanding duration of one
month. The Group had also hedged 33,750 tonnes of production using min/max
options with a weighted average floor and ceiling of 74.2 cents and 80.0 cents
respectively, and an average duration of 2.3 months. The unrealised
mark-to-market gain on these instruments at that date was US$2.3 million, when
the LME cash price was 74.6 cents. Further hedges were entered subsequent to 30
June covering the period to March 2004.
5 Operating profit
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Turnover 471.9 418.7 863.1
Cost of sales (279.7) (264.8) (558.2)
Gross profit 192.2 153.9 304.9
Administrative expenses (39.2) (36.4) (82.2)
Closure provision (Note 13) (0.5) (0.5) (1.2)
Severance charges (Note 13) (1.0) (0.7) (1.9)
Exploration costs (1.5) (1.6) (2.8)
Other net operating income/(expenditure) 3.2 (2.1) (2.9)
Operating profit 153.2 112.6 213.9
Depreciation charges in the six months to 30 June 2003 were US$64.8 million
(2002 half year - US$63.1 million). Of this amount, US$58.9 million (2002 half
year - US$56.2 million) is included in cost of sales and US$5.9 million (2002
half year - US$6.9 million) is included in administrative expenses.
6 Net interest payable
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Interest receivable and similar income 2.2 3.6 6.4
Interest payable and similar charges (17.1) (24.6) (46.7)
Foreign exchange 0.3 (0.4) (0.1)
Discount charge relating to provisions (0.6) 0.4 0.1
(Note 13)
(15.2) (21.0) (40.3)
7 Tax
The tax charge of US$30.0 million (2002 half year - US$16.8 million) represents
an effective rate (including deferred tax) of 21.7% (2002 half year - 17.7%) on
profit before tax, as compared with the Chilean statutory tax rate of 16.5%
(2002 half year - 16%).
The effective tax rate is higher than the statutory rate partly because deferred
tax is measured at the rates expected to apply in the period in which timing
differences are expected to reverse. Legislative changes at the end of 2001
increased the tax rate progressively to reach 17% in 2004. Additionally, the
tax charge in the first six months of 2003 includes provision for the payment of
certain withholding taxes.
8 Earnings per share
Earnings per share is calculated on profit after tax, minority interest and
preference dividends giving earnings of US$67.1 million (2002 half year -
US$52.4 million) and based on 197,171,339 (2002 half year - 197,171,339)
ordinary shares in issue throughout the period.
9 Dividends
Dividends are declared in US dollars but may be paid in either dollars or
sterling. Shareholders on the register of members with an address in the United
Kingdom receive dividend payments in sterling, unless they elect to be paid in
dollars. All other shareholders are paid by cheque in dollars, unless they have
previously instructed the Company's registrar to pay dividends by bank transfer
to a sterling bank account, or they elect for payment by cheque in sterling. The
Company's registrar must receive any such election before the record date of 12
September 2003.
The Board has declared an interim dividend of 11 cents per ordinary share for
payment on 10 October 2003 to shareholders on the register at the close of
business on 12 September 2003. Dividends are declared and paid gross. The
exchange rate to be applied for the conversion of dividends will be £1 =
US$1.595, giving those shareholders who will be paid in sterling an interim
dividend of 6.8966 pence per ordinary share. In 2002, the Board declared an
interim dividend of 10 cents per share, equivalent to a dividend of 6.5274 pence
per share based on an exchange rate of £1=US$1.532.
The Board has also proposed, subject to shareholder approval, a special dividend
in specie of shares in Andsberg Limited. Further details are given in Note 17.
10 Tangible fixed assets
Railway
Net book value and other
Mining transport Total
US$'m US$'m US$'m
1 January 2003 (audited) 1,737.3 93.0 1,830.3
Additions 38.6 4.1 42.7
Disposals (1.0) - (1.0)
Depreciation (61.1) (3.7) (64.8)
Exchange - 1.7 1.7
30 June 2003 (unaudited) 1,713.8 95.1 1,808.9
11 Other investments
US$'m
1 January 2003 (audited)
187.4
Additions 0.5
Disposal (0.1)
Exchange 0.1
30 June 2003 (unaudited) 187.9
Other investments include quoted investments with a book value of US$187.7
million (2002 half year - US$185.5 million). The market value of these
investments at 30 June 2003 was US$220.6 million (2002 half year - US$181.8
million). These investments include a 33.6 per cent interest in Quinenco S.A.
12 Loans
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Los Pelambres
Projects loans (660.4) (747.7) (704.0)
Other loans (26.3) (28.7) (28.7)
El Tesoro
Project loans (169.2) (197.0) (181.3)
Subordinated debt (24.9) (31.6) (24.3)
Finance leases (15.3) (16.4) (16.4)
Michilla
Finance leases (1.5) (2.5) (2.0)
Railway and other transport services
Loans (8.7) (8.6) (8.6)
(906.3) (1,032.5) (965.3)
Project loans at El Tesoro at 30 June 2003 are shown net of deferred financing
costs of US$3.2 million (30 June 2002 - nil). The gross amount due was US$172.4
million.
Maturity of loans
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Due within one year (127.7) (117.8) (124.0)
Due after more than one year (778.6) (914.7) (841.3)
(906.3) (1,032.5) (965.3)
At 30 June 2003, US$27.2 million of project loans have been fixed at a rate of
5.56% for a remaining period of 1.7 years. The remainder of the loans are
predominantly floating rate. However, the Group periodically enters into
interest rate hedging contracts to manage its exposure to interest rates. At 30
June 2003, the Group had hedged US$167.5 million of its borrowings using collars
for a remaining weighted average period of 2.7 years. These limit the
variability of the interest rate to a weighted average minimum (a floor) of
5.01% and a weighted average (a cap) of 5.99%.
13 Provisions for liabilities and charges
Decommissioning
and site Severance Deferred
rehabilitation indemnities tax Total
US$'m US$'m US$'m US$'m
1 January 2003 (audited) (7.5) (10.6) (77.2) (95.3)
Charge to operating profit in period (Note 5) (0.5) (1.0) - (1.5)
Release of discount to net interest in period (0.2) (0.4) - (0.6)
(Note 6)
Charge to tax on profit in period - - (20.4) (20.4)
Utilised in period - 0.5 - 0.5
Exchange - (0.1) - (0.1)
30 June 2003 (unaudited) (8.2) (11.6) (97.6) (117.4)
14 Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Profit for the financial period 67.2 52.5 96.8
Other recognised gains and losses relating to the period
- Exchange 1.3 (1.5) (10.3)
Total recognised gains and losses 68.5 51.0 86.5
Dividends (21.8) (19.8) (55.4)
46.7 31.2 31.1
Opening shareholders' funds 960.4 929.3 929.3
Closing shareholders' funds 1,007.1 960.5 960.4
15 Reconciliation of operating profit to net cash inflow from
operating activities
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Operating profit 153.2 112.6 213.9
Depreciation 64.8 63.1 128.7
Loss/(profit) on disposal of tangible fixed assets 0.6 (0.1) 7.1
Increase in stocks (0.1) (4.3) (8.0)
Decrease/(increase) in debtors 1.0 (14.9) (10.2)
(Decrease)/increase in creditors and provisions (13.3) (7.6) 18.8
Net cash inflow from operating activities 206.2 148.8 350.3
16 Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$'m US$'m
Net cash inflow/(outflow) in the period 0.3 (3.7) 1.2
Cash outflow from decrease in debt 60.0 27.9 96.8
Cash outflow/(inflow) from increase/(decrease) in liquid resources 49.0 (8.9) 3.1
Change in net debt resulting from cash flows 109.3 15.3 101.1
Interest accrued on long-term loan balances (0.8) (1.5) (2.3)
New leases - (1.3) (2.0)
Exchange 0.5 4.2 (1.0)
Movement in net debt in the period 109.0 16.7 95.8
Net debt at the beginning of the period (712.9) (808.7) (808.7)
Net debt at the end of the period (603.9) (792.0) (712.9)
Composition of net debt
Unaudited Unaudited Audited
half year to half year year to
30.6.03 to 30.6.02 31.12.02
US$'m US$m US$'m
Cash in hand and demand deposits 4.3 3.0 3.4
Current asset investments 298.1 237.5 249.0
Long and short term loans including finance leases (Note 12) (906.3) (1,032.5) (965.3)
Net debt at the end of the period (603.9) (792.0) (712.9)
17 Post balance sheet event
On 2 September, Antofagasta plc announced a proposal to demerge its holding in
Quinenco S.A. via a special dividend in specie to ordinary shareholders of
shares in Andsberg Limited, a wholly owned subsidiary of the Group. Andsberg
is an unlisted Jersey registered holding company which has as its principal
ultimate asset the Group's 33.6% interest in Quinenco.
Under the terms of the proposed demerger, ordinary shareholders will receive, by
way of a dividend in specie, one share in Andsberg for every ordinary share held
in Antofagasta plc at the record date for this dividend in specie, which is
expected to be 1 October 2003. The Andsberg shares will carry a redemption
right until 30 October 2003 at a fixed price of US$1.11 per Andsberg share.
The proposed demerger is subject to shareholder approval at an Extraordinary
General Meeting to be held on 1 October 2003.
18 Financial information
The Group's statutory accounts for the year to 31 December 2002 have been filed
with the Registrar of Companies. The auditors' report on these accounts was
unqualified and did not include a statement under s237(2) or (3) of the
Companies Act 1985. The 31 December 2002 profit and loss account, balance sheet
and cash flow statement shown in this interim report are an abridged version of
these statutory accounts. The financial information contained in this statement
does not constitute statutory accounts within the meaning of s240 of the
Companies Act 1985.
19 Currency translation
Results denominated in foreign currencies have been translated into dollars at
the average rate for each period.
Period end rates Average rates
30.6.03 US$1.6469 = £1; US$1 = Ch$699 US$1.6098 = £1; US$1 = Ch$724
30.6.02 US$1.5281 = £1; US$1 = Ch$688 US$1.4428 = £1; US$1 = Ch$665
31.12.02 US$1.6033 = £1; US$1 = Ch$719 US$1.4995 = £1; US$1 = Ch$689
20 Distribution
These results will be sent by first class post to all shareholders on 2
September 2003. Copies of this report will be available for members of the
public who are not shareholders at the Company's Registered Office, Park House,
16 Finsbury Circus, London EC2M 7AH.
Independent Review Report to Antofagasta plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement and related Notes 1 to 17, with the exception of Note 2. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
Deloitte & Touche LLP
Chartered Accountants
London
2 September 2003
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