Interim Results
Antofagasta PLC
07 September 2004
Antofagasta plc
Interim Results Announcement
for the six months ended 30 June 2004
7 September 2004
• Turnover of US$819.8 million (2003 half year - US$471.9 million).
• Operating cash flow of US$517.3 million (2003 half year - US$206.2 million).
• Profit before tax of US$438.9 million (2003 half year - US$138.1 million).
• Earnings per share of 112.7 cents (2003 half year - 34.0 cents).
• Interim dividend of 15 cents per share (2003 interim - 11 cents per share)*.
LME copper prices were significantly stronger in the period, averaging 125.2
cents per pound compared with 74.9 cents in the first half of 2003. Group
copper production rose by 4.6% per cent to 235,400 tonnes this period (2003 half
year - 225,100 tonnes). Group weighted average cash costs** were 17% lower at
31.2 cents per pound (2003 half year - 37.6 cents), as by-product credits at Los
Pelambres increased significantly due to higher molybdenum prices. Group profit
before tax increased from US$138.1 million last period to US$438.9 million, and
earnings per share rose from 34.0 cents to 112.7 cents.
Jean-Paul Luksic, CEO of the mining division, commented, 'This is an excellent
result for Antofagasta helped by high metal prices, and we should continue to
benefit from current strong demand while fundamentals for the copper market
remain positive.'
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 water distribution.
* The interim dividend is paid in either sterling or US dollars. A conversion
rate of £1=US$1.8151 will be applied to the interim dividend giving
shareholders who receive dividends in sterling an interim dividend of 8.2640
pence per share.
** Cash cost is a method used by the industry to express the cost of production
in cents per pound of copper, and is further explained in Note 2(d) 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
Alejandro Rivera
Philip Adeane Chief Financial Officer
Managing Director Email: arivera@aminerals.cl
Email: nwakefield@antofagasta.co.uk
Issued by
Hussein Barma Keith Irons
Chief Financial Officer Email: keith@bankside.com
Email: hbarma@antofagasta.co.uk Tel: +44 20 7444 4155
DIRECTORS' COMMENTS FOR THE HALF YEAR TO 30 JUNE 2004
The Group reported significantly improved results driven by higher copper and
molybdenum prices. Profit before tax was up 218% to US$438.9 million (2003 half
year - US$138.1 million) with earnings per share up 231% to 112.7 cents (2003
half year - 34.0 cents). LME copper prices averaged 125.2 cents per pound (2003
half year - 74.9 cents per pound) while molybdenum prices averaged US$11.40 per
pound (2003 half year - US$4.60 per pound). Group copper production increased
by 4.6% to 235,400 tonnes. Cash costs at the mining operations, which include
by-product credits, were 17% lower mainly due to exceptional molybdenum prices
which offset higher operating costs.
Interim Review of Operations
Los Pelambres
Los Pelambres produced 165,000 tonnes of payable copper compared with 155,200
tonnes in the 2003 first half. The increase was due mainly to higher throughput
at the plant which averaged 121,400 tonnes per day (tpd) of ore compared with
111,300 tpd in the first six months of 2003. This followed completion of the
plant upgrade in August 2003, which countered an ore grade which decreased from
0.90% to 0.88%. Shipment dates caused significant tonnages to be delayed until
July, and consequently the amount of payable copper sold in the period was
139,800 tonnes compared with 160,800 tonnes in the 2003 half year.
Cash costs, which are stated net of by-product credits, fell to 18.0 cents per
pound of copper produced (2003 half year - 31.5 cents) as molybdenum prices
increased significantly from US$4.60 in the 2003 half year to US$11.40 in the
first half of 2004. Molybdenum production was similar at 3,700 tonnes (2003
half year - 3,800 tonnes). Excluding by-product credits, cash costs in the
period were 53.0 cents per pound compared to 44.4 cents per pound in the first
half of 2003. The increase was due mainly to higher treatment and refining
charges (TC/RCs) and also a number of other factors in the period including
higher shipping costs, the effects of the stronger Chilean peso and higher
maintenance costs.
Realised copper prices (which are determined by dividing copper revenues by
sales volumes) were 141.8 cents per pound (2003 half year - 77.6 cents per
pound), due to higher LME copper prices and also because Los Pelambres continued
to benefit from positive adjustments on final settlement of concentrate sales.
Realised molybdenum prices in the period were US$14.60 per pound (2003 half year
- US$4.70 per pound), due to higher market prices and similar positive
adjustments on final settlement of molybdenum concentrate sales. The
combination of higher realised copper and molybdenum prices offset the lower
sales volumes and higher underlying costs to enable Los Pelambres to increase
operating profits by 204% to US$353.4 million compared with US$116.2 million.
Los Pelambres continued to reduce its project borrowings with a further
principal repayment in June of US$42.1 million. Since operations began in
November 1999, a total of US$393.2 million of the original US$946 million
project borrowings has now been repaid. Los Pelambres also paid a dividend of
US$ 42.0 million to its shareholders in June, of which the Group's share
amounted to US$25.2 million.
In March this year, the Regional Commission of the Environment (COREMA) approved
the Environmental Impact Assessment (EIA) submitted in May 2003. The approval
allows Los Pelambres to mine up to 2.1 billion tonnes of its known ore reserves,
and permits the construction of the El Mauro tailings dam which will provide
storage capacity for the increased reserves. Engineering studies for the
project, which will cost approximately US$450 million, are now being completed
and construction is expected to begin by the end of this year. Los Pelambres is
studying alternatives for an expansion of the concentrator plant, which will
allow an increase in ore processing capacity of up to 175,000 tpd. This
compares with the current 120,000 tpd level.
During the second half of this year, better processing levels and a marginal
improvement in the ore grade should allow production of payable copper to reach
350,000 tonnes for the full year. Cash costs for the remainder of this year are
expected to stay low if molybdenum prices hold at present high levels.
El Tesoro
Production at El Tesoro increased slightly to 46,900 tonnes (2003 half year -
45,500 tonnes), as higher ore throughput compensated for a decrease in the ore
grade from 1.54% to 1.34%. Cash costs rose to 50.5 cents per pound compared
with 41.0 cents in the first six months of 2003, mainly due to higher sulphuric
acid prices and consumption, blasting costs, a stronger Chilean peso and higher
waste-to-ore ratio at the mine.
Higher copper prices and better premiums for El Tesoro's LME Grade A cathodes
offset the increase in cash costs, and enabled operating profits to reach
US$67.4 million (2003 half year - US$26.2 million).
Project borrowings at El Tesoro were reduced to US$124.1 million after two
principal repayments totalling US$32.5 million in February and August this year.
Cathode production at El Tesoro in 2004 is estimated to reach around 96,000
tonnes, with cash costs expected to be around 53 cents per pound for the year.
Michilla
Michilla produced 23,500 tonnes of cathodes to 30 June 2004 compared with 24,400
tonnes in the first half of 2003 due mainly to lower ore grades in the period.
Changes made in the sequence of ore extraction in order to avoid old mine
workings in the vicinity of Michilla's pit affected the volume of ore extracted
for processing and prevented Michilla from taking full advantage of the
additional crushing capacity installed during 2003.
Cash costs increased to 84.7 cents per pound compared to 69.9 cents per pound in
the first six months of last year, as a result of lower grades but also higher
sulphuric acid prices and the stronger peso. In addition, Michilla did not
benefit fully from higher copper prices, as part of its production in the first
quarter had been hedged in 2003 at a cost of US$9.3 million. Nevertheless, the
strong improvement in market prices outweighed the increase in costs and hedging
losses, and enabled Michilla to achieve an operating profit of US$5.2 million
compared to an operating loss of US$4.4 million in the first half of 2003.
During the second half of this year, higher processing levels and better ore
grades should allow production for the year to reach around 50,000 tonnes with
cash costs slightly lower at around 82 cents per pound.
Exploration
The Group spent US$2.7 million in the first six months to June 2004, mainly in
the Conchi-Brujulinas area near El Abra, which is approximately 120 km
north-east of El Tesoro. A total of 30,429 metres was drilled as part of an
on-going campaign to explore these deposits in detail and to increase the oxide
base in the area. During the first half the Group also decided to advance the
Esperanza project, which requires the construction of a 2 km-long exploration
decline to obtain bulk samples for detailed metallurgical testing. The
Esperanza project is expected to reach the pre-feasibility stage within two
years, at an estimated cost of US$15.3 million, of which around US$3.4 million
will be spent in the second half of this year.
Exploration activities have continued in southern Peru, where the Group and CVRD
have a joint-venture programme. The Group sold its 51% interest in the
Magistral project to Inca Pacific S.A. for US$2.1 million in February 2004. In
July, the Group decided to withdraw from the auction of the Las Bambas copper
project after further evaluation and following approval of the introduction of a
royalty on concentrate sales by the Peruvian Congress.
Railway and Other Transport Services
Rail tonnages remained virtually unchanged at 2.1 million tons, while turnover
was US$39.9 million (2003 half year - US$35.7 million), mainly due to the
strengthening of the Chilean peso. Freight from existing customers and marginal
mine expansions should enable these tonnage levels to be maintained.
The Railway is continuing discussions with Apex Silver Mines following a Letter
of Intent signed during 2003, which related to future transport requirements for
the San Cristobal polymetallic project in Bolivia. Apex is planning to
transport up to 650,000 tonnes of silver, zinc and lead concentrates annually
for a period of 17 years and could become an important new customer for the FCAB
and its Bolivian operation, the Andino rail network.
Aguas de Antofagasta
Aguas de Antofagasta, which began to operate the water rights and distribution
and treatment facilities in Chile's Second Region on 29 December 2003, had a
very satisfactory first six months of operations. Programmes have been
implemented to reduce water losses, reduce costs and improve the quality of
service to domestic customers. Water volumes amounted to 16.3 million cu. m., a
4.5% increase over the comparable period last year when controlled by ESSAN.
Turnover in the first six months of 2003 was US$22.1 million, of which 12.1%
related to mining and industrial customers. Aguas is currently involved in
jointly planning and designing the water supply to two mining projects in the
region; firstly, BHP's Spence project near El Tesoro and, secondly,
Falconbridge's Collahuasi project near the border with Bolivia. Growth
prospects in the medium to longer term for mining-related supplies remain good.
Dividends
An interim dividend of 15 cents (2003 interim - 11 cents) will be paid on 8
October 2004 to ordinary shareholders on the register at the close of business
on 17 September 2004. Dividends are payable in either US dollars or sterling,
and shareholders who receive dividends in sterling will be paid an interim
dividend of 8.2640 pence per share, based on an exchange rate of £1=US$1.8151.
Further details are given in Note 9 to the Interim Report.
Current Trading Prospects
Although the copper price has eased from its recent high of over 140 cents per
pound in mid-April, the market has remained resilient with prices still trading
in the 120-130 cent range during the traditionally weaker summer period.
Inventory levels still remain very low, with LME stocks currently around 110,000
tonnes compared with 430,000 tonnes at the beginning of the year. Including
Comex and the Shanghai Exchange, total visible inventories are just over 200,000
tonnes.
Most commentators expect the copper market to remain in deficit in the medium
term, although recent increases in TC/RCs indicate that mine production is
beginning to respond to high metal prices. Nevertheless, solid demand from both
China and other Asian countries, as well as an improvement in economic
indicators in the United States, should continue to support copper prices at
high levels into 2005.
Group copper production is now expected to exceed 490,000 tonnes in 2004 and
cash costs per pound are expected to remain in the 30 cent range, helped by
strong molybdenum prices. As a low cost producer, the Group should continue to
benefit from this period of strong metal prices.
7 September 2004
FINANCIAL COMMENTARY FOR THE HALF YEAR TO 30 JUNE 2004
Results
Turnover increased to US$819.8 million from US$471.9 million in the same period
in 2003. Turnover from the mining division increased by US$321.6 million.
Turnover from the transport division (FCAB) increased by US$4.2 million, while
Aguas de Antofagasta, which started operations at the end of 2003, contributed
US$22.1 million. The significant increase in turnover from the mining division
was mainly due to higher realised copper and molybdenum prices. These higher
prices offset the reduction in copper tonnage sold, which was 230,000 tonnes in
the 2003 half year compared to 209,800 tonnes this period due to delayed
shipments of concentrate.
The Group's realised copper price averaged 136.6 cents per pound (2003 half year
- 77.5 cents per pound), while the realised molybdenum price averaged US$14.60
per pound (2003 half year - US$4.70 per pound). Realised copper and molybdenum
prices exceeded average 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 specified future periods. Revenues on provisionally
priced shipments are adjusted monthly until final settlement. Turnover from
copper sales at Los Pelambres in the first six months of 2004 include positive
net pricing adjustments of US$49.8 million. These include favourable
adjustments of US$62.5 million relating to sales open at 31 December 2003 which
were closed in the first half of 2004, a further US$3.4 million for sales
invoiced and settled in the same period and a downward mark-to-market adjustment
of US$16.1 million for sales open at 30 June 2004.
Molybdenum sales at Los Pelambres in the first half of this year also included
positive net pricing adjustments of US$35.8 million. This included US$8.1
million relating to sales open at the beginning of the year and closed in the
first half and US$27.7 million relating to sales invoiced and settled in the
same period.
Group operating profits were US$445.9 million (2003 half year - US$153.2
million). Operating profits at the mining division increased by US$287.1
million, mainly due to the impact of the higher copper and molybdenum prices,
partly offset by lower copper sales volume and higher operating costs.
Operating profits at the transport division decreased by US$4.8 million compared
to the 2003 half year which included other operating income of US$6.5 million
received from a third party relating to a contract cancellation. Aguas de
Antofagasta contributed US$10.4 million.
Operating profit is stated after depreciation and amortisation of US$71.4
million (2003 half year - US$64.8 million) and loss on disposal of fixed assets
of US$7.3 million (2003 half year - US$0.6 million), giving EBITDA (earnings
before interest, tax, depreciation and amortisation) for the Group of US$524.6
million (2003 half year - US$218.6 million).
Interest costs relate mainly to the project loans which financed the Los
Pelambres and El Tesoro mines. Net interest expense was US$7.0 million,
compared with net interest expense of US$15.2 million in the 2003 half year.
This was partly due to lower interest costs with regular principal repayments of
project debt, but also because interest income included US$7.5 million relating
to gains under currency swaps in the period.
Profit before tax for the period was US$438.9 million compared to US$138.1
million in the first six months of 2003.
Tax amounted to US$82.4 million (2003 half year - US$30.0 million), representing
an effective tax rate (including deferred tax) of 18.8% (2003 half year -
21.7%), compared with the present statutory Chilean tax rate of 17% (2003 -
16.5%). The effective tax rate in the current period is higher than the
statutory rate mainly due to non-deductible costs incurred by the operations.
In the six months to 30 June 2003, the higher rate resulted mainly from the
payment of withholding taxes during that period.
The tax charge for the period of US$82.4 million comprises current taxes of
US$74.2 million, and deferred taxes of US$8.2 million. This compares with
current taxes of US$9.6 million and deferred taxes of US$20.4 million in the
2003 half year. The increase in current taxes has arisen since Los Pelambres
and El Tesoro have fully utilised their tax losses in the present half year, and
the taxes will fall due to be paid mainly in 2005.
Earnings per share were 112.7 cents compared with 34.0 cents for the
corresponding period last year, reflecting the higher profit after tax and
minority interests.
Cash Flows
Net cash inflow from operating activities was US$517.3 million in the first six
months of 2004 compared with US$206.2 million in the same period last year,
reflecting the improved operating results adjusted for depreciation,
amortisation and normal working capital movements.
Net capital expenditure and financial investment was US$31.2 million in the
period, relating mainly to normal on-going requirements, compared to net capital
expenditure in the first half of 2003 which amounted to US$42.6 million when Los
Pelambres was completing its plant upgrade programme.
Cash and Debt
At 30 June 2004, the Group had cash and deposits of US$491.3 million (2003 -
US$302.4 million). Excluding the minority share in each partly-owned operation,
the Group's share of this balance was US$351.4 million (2003 - US$253.1
million).
Total Group debt at 30 June 2004 was US$745.4 million (2003 - US$906.3 million);
of this, US$445.2 million (2003 - US$532.9 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. At 30 June 2004, the total
borrowings of US$745.4 million included US$552.8 million under the Los Pelambres
non-recourse project financing arrangements of which 40% is attributable to
minority shareholders and US$140.9 million under the El Tesoro non-recourse
project financing arrangements of which 39% is attributable to minority
shareholders.
Balance Sheet
Shareholders' funds increased from US$905.9 million at the beginning of the year
to US$1,079.5 million, relating mainly to profit after tax and minorities for
the period less the interim dividend declared.
Minority interests increased from US$343.1 million at the beginning of the year
to US$459.9 million, principally reflecting the minority's share of profit after
tax less the minority's share of the dividend declared by Los Pelambres in the
period.
7 September 2004
Consolidated Profit and Loss Account
Notes Unaudited Unaudited Audited
half year half year year
to to to
30.6.04 30.6.03 31.12.03
US$'m US$'m US$'m
Turnover 3 819.8 471.9 1,076.2
Operating profit 3,5 445.9 153.2 387.3
Income from fixed asset investments - 0.1 0.1
Profit on disposal of fixed asset investments - - 1.1
Net interest payable 6 (7.0) (15.2) (31.3)
Profit on ordinary activities before tax 438.9 138.1 357.2
Tax on profit on ordinary activities 7 (82.4) (30.0) (64.4)
Profit on ordinary activities after tax 356.5 108.1 292.8
Minority interests - equity (134.2) (40.9) (112.1)
Profit for the financial period 222.3 67.2 180.7
Dividends
Preference - non equity (0.1) (0.1) (0.2)
Ordinary (excluding demerger dividend in 2003) - equity (29.6) (21.7) (69.0)
Demerger dividend - equity - - (181.5)
Transferred to/(from) reserves 192.6 45.4 (70.0)
Earnings per share 8 112.7c 34.0c 91.5c
Dividends per ordinary share (excluding demerger dividend 9 15.0c 11.0c 35.0c
in 2003)
Turnover and operating profit are derived from continuing operations
Other recognised gains and losses
Other recognised gains and losses in the period (foreign currency exchange
differences) amounted to a loss of US$19.0 million (2003 half year - a gain of
US$1.3 million), and are shown in Note 15 together with other movements in
shareholders' funds.
Consolidated Balance Sheet
Unaudited Unaudited Audited
30.6.04 30.6.03 31.12.03
US$'m US$'m US$'m
Notes
Fixed assets
Intangible assets 10 83.1 - 90.6
Tangible assets 11 1,804.7 1,808.9 1,863.2
Investments 12 0.4 187.9 0.4
1,888.2 1,996.8 1,954.2
Current assets
Stocks 80.9 57.7 60.5
Debtors - amounts falling due after more than 24.0 5.0 29.0
one year
Debtors - amounts falling due within one year 167.5 124.6 166.7
Current asset investments - including time deposits 487.7 298.1 188.1
Cash at bank and in hand 3.6 4.3 7.6
763.7 489.7 451.9
Creditors - amounts falling due within one year
Loans 13 (125.5) (127.7) (166.7)
Trade and other creditors (173.3) (96.8) (94.9)
Dividends payable 9 (29.6) (21.7) (47.3)
(328.4) (246.2) (308.9)
Net current assets 435.3 243.5 143.0
Total assets less current liabilities 2,323.5 2,240.3 2,097.2
Creditors - amounts falling due after more than one
year
Loans 13 (619.9) (778.6) (690.8)
Provisions for liabilities and charges 14 (164.2) (117.4) (157.4)
1,539.4 1,344.3 1,249.0
Capital and reserves 1(a)
Preference share capital called up - non-equity 3.7 3.3 3.5
Ordinary share capital called up - equity 17.9 16.2 17.5
Share premium - equity 308.1 279.1 300.4
Revaluation reserve - equity 14.5 13.6 15.7
Profit and loss reserve - equity 735.3 694.9 568.8
Shareholders' funds - including non-equity 15 1,079.5 1,007.1 905.9
interests
Minority interests - equity 459.9 337.2 343.1
1,539.4 1,344.3 1,249.0
Approved by the Board of Directors and signed on their behalf by P J Adeane,
Director.
7 September 2004
Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
half year to half year to year to
30.6.04 30.6.03 31.12.03
US$'m US$'m US$'m
Net cash inflow from operating activities 16 517.3 206.2 510.2
Dividends received from other fixed asset investments - 0.1 0.1
Interest received 2.2 2.1 4.7
Realised gains from currency swaps 7.5 - -
Interest paid (14.2) (17.2) (31.6)
Dividends paid to minority interests (18.8) (0.2) (81.7)
Preference dividends paid (0.1) (0.1) (0.2)
Net cash outflow from returns on investment and servicing of finance (23.4) (15.3) (108.7)
Tax paid (4.8) (2.6) (12.9)
Purchase of tangible fixed assets (31.1) (42.6) (91.7)
Purchase of fixed asset investments (0.4) (0.5) (1.3)
Sale of tangible fixed assets 0.2 0.4 5.4
Sale of fixed asset investments 0.1 0.1 9.4
Net cash outflow from capital expenditure and financial investment (31.2) (42.6) (78.2)
Purchase of water concession - - (193.8)
Cash balances included in demerged assets - - (1.4)
Net cash outflow from acquisitions and disposals - - (195.2)
Equity dividends paid (47.0) (36.4) (58.2)
Cash inflow before management of liquid resources and financing 410.9 109.3 57.0
Management of liquid resources - Net (increase)/decrease in time (299.9) (49.0) 52.9
deposits
New loans drawn down 0.3 0.4 41.4
Repayment of loans (111.5) (58.8) (149.5)
Repayment of principal element of finance leases (1.7) (1.6) (3.3)
Net cash outflow from financing (112.9) (60.0) (111.4)
Net cash (outflow)/inflow in the period 17 (1.9) 0.3 (1.5)
Notes
1 Reporting currency and accounting policies
a) Reporting currency
The functional reporting currency of the Group is United States (US) dollars,
the principal currency in which the Group operates and in which assets and
liabilities are held. Share capital is denominated in sterling and, for the
purposes of reporting in US dollars, share capital and share premium are
translated at the period end rate of exchange. As explained in Note 9, dividends
are paid in either US dollars or sterling.
b) Accounting policies
The profit and loss account, balance sheet and cash flow statement for the half
year to 30 June 2004 have been prepared on the basis of the accounting policies
set out in the Group's statutory accounts for the year to 31 December 2003.
2 Production and sales statistics (neither audited nor reviewed)
(See notes following Note 2(d).)
a) Copper production volumes
Half year Half year to Year to
to 30.06.04 30.06.03 31.12.03
'000 tonnes '000 tonnes '000 tonnes
Los Pelambres 165.0 155.2 326.7
El Tesoro 46.9 45.5 92.4
Michilla 23.5 24.4 52.7
Group total 235.4 225.1 471.8
b) Copper sales volumes
Half year Half year to Year to
to 30.06.04 30.06.03 31.12.03
'000 tonnes '000 tonnes '000 tonnes
Los Pelambres 139.8 160.8 332.8
El Tesoro 47.1 45.3 92.0
Michilla 22.9 23.9 52.6
Group total 209.8 230.0 477.4
c) Cash costs per pound
Half year Half year to Year to
to 30.06.04 30.06.03 31.12.03
cents cents cents
Los Pelambres 18.0 31.5 29.3
El Tesoro 50.5 41.0 42.4
Michilla 84.7 69.9 69.8
Group weighted average 31.2 37.6 36.4
d) Realised copper price per pound and LME average
Half year Half year to Year to
to 30.06.04 30.06.03 31.12.03
cents cents cents
Los Pelambres 141.8 77.6 84.6
El Tesoro 132.0 76.9 82.5
Michilla 113.7 77.6 82.5
Group weighted average 136.6 77.5 83.9
LME average 125.2 74.9 80.7
Notes to the production and sales statistics
(i) The production and sales figures represent the actual
amounts produced and sold, not the Group's attributable share of each mine. The
Group owns 60% of Los Pelambres, 61% of El Tesoro and 74.2% of Michilla.
(ii) Los Pelambres produces copper concentrate, and the figures
for Los Pelambres are expressed in terms of payable copper contained in
concentrate. In the six months to 30 June 2004, Los Pelambres also produced
3,700 tonnes (2003 half year - 3,800 tonnes) of molybdenum concentrate. El
Tesoro and Michilla produce cathodes which contain 99.999% copper.
(iii) Cash costs are a measure of the cost of operational
production expressed in terms of cents per pound of payable copper produced.
Cash costs include by-product credits and exclude depreciation, financial income
and expenses, exchange gains and losses and corporation tax.
(iv) Realised copper prices are determined by comparing turnover
from copper sales with sales volumes for each mine in the period.
(v) The individual figures are sometimes more specific than the
rounded numbers shown; hence small differences may appear in the totals.
3 Segmental analysis
a) Turnover by geographical destination
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
UK 1.3 8.6 10.5
Rest of Europe 215.8 143.2 312.9
Chile 115.7 68.9 149.4
Rest of Latin America 32.1 23.6 53.9
North America 65.1 29.9 59.4
Asia Pacific / other 389.8 197.7 490.1
819.8 471.9 1,076.2
b) Turnover by operation
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 563.3 318.7 737.2
El Tesoro 137.1 76.6 167.2
Michilla 57.4 40.9 95.6
Mining 757.8 436.2 1,000.0
Railway and other transport services 39.9 35.7 75.8
Water concession (acquired 29 December 2003) 22.1 - 0.4
819.8 471.9 1,076.2
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$3.3
million (2003 half year - US$2.4 million).
(ii) Los Pelambres produces and sells copper and molybdenum
concentrates. It is also credited for the gold and silver content in the
copper concentrate it sells. Turnover by type of metal is analysed below. El
Tesoro and Michilla do not generate by-products from their copper cathode
operations.
Los Pelambres turnover by type of metal Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Copper 437.1 274.9 620.5
Molybdenum 119.1 39.6 105.4
Gold and silver 7.1 4.2 11.3
563.3 318.7 737.2
c) Earnings before interest, tax, depreciation and amortisation
(EBITDA) by operation
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 397.3 159.6 402.9
El Tesoro 83.5 36.0 78.8
Michilla 15.3 3.9 14.0
Exploration (2.7) (1.5) (3.5)
Corporate and other items (3.7) (4.0) (11.0)
Mining 489.7 194.0 481.2
Railway and other transport services 20.8 24.6 42.9
Water concession (acquired 29 December 2003) 14.1 - 0.2
524.6 218.6 524.3
EBITDA is calculated by adding back depreciation, amortisation and the
non-exceptional loss on disposal of fixed assets (see Note 3(d)) to operating
profit (see Note 3(e)).
As explained in Note 3(e), in the 2003 half and full year, the Railway and other
transport services division included other operating income of US$6.5 million.
d) Depreciation and amortisation by operation
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 42.3 43.0 89.6
El Tesoro 11.2 9.7 20.2
Michilla 10.0 8.2 17.5
Corporate and other items 0.2 0.2 0.6
Mining 63.7 61.1 127.9
Railway and other transport services 4.1 3.7 8.9
Water concession (acquired 29 December 2003) 3.6 - -
71.4 64.8 136.8
Loss on disposal of fixed assets included in operating profit 7.3 0.6 0.2
78.7 65.4 137.0
e) Operating profit/(loss) by operation
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 353.4 116.2 313.3
El Tesoro 67.4 26.2 58.5
Michilla 5.2 (4.4) (3.6)
Exploration (2.7) (1.5) (3.5)
Corporate and other items (3.9) (4.2) (11.6)
Mining 419.4 132.3 353.1
Railway and other transport services 16.1 20.9 34.0
Water concession (acquired 29 December 2003) 10.4 - 0.2
445.9 153.2 387.3
In the 2003 half and full year, operating profit at the Railway and other
transport services division included other operating income of US$6.5 million
for the cancellation of a contract for additional tonnages by a customer.
f) Capital expenditure by operation
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 14.7 28.4 62.4
El Tesoro 4.2 6.1 9.6
Michilla 7.2 4.0 10.8
Corporate and other items 0.1 0.1 0.2
Mining 26.2 38.6 83.0
Railway and other transport services 4.3 4.1 9.9
Water concession (acquired 29 December 2003) 0.7 - -
31.2 42.7 92.9
Capital expenditure represents purchase of tangible fixed assets stated on an
accruals basis (see Note 11) and may therefore differ from the amount included
in the cash flow statement.
g) Net assets by operation
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres 1,160.7 1,255.9 1,240.1
El Tesoro 315.7 344.4 337.1
Michilla 75.3 79.4 75.1
Corporate and other - 2.0 2.1
Mining 1,551.7 1,681.7 1,654.4
Railway and other transport services 97.9 100.3 107.8
Water concession (acquired 29 December 2003) 173.1 - 195.5
Operating net assets 1,822.7 1,782.0 1,957.7
Fixed asset investments 0.4 187.9 0.4
Net debt (254.1) (603.9) (661.8)
Unallocated liabilities - Group dividend (29.6) (21.7) (47.3)
Net assets 1,539.4 1,344.3 1,249.0
Net assets are stated before deducting minority interests.
4 Provisional pricing and commodity hedging
a) Provisional pricing
Copper concentrate agreements generally provide for provisional pricing at the
time of shipment with final pricing settlement based on the average LME copper
price for specified future periods. Copper revenues on provisionally priced
tonnages are adjusted monthly until final settlement. Sales volumes are also
adjusted on the final metallurgical content of the concentrate.
Revenues in the six months to 30 June 2004 included positive adjustments to
sales of concentrates open at 31 December 2003 totalling US$62.5 million.
Revenues in the six months to 30 June 2003 included positive adjustments to
sales of concentrates open at 31 December 2002 totalling US$8.8 million.
At 30 June 2004, copper sales totalling 90,152 tonnes remained to be finally
priced, and were recorded at that date at an average price of 129.2 cents per
pound. At 30 June 2003, copper sales totalling 66,040 tonnes remained to be
finally priced, and were recorded at that date at an average price of 74.9 cents
per pound.
b) Commodity hedging
The Group periodically enters into commodity hedging contracts to manage its
exposure to the copper price. Turnover for the mining division for the six
months to 30 June 2004 included losses of US$9.3 million relating to commodity
hedging activities. Turnover for the first six months of 2003 included gains of
US$1.9 million relating to commodity hedging.
At 30 June 2004, the Group did not have any commodity hedging in place.
5 Operating profit
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Turnover 819.8 471.9 1,076.2
Cost of sales (315.0) (279.7) (588.4)
Gross profit 504.8 192.2 487.8
Administrative expenses (52.2) (39.2) (88.6)
Closure provision (Note 14) (0.5) (0.5) (1.1)
Severance charges (Note 14) (1.1) (1.0) (2.7)
Exploration costs (2.7) (1.5) (3.5)
Other net operating (expenditure)/income (2.4) 3.2 (4.6)
Operating profit 445.9 153.2 387.3
Depreciation and amortisation charges in the six months to 30 June 2004 were
US$71.4 million (2003 half year - US$64.8 million). Of this amount, US$66.3
million (2003 half year - US$58.9 million) is included in cost of sales and
US$5.1 million (2003 half year - US$5.9 million) is included in administrative
expenses.
6 Net interest payable
Unaudited Unaudited Audited
half year to half year to year to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Interest receivable and similar income 9.8 2.2 4.6
Interest payable and similar charges (14.9) (17.1) (32.7)
Foreign currency exchange difference (1.5) 0.3 (2.1)
Discount charge relating to provisions (Note 14) (0.4) (0.6) (1.1)
(7.0) (15.2) (31.3)
Interest receivable and similar income includes US$7.5 million relating to gains
under currency swaps during the 2004 half year (2003 - nil).
7 Tax
The tax charge of US$82.4 million represents an effective rate (including
deferred tax) of 18.8%, compared with the Chilean statutory tax rate of 17%,
mainly due to non-deductible costs incurred by the operations.
In the 2003 half year, the tax charge of US$30.0 million represented an
effective tax rate of 21.7% on profit before tax, as compared with the Chilean
statutory tax rate that year of 16.5% mainly due to the payment of withholding
taxes relating to that period.
8 Earnings per share
Earnings per share is calculated on profit after tax, minority interest and
preference dividends giving earnings of US$222.2 million (2003 half year -
US$67.1 million) and based on 197,171,339 ordinary shares in issue throughout
both periods.
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 17
September 2004.
The Board has declared an interim dividend of 15 cents per ordinary share (2003
half year - 11 cents) for payment on 8 October 2004 to shareholders on the
register at the close of business on 17 September 2004. Dividends are declared
and paid gross. The exchange rate to be applied for the conversion of dividends
will be £1 = US$1.8151 (2003 half year - £1=US$1.595), giving those shareholders
who will be paid in sterling an interim dividend of 8.2640 pence per ordinary
share (2003 half year - 6.8966 pence).
In October 2003, the Group made a dividend in specie of shares in Andsberg
Limited (the 'demerger dividend'), which was recorded in the profit and loss
account at the book value of the assets demerged. No comparable transaction
occurred in the six months to 30 June 2004.
10 Intangible fixed asset
Concession
right
US$'m
1 January 2004 (audited) 90.6
Amortisation (1.4)
Foreign currency exchange difference (6.1)
30 June 2004 (unaudited) 83.1
11 Tangible fixed assets
Railway
Net book value and other Water
Mining transport Concession Total
US$'m US$'m US$'m US$'m
1 January 2004 (audited) 1,688.7 106.2 68.3 1,863.2
Additions 26.2 4.3 0.7 31.2
Transfers - (0.4) - (0.4)
Disposals (6.6) (0.6) (0.1) (7.3)
Depreciation (63.7) (4.1) (2.2) (70.0)
Foreign currency exchange difference - (7.6) (4.4) (12.0)
30 June 2004 (unaudited) 1,644.6 97.8 62.3 1,804.7
12 Investments
US$'m
1 January 2004 (audited) 0.4
Additions 0.4
Disposals and provisions (0.4)
30 June 2004 (unaudited) 0.4
13 Loans
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Los Pelambres
Projects loans (552.8) (660.4) (594.9)
Other loans (21.5) (26.3) (37.9)
El Tesoro
Project loans (138.4) (169.2) (153.8)
Subordinated debt (9.7) (24.9) (18.7)
Finance leases (13.2) (15.3) (14.2)
Michilla
Finance leases (1.6) (1.5) (2.2)
Railway and other transport services
Loans (8.2) (8.7) (9.0)
Corporate
Loans - - (26.8)
(745.4) (906.3) (857.5)
Loans are shown net of deferred financing costs of US$2.5 million (30 June 2003
- US$3.2 million) which relates to the project loans at El Tesoro. The gross
amount due in relation to project loans at El Tesoro is US$140.9 million (2003
half year - US$172.4 million).
Maturity of loans
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Due within one year (125.5) (127.7) (166.7)
Due after more than one year (619.9) (778.6) (690.8)
(745.4) (906.3) (857.5)
At 30 June 2004, US$22.2 million of project loans have been fixed at a rate of
5.56% for a remaining period of 0.6 years. The remainder of the loans are
predominantly floating rate. However, the Group periodically enters into
interest rate hedging contracts to manage its exposure to interest rates. At 30
June 2004, the Group had hedged US$164.5 million of its borrowings using '
collars' for a remaining weighted average period of 1.7 years. These limit the
variability of the interest rate to a weighted average minimum (a floor) of
5.01% and a weighted average maximum (a cap) of 5.99%.
14 Provisions for liabilities and charges
Decommis-sioning
Termination and site
of water rehabilitation Severance Deferred
concession indemnities tax Total
US$'m US$'m US$'m US$'m US$'m
1 January 2004 (audited) (0.1) (8.9) (15.7) (132.7) (157.4)
Charge to operating profit in period (Note 5) - (0.5) (1.1) - (1.6)
Release of discount to net interest in period - (0.2) (0.2) - (0.4)
(Note 6)
Charge to tax on profit in period - - - (8.2) (8.2)
Utilised in period - - 0.6 - 0.6
Foreign currency exchange difference - - 1.1 1.7 2.8
30 June 2004 (unaudited) (0.1) (9.6) (15.3) (139.2) (164.2)
15 Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Profit for the financial period 222.3 67.2 180.7
Other recognised gains and losses relating to the period
- Foreign currency exchange difference (19.0) 1.3 15.5
Total recognised gains and losses 203.3 68.5 196.2
Dividends (including demerger dividend of US$181.5 million in 2003) (29.7) (21.8) (250.7)
173.6 46.7 (54.5)
Opening shareholders' funds 905.9 960.4 960.4
Closing shareholders' funds 1,079.5 1,007.1 905.9
16 Reconciliation of operating profit to net cash inflow from operating
activities
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Operating profit 445.9 153.2 387.3
Depreciation and amortisation 71.4 64.8 136.8
Loss on disposal of tangible fixed assets 7.3 0.6 0.2
Increase in stocks (20.1) (0.1) (1.6)
(Increase)/decrease in debtors (2.9) 1.0 (23.7)
Increase/(decrease) in creditors and provisions 15.7 (13.3) 11.2
Net cash inflow from operating activities 517.3 206.2 510.2
17 Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Net cash (outflow)/inflow in the period (1.9) 0.3 (1.5)
Cash outflow from decrease in debt 112.9 60.0 111.4
Cash outflow/(inflow) from increase/(decrease) in liquid resources 299.9 49.0 (52.9)
Change in net debt resulting from cash flows 410.9 109.3 57.0
Interest accrued on long-term loan balances and amortisation of deferred (0.9) (0.8) (1.5)
financing costs
New leases - - (1.3)
Foreign currency exchange difference (2.3) 0.5 (3.1)
Movement in net debt in the period 407.7 109.0 51.1
Net debt at the beginning of the period (661.8) (712.9) (712.9)
Net debt at the end of the period (254.1) (603.9) (661.8)
Composition of net debt
Unaudited Unaudited Audited
half year half year year
to to to
30.06.04 30.06.03 31.12.03
US$'m US$'m US$'m
Cash in hand and demand deposits 3.6 4.3 7.6
Current asset investments 487.7 298.1 188.1
Long and short term loans including finance leases (Note 13) (745.4) (906.3) (857.5)
Net debt at the end of the period (254.1) (603.9) (661.8)
18 Financial information
The Group's statutory accounts for the year to 31 December 2003 have been filed
with the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not include a statement under s237(2) or (3) of the
Companies Act 1985. The 31 December 2003 profit and loss account, balance sheet
and cash flow statement shown in this interim report are abridged versions of
those contained in the statutory accounts. The financial information contained
in this statement does not constitute statutory accounts within the meaning of
s240 of the Companies Act 1985.
19 Currency translation
Results denominated in foreign currencies have been translated into dollars at
the average rate for each period.
Period end rates Average rates
30.06.04 US$1.8185 = £1; US$1 = Ch$636 US$1.8222 = £1; US$1 = Ch$608
30.06.03 US$1.6469 = £1; US$1 = Ch$699 US$1.6098 = £1: US$1 = Ch$724
31.12.03 US$1.7727 = £1; US$1 = Ch$594 US$1.6321 = £1; US$1 = Ch$692
20 Distribution
These results will be sent by first class post to all shareholders on 7
September 2004. 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 2004 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement and related Notes 1 to 20, with the exception of Note 2. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.
Deloitte & Touche LLP
Chartered Accountants
London
7 September 2004
This information is provided by RNS
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