Interim Results
Antofagasta PLC
13 September 2005
ANTOFAGASTA PLC
Interim Results Announcement
for the six months ended 30 June 2005
13 September 2005
• Turnover of US$1,123.6 million (2004 half year - US$753.4 million).
• Operating cash flow of US$767.1 million (2004 half year - US$517.3
million).
• Profit before tax of US$ 739.5 million (2004 half year - US$415.4
million).
• Earnings per share of 186.4 cents (2004 half year -105.2 cents).
• Interim dividend of 16 cents per share (2004 interim - 15 cents per
share)*.
LME copper prices were significantly stronger in the period, averaging 151.1
cents per pound compared with 125.2 cents in the first half of 2004. Group
copper production was 3.4% lower at 227,400 tonnes in this period (2004 half
year - 235,400 tonnes). Group weighted average cash costs for copper ** reached
a record low of negative 8.7 cents per pound (2004 half year positive cash costs
of 31.2 cents per pound), as significantly higher molybdenum revenues outweighed
higher operating costs. Group profit before tax increased to US$739.5 million
from US$415.4 million last period, and earnings per share rose to 186.4 cents
from 105.2 cents.
Jean-Paul Luksic, Chairman of Antofagasta, commented, 'This is an excellent
result for Antofagasta with a strong operating performance supported by high
metal prices. Although some fundamentals for the future of continuing strong
copper and molybdenum markets are being questioned by analysts, we expect to
continue to benefit from current strong demand for the rest of the year.'
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 and port management and water distribution.
* The interim dividend is paid in either sterling or US dollars. A conversion
rate of £1=US$1.8412 will be applied to the interim dividend giving
shareholders who receive dividends in sterling an interim dividend of 8.69
pence per share.
** Cash cost is a method used by the mining industry to express the cost of
production in cents per pound of copper, and is further explained in Note 2(d)
(iii) to the Interim Results Announcement.
Enquiries - London Enquiries - Santiago
Antofagasta plc Antofagasta Minerals S.A.
Tel: +44 20 7808 0988 Tel +562 377 5145
www.antofagasta.co.uk
Desmond O'Conor Alejandro Rivera
Email: doconor@antofagasta.co.uk Chief Financial Officer
Email: arivera@aminerals.cl
Hussein Barma
Chief Financial Officer (UK) Issued by
Email: hbarma@antofagasta.co.uk Bankside Consultants
Tel: +44 20 7367 8873
Keith Irons
Email: keith@bankside.com
DIRECTORS' COMMENTS FOR THE HALF YEAR TO 30 JUNE 2005
The Group reported substantially improved results driven by higher copper and
molybdenum prices. Profit before tax was up 78% to US$739.5 million (2004 half
year - US$415.4 million) with earnings per share up 77% to 186.4 cents (2004
half year - 105.2 cents). LME copper prices averaged 151.1 cents per pound
(2004 half year - 125.2 cents per pound) while molybdenum prices nearly trebled
to average US$33.4 per pound (2004 half year - US$11.4 per pound). The Group
also benefited from higher molybdenum production of 4,700 tonnes (2004 half year
- 3,700 tonnes). Copper production decreased by 3.4% to 227,400 tonnes (2004
half year - 235,400 tonnes) mainly because of lower ore grades at Los Pelambres,
in part due to the maximisation of molybdenum production. The higher metal
prices and increased molybdenum production offset increased operating costs.
The Group's transport and water operations also had a satisfactory half year
with increased volumes and potential for future growth.
Interim Review of Operations
Los Pelambres
Los Pelambres produced 154,900 tonnes of payable copper in the first half of
2005 compared with 165,000 tonnes in the 2004 first half. Lower ore grades
averaged 0.78% (2004 half year - 0.88%) because of normal grade decline
anticipated under the mine plan but also partly as a result of the decision to
maximise molybdenum production. The decrease was partly offset by higher ore
throughput as average processing levels increased to 126,500 tonnes per day
(tpd) of ore compared with 121,400 tpd in the first six months of 2004.
Molybdenum production increased to 4,700 tonnes (2004 half year - 3,700 tonnes)
as selective mining resulted in higher grades and improved recoveries. This
combination enabled cash costs, which are stated net of by-product credits, to
reach negative 48.1 cents per pound, as molybdenum revenues outweighed Los
Pelambres' operating costs. Excluding by-product credits, copper production
cash costs in the period increased to 69.9 cents per pound (2004 half year -
53.0 cents per pound). This was due to higher treatment and refining charges
and higher input prices such as steel, energy and oil which, like the copper
price, have risen in the current strong economic environment. Costs were also
affected by the lower ore grade.
Realised copper prices were 159.8 cents per pound (2004 half year - 134.1 cents
per pound) and realised molybdenum prices were US$36.1 per pound (2004 half year
- US$14.4 per pound). The combination of higher realised copper and molybdenum
prices offset the lower production volumes and higher underlying costs. This
enabled Los Pelambres to increase operating profits by 87.5% to US$620.1 million
compared with US$330.8 million in the first half of 2004.
After replacing its project finance loans with unsecured corporate loan
facilities at the end of 2004, Los Pelambres further reduced its borrowings with
a repayment in June of US$38.3 million. Total borrowings were US$438.4 million
at 30 June 2005.
Los Pelambres continues to have one of the best safety records in the Chilean
mining industry with a lost time frequency index, including contractors, of 0.7
accidents per million hours worked compared with an industry average in excess
of 4.0 accidents per million hours worked.
Work has begun on the infrastructure for the Mauro tailings dam following
environmental approval received in 2004. This approval allows Los Pelambres to
increase its mineable reserves to 2.1 billion tonnes of ore taking into account
the increased storage capacity of this dam. The Mauro project, which will cost
approximately US$450 million, is expected to be completed as planned by the end
of 2007. In the second quarter of 2005 the Los Pelambres board also approved an
expansion of the concentrator plant to increase average ore throughput to
140,000 tonnes per day, by increasing the power of the grinding lines and with
the installation of an additional fifth ball mill at the concentrator plant.
Work on this project, which will cost approximately US$182 million, has also
begun and is expected to be completed by mid-2007 with a marginal increase in
throughput expected in mid-2006. Both the Mauro dam and the expansion to
140,000 tpd will be financed by Los Pelambres through its own cash resources.
Copper production at Los Pelambres for the full year is expected to reach
324,000 tonnes, marginally ahead of the Group's original forecast of 321,000
tonnes. Excluding by-product credits, cash costs are expected to be around 69
cents per pound, in line with the first half of the year. Molybdenum grades in
the second half are expected to decline slightly but production is expected to
reach 8,300 tonnes for the year compared with an earlier forecast of 7,200
tonnes.
El Tesoro
Production at El Tesoro increased 6.4% to 49,900 tonnes (2004 half year - 46,900
tonnes) due to higher ore throughput and recoveries together with an increase in
the ore grade from 1.34% to 1.37%. Cash costs nonetheless rose to 58.9 cents
per pound compared with 50.5 cents in the first six months of 2004 due to a
higher waste-to-ore ratio as well as increased input costs such as acid and fuel
prices which have risen in the current economic environment.
Higher copper prices, including premiums obtained for El Tesoro's LME Grade A
cathodes, offset the increase in cash costs, and operating profits were US$97.6
million (2004 half year - US$66.6 million).
El Tesoro replaced its project finance loans with unsecured corporate
facilities. Following further repayments in the first half of this year El
Tesoro's borrowings were US$74.3 million at 30 June 2005.
During the first half of 2005 El Tesoro initiated a plant optimisation to
increase processing capacity to 10.5 million tonnes of ore annually, compared
with the current level of 9.7 million tonnes. The increased processing capacity
should be completed by the fourth quarter of this year and formal environmental
permits are expected to be issued in September.
El Tesoro expects to produce 97,000 tonnes of cathodes with cash costs averaging
approximately 65 cents per pound.
Michilla
Michilla produced 22,600 tonnes of cathodes to 30 June 2005 compared with 23,500
tonnes in the first half of 2004. Ore grades from the current phase of the open
pit, which provides more than 50% of the ore for the crushing plant, have been
lower than expected. The area being mined, which is located near former
underground workings, is geologically complex. During the first half of 2005,
Michilla also experienced operational difficulties in the underground mine which
affected grades and throughput. Costs have also risen due to higher sulphuric
acid and other input prices, as well as the effect of a stronger peso. These
factors combined to increase cash costs to 112.2 cents per pound in the first
half of 2004 compared to 84.7 cents per pound in the first six months of last
year.
Strong copper prices compensated for increased costs and enabled Michilla to
make an operating profit of US$9.6 million (2004 half year - US$9.5 million).
Michilla is continuing its exploration programme initiated at the end of 2004,
in order to identify further ore resources with drilling concentrated on the
underground Estefania Este area.
Higher processing levels should allow production for the year to reach around
46,000 tonnes with cash costs expected at 115 cents per pound for the year.
Projects and Exploration
The Group spent US$8.0 million on exploration in the first six months to June
2005. The principal focus was the Esperanza project, located approximately 5
kilometres from El Tesoro. The project is advancing to the pre-feasibility
stage and includes a 40,000 metre drilling programme, the construction of a 2.25
kilometre exploration decline, and metallurgical and engineering studies.
Completion is expected by October 2006 at a budgeted cost of US$15.3 million.
Approximately 800 metres of the decline has been constructed with the drilling
programme expected to be completed by September 2005. The current drill-
inferred sulphide resource at Esperanza is 469 million tonnes of copper with an
average grade of 0.63% and 0.27 g/t of gold.
Railway and Other Transport Services
Rail volumes transported were steady at 2.2 million tons (2004 half year - 2.1
million tons) and turnover was US$44.7 million compared with US$39.9 million in
2004. Train Ltda., the road transport subsidiary, also continued to perform
well. Operating results for the transport division were slightly down.
The FCAB's medium-term prospects remain positive. During the first half of 2005
the Railway signed two new contracts: firstly, with Apex Silver Mines' San
Cristobal polymetallic project in southwest Bolivia and secondly with BHP
Billiton's Spence copper project in Chile's Second Region near El Tesoro. These
projects should start to contribute to additional rail tonnages from the second
half of 2006, eventually increasing overall volumes by up to 20%.
Aguas de Antofagasta
Aguas de Antofagasta, which began operations in Chile's Second Region at the end
of 2003, has continued to perform satisfactorily. Combined industrial and
domestic water sales increased from 16.0 million cu. m. in the first half of
2004 to 16.6 million cu. m. Turnover in the first six months of 2005 was
US$25.8 million, compared with US$22.1 million in the first six months of 2004.
A programme to improve the quality of service and productivity levels is
resulting in a progressive reduction in water losses.
A contract has been signed with BHP Billiton's Spence project for the supply of
water for the construction period and subsequently for its operations. Detailed
engineering studies are underway to supply water for a possible future expansion
of the Collahuasi mine owned by Noranda and Anglo American.
Dividends
An interim dividend of 16 cents (2004 interim - 15 cents) will be paid on 13
October 2005 to ordinary shareholders on the register at the close of business
on 23 September 2005. Dividends are payable in either US dollars or sterling,
and shareholders who receive dividends in sterling will be paid an interim
dividend of 8.69 pence per share, based on an exchange rate of £1=US$1.8412.
Further details are given in Note 9 to this Interim Report.
Current Trading Prospects
Copper prices remain at historically high levels having averaged just under 170
cents per pound since the end of June, traditionally a weaker summer period.
Visible inventory levels remain low at around 120,000 tonnes representing less
than three days of world consumption. The copper market remains volatile,
against a background of strong global economic growth, a weak dollar, smelting
constraints and supply disruption; market commentators remain divided about the
future direction of prices. Most commentators expect the market to move towards
a balance of supply and demand during 2006 and prices to ease back from the
current levels as higher mine production and greater smelting capacity becomes
available. The tight inventory position suggests, nevertheless, that the market
remains vulnerable to any supply disruption or delays in the limited number of
new mines or expansions currently underway.
Although molybdenum prices have retreated from the peak of US$39 per pound
reached at the beginning of June 2005, they remain at exceptionally high
historical levels, averaging US$30 per pound since the end of June. Increases
in supply from primary producers in North America and from copper mines
producing molybdenum as a by-product have been offset by disruption to
production in China due to a number of factors, particularly safety and
environmental issues. Demand also remains strong, both in the stainless steel
sector and in non-metallurgical applications. Prices should eventually ease as
supply responds to the current highs and existing production difficulties in
China are resolved.
Group copper production is expected to be just under 470,000 tonnes this year
and molybdenum production around 8,300 tonnes. Although underlying cash costs
have increased as a result of pressures affecting all mines, copper and
molybdenum prices remain robust. Antofagasta should continue to benefit from
current strength in metals prices.
12 September 2005
FINANCIAL COMMENTARY FOR THE HALF YEAR TO 30 JUNE 2005
Results
Turnover increased by 49.1% to US$1,123.6 million, compared with US$753.4
million in the first six months of 2004. The increase was mainly due to higher
metal prices and higher sales volumes at all three mines, which enabled turnover
from the mining division to increase by US$361.7 million. Copper sales volume
increased by 6.9% from 209,800 tonnes in the first six months of 2004, when some
shipments of concentrate were delayed until the second half of that year, to
224,300 tonnes in the first six months of this year. Molybdenum sales volumes
also increased by 16.2% to 4,300 tonnes compared with 3,700 tonnes in the same
period of last year. The Group's realised copper price averaged 159.1 cents per
pound (2004 half year - 133.1 cents per pound) while the realised molybdenum
price increased significantly from US$14.4 per pound in the first half of 2004
to US$36.0 per pound. Realised copper and molybdenum prices are determined by
comparing turnover (gross of tolling charges for concentrates) with sales volume
in the period. Realised prices exceeded market prices mainly because, in line
with industry practice, concentrate sales agreements at Los Pelambres generally
provide for provisional pricing at the time of shipment with final pricing based
on the average market price for future periods (normally 30 to 180 days after
delivery to the customer). These pricing adjustments were positive as copper
and molybdenum prices generally increased during the first half. Sales of
LME-registered cathodes by El Tesoro and Michilla also benefited from strong
cathode premiums, reflecting tight market conditions. Turnover from the
transport division (FCAB) increased by US$4.8 million to US$44.7 million, while
Aguas de Antofagasta, which operates the Group's water business, increased by
US$3.7 million to US$25.8 million, reflecting higher transport tonnages and
water sales volumes respectively.
Excluding by-product credits (which are reported as part of turnover), weighted
average cash costs for the Group as a whole increased from 55.7 cents per pound
in the first half of 2004 to 71.7 cents per pound, reflecting the impact of
higher treatment and refining charges and input costs, as well as lower grades
and higher waste-to-ore ratios. Nevertheless, the strong metal prices and
higher sales volumes enabled Group operating profits to increase by 73.1% to
US$739.0 million (2004 half year - US$426.9 million), despite these higher
operating costs. Operating profits at the transport division decreased by
US$1.5 million compared to the 2004 despite improved transport tonnages, mainly
due to lower revenues from ancillary services. Aguas de Antofagasta contributed
US$11.9 million compared to US$ 10.4 million in the same period last year.
EBITDA (earnings before interest, depreciation, tax and amortisation) in the
first half of 2005 was US$806.4 million, compared with US$505.7 million in the
first half of 2004. This is calculated by adding back depreciation and
amortisation of US$63.6 million (2004 first half - US$71.5 million) and other
amounts written off plant, property and equipment of US$3.8 million (2004 half
year - US$7.3 million).
The Group's share of net profit from its 30% investment in Antofagasta Terminal
Internacional S.A. ('ATI'), acquired at the end of 2004, was US$0.5 million.
This compares with an acquisition cost of US$2.9 million.
Net finance costs in the period were nil, as interest receivable of US$15.4
million offset interest payable of US$12.2 million and other net finance
charges, including net foreign exchange losses, of US$3.2 million. This
compared with net finance costs of US$11.5 million in the first half of 2004,
comprising interest receivable of US$9.8 million, interest payable of US$14.9
million and other net finance charges, including net foreign exchange losses, of
US$6.4 million. Higher interest receivable resulted mainly from higher cash and
deposit balances held by the Group, while interest payable decreased with loan
repayments, including prepayments made in the second half of 2005. As the Group
was in a net cash position during 2004, it also benefited from the increase in
market interest rates.
The resulting profit before tax for the period was US$739.5 million compared to
US$415.4 million in the first six months of 2004.
Tax (including deferred tax) amounted to US$132.0 million (2004 half year -
US$79.2 million), reflecting the increased profit for the period. The tax
charge comprises current tax of US$118.3 million (2004 half year - US$75.7
million) and deferred tax of US$13.7 million (US$3.5 million). The tax charge
in the first half of 2005 includes a provision of US$8.7 million for withholding
taxes, and is the principal reason the effective tax rate of 17.9% exceeds the
Chilean statutory tax rate of 17%. The effective tax rate in the first half of
2004 was 19.1% mainly due to non-deductible costs incurred by the operations.
Earnings per share were 186.4 cents compared with 105.2 cents for the
corresponding period last year, reflecting the higher profit after tax and
minority interests.
Derivative Financial Instruments
The Group uses derivative financial instruments to reduce exposure to foreign
exchange, interest rate and commodity price movements. The Group does not use
such derivative instruments for trading purposes, but as it has not applied the
hedge accounting provisions of IAS 39 'Financial Instruments: Recognition and
Measurement', derivatives are measured at fair value in the balance sheet with
changes in value recognised in the income statement.
At 30 June 2005, Group had min/max instruments for 78,150 tonnes of copper
production, with a weighted average floor of 117.7 cents per pound and a
weighted average cap of 151.7 cents per pound. These instruments had an average
duration of four months. The Group's exposure to the copper price up to this
level of production will be limited to the extent that market prices exceed the
cap or fall below the floor at each relevant exercise date.
Details of the mark-to-market position of these instruments, together with
details of interest and commodity derivatives held by the Group, are given in
Note 5 to this Interim Report.
Cash Flows, Cash and Debt
Net cash inflow from operating activities was US$767.1 million in the first six
months of 2005 compared with US$517.3 million in the same period last year,
reflecting the improved operating results adjusted for depreciation,
amortisation and normal working capital movements. A dividend of US$1.0 million
was received from the Group's investment in ATI, acquired at the end of 2004.
Tax payments in the period were US$191.5 million, compared with US$4.8 million
in the first six months of 2004. The significant increase arose because at the
beginning of 2004, Los Pelambres and El Tesoro absorbed the tax losses which
derived from the start up of their operations in 1999 and 2001 respectively.
The current tax liability for these operations in respect of 2004 was paid in
the first half of 2005.
Capital expenditure was US$79.2 million in the period. This included first
expenditures on the Mauro tailings dam project at Los Pelambres and the
investment in additional ore processing capacity at El Tesoro.
Dividends paid to ordinary shareholders of the Company in the first six months
of this year were US$124.3 million (2004 half year - US$47.0 million), which
related to the final dividend declared in respect of 2004 including a special
dividend of 40 cents per ordinary share. Dividends paid by subsidiaries to
minority shareholders were US$114.3 million (2004 half year - US$18.8 million),
principally due to increased distributions by Los Pelambres.
Repayment of borrowings, mainly at Los Pelambres and El Tesoro, were US$67.1
million compared with US$111.5 million in the first half of 2004. Regular
repayments are now lower following the prepayments and refinancings which took
place at the end of 2004. The repayments in the first half of 2004 also
included repayment of short-term facilities of US$41.5 million drawn down the
previous year.
Details of other cash inflows and outflows in the period are contained in the
Consolidated Cash Flow Statement on page 13.
At 30 June 2005, the Group had cash and cash equivalents of US$1,064.6 million
(2004 - US$491.3 million), which includes cash balances held by Los Pelambres to
finance the Mauro tailings dam and the plant expansion projects. Excluding the
minority share in each partly-owned operation, the Group's share of this balance
was US$793.6 million (2004 - US$351.4 million).
Total Group borrowings at 30 June 2005 were US$524.7 million (2004 - US$749.1
million); of this, US$319.4 million (2004 - US$448.9 million) is proportionally
attributable to the Group after excluding the minority shareholdings in
partly-owned operations. The decrease in debt is mainly due to further
principal repayments at Los Pelambres and El Tesoro as explained above.
Balance Sheet
Net equity (i.e. equity attributable to ordinary shareholders of the Company)
increased from US$1,465.5 million at the beginning of the year to US$1,702.7
million, relating mainly to profit after tax and minority interests for the
period less the ordinary dividend for 2004 which was approved and paid in the
first half of 2005.
Minority interests increased from US$604.5 million at the beginning of the year
to US$722.2 million, principally reflecting the minority's share of profit after
tax less the minority's share of the dividends approved or paid by subsidiaries
in the period.
International Financial Reporting Standards
The financial information contained in this Interim Report, including all
comparatives, has been prepared in accordance with International Financial
Reporting Standards ('IFRS') in place of UK GAAP. Further details are given in
Notes 1 and 21 to this Interim Report. The Group also published financial
information in accordance with IFRS for 2004 on 13 September 2005. The news
release, together with the full statement 'Adoption of International Financial
Reporting Standards and Restatements for 2004', is available on the Company's
website and from the Company's registered office. The statement includes
explanations and quantifications of the significant UK GAAP to IFRS differences,
a summary of which is contained in Note 21 to this Interim Report.
12 September 2005
Consolidated Income Statement
Six months ended Six months Year ended
30.6.05 ended 31.12.04
30.6.04
Notes US$'m US$'m US$'m
Group turnover 3,4 1,123.6 753.4 1,942.1
Total operating 3,4 (384.6) (326.5) (738.7)
costs
Group operating profit 739.0 426.9 1,203.4
Share of income from associate 13 0.5 - -
Total profit from operations and associates 4 739.5 426.9 1,203.4
Net finance costs 6 - (11.5) (4.9)
Profit before tax 739.5 415.4 1,198.5
Income tax expense 7 (132.0) (79.2) (241.9)
Profit for the financial year 607.5 336.2 956.6
Attributable to:
Minority interests 240.0 128.7 377.1
Equity holders of the Company (net earnings) 367.5 207.5 579.5
US cents US cents US cents
Basic earnings per share 8 186.4 105.2 293.9
Dividends to ordinary shareholders of the
Company
Per share US cents US cents US cents
Dividends per share proposed in relation to 9
the period 16.0 15.0 79.0
Dividends per share paid in the
period 64.0 24.0 39.0
In aggregate US$'m US$'m US$'m
Dividends proposed in relation to the period 9 31.5 29.6 155.8
Dividends paid in the period 126.2 47.3 76.9
There was no potential dilution of earnings per share in any period set out
above.
The results relate wholly to continuing operations.
Consolidated Balance Sheet
At 30.6.05 At 30.6.04 At 31.12.04
Notes US$'m US$'m US$'m
Non-current assets
Intangible asset 10 88.1 83.1 93.2
Property, plant and 11 1,807.1 1,807.1 1,796.1
equipment
Investment property 12 3.1 2.8 3.2
Investment in associate 13 2.4 - 2.9
Available for sale 14 0.2 0.2 0.1
investments
Deferred tax assets 18 2.5 1.5 1.6
1,903.4 1,894.7 1,897.1
Current assets
Inventories 87.3 80.9 69.9
Trade and other 340.1 190.8 349.8
receivables
Current tax assets 1.6 4.7 1.0
Financial instruments -derivatives 5 0.9 - 0.2
Cash and cash equivalents 20 1,064.6 491.3 881.4
1,494.5 767.7 1,302.3
Total assets 3,397.9 2,662.4 3,199.4
Current liabilities
Short-term borrowings 15, 20 (103.3) (125.5) (104.7)
Financial instruments -derivatives 5 (6.2) (6.3) (2.3)
Trade and other payables (113.5) (106.7) (135.3)
Current tax liabilities (87.8) (66.6) (162.2)
(310.8) (305.1) (404.5)
Non-current liabilities
Medium and long term borrowings 15, 20 (421.4) (623.6) (498.1)
Trade and other payables (3.1) (1.3) (1.3)
Post-employment benefit obligations 16 (16.8) (12.8) (16.2)
Long-term provisions 17 (10.2) (11.7) (13.2)
Deferred tax liabilities 18 (210.7) (140.7) (196.1)
(662.2) (790.1) (724.9)
Total liabilities (973.0) (1,095.2) (1,129.4)
Net assets 2,424.9 1,567.2 2,070.0
Equity
Share 16.6 16.6 16.6
capital
Share premium 272.4 272.4 272.4
Translation reserves 4.4 (6.0) 8.5
Retained earnings 1,409.3 825.6 1,168.0
Net equity attributable to equity holders of the
Company 1,702.7 1,108.6 1,465.5
Minority interests 722.2 458.6 604.5
Total equity 2,424.9 1,567.2 2,070.0
The interim financial information was approved by the Board of Directors on 12
September 2005.
Consolidated Cash Flow Statement
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
Note US$'m US$'m US$'m
Cash flows from 19 767.1 517.3 1,253.5
operations
Dividend from associate 1.0 - -
Income tax paid (191.5) (4.8) (14.3)
Net cash flow from operating
activities 576.6 512.5 1,239.2
Investing activities
Acquisition of subsidiary - - (0.1)
Recovery of IVA (Chilean VAT) paid on purchase of
water concession 3.8 - 5.8
Acquisition of investment in associate - - (2.9)
Purchases of property, plant and
equipment (79.2) (31.1) (80.4)
Proceeds from sale of property, plant and
equipment 0.4 0.2 0.2
Purchase of available for sale
investments - (0.4) -
Proceeds from disposal of available for sale
investments - 0.1 0.1
Net cash used in investing activities (75.0) (31.2) (77.3)
Financing activities
Dividends paid to equity holders of
the Company (124.3) (47.0) (76.5)
Dividends paid to preference shareholders of (0.1) (0.1) (0.2)
the Company
Dividends paid to minority interests (114.3) (18.8) (120.8)
Interest paid, including payments under (11.8) (14.2) (32.5)
interest derivatives
Interest received 14.7 2.2 11.1
Realised gains from currency swaps - 7.5 7.5
Net proceeds from issue of new
borrowings - 0.3 558.0
Repayments of borrowings (67.1) (111.5) (818.4)
Repayments of obligations under
finance leases (12.7) (1.7) (2.9)
Movement on medium term deposits - 27.0 27.0
Net cash used in financing activities (315.6) (156.3) (447.7)
Net increase in cash and cash equivalents 186.0 325.0 714.2
Cash and cash equivalents at beginning of
period 881.4 168.7 168.7
Net increase in cash and cash equivalents 186.0 325.0 714.2
Effect of foreign exchange rate
changes (2.8) (2.4) (1.5)
Cash and cash equivalents at end of 20
period 1,064.6 491.3 881.4
Consolidated statements of changes in equity
For the six months ended 30 June 2004
Share Share Translation Retained Net Minority Total
capital premium reserves earnings equity interests
US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Balance at 1 January 2004 16.6 272.4 - 665.4 954.4 347.3 1,301.7
Profit for the
financial period - - - 207.5 207.5 128.7 336.2
Currency translation
adjustment - - (6.0) - (6.0) 0.1 (5.9)
Dividends - - - (47.3) (47.3) (17.5) (64.8)
Balance at 30 June 2004 16.6 272.4 (6.0) 825.6 1,108.6 458.6 1,567.2
For the year ended 31 December 2004
Share Share Translation Retained Net Minority Total
capital premium reserves earnings equity interests
US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Balance at 1 January 2004 16.6 272.4 - 665.4 954.4 347.3 1,301.7
Profit for the financial year - - - 579.5 579.5 377.1 956.6
Currency translation adjustment - - 8.5 - 8.5 (0.4) 8.1
Dividends - - - (76.9) (76.9) (119.5) (196.4)
Balance at 31 December 2004 16.6 272.4 8.5 1,168.0 1,465.5 604.5 2,070.0
For the six months ended 30 June 2005
Share Share Translation Retained Net Minority Total
capital premium reserves earnings equity interests
US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Balance at 1 January 2005 16.6 272.4 8.5 1,168.0 1,465.5 604.5 2,070.0
Profit for the financial period - - - 367.5 367.5 240.0 607.5
Currency translation adjustment - - (4.1) - (4.1) (0.2) (4.3)
Dividends - - - (126.2) (126.2) (122.1) (248.3)
Balance at 30 June 2005 16.6 272.4 4.4 1,409.3 1,702.7 722.2 2,424.9
There were no items of recognised income and expense in either period other than
the profit for the financial period.
Notes to the interim financial statements
1. General information and accounting policies
a) General information
These June 2005 interim consolidated financial statements are for the six months
ended 30 June 2005. The information for the year ended 31 December 2004 does
not constitute statutory accounts as defined in section 240 of the Companies Act
1985. A copy of the statutory accounts for that year, which were prepared under
UK Generally Accepted Accounting Principles ('UK GAAP'), has been delivered to
the Registrar of Companies. The auditors' report on these accounts was
unqualified.
b) Accounting policies
For accounting periods beginning on or after 1 January 2005, the Group is
required to prepare consolidated financial statements in accordance with
International Financial Reporting Standards ('IFRSs') in place of UK GAAP. For
these purposes, IFRSs comprise the Standards and Interpretations issued by the
International Accounting Standards Board ('IASB') and Interpretations issued by
the International Financial Reporting Interpretations Committee ('IFRIC') that
have been, or are expected to be, endorsed by the European Union by 31 December
2005.
These interim financial statements, including all comparatives, have been
prepared using the accounting policies consistent with all IFRS Standards and
Interpretations published by 31 December 2004 which are mandatory for accounting
periods beginning on or after 1 January 2005. The Group has also chosen to
adopt IFRS 6 'Exploration for and Evaluation of Mineral Resources' early. These
interim financial statements are covered by IFRS 1 'First-time adoption of
International Financial Reporting Standards' because they form part of the
period included in the Group's first IFRS financial statements for the year
ended 31 December 2005. The Group has applied the exemption not to comply fully
with International Accounting Standard 34 'Interim Financial Reporting'.
The accounting policies and methods of computation followed in these interim
financial statements are those set out in the news release 'Adoption of
International Financial Reporting Standards and Restatements for 2004' published
by the Company on 13 September 2005. The news release, including full
disclosure of these accounting policies, is available on the Company's website
www.antofagasta.co.uk or from the Company's Registered Office. These policies
have been consistently applied to all periods presented in these interim
financial statements.
2. Production and Sales Statistics (Neither Audited nor Reviewed)
(See notes following Note 2(d).)
a) Production volumes for copper and molybdenum
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 154.9 165.0 350.6
El Tesoro 49.9 46.9 97.8
Michilla 22.6 23.5 50.0
Group total 227.4 235.4 498.4
Molybdenum
Los Pelambres 4.7 3.7 7.9
b) Sales volumes for copper and molybdenum
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
000 tonnes 000 tonnes 000 tonnes
Copper
Los Pelambres 150.6 139.8 352.2
El Tesoro 50.6 47.1 98.3
Michilla 23.1 22.9 50.2
Group total 224.3 209.8 500.7
Molybdenum
Los Pelambres 4.3 3.7 7.9
c) Cash costs per pound of copper produced
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
cents cents cents
Copper
Los Pelambres (48.1) 18.0 7.9
El Tesoro 58.9 50.5 52.4
Michilla 112.2 84.7 85.6
Group weighted average (including by-products) (8.7) 31.2 24.3
Group weighted average (before deducting by-products) 71.7 55.7 56.6
Cash costs at Los Pelambres comprise:
On-site and shipping costs 43.9 36.4 37.2
Tolling charges for concentrates 26.0 16.6 16.5
Cash costs before deducting by-product credits 69.9 53.0 53.7
By-product credits (principally molybdenum) (118.0) (35.0) (45.8)
Cash costs (net of by-product credits) (48.1) 18.0 7.9
d) Realised prices per pound for copper and molybdenum and
market prices
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
cents cents cents
Copper
Los Pelambres 159.8 134.1 141.5
El Tesoro 157.9 131.2 136.9
Michilla 157.1 131.3 137.4
Group weighted average 159.1 133.1 140.2
LME average 151.1 125.2 130.0
US$ US$ US$
Molybdenum
Los Pelambres 36.0 14.4 21.5
Market average price 33.4 11.4 16.2
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, 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.
(v) The individual figures are sometimes more specific than the
rounded numbers shown; hence small differences may appear in the totals.
3. Operating profit
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
US$'m US$'m US$'m
Turnover 1,123.6 753.4 1,942.1
Cost of (311.7) (262.2) (593.4)
sales
Gross profit 811.9 491.2 1,348.7
Adminsitrative expenses (59.3) (52.1) (118.1)
Closure provision 3.9 (0.6) (1.2)
Severance charges (2.5) (1.0) (3.2)
Exploration costs (8.0) (2.7) (10.3)
Other operating income 2.1 1.0 4.7
Other operating expenses (9.1) (8.9) (17.2)
Group operating profit 739.0 426.9 1,203.4
Share of income from associate 0.5 - -
Total profit from operations and 739.5 426.9 1,203.4
associates
4. Segmental analysis
a) Turnover by operation
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Los Pelambres 797.0 488.9 1,362.8
El Tesoro 176.1 136.2 296.6
Michilla 80.0 66.3 152.1
Mining 1,053.1 691.4 1,811.5
Railway and other transport services 44.7 39.9 85.7
Water concession 25.8 22.1 44.9
1,123.6 753.4 1,942.1
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$4.1
million (2004 half year - US$3.3 million).
(ii) Los Pelambres produces and sells copper and molybdenum concentrates.
It is also credited for the gold and silver content in the copper
concentrate it sells. Turnover by type of metal is analysed below, to
show separately the amounts prior to deduction of tolling charges, the
tolling charges involved and the net amounts included in turnover.
El Tesoro and Michilla do not generate by-products from their copper
cathode operations.
Turnover prior to deduction of tolling charges:
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Copper 530.6 413.3 1,098.4
Molybdenum 341.7 117.7 374.9
Gold and silver 9.5 7.1 16.8
Los Pelambres 881.8 538.1 1,490.1
Tolling charges:
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Copper (71.0) (43.2) (111.4)
Molybdenum (13.6) (5.8) (15.4)
Gold and silver (0.2) (0.2) (0.5)
Los Pelambres (84.8) (49.2) (127.3)
Turnover (net of tolling charges) included in Group turnover:
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Copper 459.6 370.1 987.0
Molybdenum 328.1 111.9 359.5
Gold and silver 9.3 6.9 16.3
Los Pelambres 797.0 488.9 1,362.8
b) Earnings before interest, tax, depreciation and
amortisation (EBITDA) by operation
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Los Pelambres 655.4 374.7 1,072.0
El Tesoro 110.8 82.7 179.6
Michilla 18.0 19.6 53.6
Exploration (8.0) (2.7) (10.3)
Corporate and other items (6.7) (3.7) (10.2)
Mining 769.5 470.6 1,284.7
Railway and other transport 19.8 21.0 41.8
services
Water concession 17.1 14.1 30.2
806.4 505.7 1,356.7
EBITDA is calculated by adding back depreciation, amortisation and amounts
written off plant, property and equipment (see Note 4(c)) to operating profit
(see Note 4(d)).
c) Depreciation and amortisation by operation
Six months Six months Year ended
ended 30.6.05 ended 30.6.04 31.12.04
US$'m US$'m US$'m
Los Pelambres 34.8 42.3 80.2
El Tesoro 13.1 11.2 22.3
Michilla 6.9 10.0 13.9
Corporate and other items 0.2 0.2 0.4
Mining 55.0 63.7 116.8
Railway and other transport services 4.5 4.2 9.1
Water concession 4.1 3.6 8.3
63.6 71.5 134.2
Amounts written off plant, property and equipment 3.8 7.3 19.1
67.4 78.8 153.3
d) Operating profit/(loss) by operation
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Los Pelambres 620.1 330.8 988.7
El Tesoro 97.6 66.6 151.4
Michilla 9.6 9.5 31.6
Exploration (8.0) (2.7) (10.3)
Corporate and other items (6.9) (3.9) (10.7)
Mining 712.4 400.3 1,150.7
Railway and other transport services 14.7 16.2 30.9
Water concession 11.9 10.4 21.8
Group operating profit 739.0 426.9 1,203.4
Share of income from associate 0.5 - -
Total profit from operations and associates 739.5 426.9 1,203.4
e) Capital expenditure by operation
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Los Pelambres 35.4 14.7 47.7
El Tesoro 28.7 4.2 10.0
Michilla 7.1 7.2 14.8
Corporate and other items 1.2 0.1 0.2
Mining 72.4 26.2 72.7
Railway and other transport services 7.0 4.3 7.1
Water concession 1.6 0.7 1.4
81.0 31.2 81.2
Capital expenditure represents purchase of property, plant and equipment stated
on an accruals basis (see Note 11) and may therefore differ from the amount
included in the cash flow statement.
5. Derivatives and embedded derivatives
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:
At 30.6.05 At 30.6.04 At 31.12.04
Balance sheet US$'m US$'m US$'m
Pelambres - copper concentrate 2.1 (15.3) 17.6
Pelambres - molybdenum concentrate 14.9 3.1 32.9
Tesoro - copper cathodes (0.4) - 0.8
Michilla - copper cathodes (0.4) 0.1 0.4
16.2 (12.1) 51.7
Income statement Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Mark-to-market effect on (35.5) (8.8) 11.3
turnover
Copper concentrate sales at Los Pelambres totalling 112,900 tonnes at 30 June
2005 remained open as to price, with an average mark-to-market price of 152.9
cents per pound.
Molybdenum concentrate sales at Los Pelambres totalling 1,700 tonnes at 30 June
2005 remained open as to price, with an average mark-to-market price of US$37.4
per pound.
Derivative financial instruments
The Group uses derivative financial instruments to reduce exposure to foreign
exchange, interest rate and commodity price movements. The Group does not use
such derivative instruments for trading purposes. The Group has not adopted the
hedge accounting provisions of IAS 39 'Financial Instruments: Recognition and
Measurement'. Accordingly, derivatives are measured at each balance sheet date
at fair value. Gains and losses arising from changes in fair value are included
in the income statement for the period, within operating profit for commodity
derivatives and within net finance costs for exchange and interest derivatives.
The mark-to-market adjustments at the end of each period and the effect on
operating profit and net finance costs in the income statement for each period
are as follows:
At 30.6.05 At 30.6.04 At 31.12.04
Balance sheet US$'m US$'m US$'m
Current assets - derivative financial instruments 0.9 - 0.2
Current liabilities - derivative financial instruments (6.2) (6.3) (2.3)
(5.3) (6.3) (2.1)
At 30.6.05 At 30.6.04 At 31.12.04
Balance sheet - net position US$'m US$'m US$'m
Commodity (3.8) - 0.2
Interest (1.5) (6.3) (2.2)
Exchange - - (0.1)
(5.3) (6.3) (2.1)
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
Income statement US$'m US$'m US$'m
Mark-to-market effect on other operating expenses (4.0) 3.8 4.0
Mark-to-market effect on net finance costs 0.8 3.5 7.5
(3.2) 7.3 11.5
The Group had min/max instruments at 30 June 2005 for 78,150 tonnes of copper
production, with a weighted average floor of 117.7 cents per pound and a
weighted average cap of 151.7 cents per pound. These instruments had a weighted
average duration of 4.4 months and covered a period of 1.5 years.
The Group had interest rate collars at 30 June 2005 with a notional principal
amount of US$111.5 million, with a weighted average floor of 5.01% and a
weighted average cap of 5.99%. These instruments had a weighted average
duration of 1.1 years.
The Group had outstanding forward exchange contracts at 30 June 2005 to buy US
dollars and sell pesos with a net value of US$3 million. The duration of these
instruments was 1.5 months.
6. Net finance costs
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Interest 15.4 9.8 19.2
receivable
Interest payable (12.2) (14.9) (34.0)
Foreign exchange (3.1) (9.4) 3.3
Mark-to-market effect of derivatives 0.8 3.5 7.5
Preference dividends (0.1) (0.1) (0.2)
Discount charge relating to provisions (0.8) (0.4) (0.7)
Net finance cost - (11.5) (4.9)
In 2004, interest receivable and similar income includes realised gains of
US$7.5 million relating to gains under currency swaps.
7. Taxation
The tax charge for the period is comprised as follows:
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Current tax charge (118.3) (75.7) (183.1)
Deferred tax charge (13.7) (3.5) (58.8)
(132.0) (79.2) (241.9)
Current tax is based on taxable profit for the period. Deferred tax is the tax
expected to be payable or recoverable on temporary differences (i.e. differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable
profit). Deferred tax is accounted for using the balance sheet liability method
and is provided on all temporary differences with certain limited exceptions.
The Group incurs withholding taxes on the remittance of profits from Chile and
the other countries in which it operates and deferred tax is provided on
undistributed earnings to the extent that remittance is probable in the
foreseeable future.
The effective tax rate for the six months ended 30 June 2005 was 17.9%, compared
with the Chilean statutory tax rate of 17%. This was principally due to the
provision of additional deferred tax of US$8.7 million in the period for
withholding taxes. The effective tax rate for the six months ended 30 June 2004
was 19.1% and for the year ended 31 December 2004 was 20.2%. In the 2004
financial year, US$36 million was provided for such withholding taxes accounting
for the higher effective tax rate that year.
8. Earnings per share
Earnings per share is calculated on profit after tax and minority interest
giving net earnings of US$367.5 million (2004 half year - US$207.5 million) and
based on 197,171,339 ordinary shares in issue throughout both periods.
There was no potential dilution of ordinary shares in either 2004 or the six
months ended 30 June 2005.
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 23
September 2005.
The Board has declared an interim dividend of 16 cents per ordinary share (2004
half year - 15 cents) for payment on 13 October 2005 to shareholders on the
register at the close of business on 23 September 2005. Dividends are declared
and paid gross. The exchange rate to be applied for the conversion of dividends
will be £1 = US$1.8412 (2004 half year - £1=US$1.8151), giving those
shareholders who will be paid in sterling an interim dividend of 8.69 pence per
ordinary share (2004 half year - 8.2640 pence).
In 2004, the Group proposed an ordinary dividend of 39 cents per share and a
special dividend per share of 40 cents per share, giving a total dividend for
the year of 79 cents per ordinary share.
10. Intangible asset - concession right
Concession right Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Balance at the beginning of the period 93.2 90.6 90.6
Amortisation (1.6) (1.4) (3.3)
Foreign currency exchange difference (3.5) (6.1) 5.9
Balance at the end of the period 88.1 83.1 93.2
The intangible asset relates to the 30-year concession to operate the water
rights and facilities in the Antofagasta Region of Chile which the Group's
wholly-owned subsidiary, Aguas de Antofagasta S.A., acquired in December 2003.
The intangible asset is being amortised on a straight-line basis over the life
of the concession.
11. Property, plant and equipment
Mining Railway and Water Six months Six months Year ended
other Concession ended 30.6.05 ended 30.6.04 31.12.04
transport
US$'m US$'m US$'m US$'m US$'m US$'m
Balance at the beginning of
the period 1,627.2 99.7 69.2 1,796.1 1,860.0 1,860.0
Additions 72.4 7.0 1.6 81.0 31.2 81.2
Acquisition - - - - - 0.2
Transfers and reclassifications (0.8) - - (0.8) (0.4) 0.3
Disposals and amounts written
off property, plant and equipment (2.5) (0.6) (1.1) (4.2) (7.3) (19.1)
Depreciation (55.0) (4.5) (2.5) (62.0) (70.1) (130.9)
Foreign currency exchange
difference - (0.6) (2.4) (3.0) (6.3) 4.4
Balance at the end of the period 1,641.3 101.0 64.8 1,807.1 1,807.1 1,796.1
12. Investment property
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Balance at the beginning of the period 3.2 3.0 3.0
Foreign currency exchange difference (0.1) (0.2) 0.2
Balance at the end of the period 3.1 2.8 3.2
Investment property represents the Group's forestry properties, which are held
for long-term potential and accordingly classified as investment property held
at cost.
13. Investment in associate
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Balance at the beginning of the period 2.9 - -
Acquisition - - 2.9
Share of profit before tax 0.6 - -
Share of tax (0.1) - -
Dividends received (1.0) - -
Foreign currency exchange difference - - -
Balance at the end of the period 2.4 - 2.9
The investment in associate refers to the Group's 30% interest in Antofagasta
Terminal Internacional S.A. ('ATI'), which operates a concession to manage
installations in the port of Antofagasta. The investment was acquired on 16
December 2004 and did not have any material effect on the Group's earnings or
operating cash flows in that year.
14. Available for sale investments
Available for sale investments represent those investments which are not
subsidiaries, associates or joint ventures and are not held for trading
purposes. The fair value of the available for sale investments held by the
Group did not differ materially from cost at any period end.
15. Borrowings
At 30.6.05 At 30.6.04 At 31.12.04
US$'m US$'m US$'m
Los Pelambres
Corporate (419.8) (552.8) (457.9)
loans
Other loans (16.7) (21.5) (19.1)
El Tesoro
Corporate (73.7) (138.4) (99.7)
loans
Subordinated debt - (9.7) -
Finance (0.3) (13.2) (12.2)
leases
Michilla
Finance (3.2) (1.6) (2.1)
leases
Railway and other transport
services
Loans (7.4) (8.2) (7.9)
Other
Preference shares (3.6) (3.7) (3.9)
Total (524.7) (749.1) (602.8)
Loans at 30 June 2005 are shown net of deferred financing costs of US$2.2
million (30 June 2004 - US$2.5 million; 31 December 2004 - US$2.4 million). The
amount in relation to Los Pelambres was US$1.9 million (30 June 2004 - nil; 31
December 2004 - US$2.1 million). The amount in relation to El Tesoro was US$0.3
million (30 June 2004 - U$2.5 million; 31 December 2004 - US$0.3 million)
Maturity of borrowings
At 30.6.05 At 30.6.04 At 31.12.04
US$'m US$'m US$'m
Short-term (103.3) (125.5) (104.7)
borrowings
Medium and long-term borrowings (421.4) (623.6) (498.1)
(524.7) (749.1) (602.8)
Loans are predominantly floating rate. However the Group periodically enters
into interest rate derivative contracts to manage its exposure to interest
rates. Details of derivative instruments held by the Group are given in Note
5.
16. Post-employment benefit obligation
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Balance at the beginning of the period (16.2) (13.0) (13.0)
Charge to operating profit in the period (2.5) (1.0) (3.2)
Release of discount to net interest in period (0.4) (0.2) (0.1)
Reclassification 1.0 (0.3) (0.5)
Utilised in period 0.4 0.6 0.7
Foreign currency exchange difference 0.9 1.1 (0.1)
Balance at the end of the period (16.8) (12.8) (16.2)
The post employment benefit obligation relates to the provision for severance
indemnities which are payable when an employment contract comes to an end, in
accordance with normal employment practice in Chile and other countries in which
the Group operates. The severance indemnity obligation is treated as an
unfunded defined benefit plan, and the calculation is based on valuations
performed by an independent actuary.
17. Long-term provisions
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Balance at the beginning of the period (13.2) (11.6) (11.6)
Charge to operating profit in the period 3.9 0.6 1.2
Release of discount to net interest in period (0.5) (0.2) (0.6)
Utilised in period (0.4) (0.5) (2.2)
Balance at the end of the period (10.2) (11.7) (13.2)
Analysed as follows:
Decommissioning and restoration (10.0) (11.6) (13.0)
Termination of water concession (0.2) (0.1) (0.2)
Balance at the end of the period (10.2) (11.7) (13.2)
Decommissioning and restoration costs relate to the Group's mining operations.
Costs are estimated on the basis of a formal closure plan and are subject to
regular formal review.
18. Deferred tax assets and liabilities
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Net position at the beginning of the period (194.5) (135.7) (135.7)
Charge to tax on profit in period (13.7) (3.5) (58.8)
Net position at the end of the period (208.2) (139.2) (194.5)
Analysed between:
Deferred tax assets 2.5 1.5 1.6
Deferred tax liabilities (210.7) (140.7) (196.1)
Net position (208.2) (139.2) (194.5)
19. Reconciliation of profit before tax to net cash inflow from operating
activities
Six months Six months Year ended
ended ended 31.12.04
30.6.05 30.6.04
US$'m US$'m US$'m
Profit before tax 739.5 415.4 1,198.5
Depreciation and amortisation 63.6 71.5 134.2
Amounts written off property, plant and equipment 3.8 7.3 19.1
Net finance costs - 11.5 4.9
Share of profit of associ ate (0.5) - -
Increase in inventories (17.6) (20.1) (9.5)
Decrease/(increase) in debtors 4.0 20.7 (140.7)
(Decrease)/increase in creditors and provisions (25.7) 11.0 47.0
Cash flow from operations 767.1 517.3 1,253.5
20. Analysis of changes in net borrowings
At 1.1.05 Cash Flows Other Exchange At 30.06.05
US$'m US$'m US$'m US$'m US$'m
Cash and cash equivalents 881.4 186.0 - (2.8) 1,064.6
Bank borrowings due within one year (102.1) 51.1 (50.9) 0.1 (101.8)
Bank borrowings due after one year (482.5) 16.0 50.7 - (415.8)
Finance leases due within one year (2.6) 2.3 (1.3) 0.1 (1.5)
Finance leases due after one year (11.7) 10.4 (0.7) - (2.0)
Preference shares (3.9) - - 0.3 (3.6)
Total borrowings (602.8) 79.8 (2.2) 0.5 (524.7)
Net borrowings 278.6 265.8 (2.2) (2.3) 539.9
Net cash/(borrowings)
Net cash and net borrowings at the end of each period is as follows:
At 30.6.05 At 30.6.04 At 31.12.04
US$'m US$'m US$'m
Cash and cash equivalents 1,064.6 491.3 881.4
Total borrowings (524.7) (749.1) (602.8)
539.9 (257.8) 278.6
21. Reconciliation between UK GAAP and IFRS
The Group published financial information in accordance with IFRS for 2004, as
required by IFRS 1, on 13 September 2005. The news release, together with the
full statement 'Adoption of International Financial Reporting Standards and
Restatements for 2004' is available on the Company's website and from the
Company's registered office, 5 Princes Gate London SW7 1QJ (telephone: +44 20
7808 0988). The statement includes explanations of the significant UK GAAP to
IFRS differences and reconciliations for:
a. net earnings (profit after tax and minority interests) for the six
months ended 30 June 2004 and the year ended 31 December 2004;
b. net equity (excluding minority interests) at 1 January 2004 (the
date of transition), 30 June 2004 and 31 December 2004.
The statement also includes detailed IFRS accounting policies adopted by the
Company in preparing its consolidated financial statements. A summary of the
detailed information is provided in the statements is set out below.
Reconciliation of net earnings under UK GAAP to net earnings after IFRS
Half year Full year
30.06.04 31.12.04
US$'m US$'m
UK GAAP - Net earnings 222.3 558.3
Mark-to-market of provisionally priced sales (11.7) 12.0
Mark-to-market of financial derivatives 4.3 6.2
Reclassification of preference dividends to finance costs (0.1) (0.2)
Post-employment benefits - measurement of severance indemnities 0.6 -
Change in functional currency of subsidiary (1.0) 1.1
Exchange differences on intra-group items (7.7) 0.5
Recognition of deferred tax on temporary differences 0.8 1.6
Total adjustments (14.8) 21.2
IFRS - Net earnings 207.5 579.5
Net earnings are stated after tax and minority interests.
Reconciliation of shareholders' funds under UK GAAP to net equity under IFRS
01.01.04 30.06.04 31.12.04
US$'m US$'m US$'m
UK GAAP - shareholders' funds 905.9 1,079.5 1,322.7
Mark-to-market of provisionally priced sales 13.7 2.0 25.7
Mark-to-market of financial derivatives (7.4) (3.1) (1.2)
Reversal of proposed ordinary dividends 47.3 29.6 126.2
Reclassification of preference shares to borrowings (3.5) (3.7) (3.9)
Post-employment benefits - measurement of severance indemnities (1.5) (0.9) (1.5)
Change in functional currency of subsidiary - 4.5 (4.0)
Currency treatment of non US dollar fair value adjustments (0.4) (0.4) (0.4)
Recognition of deferred tax on temporary differences 0.3 1.1 1.9
Total adjustments 48.5 29.1 142.8
IFRS - net equity 954.4 1,108.6 1,465.5
Net equity is stated excluding minority interests.
22. Other disclosures
Contingent assets and liabilities
There were no material contingent assets or liabilities in the period.
Changes in estimates
During the six months ended 30 June 2005, the Group conducted a formal review of
its mine closure plans and accordingly reassessed the decommissioning and
restoration provisions for each mine.
As a result of the review, the provision at Los Pelambres was reduced by US$5.0
million, principally as a result of the extension of the mine life following the
approval of the Environmental Impact Assessment in 2004 which increased the
mine's reserves. Of this amount, US$0.8 million related to decommissioning
costs and this amount has been credited against property, plant and equipment.
The balance of US$4.2 million related to restoration costs and has been credited
against operating profit. There were no material changes to the provisions at
El Tesoro or Michilla.
Related Party Transactions
The ultimate parent company of the Group is Metalinvest Establishment, a company
controlled by the estate of Mr. A A Luksic and his family interests. The
Company's subsidiaries, in the ordinary course of business, enter into various
sale, purchase and transactions with companies also controlled by the estate of
Mr. A A Luksic and his family interests, including Quinenco S.A., a Chilean
industrial and financial conglomerate the shares of which are traded on the
Santiago and New York Stock Exchanges. These transactions are under terms
that are no more favourable than those arranged with third parties. These
transactions, in total, are not considered to be material.
The Group has a 30% interest in Antofagasta Terminal Internacional S.A. ('ATI'),
which is accounted for as an associate. The Group received dividends during the
period of US$1.0 million, as disclosed in the Consolidated Cash Flow Statement
on page 13.
23. Currency translation
Assets and liabilities denominated in foreign currencies are translated into
dollars and sterling at the period end rates of exchange. Results denominated in
foreign currencies have been translated into dollars at the average rate for
each period.
Period end rates Average rates
30.06.05 US$ 1.7905 = £1; US$1 = Ch$579 US$1.8737 = £1; US$1 = Ch$580
30.06.04 US$1.8185 = £1; US$1 = Ch$636 US$1.8222 = £1; US$1 = Ch$608
31.12.04 US$1.9257 = £1; US$1 = Ch$557 US$1.8457 = £1; US$1 = Ch$607
24. Distribution
These results will be sent by first class post to all shareholders on 13
September 2005. Copies of this report will be available for members of the
public who are not shareholders at the Company's registered office, 5 Princes
Gate, London SW7 1QJ (telephone: +44 20 7808 0988).
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 2005 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement, the consolidated statement of changes in equity and related Notes 1
to 24, 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.
International Financial Reporting Standards
As disclosed in Note 1, the next annual financial statements of the Group will
be prepared in accordance with International Financial Reporting Standards ('
IFRS') as adopted for use in the European Union. Accordingly, the Interim
Report has been prepared in accordance with the recognition and measurement
criteria of IFRS and the disclosure requirements of the Listing Rules.
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 International Standards on Auditing (UK and
Ireland) 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 2005.
Deloitte & Touche LLP
Chartered Accountants
London
12 September 2005
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