1st Quarter Results

Antofagasta PLC 25 May 2006 Antofagasta plc Unaudited Results for the First Quarter ended 31 March 2006 London, 25 May 2006 Introduction Antofagasta plc announces Group turnover and EBITDA for the three-month period ended 31 March 2006. The Group released its production report for this period on 3 May 2006. The Group turnover and EBITDA figures included in this release 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 three-month period ended 31 March 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. Highlights Q1 2006 Q1 2005 Change Full year 2005 US$'m US$'m % US$'m Group turnover 748.6 534.9 40.0% 2,445.3 ======== ======== ======== Group EBITDA 522.7 386.4 35.3% 1,674.1 ======== ======== ======== Turnover Group turnover in Q1 2006 increased by 40.0% to US$748.6 million, compared with US$534.9 million in Q1 2005. Group turnover also exceeded the quarterly average for 2005 by 22.5%. The significant increase was mainly due to higher LME copper prices, which averaged 224.3 cents per pound compared with 148.3 cents per pound in Q1 2005. The Group also benefited from pricing adjustments on the mark-to-market and close out of provisional sales due to the increase in the copper price during the quarter, resulting in an average realised copper price of 276.3 cents per pound (Q1 2005 - 159.5 cents per pound). Market molybdenum prices, which did not differ significantly from prices realised by Los Pelambres, averaged US$23.0 per pound in Q1 2006 (Q1 2005 - US$31.5 per pound). Higher metal prices offset lower mine production and sales volumes in the quarter. Copper sales in Q1 2006 were 108,100 tonnes (Q1 2005 - 111,600 tonnes), reflecting the decrease in production in the period as announced in the Group's Q1 production report of 3 May 2006. This decrease was mainly due to lower ore throughput at Los Pelambres and lower ore grades and recoveries at El Tesoro. Molybdenum sales were 2,000 tonnes compared with 2,100 tonnes in Q1 2005. In the case of both copper and molybdenum, sales volumes may vary from the production volumes reported on 3 May 2006 as a result of timing differences in shipping and loading schedules. The transport and water divisions continued to perform strongly with turnover above the quarterly average for 2005 in line with increased volumes as reported on 3 May 2006. 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 Q1 2006 increased by 35.3% to US$522.7 million (Q1 2005 - US$386.4 million). Group EBITDA also exceeded the quarterly average for 2005 by 24.9%. 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 sales volume and molybdenum prices as set out above, as well as higher operating and hedging costs. As reported on 3 May 2006, weighted average cash costs for the Group's mining operations, which are stated net of by-product credits, were 49.7 cents per pound in Q1 2006. This compared with negative 7.9 cents per pound in Q1 2005 when Los Pelambres benefited from exceptionally strong molybdenum prices. Weighted average cash costs excluding by-product credits were 90.9 cents per pound (Q1 2005 - 66.5 cents per pound and Full Year 2005 - 77.3 cents per pound). These costs include tolling charges and production costs for both copper and molybdenum. Reasons for the increases in costs were given in the Group's Q1 2006 production report, and include industry pressures, principally higher treatment and refining charges at Los Pelambres (mainly due to price participation by smelters as the LME copper price was higher), the stronger Chilean peso and other input costs such as fuel prices. Cash costs per pound also increased due to the lower production level at Los Pelambres and El Tesoro reflecting lower processing levels and ore grades respectively. Total charges for the Group's commodity hedging programme amounted to US$37.8 million in Q1 2006. This relates to commodity instruments in place at the end of 2005 and which mature during 2006. No new hedges were entered during Q1 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. 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 207367 8873 Keith Irons Email: keith@bankside.com Notes 1. General information and accounting policies These unaudited first quarter results are for the three-month period ending 31 March 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 first quarter 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 2005 and 31 March 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 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 14 June 2006. 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 ------------ ------- Q1 2006 Q1 2005 Full year 2005 Q1 2006 Q1 2005 Full year 2005 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes 000 tonnes Copper Los Pelambres 74.1 80.6 322.8 75.0 74.9 319.1 El Tesoro 20.8 26.3 98.1 21.9 25.7 96.1 Michilla 12.1 12.0 46.4 11.2 11.0 45.3 -------- -------- -------- -------- -------- -------- Group total 107.0 118.9 467.3 108.1 111.6 460.5 ======== ======== ======== ======== ======== ======== Molybdenum Los Pelambres 2.0 2.2 8.7 2.0 2.1 8.5 ======== ======== ======== ======== ======== ======== (b) Cash costs per pound of copper produced and realised prices per pound of copper and molybdenum sold Cash cost Realised prices ----------- ----------------- Q1 2006 Q1 2005 Full year 2005 Q1 2006 Q1 2005 Full year 2005 US cents US cents US cents US cents US cents US cents Copper Los Pelambres 29.8 (45.9) (17.1) 291.1 162.8 189.2 El Tesoro 79.6 57.8 66.1 242.1 152.1 175.7 Michilla 120.2 102.4 118.8 244.6 154.6 177.1 -------- -------- -------- -------- -------- -------- Group weighted average (net of 49.7 (7.9) 13.9 276.3 159.5 185.2 by-products) ======== ======== ======== ======== ======== ======== Group weighted average (before deducting 90.9 66.5 77.3 by-products) ======== ======== ======== Cash costs at Los Pelambres comprise: On-site and shipping cost 54.5 41.8 47.1 Tolling charges for concentrates 34.8 22.2 27.6 -------- -------- -------- Cash costs before deducting by-product credits 89.3 64.0 74.7 By-product credits (principally molybdenum) (59.5) (109.9) (91.8) -------- -------- -------- Cash costs (net of by-product credits) 29.8 (45.9) (17.1) ======== ======== ======== LME average 224.3 148.3 167.1 ======== ======== ======== US$ US$ US$ Molybdenum Los Pelambres 22.5 30.2 31.4 ======== ======== ======== Market average price 23.0 31.5 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, 61% of El Tesoro 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 first quarter of 2006 published on 3 May 2006. 3. Turnover and EBITDA analysed by business segment Turnover EBITDA ----------- -------- Q1 2006 Q1 2005 Full year 2005 Q1 2006 Q1 2005 Full year 2005 US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres 531.1 375.6 1,749.8 439.0 306.4 1,420.5 El Tesoro 116.9 86.2 372.2 61.6 53.0 203.2 Michilla 60.4 37.5 177.1 8.6 10.5 16.3 Exploration - - - (2.4) (1.1) (22.4) Corporate and other items - - - (3.9) (3.1) (15.6) -------- -------- -------- -------- -------- -------- Mining 708.4 499.3 2,299.1 502.9 365.7 1,602.0 Railway and other transport services 23.5 22.3 92.5 8.5 11.2 38.2 Water concession 16.7 13.3 53.7 11.3 9.5 33.9 -------- -------- -------- -------- -------- -------- Group turnover 748.6 534.9 2,445.3 522.7 386.4 1,674.1 and EBITDA ======== ======== ======== ======== ======== ======== Turnover at Los Pelambres by mineral: Before deducting tolling charges Tolling charges Net of tolling charges --------------------------- ----------------- ------------------------ Q1 2006 Q1 2005 Full year 2005 Q1 2006 Q1 2005 Full year 2005 Q1 2006 Q1 2005 Full year 2005 US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m Copper 481.3 268.8 1,331.0 (51.8) (33.6) (166.9) 429.5 235.2 1,164.1 Molybdenum 99.3 139.6 588.4 (6.1) (2.7) (25.6) 93.2 136.9 562.8 Gold and silver 8.5 3.6 23.4 (0.1) (0.1) (0.5) 8.4 3.5 22.9 ------ ------ ------ ------ ------ ------ ------ ------ ------- Los Pelambres 589.1 412.0 1,942.8 (58.0) (36.4) (193.0) 531.1 375.6 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$2.1 million (Q1 2005 - US$2.0 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$17.3 million (Q1 2005 - US$0.6 million; full year 2005 - US$24.8 million); and Michilla of US$20.5 million (Q1 2005 - US$2.4 million; full year 2005 - US$43.8 million). Further details are given in Note 5. 4. Embedded derivatives - provisionally priced sales Copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally provide for provisional pricing of sales at the time of shipment, with final pricing being based on the monthly average London Metal Exchange copper price or monthly average molybdenum price for specified future periods. This normally ranges from 30 to 180 days after delivery to the customer. Under IFRS, both gains and losses from the marking-to-market of open sales are recognised through adjustments to turnover in the income statement and to trade debtors in the balance sheet. The Group determines mark-to-market prices using forward prices at each period end for copper concentrate and cathode sales, and period-end month average prices for molybdenum concentrate sales due to the absence of a futures market for that commodity. The mark-to-market adjustments at the end of each period and the effect on turnover in the income statement for each period are as follows: Balance sheet - Income statement - ----------------- -------------------- net mark to market effect on debtors net mark to market effect on turnover -------------------------------------- -------------------------------------- At 31.03.06 At 31.03.05 At 31.12.05 Q1 2006 Q1 2005 Full year 2005 US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres - copper concentrate 74.3 22.0 33.2 41.1 4.4 15.6 Los Pelambres - molybdenum concentrate (5.8) 13.8 (12.6) 6.8 (19.1) (45.5) El Tesoro - copper cathodes 3.1 (1.8) 0.2 2.9 (2.6) (0.6) Michilla - copper cathodes 1.0 - (0.1) 1.1 (0.4) (0.5) -------- -------- -------- -------- -------- -------- 72.6 34.0 20.7 51.9 (17.7) (31.0) ======== ======== ======== ======== ======== ======== (a) Copper concentrate sales at Los Pelambres Revenues in the three months to 31 March 2006 included total positive pricing adjustments of US$114.7 million, representing the difference between reported revenues and initially invoiced amounts. This comprised actual pricing adjustments compared with initial provisionally invoiced prices of US$73.6 million (relating wholly to sales of concentrate open at 31 December 2005) together with net mark-to-market adjustments of US$41.1 million as disclosed above. At 31 March 2006, copper concentrate sales at Los Pelambres totalling 113,500 tonnes remained open as to price, with an average mark-to-market price of 245.3 cents per pound. (b) Molybdenum concentrate sales at Los Pelambres Revenues in the three months to 31 March 2006 included total negative pricing adjustments of US$18.5 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$25.3 million (of which US$22.8 million related to sales of concentrate open at 31 December 2005 and US$2.5 million related to sales of concentrate during 2006) together with net positive mark-to-market adjustments of US$6.8 million as disclosed above. At 31 March 2006, molybdenum concentrate sales at Los Pelambres totalling 1,500 tonnes remained open as to price, with an average mark-to-market price of US$22.9 per pound. 5. Commodity derivatives The Group periodically uses derivative financial instruments to reduce exposure to commodity price movements. The Group does not use such derivative instruments for speculative trading purposes. The Group has not yet adopted the hedge accounting provisions of IAS 39 'Financial Instruments: Recognition and Measurement'. Accordingly, under IFRS, derivatives are measured at each balance sheet date at fair value. Gains and losses arising from changes in fair value are included in the income statement for the year, within operating profit and EBITDA. The mark-to-market adjustments at the end of each period and the effect on operating profit and net finance costs in the income statement for each period are as follows: Balance sheet - Income statement ------------------ ------------------ net mark to market effect on creditors net mark to market effect on EBITDA -------------------------------------- ------------------------------------- At 31.03.06 At 31.03.05 At 31.12.05 Q1 2006 Q1 2005 Full year 2005 US$'m US$'m US$'m US$'m US$'m US$'m El Tesoro (27.5) (0.6) (17.0) (10.5) (0.6) (17.0) Michilla (30.8) (2.6) (27.5) (3.3) (2.4) (27.7) -------- -------- -------- -------- -------- -------- (58.3) (3.2) (44.5) (13.8) (3.0) (44.7) ======== ======== ======== ======== ======== ======== The balance sheet mark-to-market effect is stated before taking into account any payments on account of margin calls. During Q1 2006, the amount charged to operating profit on commodity derivatives was US$37.8 million, comprising US$17.3 million at El Tesoro and US$20.5 million at Michilla. This comprised losses on derivatives which matured in Q1 2006 of US$24.0 million and net mark-to-market losses in Q1 2006 of US$13.8 million. The Group had min/max instruments at 31 March 2006 for 27,450 tonnes of copper production, with a weighted average floor of 115.1 cents per pound and a weighted average cap of 145.4 cents per pound. These instruments had a weighted average duration of 4.1 months and covered a period of nine months. 6. Summary of mining companies' Chilean GAAP financial statements (See notes following Note 6(c)). The balance sheets, income statements and cash flow statements prepared under Chilean GAAP and to be filed with the SVS are summarised below. (a) Balance sheets Los Pelambres El Tesoro Michilla At 31.03.2006 At 31.03.2006 At 31.03.2006 US$'m US$'m US$'m Cash and cash equivalents 780.7 40.9 7.8 Trade and other receivables 248.1 47.1 16.4 Inventories 46.2 35.6 20.9 Current and deferred tax assets 14.8 22.7 5.2 ---------- ---------- ---------- Current assets 1,089.8 146.3 50.3 Fixed assets 1,242.2 264.9 64.4 Other non-current assets 149.4 61.4 1.1 ---------- ---------- ---------- TOTAL ASSETS 2,481.4 472.6 115.8 ========== ========== ========== Short term borrowings (87.2) (14.9) - Trade and other payables (65.9) (34.3) (18.3) Current and deferred tax liabilities (97.8) (35.2) (0.6) ---------- ---------- ---------- Current liabilities (250.9) (84.4) (18.9) ---------- ---------- ---------- Medium and long term borrowings (313.8) (42.0) - Trade and other payables (11.7) (5.9) (7.6) Deferred tax liabilities (132.4) (27.8) - ---------- ---------- ---------- Non-current liabilities (457.9) (75.7) (7.6) ---------- ---------- ---------- Total liabilities (708.8) (160.1) (26.5) ---------- ---------- ---------- Share capital (373.8) (91.0) (78.4) Reserves (1,398.8) (221.5) (10.9) ---------- ---------- ---------- Total shareholders' equity (1,772.6) (312.5) (89.3) ---------- ---------- ---------- ========== ========== ========== TOTAL LIABILITIES AND (2,481.4) (472.6) (115.8) SHAREHOLDERS' EQUITY ========== ========== ========== (b) Income statements Los Pelambres El Tesoro Michilla Q1 2006 Q1 2006 Q1 2006 US$'m US$'m US$'m Turnover 490.0 107.2 42.1 Operating costs (90.4) (40.5) (31.2) ---------- ---------- ---------- Operating margin 399.6 66.7 10.9 Administrative and distribution expenses (17.8) (6.0) (3.5) ---------- ---------- ---------- Operating profit 381.8 60.7 7.4 ---------- ---------- ---------- Other income 0.1 0.3 0.2 Financial income 7.1 - 0.1 Financial expenses (5.4) (0.9) (0.1) Other expenses (0.2) (0.3) (0.3) Exchange difference 2.6 0.6 0.5 ---------- ---------- ---------- Net non-operating income/(expenses) 4.2 (0.3) 0.4 ---------- ---------- ---------- Profit before tax 386.0 60.4 7.8 Income tax expense (68.9) (11.3) (1.5) ---------- ---------- ---------- Profit for the financial period 317.1 49.1 6.3 ========== ========== ========== (c) Cash flow statements Los Pelambres El Tesoro Michilla Q1 2006 Q1 2006 Q1 2006 US$'m US$'m US$'m Net cash flow from operating activities 367.9 40.2 (3.3) ---------- ---------- ---------- Investing activities Additions to fixed assets (146.1) (2.8) (3.7) Disposals of fixed assets 0.6 - - Other items - - (0.4) ---------- ---------- ---------- Net cash used in investing activities (145.5) (2.8) (4.1) ---------- ---------- ---------- Financing activities Loans repaid (2.4) - - ---------- ---------- ---------- Net cash used in financing activities (2.4) - - ---------- ---------- ---------- Net increase in cash and cash equivalents 220.0 37.4 (7.4) 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 780.7 40.9 7.8 ========== ========== ========== 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, 61% of El Tesoro and 74.2% of Michilla. (iv) Los Pelambres and El Tesoro repay their corporate facilities in June and December each year and therefore debt balances have not changed significantly at either operation between 1 January 2006 and 31 March 2006. (v) 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 Q1 2006 Q1 2006 Q1 2006 Notes US$'m US$'m US$'m Chilean GAAP - Turnover 490.0 107.2 42.1 Mark-to-market of provisionally priced sales 7(i) 41.1 2.9 1.1 Reclassification of realised losses on commodity derivatives to other operating expense 7(ii) - 6.8 17.2 ---------- ---------- ---------- IFRS - Turnover 531.1 116.9 60.4 ========== ========== ========== (b) EBITDA Los Pelambres El Tesoro Michilla Q1 2006 Q1 2006 Q1 2006 Notes US$'m US$'m US$'m Chilean GAAP - Operating profit 381.8 60.7 7.4 Depreciation & amortisation 16.5 8.8 3.5 ---------- ---------- ---------- Chilean GAAP - EBITDA 398.3 69.5 10.9 Mark-to-market of provisionally priced sales 7(i) 41.1 2.9 1.1 Mark-to-market of financial derivatives 7(ii) - (10.5) (3.3) Other IFRS and consolidation adjustments 7(iii) (0.4) (0.3) (0.1) ---------- ---------- ---------- IFRS - EBITDA 439.0 61.6 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. (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. This information is provided by RNS The company news service from the London Stock Exchange

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