Final Results
Antofagasta PLC
11 March 2003
ANTOFAGASTA PLC
Preliminary Results Announcement
for the year ended 31 December 2002
11 March 2003
• Turnover of US$863.1 million (2001 - US$769.5 million).
• Operating cash flow of US$350.3 million (2001 - US$265.9 million).
• Profit before tax of US$176.8 million (2001 - US$113.5 million).
• Earnings per share of 49.0 cents (2001 -31.4 cents).
• Final dividend of 18 cents* (2001 - final ordinary dividend of 14.75
cents; in addition a special dividend of 10 cents was declared giving a
total final dividend of 24.75 cents) .
• Total dividend for year of 28 cents per share (2001 - total ordinary
dividend of 22 cents which together with the special dividend gave a total
dividend of 32 cents).
*Dividends are paid either in US dollars or sterling. A conversion rate of £1=
US$1.581 will be applied to the final dividend of 18 cents, giving shareholders
who receive dividends in sterling a final dividend of 11.3852p.
The Group's copper production increased from 445,000 tonnes in 2001 to 460,700
tonnes in 2002. Group weighted average cash costs remained virtually unchanged
at 38.9 cents per pound (2001 - 38.8 cents per pound). Group results benefited
from a full year's contribution from the El Tesoro mine, which came on stream in
the second half of 2001, higher molybdenum revenues and positive pricing
adjustments on close out of provisional concentrate sales at Los Pelambres.
These factors offset the lower LME copper price, which averaged 70.7 cents in
the year (2001 - 71.6 cents per pound).
Mr Jean-Paul Luksic, CEO of Antofagasta Minerals, the Group's mining division
commented, '2002 has been another excellent year for the Group, with earnings up
56% despite the continued period of low copper prices. With costs among the
lowest in the industry, both profits and cash flow generation remain strong and
the Group continues to be very well positioned for the future.'
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 a 33.6% interest in Quinenco S.A. (LQ - NYSE).
Enquiries - London Enquiries - Santiago
Antofagasta plc Antofagasta Minerals S.A.
Tel: +44 20 7382 7862 Tel +562 377 5145
Alejandro Rivera
Philip Adeane Chief Financial Officer
Managing Director Email: arivera@aminerals.cl
Email: nwakefield@antofagasta.co.uk
Issued by Bankside Consultants Ltd
Hussein Barma Keith Irons
Chief Financial Officer Email: keith@bankside.com
Email: hbarma@antofagasta.co.uk Tel: +44 20 7444 4155
DIRECTORS' COMMENTS for the year to 31 December 2002
The Group's copper production, which included a full year's output from El
Tesoro in 2002, increased to 460,700 tonnes compared with 445,000 tonnes in
2001. Group weighted average cash costs for the year were virtually unchanged
at 38.9 cents per pound (2001 - 38.8 cents). These factors together with higher
realised copper prices and better by-product sales of molybdenum by Los
Pelambres offset the effect of slightly weaker LME copper prices, which averaged
70.7 cents per pound compared with 71.6 cents last year. As a result, profit
before tax increased to US$176.8 million from US$113.5 million in 2001, while
earnings per share rose from 31.4 cents to 49.0 cents.
Review of Operations
Los Pelambres
Los Pelambres produced 324,600 tonnes of payable copper compared with 361,500
tonnes in 2001. The decrease was mainly due to the reduction in the ore grade
from 1.05% to 0.91% under the 2002 mine plan. This was mitigated by the higher
throughput level resulting from the continuing optimisation at the plant.
Cash costs, which include by-product credits, were contained at 34.9 cents per
pound (2001 - 35.3 cents per pound). Los Pelambres was able to take advantage
of both higher molybdenum prices, which spiked during the year and averaged
US$3.7 per pound compared with US$2.4 per pound in 2001, and higher production
which increased from 6,900 tonnes to 7,800 tonnes this year. As a result,
by-product credits were 11.0 cents per pound compared with 5.3 cents in 2001,
and this outweighed higher mining costs due to the lower ore grades.
During the year, Los Pelambres shipped 318,200 tonnes of payable copper,
compared with 360,900 tonnes in 2001. Copper concentrate sales agreements
generally provide for provisional pricing at the time of shipment with final
pricing based on the average LME copper price for specified future periods.
Sales volumes are also adjusted based on the final metallurgical content of the
concentrate. Copper revenues on provisionally priced shipments are adjusted
monthly until final settlement. During 2001, there were significant adverse
adjustments to provisionally invoiced shipments including US$16.5 million which
related to sales open at 1 January 2001. In contrast, following the decline in
copper prices through the remainder of 2001, prices strengthened in the early
months of 2002 and consequently revenues for that year include positive
adjustments of US$10.5 million relating to sales open at 31 December 2001. This
enabled Los Pelambres to achieve an effective realised copper price of 71.2
cents per pound compared with 65.8 cents in 2001, an increase of 8.2%. These
positive factors, combined with continued low cash costs, enabled Los Pelambres
to achieve operating profits of US$165.9 million compared with US$163.0 million
in 2001 despite the decrease in production. At 31 December 2002, 87,800 tonnes
remained to be finally priced, and were recorded on that date at an average
price of 70.5 cents per pound. A one-cent change in the average realised price
of these provisionally-priced tonnes would have an approximate effect on
turnover and profit before tax in 2003 of US$1.9 million.
Los Pelambres has further reduced its project borrowings with two principal
repayments during the year totalling US$87.3 million. A total of US$242 million
of the original US$946 million project borrowings has now been repaid since
operations began in 2000. Los Pelambres also paid dividends to its shareholders
of a similar amount totalling US$87.3 million in July and December, and the
Group's share amounted to US$52.4 million.
Los Pelambres is expected to complete its plant upgrade programme during 2003
with the installation of a permanent pebble crusher to improve the efficiency of
its grinding lines. As a result, daily ore throughput should increase from
110,500 tonnes per day in 2002 to over 115,000 tonnes per day in 2003, with an
average of 118,000 tonnes per day for the next five years when the upgrade
programme is completed. The increased throughput will compensate for a slight
decrease in the expected ore grade to approximately 0.88% from 0.91% in 2002.
As a result, production of payable copper in 2003 is expected to be around
325,000 tonnes. Cash costs should be around 37 cents, mainly due to lower
by-product revenues as molybdenum prices return to lower historical levels
following the spike in prices during 2002. During 2003, Los Pelambres is
expected to submit an environmental study in preparation for a possible future
expansion to 175,000 tonnes per day.
El Tesoro
El Tesoro produced 84,300 tonnes of cathodes in 2002, its first full year of
operation, 12% above its design capacity. This allowed El Tesoro to contribute
US$36.4 million to operating profits against US$12.9 million in the second half
of 2001 when average copper prices were significantly lower. Cash costs in 2002
were 40.8 cents per pound, compared with 39.6 cents in the second half of 2001.
The costs of developing El Tesoro were under budget and the project achieved
banking completion ahead of schedule in December 2001. As a consequence, El
Tesoro was able to return surplus funds of US$24.4 million to its shareholders
in January 2002. A further distribution of US$21.0 million was made in
September and the Group's share of these two payments amounted to US$27.7
million.
As part of its development, El Tesoro borrowed US$197 million under project
finance facilities. These became non-recourse when the project achieved banking
completion in December 2001 and in August 2002, El Tesoro made its first
principal repayment of US$12.3 million. Refinancing agreements also were signed
in respect of the remaining balance of US$184.7 million in order to benefit from
lower interest rate margins and more flexible covenants. The refinanced loans
will be repayable in semi-annual instalments over a period of 71/2 years and the
first principal repayment under the new agreements was made in February 2003.
In 2003, El Tesoro is expected to produce 85,000 tonnes of copper at cash costs
of around 41 cents per pound.
Michilla
Michilla produced 51,800 tonnes of cathodes in 2002 compared with 49,600 tonnes
the previous year. Cash costs fell to 61.4 cents per pound compared to 64.5
cents per pound in 2001, following the implementation of a successful cost
reduction programme. The introduction of the Cuprochlor process, which was
developed and patented by Michilla, is now leaching sulphide ores with
favourable recoveries of over 80%. Lower costs enabled Michilla to reduce its
operating loss to US$3.4 million in 2002 from US$14.4 million despite lower
copper prices. Michilla contributed US$17.6 million to operating cash flow
compared to US$4.7 million the previous year.
Cathode production in 2003 is forecast to increase to 54,000 tonnes following
the installation of additional crushing capacity in 2002. Cash costs are
expected to average approximately 64.5 cents, mainly as a result of a higher
waste-to-ore ratio at the open pit and slightly lower ore grades.
In January 2003, Michilla increased the reserves at its underground mine by
approximately 2 million tonnes of ore by improving its mine plan. The new plan
will enable production to be maintained at around 50,000 tonnes per year for
most of the remaining mine life to 2007 in contrast to a declining production
profile anticipated from 2004 under the previous plan. It should also enable
average cash costs to be maintained below 65 cents. A further development plan
to extend the mine life is under consideration.
Exploration
The Group spent US$2.8 million in 2002 mainly on exploration around El Tesoro in
the Sierra Gorda district, one of the most prospective copper belts in the
world. Drilling in this area where a number of targets have been identified is
continuing in order to identify oxide and sulphide deposits which will
complement the Esperanza project, where a conceptual study for a 50,000 tonnes
per day concentrator facility has been completed.
In July 2002, Antofagasta signed a joint venture agreement with CVRD, the
world's largest iron-ore producer. The joint venture which was formed to
identify high grade porphyry copper deposits covers an area of approximately
60,000 square kilometres near Cuzco in southern Peru. Under the terms of the
agreement, Antofagasta has contributed its mining properties in the area and
CVRD has committed to spend US$6.7 million over a period of three years in order
to acquire a 50% interest in Cordillera de las Minas S.A., the joint venture
company.
Railway and other transportation services
Rail tonnages reached a record 4.1 million tons with most of the 6% increase
coming from freight shipments from the El Tesoro mine. Third-party turnover
increased slightly from US$69.1 million to US$70.4 million. Freight from
existing customers and marginal expansions from mines in the region should
enable rail tonnages to be maintained in the future.
Train Ltda., the road transport subsidiary also had a successful year with sales
volumes mainly from beer and soft drink deliveries increasing by 49% compared
with 2001.
Investments
The Group continues to hold a 33.61% interest in Quinenco S.A., a diversified
industrial and financial group listed in Santiago and New York. The market
value of the Group's investment was US$174.2 million at 31 December 2002 and
also US$174.2 million at 28 February 2003. Income from Quinenco is accounted
for on a dividends received basis and in 2002, the Group received a dividend of
US$3.2 million.
Quinenco has not yet announced its results for 2002, but nine-month results
reported a loss after tax and minorities of US$47.4 million, as Quinenco's
businesses were affected by the extremely adverse economic and political
conditions in the regions where it operates, in particular Argentina, Peru and
Brazil. The merger of Banco de Chile and Banco Edwards was, however,
successfully completed during the year and Banco de Chile, in which Quinenco
holds a 52.7% interest, is now the country's second largest financial
institution. In December, Banco de Chile listed its ADRs on the London Stock
Exchange, the first Chilean company to do so.
Dividends
The Board is recommending a final dividend of 18 cents per ordinary share
payable on 13 June 2003 to shareholders on the Register at the close of business
on 9 May 2003. In 2001, the final dividend of 24.75 cents included a special
dividend of 10 cents.
Dividends are payable in either US dollars or sterling, and shareholders who
receive dividends in sterling will be paid a final dividend of 11.3852p, based
on an exchange rate of £1=US$1.581.
Dividends for the year are as follows:
US Dollars Sterling
2002 2001 2002 2001
cents cents pence pence
Ordinary
Interim 10.00 7.25 6.53 5.02
Final 18.00 14.75 11.39 10.31
28.00 22.00 17.92 15.33
Special
Final - 10.00 - 6.99
Total 28.00 32.00 17.92 22.32
Sterling amounts shown above have been rounded for presentation. Further
details are given in Note 10 to the Preliminary Announcement.
Current Trading Prospects
Base metal prices, including copper, continued to be affected by the slowdown in
the United States and uncertainty in equity markets particularly in the latter
part of 2002 due to the situation unfolding in Iraq. Consequently, copper
prices remained at low levels, averaging 70.7 cents compared with 71.6 cents in
2001. However, there are some recent signs that the market has improved with
strong demand from China and other Asian countries. LME warehouse stocks have
steadily declined from a peak of 980,000 tonnes in May 2002 to an approximate
level of 826,000 tonnes by the end of February 2003. Further cutbacks announced
by producers in the last quarter of 2002 should also benefit the market this
year. Copper prices have recently strengthened, and have averaged 75.5 cents in
the first two months of 2003. Most commentators are cautiously optimistic that
prices should steadily improve from last year as world industrial demand picks
up. As a low cost producer, the Group remains well placed to benefit from any
improvement in prices.
11 March 2003
FINANCIAL COMMENTARY for the year to 31 December 2002
Results
Turnover increased from US$769.5 million in 2001 to US$863.1 million in 2002.
The increase was due mainly to El Tesoro, where turnover increased by US$74.7
million with a full year's production compared with six months in the previous
year. At Los Pelambres, revenues increased by US$11.9 million, as higher
by-product revenues and the positive pricing adjustments relating to
provisionally invoiced concentrate sales offset the impact of lower LME copper
prices and reduced production due to lower ore grades. Turnover at Michilla and
the Railway were also slightly up due to higher production and transport volumes
respectively.
Operating profits were US$213.9 million (2001 - US$165.2 million). The
contribution from El Tesoro went up by US$23.5 million, as a result of the
increase in production. Los Pelambres' operating profit was US$2.9 million
higher than the previous year, as the combined effect of higher realised copper
prices and by-product sales offset lower production volumes. Michilla's
operating loss was reduced by US$11.0 million mainly due to lower cash costs
following the implementation of its cost reduction programme. The Group also
benefited from reduced corporate overheads and exploration costs and improved
contribution from the transport division with higher volumes. Operating profit
is stated after depreciation and non-exceptional disposal of fixed assets,
giving EBITDA (earnings before interest, tax, depreciation and amortisation) of
US$349.7 million (2001 - US$283.1 million).
In 2001, the Group sold a surplus property resulting in an exceptional profit of
US$3.5 million (US$2.8 million after tax). No comparable disposals were made in
2002.
Income from fixed asset investments was US$3.2 million, compared with US$0.1
million in 2001 when no dividend was received from Quinenco.
Net interest expense was US$40.3 million compared with US$55.3 million in 2001.
Interest costs relate mainly to the project loans which financed the Los
Pelambres and El Tesoro mines. Net interest expense at Los Pelambres was
US$30.2 million (2001 - US$55.5 million), benefiting from lower interest rates
and regular principal prepayments. Net interest expense relating to El Tesoro
was US$13.8 million, compared with US$9.7 million in 2001 when costs in the
first half of that year were capitalised while the project remained under
development. Interest costs at El Tesoro should also progressively reduce as
principal repayments on its project loans have also now begun. Lower net
interest income from other divisions in the Group result mainly from lower
interest rates.
As a result of these factors, profit before tax was US$176.8 million compared
with US$113.5 million in 2001.
Tax (including deferred tax) amounted to US$29.9 million (2001 - US$21.1
million), reflecting the increased profit for the year. This represents an
effective tax rate of 16.9% (2001 - 18.6%), compared with the Chilean statutory
tax rate of 16% (2001 - 15%). In 2001, legislation was announced in Chile to
increase statutory rates of tax to 16% in 2002, 16.5% in 2003 and 17% from 2004.
Since deferred tax balances are measured at the rates which apply in the
period in which timing differences are expected to reverse, the effect of the
prospective tax changes is to increase the rate at which deferred tax (which
relates mainly to Los Pelambres and El Tesoro) is calculated above the current
statutory rate.
Earnings per share were 49.0 cents in 2002 compared with 31.4 cents the previous
year, reflecting the higher profit after tax and minority interests.
Cash Flows
Net cash inflow from operating activities was US$350.3 million compared with
US$265.9 million in 2001, reflecting the improved operating results adjusted for
depreciation, the non-exceptional loss on disposal of fixed assets and normal
working capital movements
Net capital and investment expenditures were US$67.3 million. Of this amount,
US$43.8 million related to Los Pelambres, which included expenditure relating to
the optimisation programme to increase ore throughput to 120,000 tonnes per day.
Net expenditure in 2001 was US$113.9 million, which included US$58.9 million
to complete the El Tesoro development.
Cash and Debt
At 31 December 2002, the Group held cash and deposits of US$252.4 million (2001
- US$248.7 million). After taking into account the minority share of non-wholly
owned operations, the Group's share of the total balance was US$235.1 million
(2001 - US$219.5 million).
Total Group debt at 31 December 2002 was US$965.3 million (2001 - US$1,057.4
million). Of this amount, US$568.7 million (2001 - US$615.8 million) is
proportionately attributable to the Group after taking the minority share of
partly-owned operations into account. The total Group borrowings included
US$704.0 million under the Los Pelambres non-recourse project financing
arrangements of which 40 per cent is attributable to minority shareholders and
US$181.3 million under the non-recourse El Tesoro project financing arrangements
of which 39 per cent is attributable to minority shareholders.
Balance Sheet
Shareholders' funds increased from US$929.3 million at the beginning of the year
to US$960.4 million, principally reflecting profit attributable to shareholders
less exchange movements and dividends for the year. Further details are given
in Note 15 to the Preliminary Announcement.
Minority interests increased from US$305.3 million at the beginning of the year
to US$314.3 million, principally reflecting the minority's share of profit after
tax less the minority share of distributions from the partly owned operations.
11 March 2003
Group Profit and Loss Account
Notes Unaudited Audited
year to year to
31.12.02 31.12.01
Total Total
US$'m US$'m
Turnover 3 863.1 769.5
Operating profit 3,5 213.9 165.2
Profit on disposal of fixed assets (exceptional) 6 - 3.5
Income from other fixed asset investments 3.2 0.1
Net interest payable 7 (40.3) (55.3)
Profit on ordinary activities before tax 176.8 113.5
(29.9) (21.1)
Tax on profit on ordinary activities 6,8
Profit on ordinary activities after tax 146.9 92.4
Minority interests - equity (50.1) (30.3)
Profit for the financial year 96.8 62.1
Dividends
Preference - non equity (0.2) (0.2)
Ordinary - equity 10 (55.2) (63.1)
Transferred to/(from) reserves 41.4 (1.2)
Earnings per share excluding exceptional items 9 49.0c 30.0c
Earnings per share 9 49.0c 31.4c
Dividend per ordinary share 10 28.0c 32.0c
Turnover and profit are derived from continuing operations.
There were no exceptional items in 2002.
Further details relating to dividends are given in Note 10. The dividend in
2001 included a special dividend of 10 cents per share.
Other recognised gains and losses
Other recognised gains and losses in the period (exchange differences) amounted
to a loss of US$10.3 million (2001 - a loss of US$18.0 million) and are shown in
Note 15 together with other movements in shareholders' funds.
Group Balance Sheet
Unaudited Audited
31.12.02 31.12.01
Notes US$'m US$'m
Fixed assets
Tangible fixed assets 11 1,830.3 1,916.8
Other investments 12 187.4 185.5
2,017.7 2,102.3
Current assets
Stocks 57.5 49.3
Debtors 130.7 113.7
Current asset investments (including time deposits) 249.0 246.5
Cash at bank and in hand 3.4 2.2
440.6 411.7
Creditors - amounts falling due within one year
Trade and other creditors (87.5) (79.0)
Loans 13 (124.0) (104.2)
Dividends (35.5) (48.8)
(247.0) (232.0)
Net current assets 193.6 179.7
Total assets less current liabilities 2,211.3 2,282.0
Creditors - amounts falling due after more than one year
Other creditors - (25.3)
Loans 13 (841.3) (953.2)
Provisions for liabilities and charges 14 (95.3) (68.9)
1,274.7 1,234.6
Capital and reserves
Called up share capital 1(a) 19.0 17.2
Share premium 1(a) 271.7 245.3
Reserves 669.7 666.8
Shareholders' funds - including non-equity 15 960.4 929.3
interests
Minority interests - equity 314.3 305.3
1,274.7 1,234.6
Approved by the Board of Directors on 11 March, 2003.
P J Adeane Director.
Group Cash Flow Statement
Notes Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Net cash inflow from operating activities 16 350.3 265.9
Dividends received from other fixed asset investments 3.2 0.1
Interest received (including capitalised interest relating to El Tesoro in 2001) 7.0 13.3
Interest paid (including capitalised interest relating to El Tesoro in 2001) (46.0) (74.4)
Dividends and other distributions paid to minority interests (40.7) (18.5)
Preference dividends paid (0.2) (0.2)
Net cash outflow from returns on investment and servicing of finance (76.7) (79.7)
Overseas tax paid (5.5) (0.9)
Purchase of tangible fixed assets (66.8) (123.1)
Purchase of fixed asset investments (1.8) -
Sale of tangible fixed assets 1.3 9.2
Net cash outflow from capital expenditure and financial investments (67.3) (113.9)
Equity dividends paid (69.8) (77.5)
Cash inflow/(outflow) before management of liquid resources 131.0 (6.1)
Management of liquid resources - Net (increase)/decrease in (3.1) 49.1
time deposits
New loans drawn down 210.0 47.6
Repayment of amounts borrowed (304.8) (89.7)
Repayment of principal element of finance leases (2.0) (1.9)
Repayment of other creditors (29.9) -
Net cash outflow from financing (126.7) (44.0)
Net cash inflow/(outflow) in the year 17 1.2 (1.0)
Notes
1. Reporting currency and accounting policies
a) Reporting currency
The functional reporting currency of the Group is US dollars, the principal
currency in which the Group operates and in which assets and liabilities
are held. Share capital is denominated in sterling and, for the purposes
of reporting in US dollars, share capital and share premium are translated
at the period end rate of exchange. As explained in Note 10, dividends are
paid in either US dollars or sterling.
b) Accounting policies
The profit and loss account, balance sheet and cash flow statement for the
year to 31 December 2002 have been prepared on the basis of the accounting
policies set out in the Group's statutory accounts for the year to 31
December 2001.
2. Production and sales statistics (unaudited)
(See notes following table 2(d).)
a) Copper production volumes
Year to Year to
31.12.02 31.12.01
'000 tonnes '000 tonnes
Los Pelambres 324.6 361.5
El Tesoro 84.3 34.0
Michilla 51.8 49.6
Group total 460.7 445.0
b) Copper sales volumes
Year to Year to
31.12.02 31.12.01
'000 tonnes '000 tonnes
Los Pelambres 318.2 360.9
El Tesoro 83.4 39.3
Michilla 51.6 50.6
Group total 453.2 450.8
c) Cash costs per pound
Year to Year to
31.12.02 31.12.01
cents cents
Los Pelambres 34.9 35.3
El Tesoro 40.8 39.6
Michilla 61.4 64.5
Group weighted average 38.9 38.8
d) LME and realised copper price per pound
Year to Year to
31.12.02 31.12.01
cents cents
Los Pelambres 71.2 65.8
El Tesoro 72.0 67.1
Michilla 73.2 72.6
Group weighted average 71.6 66.7
LME average 70.7 71.6
Notes to the production and sales statistics
(i) The production and sales figures represent the actual amounts produced and
sold for each mine, not the Group's attributable share for each mine. The
Group owns 60% of Los Pelambres, 61% of El Tesoro and 74.2% of Michilla.
(ii) Los Pelambres produces copper concentrate, and the figures for
Los Pelambres are expressed in terms of payable copper contained in
concentrate. El Tesoro and Michilla produce copper cathodes.
(iii)El Tesoro remained under development for the first six months of 2001 and
it produced 9,000 tonnes and shipped 2,350 tonnes of cathodes during the
commissioning period in the second quarter of that year. This tonnage has
not been included in the El Tesoro and Group tables for 2001.
(iv) Cash costs are a measure of the cost of operational production expressed in
terms of cents per pound of payable copper produced. Cash costs include
by-product credits and exclude depreciation, financial income and expenses,
exchange gains and losses and corporation tax.
(v) Realised copper prices are determined by comparing turnover from copper
sales with sales volumes for each mine in the period.
(vi) The individual figures are sometimes more specific than the rounded numbers
shown; hence small differences may appear in the totals.
3. Segmental analysis
a) Turnover by geographical destination
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
UK 14.0 12.4
Rest of Europe 241.8 205.2
Chile 120.7 103.4
Rest of Latin America 61.2 48.8
North America 50.8 50.2
Asia Pacific / other 374.6 349.5
863.1 769.5
b) Turnover by operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 576.7 564.8
El Tesoro 132.8 58.1
Michilla 83.2 77.5
Mining 792.7 700.4
Railway and other transport services 70.4 69.1
863.1 769.5
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$4.9 million
(2001 - US$2.7 million).
(ii) Los Pelambres produces and sells copper and molybdenum concentrates. It is
also credited for the gold and silver content in the copper concentrate it
sells. Turnover by type of metal is analysed below. El Tesoro and
Michilla do not have by-products from their copper cathode operations.
Los Pelambres turnover by type of metal
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Copper 499.3 523.8
Molybdenum 65.3 33.5
Gold and silver 12.1 7.5
576.7 564.8
c) Earnings before tax, interest, depreciation and amortisation (EBITDA) by
operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 256.2 239.4
El Tesoro 58.9 27.2
Michilla 13.6 3.7
Exploration (2.8) (9.7)
Corporate and other (8.2) (7.4)
Mining 317.7 253.2
32.0 29.9
Railway and other transport services
349.7 283.1
d) Depreciation and amortisation by operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 84.9 76.0
El Tesoro 19.8 14.3
Michilla 16.8 18.5
Corporate and other 1.0 1.2
Mining 122.5 110.0
Railway and other transport services 6.2 6.8
Total depreciation and amortisation 128.7 116.8
Loss on disposal of fixed assets included in operating profit 7.1 1.1
135.8 117.9
e) Operating profit by operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 165.9 163.0
El Tesoro 36.4 12.9
Michilla (3.4) (14.4)
Exploration (2.8) (9.7)
Corporate and other (8.0) (8.6)
Mining 188.1 143.2
Railway and other transport services 25.8 22.0
213.9 165.2
f) Capital expenditure by operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 43.8 43.6
El Tesoro 7.5 61.0
Michilla 6.9 11.0
Corporate and other 0.1 0.6
Mining 58.3 116.2
Railway and other transport services 6.1 13.3
64.4 129.5
g) Net assets by operation
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Los Pelambres 1,297.3 1,334.4
El Tesoro 354.6 358.7
Michilla 84.1 99.9
Corporate and other 7.2 4.9
Mining 1,743.2 1,797.9
Railway and other transport services 92.5 108.7
Operating net assets 1,835.7 1,906.6
Other fixed asset investments 187.4 185.5
Net debt (712.9) (808.7)
Unallocated liabilities - Group dividend (35.5) (48.8)
Net assets 1,274.7 1,234.6
Net assets are stated before deducting minority interests.
4. Provisional pricing and commodity hedging
a) Provisional pricing
Copper concentrate agreements generally provide for provisional pricing at
the time of shipment with final pricing settlement based on the average LME
copper price for specified future periods. Copper revenues on
provisionally priced tonnages are adjusted monthly until final settlement.
Sales volumes are also adjusted on the final metallurgical content of the
concentrate.
Revenues in the year to 31 December 2002 included positive adjustments on
sales of concentrates open at 31 December 2001 totalling US$10.5 million.
Revenues in the year to 31 December 2001 included negative adjustments on
sales of concentrates open at 31 December 2000 totalling US$16.5 million.
At 31 December 2002, copper sales totalling 87,800 tonnes remained to be
finally priced, and were recorded at that date at an average price of 70.5
cents. At 31 December 2001, copper sales totalling 75,300 tonnes remained
to be finally priced, and were recorded at that date at an average price of
64.3 cents.
b) Commodity hedging
The Group periodically enters into commodity hedging contracts to manage
exposure to the copper price. Turnover for the mining division for the year
ended 31 December 2002 included gains of US$1.0 million relating to
commodity hedging activities. Turnover was not affected by hedging
activities for the year ended 31 December 2001.
At 31 December 2002, the Group had hedged 10,200 tonnes of copper
production using min/max options with a weighted average floor and ceiling
of 72.0 cents and 75.5 cents respectively, and an average duration of
one month. The unrealised mark-to-market gain on these instruments at that
date was less than US$0.1 million (2001 - US$0.3 million). Further hedges
were entered into subsequent to the year-end covering the period from 1
January to 30 June 2003.
5 Operating profit
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Turnover 863.1 769.5
Cost of sales (558.2) (506.5)
Gross profit 304.9 263.0
Administrative expenses (82.2) (83.8)
Closure provision (Note 14) (1.2) (1.1)
Severance charges (Note 14) (1.9) (1.7)
Exploration costs (2.8) (9.7)
Other net operating expenses (2.9) (1.5)
Operating profit 213.9 165.2
Depreciation charges in 2002 amounted to US$128.7 million (2001 - US$116.8
million). Of this amount, US$125.7 million (2001 - US$106.1 million) is
included in cost of sales and US$3.0 million (2001 - US$10.7 million) is
included in administrative expenses.
6. Non-operating exceptional items
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Profit on sale of land by Railway - 3.5
Tax effect - (0.7)
- 2.8
There were no exceptional items in 2002.
The exceptional profit in the second half of 2001 of US$3.5 million related to
the disposal of a surplus property owned by the Railway in the centre of the
city of Antofagasta. The net book value of this property was US$0.1 million.
7. Net interest payable
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Interest receivable 6.4 13.2
Interest payable (46.7) (67.4)
Foreign exchange (0.1) (0.2)
Discount charge relating to provisions (Note 14) 0.1 (0.9)
(40.3) (55.3)
There was no interest capitalised in the period. In 2001, interest payable
capitalised amounted to US$6.8 million and interest receivable credited against
fixed assets amounted to US$0.3 million. These amounts related to the El Tesoro
development.
8. Tax
The tax charge of US$29.9 million (2001 - US$ 21.1 million) represents an
effective rate (including deferred tax) of 16.9% (2001 - 18.6%) on profit
before tax, as compared with the current Chilean statutory tax rate of 16%
(2001 - 15%).
The effective rate is higher than the statutory tax rate mainly because
deferred tax is calculated at rates which will apply when timing
differences are expected to reverse. Legislative changes at the end of
2001 increased the statutory rate from 15% in 2001 to 16% in 2002, 16.5% in
2003 and 17% in 2004.
The cumulative effect of the application of these higher rates for the
first time in 2001 resulted in the higher effective tax rate that year
compared to 2002.
9. Earnings per share
Earnings per share is calculated on profit after tax, minority interest and
preference dividends giving earnings of US$96.6 million (2001 - US$61.9
million) and is based on 197,171,339 ordinary shares (2001 - 197,171,339)
in issue throughout the period. For 2001, earnings per share excluding
exceptional items was calculated on the same basis but excluding an
exceptional gain after tax and minority interests of US$2.8 million. There
were no exceptional items in 2002.
10. 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 9 May 2003.
The Board will recommend a final dividend of 18 cents per ordinary share
(2001 - 24.75 cents, comprising an ordinary dividend of 14.75 cents and a
special dividend of 10 cents) for payment on 13 June 2003 to shareholders
on the Register at the close of business on 9 May 2003. Dividends are
declared and paid gross. The exchange rate to be applied for the conversion
of dividends will be £1 = US$1.581, giving a final dividend to those
shareholders paid in sterling of 11.3852 pence per ordinary share (2001 -
17.3065 pence including the special dividend).
An interim dividend of 10 cents per ordinary share (2001 - 7.25 cents) was
paid in October 2002, giving a total for the year of 28 cents per ordinary
share (2001 - 32 cents per ordinary share including the special dividend of
10 cents).
11. Tangible fixed assets
Railway
and other
Mining transport Total
US$'m US$'m US$'m
Net book value
1 January 2002 (audited) 1,813.8 103.0 1,916.8
Additions 58.3 6.1 64.4
Transfer to stocks - (0.4) (0.4)
Disposals (8.7) (0.3) (9.0)
Disposal of subsidiary (3.4) - (3.4)
Depreciation (122.5) (6.2) (128.7)
Exchange (0.2) (9.2) (9.4)
31 December 2002 (unaudited) 1,737.3 93.0 1,830.3
12. Other investments
US$'m
1 January 2002 (audited) 185.5
Additions 1.8
Exchange 0.1
31 December 2002 (unaudited) 187.4
The above investments include quoted investments with a book value of US$187.2
million (2001 - US$185.5 million). The market value of these investments at 31
December 2002 was US$178.9 million (2001 - US$268.5 million). These investments
include a 33.61 % interest in Quinenco S.A.
13. Loans
Unaudited Audited
31.12.02 31.12.01
US$'m US$'m
Los Pelambres
- Project loans (704.0) (791.3)
- Other loans (28.7) -
El Tesoro
- Project loans (181.3) (197.0)
- Subordinated debt (24.3) (39.7)
- Finance leases (16.4) (17.0)
Michilla
- Finance leases (2.0) (1.6)
Railway and other transport services
- Loans (8.6) (10.8)
(965.3) (1,057.4)
Maturity of loans:
Unaudited Audited
31.12.02 31.12.01
US$'m US$'m
Due within one year (124.0) (104.2)
Due after more than one year (841.3) (953.2)
(965.3) (1,057.4)
US$29.2 million of project loans have been fixed at a rate of 5.56% for a
remaining period of 2.2 years, and finance leases are also mainly fixed rate.
The remainder of the loans are predominantly floating rate. However, the Group
periodically enters into interest rate hedging contracts to manage its exposure
to interest rates. At 31 December 2002, the Group had hedged US$168.8 million of
its borrowings using collars for a remaining weighted period of 3.25 years.
These limit the variability of the interest rate to a weighted average minimum
(a floor) of 5.01 % and a weighted average maximum (a cap) of 5.99%.
14. Provisions for liabilities and charges
US Dollars
Decommi-ssioning
and site Severance Deferred
rehabilitation indemnities tax Total
US$'m US$'m US$'m US$'m
1 January 2002 (audited) (8.1) (10.3) (50.5) (68.9)
Charge to operating profit in year (Note 5) (1.2) (1.9) - (3.1)
Release of discount to net interest in year (Note 7) (0.2) 0.3 - 0.1
Charge to tax on profit in year - - (26.7) (26.7)
Utilised in year - 0.8 - 0.8
Disposal of subsidiary 2.0 - - 2.0
Exchange - 0.5 - 0.5
31 December 2002 (unaudited) (7.5) (10.6) (77.2) (95.3)
15. Reconciliation of movements in shareholders' funds
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Profit for the financial year 96.8 62.1
Other recognised gains relating to the year
- Exchange (10.3) (18.0)
Total recognised gains and losses 86.5 44.1
Dividends (55.4) (63.3)
31.1 (19.2)
Opening shareholders' funds 929.3 948.5
Closing shareholders' funds 960.4 929.3
16. Reconciliation of operating profit to net cash inflow from operating
activities
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Operating profit 213.9 165.2
Depreciation 128.7 116.8
Loss on disposal of tangible fixed assets 7.1 1.1
Increase in stocks (8.0) (9.9)
Increase in debtors (10.2) (20.0)
Increase in creditors and provisions 18.8 12.7
Net cash inflow from operating activities 350.3 265.9
17. Reconciliation of net cash flow to movement in net debt
Unaudited Audited
year to year to
31.12.02 31.12.01
US$'m US$'m
Net cash inflow/(outflow) in the year 1.2 (1.0)
Cash outflow from decrease in debt 96.8 44.0
Cash outflow/(inflow) from increase/(decrease) in 3.1 (49.1)
liquid resources
Change in net debt resulting from cash flows 101.1 (6.1)
Reclassification - 0.6
Interest accrued on long-term loan balances (2.3) (3.4)
New leases (2.0) (3.4)
Exchange (1.0) (0.8)
Movement in net debt in the year 95.8 (13.1)
Net debt at the beginning of the year (808.7) (795.6)
Net debt at the end of the year (712.9) (808.7)
Composition of net debt
Unaudited Audited
31.12.02 31.12.01
US$'m US$'m
Cash in hand and demand deposits 3.4 2.2
Current asset investments 249.0 246.5
Long and short term loans including finance leases (Note 13) (965.3) (1,057.4)
Net debt at the end of the year (712.9) (808.7)
18. Financial information
The financial information set out in this announcement does not constitute
the Group's statutory accounts for the years ended 31 December 2002 or
2001. The financial information for the year ended 31 December 2001 is
derived from the statutory accounts for that year which have been delivered
to the Registrar of Companies. The auditors reported on those accounts;
their report was unqualified and did not contain a statement under s237(2)
or (3) Companies Act 1985. The statutory accounts for the year ended 31
December 2002 will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual
General Meeting.
19. Currency translation
Assets and liabilities denominated in foreign currencies are translated
into dollars and sterling at the year end rates of exchange. Results
denominated in foreign currencies have been translated into dollars and
sterling at the average rate for each year.
Year end rates Average rates
31.12.02 US$1.60 = £1; US$1 = Ch$719 US$1.50 = £1 US$1 = Ch$689
31.12.01 US$1.45 = £1; US$1 = Ch$655 US$1.44 = £1 US$1 = Ch$365
20. Distribution
The Annual Report and Financial Statements, including the Notice of the
Annual General Meeting and Chairman's Statement for the year ended 31
December 2002, will be posted to all shareholders in May 2003. The
Annual General Meeting will be held in the Armourers Hall, 81 Coleman
Street, London EC2 at 10.30 a.m. on 12 June 2003.
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