TIDMANTO
RNS Number : 3988C
Antofagasta PLC
22 February 2022
NEWS RELEASE, 22 FEBRUARY 2022
PRELIMINARY RESULTS FOR THE
YEARED 31 DECEMBER 2021
Strong EBITDA and balance sheet
Antofagasta plc CEO Iván Arriagada said: "Antofagasta ended the
year on a strong footing, generating revenues of $7.5 billion,
reflecting the high copper prices during the year, and increasing
our EBITDA by 77% to a record of $4.8 billion, yielding an EBITDA
margin of 65%. These results illustrate our performance as a
reliable and responsible copper producer with the operational and
financial strength and balance sheet to deliver on our
promises.
"Our mines and plants performed as planned and we can be proud
of our achievements, regardless of the challenges of the year
including COVID-19 and continued drought conditions in central
Chile. Thanks to our team's commitment and motivation, we have been
able to continue operating safely while contributing to the
national economy in Chile and supporting local communities,
socially and economically.
"We have made excellent progress on unlocking the embedded
growth options in our portfolio with identified key brownfield
developments and incremental growth within our asset portfolio. The
expansion of Los Pelambres is now 68% complete and the desalination
plant remains on track for completion in H2 2022. The Chloride
Leach project at Zaldívar was completed in January 2022 and at
Centinela, pre-stripping advanced over the year at the Esperanza
Sur pit ready for mining ore for processing in the first half of
2022.
"Climate change remains a key focus for Antofagasta, and we have
expanded our capital allocation framework to include climate risk
factors and have set environmental commitments to significantly
reduce our continental water consumption and emissions by 2025. By
then around 90% of our water use will be sea or recirculated water
and our GHG emissions will have reduced by our target of 30%. We
also have clear social commitments to our workers and our
communities to make our mines safer and greener
"Following the successful performance of the Company and
considering our robust balance sheet and the continued strong
copper price, the Board has declared a final dividend of 118.9
cents per share. This brings the total dividend for the year to
142.5 cents per share, equivalent to a pay-out ratio of 100% and an
increase of 161% on 2020.
HIGHLIGHTS
Financial performance
-- Revenue for the full year was $7,470 million, 46% higher than
in 2020 reflecting a 47% increase in copper realised prices
-- EBITDA(1) was $4,836 million , 77% higher than the previous
year on higher revenue, partially offset by higher operating
costs
-- EBITDA margin(2) increased to 64.7% from 53.4% in 2020
-- Cost and Competitiveness Programme (CCP) generated benefits
of $131 million, above the original target of $100 million
-- Profit before tax including exceptional items increased by 146% to $3,477 million
-- Cash flow from operations was $4,508 million, 85% higher than in 2020 due to higher EBITDA
-- Strong balance sheet with net cash of $540 million at the end
of 2021, an improvement of $622 million from the net debt position
at the end of 2020
-- Capital expenditure increased to $1,778 million(3) , $470
million higher than in 2020 with increased capital expenditure on
the Los Pelambres Expansion project, Centinela's Esperanza Sur pit
and higher mine development expenditure at Centinela
-- Underlying earnings per share from continuing operations and
excluding exceptional items(1) of 142.5 cents, an increase of 161%
compared to 2020 with higher EBITDA partly offset by higher
non-controlling interests and tax
-- Exceptional items after tax for the year were a cost of $87
million, following the impairment of the Company's holding in Twin
Metals and the recognition of previously unrecognised deferred tax
assets
-- Earnings per share from continuing and discontinued
operations including exceptional items were 130.9 cents , 155%
higher than in 2020
-- Final dividend of 118.9 cents per share declared, bringing
the total dividend for the year to 142.5 cents per share, equal to
100 % of underlying earnings per share
Operating performance (as previously announced)
-- Safety remains our top priority . Regrettably there was a
fatal accident at Los Pelambres involving a contractor in July
2021. A full investigation was carried out and all lessons learned
have now been fully implemented
-- Copper production for the full year was 721,500 tonnes, 1.7%
lower than last year mainly on expected higher grades at Centinela
Concentrates and record plant throughput, offset by expected lower
grades and lower throughput at Los Pelambres due to water supply
restrictions resulting from the continuing drought affecting
central Chile
-- Gold production was above guidance at 252,200 ounces , 23.6%
higher than in 2020 on higher grades at Centinela
-- Molybdenum production in 2021 was 10,500 tonnes , 16.7% lower
than in 2020 and within guidance
-- Cash costs before by-product credits(1) for the full year
were $1.79/lb, 23c/lb higher than last year due to the stronger
Chilean peso (4%), higher input costs, especially energy and diesel
prices, and lower production
-- Net cash costs(1) for 2021 were $1.20/lb, below guidance and
5.3% higher than in 2020 due to higher cash costs before by-product
credits, partially offset by the 17c/lb increase in by-products
credits on increased gold production and realised molybdenum
prices
2022 Guidance (as previously announced)
-- Group production in 2022 is expected to be 660-690,000 tonnes
of copper, 170-190,000 ounces of gold and 8,500-10,000 tonnes of
molybdenum. The copper and gold production reflect lower expected
grades at Centinela Concentrates and the temporarily reduced
throughput at Los Pelambres because of the continued drought
-- Cash costs in 2022 before and after by-product credits are
expected to be $2.00/lb and $1.55/lb respectively reflecting
increased input costs, especially sulphuric acid at our cathode
operations, and lower production at the Group's two lowest cost
operations, namely Los Pelambres, which is temporarily limited by
water supply restrictions, and lower grades at Centinela
Concentrates, partly offset by CCP savings. By-product credits are
also expected to decrease as gold and molybdenum production
falls
-- Capital expenditure in 2022 is expected to be $1.7-1.9
billion(3) as sustaining and mine development expenditure increase
for the year to approximately $1.0 billion, and development
expenditure continues on the Los Pelambres Expansion project and at
Centinela, including the ongoing study and review work on the
second concentrator. The final estimated capital expenditure to
complete the Los Pelambres Expansion remains under review due
primarily to COVID-19 which has impacted input and logistics costs,
and project workers' absenteeism
YEARING 31 DECEMBER 2021 2020 %
------- -------- --------
Revenue $m 7,470.1 5,129.3 45.6
EBITDA(1) $m 4,836.2 2,739.2 76.6
EBITDA margin(1, 2) % 64.7% 53.4% 21.2
Profit before tax (including exceptional
items) $m 3,477.1 1,413.1 146.1
Underlying earnings per share(1) (continuing
operations excluding exceptional items) cents 142.5 54.7 160.5
Earnings per share (continuing and discontinued
operations including exceptional items) cents 130.9 51.3 155.2
Dividend per share cents 142.5 54.7 160.5
Cash flow from operations (continuing
and discontinued) $m 4,507.7 2,431.1 85.4
Capital expenditure(3) $m 1,777.5 1,307.4 36.0
Net (cash)/debt at period end(1) $m (540.5) 82.0 -
Average realised copper price $/lb 4.37 2.98 46.6
-------
Copper sales kt 725.6 738.5 (1.7)
Gold sales koz 244.7 199.6 22.6
Molybdenum sales kt 10.4 12.5 (16.8)
Cash costs before by-product credits(1) $/lb 1.79 1.56 14.7
Net cash costs(1) $/lb 1.20 1.14 5.3
------------------------------------------------- ------- -------- -------- -------
Note: The financial results are unaudited and prepared in
accordance with UK-adopted International Accounting Standards,
unless otherwise noted below.
(1) Non IFRS measures. Refer to the alternative performance
measures on page 64 of this preliminary results announcement
(2) Calculated as EBITDA/Revenue. If Associates and JVs revenue
is included the EBITDA margin was 61.1% in 2021 and 50.3% in
2020.
(3) On a cash basis
A recording and copy of the 2021 Full Year Results presentation
is available for download from the Company's website
www.antofagasta.co.uk .
There will be a Q&A video conference call at 13:30pm GMT
today hosted by Iván Arriagada - Chief Executive Officer, Mauricio
Ortiz - Chief Financial Officer and René Aguilar, Vice President -
Corporate Affairs and Sustainability. Participants can join the
conference call here .
Investors - Media - London
London
Andrew Lindsay alindsay@antofagasta.co.uk Carole Cable antofagasta@brunswickgroup.com
Telephone +44 20 7808 0988 Telephone +44 20 7404 5959
Rosario Orchard rorchard@antofagasta.co.uk
Telephone +44 20 7808 0988 Media - Santiago
Pablo Orozco porozco@aminerals.cl
Carolina Pica cpica@aminerals.cl
Telephone +56 2 2798 7000
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2021 FINANCIAL HIGHLIGHTS
Revenue in 2021 was $7,470 million, 46% higher than in 2020
reflecting the higher copper and molybdenum realised prices, 47%
and 98% respectively, and higher gold sales volumes, partially
offset by lower copper and molybdenum sales volumes.
EBITDA increased by 77% to $4,836 million on higher revenue,
partially offset by higher operating costs, which increased by
10%.
Profit before tax including exceptional items was $3,477.1
million, 146% higher than in 2020 reflecting the higher EBITDA and
net finance income.
Earnings per share from continuing operations excluding
exceptional items for the year were 142.5 cents, an increase of
87.8 cents or 161% compared with 2020 on higher EBITDA partly
offset by higher non-controlling interests and tax.
Earnings per share from continuing operations including
exceptional items for the year were 130.9 cents, reflecting the
impact of exceptional losses of 11.6 cents, and were an increase of
155% compared to 2020.
Cash flow from continuing operations was $4,507 million, a
$2,076 million increase compared to 2020 due to higher EBITDA.
SUSTAINABILITY
Safety and health
Antofagasta prioritises the safety and wellbeing of its
people.
We deeply regret that a contractor lost his life in July 2021 at
Los Pelambres while operating a bulldozer in the open pit. We
conducted a thorough investigation into the tragic death,
communicated these learnings across the organisation and have
incorporated the findings into our safety management system.
Given that our safety management system prioritises eliminating
fatalities, the Group focus is on high potential incidents (HPIs),
and we are using this measure as our key lead indicator of safety
performance. In 2021, the Group recorded 65 HPIs, 24% less than the
previous year, with improvements seen in both our Mining and
Transport divisions.
The Group's Lost Time Injury Frequency Rate (LTIFR) was 1.34 per
million hours worked, higher than in 2020, mainly due to an
increase in low-potential incidents at our operations,
significantly increased construction activity at our development
projects, and routine train operation and maintenance tasks in our
Transport division.
COVID-19
The control of COVID-19 infection at our operations continued to
be a priority during 2021, especially in the first half of the year
when the second wave of infections peaked in Chile. We have focused
on encouraging both vaccination and adherence to preventive
controls among employees and contractors.
In coordination with the authorities, we offered vaccinations at
our mine sites. By the end of the year, at least 97% of our
employees, contractors and sub-contractors were fully vaccinated, a
higher rate than the national average.
Communities
Antofagasta seeks to build sustainable long-term relations with
the communities near its operations, anchored in proactive and
transparent dialogue. The benefits of this engagement for both the
communities and the Group are measured to assess its impact. The
Company has implemented a bottom-up approach to ensure that local
communities participate in the selection of our social investment
projects through our Somos Choapa (We are Choapa) and Diálogos para
el Desarrollo (Dialogues for Development) engagement mechanisms in
the Choapa Province and the Antofagasta Region, respectively. The
initiatives implemented are focused on education, digitalisation,
health, water, entrepreneurship, local suppliers, sports and civil
infrastructure. In 2021 $48 million were invested in community
programmes.
Some of the programmes implemented in 2021 were:
-- Enred (Connected) programme was launched to provide rural
communities in the surrounding communities with the infrastructure,
connectivity, tools and skills to take part in the Digital Age.
-- In the Antofagasta Region, the Company actively participates
in the Antofagasta Mining Cluster, a public-private alliance that
seeks to foster the Region's economic development. The efforts are
focused on human capital creation and the development of innovative
local suppliers.
-- In 2021 the scholarship programme supported 394 young people
from the Choapa Province undertaking technical and/or university
studies.
-- Los Pelambres actively partners with local communities, the
Regional Government and local universities to address problems of
water scarcity in the region. Los Pelambres has been supporting
local communities with training and technical assistance for the
design, construction and maintenance of infrastructure of water
systems and working with the government and the government agency
CORFO, focused on studying and implementing solutions for both the
short term and the long term.
The Company set-up a Covid Support Fund in 2020 whose focus is
on healthcare and prevention, economic reactivation and relief
measures for local communities, in close coordination with local
authorities. Similar to our regular social programmes, many
initiatives were implemented jointly with local foundations.
Funding was increased in 2021 by a further $6 million, doubling the
original amount committed in 2020.
Diversity and inclusion
The Group's Diversity and Inclusion Strategy seeks to increase
the participation and retention of women in the workforce. This is
reflected in the recruitment and selection strategies, the
promotion of inclusive workspaces and the zero-tolerance policy on
sexual harassment. In 2021, 98 female employees took part in career
development programmes and women represented 82% of the 197 new
apprentices.
During the year, Antofagasta increased the proportion of women
in its workforce to 17.4%, exceeding the target one year early, of
doubling the participation of women by the end of 2022 compared to
the baseline of 8.6% at the beginning of 2018.
Climate Change and emission targets
At Antofagasta, we see climate change as one of the greatest
challenges facing the world today and are committed to being part
of the solution. As a copper producer, we have a clear role to play
in supplying a metal that is a critical input for so many
low-carbon technologies - from electromobility to the generation of
renewable energy - where we expect demand to continue to
increase.
After meeting the 2018-2022 GHG emissions reduction target in
2020, the Company announced two new greenhouse gas (GHG) reduction
targets as part of its Climate Change Strategy and its wider
commitment to operate sustainably as a leading copper producer.
The first target is to reduce the Company's Scope 1 and Scope 2
GHG emissions by 30%, or 730,000 tonnes of CO(2) e by 2025,
relative to 2020.
The second, longer-term, target is to achieve carbon neutrality
by 2050, in line with Chile's own national target, or earlier if
suitable technologies are developed.
These targets are supported by the gradual conversion of our
operations to electricity generated solely from renewable sources,
which we will complete in 2022. At the same time, we are working to
reduce and, ultimately, eliminate the use of diesel at our mining
operations through initiatives that include an Electromobility Plan
and a portfolio of energy efficiency initiatives.
In 2019, we committed to implementing the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD) and,
having published a TCFD Progress Report in September, we are
reporting against the recommendations in this year's Annual Report.
The TCFD framework has already proved useful in helping us
integrate risk management for climate change into our planning
cycles but, above all, it serves as a transparent and credible way
of informing stakeholders about the expected impact of different
climate scenarios on our business.
Water
One of the clear impacts of climate change is the 12-year
drought in central Chile, including the Choapa Valley where our Los
Pelambres operation is located in one of the most impacted areas.
Several years ago, we took the decision to build a sea water
desalination plant for Los Pelambres and the first stage of this
project, with an output of 400 litres per second, is due to start
operation in the second half of 2022. We are also planning to
double its capacity as soon as the necessary permitting is
obtained, and we expect the plant will be operating at its expanded
capacity in 2025.
Our Centinela and Antucoya operations in the north of Chile
already use sea water almost exclusively. As a result, we expect
raw or desalinated seawater and reused or recycled water to account
for 90% of the operational water use of all our mining operations
by 2025.
In 2018, Zaldívar submitted an Environmental Impact Assessment
(EIA), which included an application to extend its water permit
from 2025 to 2031 and the mining lease. This has involved
government agencies reviewing the application and a consultation
process with the indigenous community, led by the environmental
authority. The final stages of the review are expected to be
completed in H1 2022.
If the relevant permits are not extended, this is likely to be
considered as an indicator of a potential impairment, requiring a
full impairment assessment to be carried out.
Zaldívar's updated mine life now extends to 2036. Looking beyond
this date, field work and studies are underway on further extending
the life of the mine by exploiting the primary sulphide ore body
that lies below the current ore reserves. Water planning beyond the
extension to 2031 is being evaluated as part of these studies.
PRODUCTION AND CASH COSTS
During the year, copper production was 721,500 tonnes, 1.7%
lower compared to 2020, mainly on expected higher grades at
Centinela Concentrates and record plant throughput, offset by
expected lower grades and lower throughput at Los Pelambres due to
water supply restrictions resulting from the continuing drought in
central Chile.
Gold production was 252,200 ounces, 23.6% higher than in 2020 on
expected higher grades at Centinela.
Molybdenum production was 10,500 tonnes, 16.7% lower compared to
2020.
The Transport division transported 6.7 million tonnes during
2021, 4.0% higher than in 2020.
Cash costs before by-product credits were $1.79/lb, 14.7% higher
than last year due the stronger Chilean peso (4%), higher energy
and diesel prices, and lower production. Net cash costs for the
full year were $1.20/lb, below guidance and 5.3% higher than in
2020 due to higher cash costs before by-product credits partially
offset by the 17c/lb increase in by-products credits on increased
gold production and realised molybdenum price.
COST AND COMPETITIVENESS PROGRAMME
The Group's Cost and Competitiveness Programme outperformed the
target of $100 million generating benefits of $131 million during
the year, of which $72 million reflected costs savings and $59
million reflected the value of productivity improvements.
The Group has built a portfolio of initiatives focused on
reducing cash expenditure by optimising and negotiating third party
services and increasing productivity in terms of greater
throughputs and recoveries. These initiatives help the Group
mitigate cost pressures, particularly this year, with the temporary
impact of reduced production and increases in industry-wide input
prices.
EXPLORATION AND EVALUATION COSTS
Exploration and evaluation costs increased by $18 million to
$103 million, mainly as a result of a higher level of activity
particularly on exploration in Chile.
NET FINANCE EXPENSE
Net finance income for the year was $16 million compared to a
net financial expense of $103 million in 2020. This was mainly due
to the foreign exchange impact of the retranslation of Chilean peso
denominated assets and liabilities, the decrease in the carrying
value of provisions and a corresponding credit recognised in other
finance items.
TAXATION
The effective tax rate for the period was 36.5% before
exceptional items and 35.7% after exceptional items, which compares
with 36.6% and 37.3% respectively in 2020.
The income tax expense for the year excluding exceptional items
was $1,333 million, an increase of 144% as a result of higher
profits before tax. Income tax paid during the year was $777
million compared to $320 million in 2020, a 143% increase.
EXCEPTIONAL ITEMS
In January 2022, the US federal government cancelled two of Twin
Metals's mining leases overturning a previous decision in 2019 to
renew the leases, which form a significant proportion of the
mineral resources contained within Twin Metals's current project
plan. Twin Metals believes it has a valid legal right to the mining
leases and a strong case to defend its legal rights. Although the
Group intends to pursue validation of those rights, considering the
time and uncertainty related to any legal action to challenge the
government decisions, it has been decided to fully impair the $178
million carrying value of the project.
During 2021 there was an exceptional item of $91 million which
reflects the recognition of a deferred tax asset at Antucoya, due
to the increased consensus copper price forecasts resulting in
higher forecast taxable profits.
CAPITAL EXPITURE AND DEPRECIATION & AMORTISATION
Capital expenditure in 2021 was $1,778 million, including $336
million of (mining) sustaining capital expenditure, $503 million
mine development and $883 million growth expenditure. This was an
increase of $470 million on 2020 with increased expenditure on the
Los Pelambres Expansion project and Centinela's Esperanza Sur pit,
and higher mine development expenditure at Centinela. Further
information is included in the Review of Operations below.
Depreciation and amortisation was $1,079 million, an increase of
$30 million compared to 2020.
NET DEBT
Net cash was $540 million at the end of the period, $622 million
higher than at the end of 2020 as a result of the higher EBITDA,
with $634 million of net borrowings repaid during the period.
DIVIDS
The Board has declared a final dividend for 2021 of 118.9 cents
per share, which together with the interim dividend of 23.6 cents
per share amounts to a total dividend of 142.5 cents per share.
This is equal to a 100% pay-out ratio of underlying net earnings
and is consistent with the Company's dividend policy.
PROPOSED MINING ROYALTY
The Chilean lower house of Congress approved a new mining
royalty in May, which is now being debated in the Senate. The
Senate has not been restricted to the specific terms of the
proposal presented by the lower house and it received evidence from
a much broader base of interested parties including academics and
mining industry representatives.
In January 2022 the Senate Mining and Energy Committee published
its proposal for the new mining royalty which was less onerous than
the original proposal made by the lower house. This proposal will
be debated in the Senate before returning to the lower house and
proceeding through several further legislative steps that are
required before a final bill is approved by both houses.
CONSTITUTIONAL CONVENTION
A Constitutional Convention was elected in May 2021 and has
until July 2022 to develop a new constitutional text. The new
constitution will then be put to a national referendum for approval
or rejection.
MINERAL RESOURCES
The Company has discovered a significant greenfield manto type
deposit in the coastal belt of the Antofagasta Region. The initial
inferred resource of the Cachorro deposit is 142 million tonnes,
with a copper grade of 1.2%, and represents just part of the
potential resource. The resource is located near existing
infrastructure. Further drilling will be carried out during
2022.
CUPROCHLOR -T(R)
During 2021, we continued with a large-scale pilot programme to
validate our in-house patented primary sulphides leaching
technology (Cuprochlor-T(R)). We conducted industrial-scale trials
using a 40,000-tonne heap at Centinela. The results were consistent
with previous test work, giving recoveries of 70% after
approximately 200 days.
This new technology will potentially unlock value from
previously uneconomic mineral resources. It could bring forward the
profitable processing of ore otherwise scheduled to be mined in
many years' time or that was previously considered to be
uneconomic.
REKO DIQ PROJECT'S ARBITRATION
In July 2019 the World Bank Group's International Centre for
Settlement of Investment Disputes (ICSID) awarded $5.8 billion in
damages (compensation and accumulated interest as at the date of
the award), plus costs and post-award interest to Tethyan Copper
Company Pty Limited (Tethyan), a joint venture held equally by the
Company and Barrick Gold Corporation, in relation to an arbitration
claim filed against the Islamic Republic of Pakistan (Pakistan)
following the unlawful denial of a mining lease for the Reko Diq
project in Pakistan in 2011.
In November 2019, Pakistan requested that ICSID annul the award.
In March 2020, ICSID appointed a committee to consider Pakistan's
request for annulment and a hearing on Pakistan's annulment
application took place in May 2021. The committee is expected to
issue a decision on Pakistan's annulment application in the coming
months.
In March 2021, Pakistan applied to ICSID for revision of the
award and in April the ICSID tribunal that issued the award was
reconstituted to consider Pakistan's revision application. Tethyan
has filed an application to dismiss Pakistan's revision application
as being manifestly meritless.
Tethyan is permitted to enforce 50% of the award plus accrued
interest on the condition that any amounts collected through
enforcement of the award must be put into escrow and returned if
the award is annulled or if Pakistan's revision application is
successful. Tethyan continues to take steps to enforce the award in
accordance with these conditions.
The proceeds of the award will only be recognised in
Antofagasta's financial statements once they are received by the
Company.
FUTURE GROWTH
The Group has a pipeline of embedded growth projects which it is
currently advancing through a disciplined process of project
evaluation making full use of its significant mineral resource
base.
During 2021, development of the Los Pelambres Expansion project
was impacted by COVID-19 and construction at the concentrator site
was temporarily suspended in May. Construction of the desalination
plant continued according to plan.
Following the delay in 2020 to the start of construction of the
Esperanza Sur pit and the Zaldívar Chloride Leach projects, work
progressed according to plan during 2021, despite ongoing COVID
restrictions.
All projects are proceeding with fully integrated COVID-19
health protocols in place. These are expected to continue during
2022, but as a managed health risk, consistent with the high levels
of vaccination achieved in Chile. The Zaldívar Chloride Leach
project was completed in January 2022 and the Los Pelambres
desalination plant and Esperanza Sur will be completed in 2022. The
concentrator expansion at Los Pelambres will be completed in early
2023.
COPPER MARKET
The year started with the continued upward trend in the copper
price seen in the second half of 2020, with the price reaching a
peak of $4.86/lb in May. This was an all-time high and for the rest
of the year the copper price stabilised, trading in a range above
$4.20/lb. This has continued into 2022.
Due to strong copper demand growth in 2021 and the limited
capacity of copper supply to respond quickly, exchange stocks have
dropped to their lowest level since 2008, ending the year at less
than 0.6 weeks of consumption. This has consolidated the price at
historically high levels and moved the copper forward curve into
backwardation, where the uncertainty of having enough copper for
prompt delivery leads to the cash price being higher than the
forward price, reflecting exceptionally tight availability.
This situation is expected to ease during the second half of
2022, when several major greenfield and brownfield projects are
scheduled to come into production. However, we expect part, or all
of the additional production will be offset by continued falling
grades, COVID, political instability, water restrictions,
communities' unrest, and logistical and supply constraints.
Looking further ahead, the outlook for copper remains positive,
thanks to the continued decarbonisation of industrial activity and
the growth of the clean energy sector and electromobility. Demand
is expected to grow more slowly during 2022 than in 2021, but still
at a high rate of about 2.5-3.0%, requiring an additional 600 to
700,000 tonnes of refined copper per year.
Over the year the LME copper price averaged $4.23/lb, 51% higher
than in 2020.
2022 GUIDANCE
As previously announced, Group production for 2022 is expected
to be 660-690,000 tonnes of copper, 170-190,000 ounces of gold and
8,500-10,000 tonnes of molybdenum. The copper and gold production
reflect lower expected grades at Centinela Concentrates and
throughput reduced at Los Pelambres to below plant capacity to
reduce water usage until the desalination plant is completed in H2
2022.
Group cash costs in 2022 before and after by-product credits are
expected to be $2.00/lb and $1.55/lb respectively, impacted by
higher input costs and the temporary lower plant throughput at Los
Pelambres due to water supply restrictions which will reduce
production until the start-up of the desalinated water supply
system in H2 2022.
Capital expenditure in 2022 is expected to be $1.7-1.9 billion,
as sustaining and mine development expenditure increase for the
year to approximately $1.0 billion, and development expenditure
continues on the Los Pelambres Expansion project and at Centinela.
The final estimated capital expenditure to complete the Los
Pelambres Expansion remains under review due primarily to COVID-19
impacts.
REVIEW OF OPERATIONS
LOS PELAMBRES
2021 Performance
Operating Performance
There has been a worsening drought at Los Pelambres for 12
years, but this year, for the first time and despite strict water
management protocols, the water shortage impacted copper
production.
EBITDA was $2,526 million, compared with $1,663 million in 2020,
reflecting higher copper and molybdenum realised prices, offset by
lower copper and gold sales volumes and higher operating costs.
Production
Copper production for the year decreased by 9.7% to 324,700
tonnes, mainly due to the lower throughput due to water
optimisation and expected lower copper grade. Molybdenum production
in 2021 was 9,200 tonnes, 1,700 tonnes lower than in 2020 as a
result of the lower throughput, grades and recoveries. Gold
production was 53,200 ounces, 11.9% lower than the previous
year.
Costs
Cash costs before by-product credits at $1.59/lb were 25.2%, or
32c/lb, higher than in 2020, reflecting the lower production due to
water restrictions, the stronger Chilean peso and higher input
prices. Net cash costs for the full year were $0.89/lb, or 9.9%
lower than in 2020 due to higher by-product prices as Los Pelambres
benefits from the sale of gold, molybdenum and silver.
Capital expenditure
Capital expenditure during 2021 was $880 million, including $219
million on sustaining and $575 million on growth projects.
As at the end of 2021 the Los Pelambres Expansion project was
68% complete (design, procurement and construction). Currently, the
final estimated project costs are under review, considering the
impact of COVID-19, higher input and logistics costs and project
worker absenteeism.
Outlook for 2022
The forecast production for 2022 is 290-300,000 tonnes of
copper, 6.5-7,500 tonnes of molybdenum and 40-50,000 ounces of
gold. Lower production is due to temporary water supply
restrictions which are expected to end once the desalinated water
supply system is commissioned in H2 2022.
Cash costs before by-product credits are forecast to be
approximately $1.75/lb and net cash costs $1.25/lb, as throughput
is temporarily reduced because of the drought.
CENTINELA
2021 Performance
Operating Performance
Centinela had a very solid year in 2021 with increased
production and lower costs with higher sulphide ore grades and
increased throughput.
EBITDA at Centinela was $1,919 million, compared with $912
million in 2020, on higher copper and gold sales volumes and higher
copper realised prices, partly offset by higher unit costs.
Production
Copper production was 274,200 tonnes, 11.1% higher than in 2020
due to higher grades and increased throughput at Centinela
Concentrates, which operated consistently at, or above, design
capacity for the full year.
Production of copper in concentrate was 185,400 tonnes, 20.7%
higher than in 2020, reflecting expected higher ore grades and
throughput above the design capacity of 105,000 tonnes of ore per
day. Copper cathode production during the year was 88,800 tonnes,
4.8% lower than in 2020 mainly due to expected lower grades and
recoveries, despite higher throughput and consistently higher
performance at all the plants.
Gold production was 199,000 ounces, 38.5% higher than in 2020,
due to higher throughput and grades. Molybdenum production was
1,300 tonnes on decreased grades.
Costs
Cash costs before by-product credits in 2021 were $1.87/lb,
2c/lb higher than in 2020 as the impact of higher copper production
was offset by the stronger Chilean peso and higher input costs.
By-product credits were 74c/lb, 16c/lb higher than in 2020 due
to higher gold production and the improved molybdenum price.
Net cash costs for the year were $1.13/lb, 11.0% lower than in
2020.
Capital expenditure
Capital expenditure was $792 million, including $394 million on
mine development and $308 million on development capital
expenditure, which includes the Esperanza Sur pit project and new
autonomous trucks.
Outlook for 2022
Production is forecast at 245-255,000 tonnes of copper,
130-140,000 ounces of gold and 2-2,500 tonnes of molybdenum. Copper
production will decrease compared to 2020 as grades fall at
Centinela Concentrates to an expected 0.50%, before increasing
again in 2023.
Cash costs before by-product credits are forecast to be
approximately $2.30/lb and net cash costs $1.60/lb.
ANTUCOYA
2021 Performance
Operating Performance
Antucoya continued to improve its operational reliability and
consistency during the year with daily ore throughput increasing by
12.5% compared to 2020.
EBITDA was $337 million compared with $166 million in 2020,
reflecting higher sales volumes and realised prices, partially
offset by higher operating costs.
Production
Antucoya produced 78,600 tonnes, 0.9% lower than last year due
to higher throughput, offset by expected lower grades and resulting
lower recoveries.
Costs
Cash costs for 2021 were $2.04/lb, 12.1% higher than in 2020 due
to a stronger Chilean peso, and higher input costs and maintenance
expenditure.
Capital expenditure
Capital expenditure was $50 million, including $28 million on
sustaining capital expenditure.
Outlook for 2022
Production is forecast to be 75-80,000 tonnes of copper and cash
costs are expected to be approximately $2.30/lb.
ZALDÍVAR
2021 Performance
Operating Performance
Zaldívar had a challenging 2021 with grades declining compared
to 2020, however it improved its operational reliability during the
year with daily ore throughput increasing by 12.9% compared to
2020.
Attributable EBITDA was $173 million compared with $96 million
in 2020.
Production
Attributable copper production was 44,000 tonnes, 8.7% lower
than in 2020 mainly due to lower than planned recoveries and
expected lower grades, partially offset by higher throughput.
Costs
Cash costs were $2.39/lb, compared with $1.80/lb in 2020, mainly
due to lower grades, higher maintenance costs and the stronger
Chilean peso.
Capital expenditure
Attributable capital expenditure in 2021 was $87 million, of
which $49 million was development capital expenditure, mainly on
the Chloride Leach project.
Outlook for 2022
Attributable copper production is forecast to be 50-55,000
tonnes at a cash cost of approximately $2.20/lb.
TRANSPORT DIVISION
2021 Performance
Operating performance
Tonnage transported in 2021 was 4.0% higher than in the previous
year as a new transport contract started.
EBITDA was $68 million, 11.8% higher than in 2020, reflecting
the higher revenue from increased volumes and better contracted
sales prices.
Costs
Management is focused on optimising the division's business
processes to ensure its long-term competitiveness. The Group's Cost
and Competitiveness Programme continued to be applied at the
division during 2021 to improve its cost structure, revenue stream
and operating standards and achieved benefits of some $8 million
during the year.
Outlook for 2022
The division has recently strengthened its commercial area in
order to ensure the successful renewal of various sales contracts
and capture new ones in the medium and long term. Over the next few
years, the division will transport an increasing quantity of bulk
materials.
The division continues to advance its plans to convert its land
in the centre of the city of Antofagasta from industrial to urban
use. This has involved extensive consultation with communities,
neighbours and other stakeholders. An important milestone was
achieved in the first half of 2021 with the approval of the
project's Environmental Impact Assessment.
GROWTH PROJECTS AND OPPORTUNITIES
Los Pelambres Expansion
This expansion project is divided into two phases.
Phase 1
This phase is designed to optimise throughput within the limits
of the existing operating, environmental and water extraction
permits.
During 2020, the decision was made to change the scope of the
project and double the planned capacity of the desalination plant
that is part of Phase 1 from 400 litres per second to 800 litres
per second. Enabling works for this expansion are being carried out
at the same time as the Phase 1 works but are limited in extent by
what is allowed under the permits that have already been
issued.
Following the change of scope and delays due to COVID-19, the
project reached 68% overall completion by the end of the year.
As mining progresses at Los Pelambres, ore hardness will
increase. The expansion is designed to compensate for this,
increasing plant throughput from the current capacity of 175,000
tonnes of ore per day to an average of 190,000 tonnes of ore per
day. The project has two components: the expansion of the
concentrator, including an additional SAG mill, ball mill and six
cells in the flotation circuit, and the construction of a
desalination plant. These are run under separate contracts, and we
expect the desalination plant to be commissioned in the second half
of 2022 and the concentrator plant early in 2023.
Annual copper production will increase by an average of 60,000
tonnes per year over 15 years, starting at approximately 40,000
tonnes per year for the first four to five years and rising to
70,000 tonnes for the rest of the period as the hardness of the ore
increases and the benefit of higher milling capacity is fully
realised.
The 400 litres per second desalination plant includes a 62 km
pipeline from the coast to the El Mauro tailings storage facility,
where it will connect with the existing recycling circuit that
returns water to the Los Pelambres concentrator plant.
Additional permits will be needed to complete the expansion of
the desalination plant to 800 litres per second, but some
preparatory work is being carried out as part of Phase 1 of the Los
Pelambres Expansion project. The planned investment to enable the
future expansion will be limited to what is allowed under the
existing permits and includes changes to the marine works
associated with the inlet and outlet pipes, expanding the plant
footprint and changes in the piping, cabling and civil works.
The capital cost of the project is $1.7 billion but is under
final review, given the challenges of higher absenteeism and worker
rotation as well as higher logistics costs experienced this year
due to the COVID-19 pandemic.
Phase 2 - Future expansion
Following the decision in 2020 to increase the size of the
desalination plant, Phase 2 of the expansion requires two separate
Environmental Impact Assessment (EIA) applications:
Desalination plant expansion
This project is to protect Los Pelambres from the future impact
of climate change and the deteriorating availability of water in
the region, and to free up continental water for use by local
communities.
The additional works required, beyond those being completed as
part of Phase 1, include the expansion of the desalination plant
and the construction of a new water pipeline from the El Mauro
tailings storage facility to the concentrator plant. This project
requires a new EIA application, which was submitted in the first
half of 2021. The EIA also includes two sustaining capital
infrastructure projects; the replacement of the concentrate
pipeline, which is approaching the end of its useful life, and the
construction of certain long-term infrastructure at the El Mauro
tailings storage facility. The EIA is expected to be approved in
2023, with the project completed in 2025 when desalinated and
recirculated water will account for at least 90% of Los Pelambres's
operational water use.
Mine life extension
The current mine life of Los Pelambres is 13 years and is
limited by the capacity of the El Mauro tailings storage facility.
The scope of the second EIA will include increasing the capacity of
the tailings storage facility, extending the pit's pushback plan
and expanding the existing waste dumps. This will extend the mine's
life by a minimum of 15 years, with a significant portion of Los
Pelambres's six billion tonne mineral resources converting to new
mine reserves. The EIA will also include the option to increase
throughput to 205,000 tonnes of ore per day by adding a new ball
mill and repowering the conveyor that runs from the primary crusher
in the pit to the concentrator plant. This option would increase
copper production by 35,000 tonnes per year.
Key studies on tailings and waste storage capacity have been
completed, and the environmental and social studies are now being
prepared for submission to the authorities during 2022.
The capital expenditure to extend the mine life was estimated in
a pre-feasibility study in 2014 at approximately $500 million, with
most of the expenditure on mining equipment and increasing the
capacity of the concentrator plant and the El Mauro tailings
facility.
Esperanza Sur pit
The Esperanza Sur pit at Centinela is 4 km south of the
Esperanza pit and is close to Centinela's concentrator plant. The
deposit contains 1.4 billion tonnes of reserves with a grade of
0.4% copper, 0.13 g/t of gold and 0.012% of molybdenum.
Stripping advanced in 2021 and is expected to be completed in
the first half of 2022. The stripping cost is being capitalised and
is being carried out by a contractor. Once completed, autonomous
trucks operated by Centinela will be used to mine the deposit.
Opening the Esperanza Sur pit will improve Centinela's
flexibility in how it supplies ore to its concentrator. Over the
initial years, the higher-grade material from the pit will increase
production by some 10-15,000 tonnes of copper per year, compared to
the amount that would be produced if material was solely supplied
by the Esperanza pit. This greater flexibility will allow Centinela
to smooth and optimise its year-on-year production profile, which
has in the past been variable.
Centinela Second Concentrator
We are currently evaluating the construction of a second
concentrator and tailings deposit some 7 km from the existing
concentrator, to take place in two phases. Phase 1 would have an
ore throughput capacity of approximately 90,000 tonnes per day,
producing copper, and gold and molybdenum as by-products, with an
annual production of approximately 180,000 tonnes of copper
equivalent. Once Phase 1 is operating successfully, a further
expansion is possible and would involve increasing the capacity of
the concentrator to 150,000 tonnes of ore per day, with annual
production increasing to 250,000 tonnes of copper equivalent,
maximising the potential of Centinela's large resource base.
Ore for the second concentrator would be sourced initially from
the Esperanza Sur deposit and later from Encuentro Sulphides. The
latter lies under the Encuentro Oxides reserves, which are expected
to be depleted by 2026.
The EIA for both phases of the project was approved in 2016 and
the initial feasibility study for Phase 1 was completed during
2020, with further detailed and supplier engineering progressing
during 2021 ahead of an expected decision by the Board by the end
of 2022. The capital cost estimated in the 2015 pre-feasibility
study for Phase 1 was $2.7 billion, which included capitalised
stripping, mining equipment, a concentrator plant, a new tailings
storage facility, a water pipeline and other infrastructure, plus
the owner's and other costs.
During 2021, a tender process to invite third parties to provide
water for Centinela's current operations by acquiring the existing
water supply system and building the new water pipeline, progressed
and is expected to be completed during 2022.
Zaldívar Chloride Leach
The project includes an upgrade of the Solvent Extraction (SX)
plant, and the construction of new reagents facilities and
additional washing ponds for controlling chlorine levels. It was
completed in January 2022 and is now being commissioned.
The project will increase copper recoveries by approximately 10
percentage points, with further improvement possible depending on
the type of ore being processed. This will increase copper
production at Zaldívar by approximately 10-15,000 tonnes per annum
over the remaining life of the mine.
As the Group equity accounts for its interest in Zaldívar,
capital expenditure at the operation is not included in Group total
capital expenditure amounts.
Twin Metals Minnesota
Twin Metals Minnesota (Twin Metals) is a wholly owned copper,
nickel and platinum group metals (PGM) underground mining project,
which holds copper, nickel, cobalt-PGM deposits in north-eastern
Minnesota, US. The project envisages mining and processing 18,000
tonnes of ore per day for 25 years and producing three separate
concentrates - copper, nickel/cobalt and PGM.
Twin Metals has been progressing its Mine Plan of Operations
(MPO) and Scoping Environmental Assessment Worksheet Data
Submittal, submitted in December 2019 to the US Bureau of Land
Management (BLM) and Minnesota Department of Natural Resources
(DNR), respectively. However, over the past year, while the Twin
Metals project was advancing its environmental review, several
actions were taken by the federal government that have changed the
regulatory position.
In 2021, the US Forest Service (USFS) and BLM initiated an up to
two-year study regarding the potential withdrawal of lands within
the Superior National Forest (SNF), which could ultimately lead to
an effective ban on mining for twenty years. This action alone
would not have impacted Twin Metals's valid existing rights in the
area or the project.
BLM also rejected advancing Twin Metals's preference right lease
applications (PRLAs) and prospecting permit applications (PPAs),
using the potential withdrawal as a rationale. Twin Metals is
appealing that decision but made minor changes to its project
configuration to address this decision.
In early 2022, BLM took an additional action through a legal
opinion issued by the Office of the Solicitor (M-Opinion). This
action arbitrarily cancelled Twin Metals's federal leases 1352 and
1353, citing concerns with the reinstatement and renewal process,
Twin Metals considers the lease cancellation to be contrary to the
terms of the leases and in violation of its existing valid
rights.
These actions, taken collectively, create material risk to Twin
Metals's ability to continue the project. Considering the time and
uncertainty related to any legal action to challenge the government
decisions, an impairment has been recognised as at 31 December 2021
in respect of the intangible assets and property, plant and
equipment relating to the Twin Metals project. Twin Metals is
currently evaluating its options to protect its mineral rights and
to respond to these legal challenges.
FINANCIAL REVIEW FOR THE YEARED 31 DECEMBER 2021
Year ended Year ended
31.12.2021 31.12.2020
(Unaudited) (Audited)
--------------------------- ------------- -------------- ------------- ------------- -------------- ------------
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items Items Total
--------------------------- ------------- -------------- ------------- ------------- -------------- ------------
$m $m $m $m $m $m
Revenue 7,470.1 - 7,470.1 5,129.3 - 5,129.3
--------------------------- ------------- -------------- ------------- ------------- -------------- ------------
EBITDA (including share
of EBITDA from associates
and joint ventures) 4,836.2 - 4,836.2 2,739.2 - 2,739.2
--------------------------- ------------- -------------- ------------- ------------- -------------- ------------
Total operating costs (3,891.1) (177.6) (4,068.7) (3,537.1) - (3,537.1)
------------- -------------- ------------- ------------- -------------- ------------
Operating profit from
subsidiaries 3,579.0 (177.6) 3,401.4 1,592.2 - 1,592.2
Net share of results from
associates and joint
ventures 59.7 - 59.7 5.1 - 5.1
Impairment of investment
in associate - - - - (80.8) (80.8)
------------- -------------- -------------
Total profit from
operations,
associates and joint
ventures 3,638.7 (177.6) 3,461.1 1,597.3 (80.8) 1,516.5
Net finance expense 16.0 - 16.0 (103.4) - (103.4)
------------- -------------- -------------
Profit before tax 3,654.7 (177.6) 3,477.1 1,493.9 (80.8) 1,413.1
Income tax expense (1,332.9) 90.6 (1,242.3) (546.2) 19.7 (526.5)
------------- -------------- ------------- ------------- -------------- ------------
Profit from continuing
operations 2,321.8 (87.0) 2,234.8 947.7 (61.1) 886.6
Profit from discontinued
operations - - - 7.3 - 7.3
------------- -------------- ------------- ------------- -------------- ------------
Profit for the year 2,321.8 (87.0) 2,234.8 955.0 (61.1) 893.9
Attributable to:
------------- -------------- ------------- ------------- -------------- ------------
Non-controlling interests 917.4 27.2 944.6 408.4 (20.9) 387.5
Profit attributable to the
owners of the parent 1,404.4 (114.2) 1,290.2 546.6 (40.2) 506.4
------------- -------------- ------------- ------------- -------------- ------------
Basic earnings per share cents cents cents cents cents cents
From continuing operations 142.5 (11.6) 130.9 54.7 (4.1) 50.6
From discontinued
operations - - - 0.7 - 0.7
------------- -------------- ------------- ------------- -------------- ------------
Total continuing and
discontinued
operations 142.5 (11.6) 130.9 55.4 (4.1) 51.3
============= ============== ============= ============= ============== ============
The profit for the financial year attributable to the owners of
the parent (including exceptional items and discontinued
operations) increased from $506.4 million in 2020 to $1,290.2
million in the current year. Excluding exceptional items and
discontinued operations the profit attributable to the owners of
the parent increased by $539.3 million to $1,404.4 million.
The full reconciliation between 2020 and 2021, including $m
exceptional items, is as follows:
Profit attributable to the owners of the parent in
2020 506.4
Increase in revenue 2,340.8
Increase in total operating costs (excluding exceptional
items) (354.0)
Increase in net share of profit from associates and
joint ventures (excluding exceptional items) 54.6
Decrease in net finance expenses 119.4
Increase in income tax expense (excluding exceptional
items) (786.7)
Increase in non-controlling interests (509.0)
865.1
Profit attributable to the owners of the parent in
2021, excluding exceptional items and discontinued
operations 1,371.5
Exceptional items - impairment of investment in associate (74.0)
Profit from discontinued operations (7.3)
--------
Profit attributable to the owners of the parent in
2021 1,290.2
========
COVID-19
The Group has continued to proactively manage the risks of
COVID-19 on its operations and projects, allowing its operations to
continue to operate without interruption throughout the year. The
Group incurred $60 million of operational expenses (including the
50% attributable share of Zaldívar's expenditure) during the year
in respect of COVID-19 measures, including costs relating to
testing, additional travel expenses for its employees travelling to
and from the mine sites, hygiene supplies and additional costs for
third-party services. This compares with $40 million incurred
during 2020.
The Group has capitalised $32 million of additional project
costs during 2021 linked to the impact of COVID-19, mainly relating
to the additional costs of third-party contractors, testing, and
increased travel for employees and project contractors travelling
to the sites. This compares with $31 million capitalised during
2020.
Revenue
The $2,340.8 million increase in revenue from $5,129.3 million
in 2020 to $7,470.1 million in the current year reflected the
following factors:
$m
Revenue in 2020 5,129.3
Increase in realised copper price 2,095.9
Decrease in copper sales volumes (61.3)
Decrease in treatment and refining charges 30.4
Increase in gold revenue 78.7
Increase in molybdenum revenue 156.9
Increase in silver revenue 19.6
Increase in transport division revenue 20.6
2,340.8
Revenue in 2021 7,470.1
========
Revenue from the Mining division
Revenue from the Mining division increased by $2,320.2 million,
or 47%, to $7,300.1 million, compared with $4,979.9 million in
2020. The increase reflected a $2,065.0 million improvement in
copper sales and $255.2 million increase in by-product revenue.
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
increased by $2,065.0 million, or 47%, to $6,413.2 million,
compared with $4,348.2 million in 2020. The increase reflected the
impact of $2,095.9 million from higher realised prices and $30.4
million from lower treatment and refining charges, partly offset by
$61.3 million from lower sales volumes.
(i) Realised copper price
The average realised price increased by 47% to $4.37/lb in 2021
(2020 - $2.98/lb), resulting in a $2,095.9 million increase in
revenue. The increase in the realised price reflected the higher
LME average market price, which increased by 51% to $4.23/lb in
2021 (2020 - $2.80/lb), and a positive provisional pricing
adjustment of $352.7 million. The provisional pricing adjustment
mainly reflected the increase in the year-end mark-to-market copper
price to $4.42/lb at 31 December 2021, compared with $3.52/lb at 31
December 2020. In addition, there was a negative impact of $126.8
million in respect of realised losses from commodity hedging
instruments which matured during the year (2020 - $3.4 million
negative impact).
Realised copper prices are determined by comparing revenue
(before treatment and refining charges for concentrate sales) with
sales volumes in the period. Realised copper prices differ from
market prices mainly because, in line with industry practice,
concentrate and cathode sales agreements generally provide for
provisional pricing at the time of shipment with final pricing
based on the average market price in future periods (normally
around one month after delivery to the customer in the case of
cathode sales and normally four months after delivery to the
customer in the case of concentrate sales).
Further details of provisional pricing adjustments are given in
Note 6 to the preliminary results announcement.
(ii) Copper volumes
Copper sales volumes reflected within revenue decreased by 1.3%
from 690,200 tonnes in 2020 to 681,000 tonnes in 2021, decreasing
revenue by $61.3 million. This decrease was due to lower copper
sales volumes at Los Pelambres (41,500 tonnes decrease) mainly as a
result of its decreased production volumes, partly offset by higher
sales volumes at Centinela (28,400 tonnes increase) due to
increased production volumes as a result of higher grades and
increased throughput at Centinela Concentrates.
(iii) Treatment and refining charges
Treatment and refining charges (TC/RCs) for copper concentrate
decreased by $30.4 million to $152.0 million in 2021, compared with
$182.4 million in 2020, reflecting lower average TC/RC rates as
well as the decrease in the concentrate sales volumes at Los
Pelambres.
With sales of concentrates at Los Pelambres and Centinela, which
are sold to smelters and roasting plants for further processing
into fully refined metal, the price of the concentrate invoiced to
the customer reflects the market value of the fully refined metal
less a "treatment and refining charge" deduction, to reflect the
lower value of this partially processed material compared with the
fully refined metal. For accounting purposes, the revenue amount is
the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry
definition of cash costs, treatment and refining charges are
regarded as an expense and part of the total cash cost figure.
Accordingly, the decrease in these charges has had a positive
impact on revenue in the year.
Revenue from molybdenum, gold and other by-product sales
Revenue from by-product sales at Los Pelambres and Centinela
relate mainly to molybdenum and gold and, to a lesser extent,
silver. Revenue from by-products increased by $255.2 million or
40.3% to $886.9 million in 2021, compared with $631.7 million in
2020.
Revenue from gold sales (net of treatment and refining charges)
was $436.4 million (2020 - $357.7 million), an increase of $78.7
million which reflected an increase in volumes slightly offset by a
lower realised price. Gold sales volumes increased by 22.6% from
199,600 ounces in 2020 to 244,700 ounces in 2021, mainly due to
higher throughput and grades at Centinela. The realised gold price
was $1,787.6/oz in 2021 compared with $1,796.8/oz in 2020,
reflecting the average market price for 2021 of $1,798.9/oz (2020 -
$1,770.1/oz) and a negative provisional pricing adjustment of $10.8
million.
Revenue from molybdenum sales (net of roasting charges) was
$366.4 million (2020 - $209.5 million), an increase of $156.9
million. The increase was due to the higher realised price of
$17.4/lb (2020 - $8.8/lb), partially offset by decreased sales
volumes of 10,400 tonnes (2020 - 12,500 tonnes).
Revenue from silver sales increased by $19.6 million to $84.1
million (2020 - $64.5 million). The increase was due to a higher
realised silver price of $24.9/oz (2020 - $21.3/oz) and higher
sales volumes of 3.4 million ounces (2020 - 3.1 million
ounces).
Revenue from the Transport division
Revenue from the Transport division (FCAB) increased by $20.6
million or 13.8% to $170.0 million (2020 - $149.4 million), as a
result of increased volumes and better prices in sales contracts
and the impact of the stronger Chilean peso on sales denominated in
the local currency.
Total operating costs (excluding exceptional items)
The $354.0 million increase in total operating costs (excluding
exceptional items) from $3,537.1 million in 2020 to $3,891.1
million in the current year reflected the following factors:
$m
Total operating costs in 2020 (excluding
exceptional items) 3,537.1
Increase in mine-site operating costs 291.5
Decrease in closure provision and other
mining expenses (14.6)
Increase in exploration and evaluation costs 18.1
Increase in corporate costs 11.2
Decrease in Transport division operating
costs 14.9
Increase in depreciation, amortisation and
loss on disposals 32.9
354.0
Total operating costs in 2021 (excluding
exceptional items) 3,891.1
========
Operating costs (excluding depreciation, amortisation, loss on
disposals and impairments) at the Mining division
Operating costs (excluding depreciation, amortisation, loss on
disposals and impairments) at the Mining division increased by
$306.1 million to $2,696.8 million in 2021, an increase of 12.8%.
Of this increase, $291.5 million was attributable to higher
mine-site operating costs. This increase in mine-site costs
reflected higher key input prices, the stronger Chilean peso and
the cost impact of the expected lower ore grades and lower
throughput due to water optimisation at Los Pelambres, partly
offset by the cost savings from the Group's Cost and
Competitiveness Programme and the lower sale volumes. On a unit
cost basis, weighted average cash costs excluding by-product
credits (which for accounting purposes are part of revenue) and
treatment and refining charges for concentrates (which are also
part of revenue for accounting purposes), increased from $1.43/lb
in 2020 to $1.68/lb in 2021 (see the alternative performance
measures on page 64 of this preliminary results announcement for
further details in respect of the definition of cash costs).
The Cost and Competitiveness Programme was implemented to reduce
the Group's cost base and improve its competitiveness within the
industry. During 2021 the programme achieved benefits of $130.7
million, of which $72.1 million reflected cost savings and $58.6
million reflected the value of productivity improvements. Of the
$72.1 million of cost savings, $54.5 million related to Los
Pelambres, Centinela and Antucoya, and therefore impacted the
Group's operating costs, and $17.6 million related to Zaldívar (on
a 100% basis) and therefore impacted the share of results from
associates and joint ventures.
Closure provisions and other mining expenses decreased by $14.6
million. Exploration and evaluation costs increased by $18.1
million to $103.2 million (2020 - $85.1 million), reflecting
increased exploration expenditure principally in Chile, the
on-going evaluation and review work at Twin Metals, and drilling in
relation to the reserve and resource estimates at Centinela and
Antucoya. Corporate costs increased by $11.2 million.
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Transport division
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Transport division increased by $14.9 million
to $106.3 million (2020 - $91.4 million), mainly due the effect of
the stronger Chilean peso, higher diesel prices and inflation, and
to a lesser degree non-recurrent COVID-19 costs.
Depreciation, amortisation and disposals (excluding
impairments)
The depreciation and amortisation charge increased by $32.9
million from $1,055.0 million in 2020 to $1,087.9 million. This
increase is mainly due to inventory variation impacts at Centinela
and higher depreciation at Centinela and Los Pelambres, largely
offset by lower amortisation of IFRIC 20 stripping cost at
Centinela. The loss on disposal of property, plant & equipment
was $9.2 million, an increase of $2.9 million (2020 - $6.3
million).
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries increased by $1,986.8 million or 124.8% in 2021 to
$3,579.0 million (2020 - $1,592.2 million).
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures
was a profit of $59.7 million in 2021, compared to $5.1 million in
2020. Of this increase, $56.3 million was due to the higher profit
from Zaldívar.
EBITDA
EBITDA (earnings before interest, tax, depreciation and
amortisation, and impairments) increased by $2,097.0 million or
76.6% to $4,836.2 million (2020 - $2,739.2 million). EBITDA
includes the Group's proportional share of EBITDA from associates
and joint ventures.
EBITDA from the Mining division increased by 78.0% from $2,678.2
million in 2020 to $4,768.0 million this year. This reflected the
higher revenue and higher EBITDA from associates and joint ventures
partly offset by higher mine-site costs and increased exploration
and evaluation expenditure.
EBITDA at the Transport division increased by $7.2 million to
$68.2 million in 2021 ($61.0 million - 2020), reflecting the higher
revenue and slightly increased EBITDA from associates and joint
ventures, partly offset by higher operating costs.
Commodity price and exchange rate sensitivities
The following sensitivities show the estimated approximate
impact on EBITDA for 2021 of a 10% movement in the average copper,
molybdenum and gold prices and a 10% movement in the average US
dollar / Chilean peso exchange rate.
The impact of the movement in the average commodity prices
reflects the estimated impact on the relevant revenues during 2021,
and the impact of the movement in the average exchange rate
reflects the estimated impact on Chilean peso denominated operating
costs during the year. These estimates do not reflect any impact in
respect of provisional pricing or hedging instruments, any
potential inter-relationship between commodity price and exchange
rate movements, or any impact from the retranslation or changes in
valuations of assets or liabilities held on the balance sheet at
the year-end.
Average market Impact of a
commodity price 10% movement
/ average exchange in the commodity
rate during price / exchange
the year ended rate on EBITDA
31.12.21 for the year
ended 31.12.21
$m
Copper price $4.23/lb 676
Molybdenum price $15.9/lb 36
Gold price $1,799/oz 44
US dollar / Chilean peso exchange
rate 760 154
Net finance expense
Net finance expense decreased by $119.4 million to $16.0
million, compared with $103.4 million in 2020.
Year
Year ended ended
31.12.21 31.12.20
$m $m
Investment income 5.0 18.9
Interest expense (63.4) (77.1)
Other finance items 74.4 (45.2)
----------- ----------
Net finance expense 16.0 (103.4)
=========== ==========
Interest income decreased from $18.9 million in 2020 to $5.0
million in 2021, mainly due to a decrease in average interest rates
partially offset by higher average cash and liquid investment
balances.
Interest expense decreased from $77.1 million in 2020 to $63.4
million in 2021, reflecting the decrease in the average interest
rates and also a reduction in the average relevant borrowing
balances, partially offset by interest expenses relate to the bond
issue in October 2020.
Other finance items were a net gain of $74.4 million, compared
with a net loss of $45.2 million in 2020, a variance of $119.6
million. This was mainly due to the foreign exchange impact of the
retranslation of Chilean peso denominated assets and liabilities,
which resulted in a $49.7 million gain in 2021 compared with a
$28.4 million loss in 2020. Also, there was a positive variance of
$41.5 million related to the discounting of long-term provisions,
with the increase in the relevant year-end interest rates resulting
in a decrease in the net present value of the provisions and a
corresponding credit recognised in other finance items.
Profit before tax
As a result of the factors set out above, profit before tax
increased by 146.1% to $3,477.1 million (2020 - $1,413.1
million).
Income tax expense
The tax charge for 2021 excluding exceptional items increased by
$786.7 million to $1,332.9 million (2020 - $546.2 million) and the
effective tax rate for the year was 36.5% (2020 - 36.6%). Including
exceptional items the tax charge for 2021 was $1,242.3 million and
the effective tax rate was 35.7%.
Year ended Year ended Year ended Year ended
Excluding Including exceptional Excluding Including exceptional
exceptional items exceptional items
items 31.12.2021 items 31.12.2020
31.12.2021 31.12.2020
$m % $m % $m % $m %
Profit before
tax 3,654.7 3,477.1 1,493.9 1,413.1
Tax at the
Chilean
corporate tax
rate of 27% (986.8) 27.0 (938.8) 27.0 (403.4) 27.0 (381.5) 27.0
Mining Tax
(royalty) (243.8) 6.7 (243.8) 7.0 (101.3) 6.8 (101.3) 7.2
Deduction of
mining royalty
as an
allowable
expense in
determination
of first
category tax 67.8 (1.9) 67.8 (1.9) 28.1 (1.9) 28.1 (2.0)
Items not
deductible
from first
category tax (31.6) 0.9 (31.6) 0.9 (9.8) 0.7 (9.8) 0.6
Adjustment in
respect of
prior years (12.1) 0.3 (12.1) 0.3 (1.6) 0.1 (1.6) 0.1
Withholding tax (195.0) 5.3 (195.0) 5.6 (70.0) 4.7 (70.0) 5.0
Tax effect of
share of
profit of
associates and
joint ventures 16.1 (0.4) 16.1 (0.5) 1.4 (0.1) 1.4 (0.1)
Impact of
previously
unrecognised
tax losses on
current tax 52.5 (1.4) 52.5 (1.5) 10.5 (0.7) 10.5 (0.7)
Impact of
recognition of
previously
unrecognised
tax losses on
deferred tax - - 90.6 (2.6) - - - -
Impairment of
investment in
associate - - - - - - (2.2) 0.2
Provision
against
carrying value
of assets - - (48.0) 1.4 - - - -
Net other items - - - - (0.1) - (0.1) -
-------- ------
Tax expense and
effective tax
rate for the
Year ended (1,332.9) 36.5 (1.242.3) 35.7 (546.2) 36.6 (526.5) 37.3
============ ======= ========== ====== ======== ====== ======== ============
The effective tax rate excluding exceptional items of 36.5%
varied from the statutory rate principally due to the mining tax
(royalty) (net impact of $176.0 million / 4.8% including the
deduction of the mining tax (royalty) as an allowable expense in
the determination of first category tax), the withholding tax
relating to the remittance of profits from Chile (impact of $195.0
million / 5.3%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile
(impact of $31.6 million / 0.9%) and adjustments in respect of
prior years (impact of $12.1 million / 0.3%), partly offset by the
impact of unrecognised tax losses (impact of $52.5 million / 1.4%)
and the impact of the recognition of the Group's share of profit
from associates and joint ventures, which are included in the
Group's profit before tax net of their respective tax charges
(impact of $16.1 million / 0.4%).
The impact of the exceptional items on the effective tax rate
including exceptional items was $42.6 million / 1.2%.
Exceptional items
Exceptional items are material items of income and expense which
are non-regular or non-operating and typically non-cash, including
impairments and profits or losses on disposals. The tax effect of
items presented as exceptional is also classified as exceptional,
as are material deferred tax adjustments that relate to more than
one reporting period. The classification of these types of items as
exceptional is considered to be useful as it provides an indication
of the earnings generated by the on-going businesses of the
Group.
2021 - Impairment of Twin Metals' assets
Twin Metals Minnesota (Twin Metals) is a wholly owned copper,
nickel and platinum group metals (PGM) underground mining project,
which holds copper, nickel, cobalt-PGM deposits in north-eastern
Minnesota, US. In recent years Twin Metals has been progressing its
Mine Plan of Operations (MPO) and Scoping Environmental Assessment
Worksheet Data Submittal, submitted in December 2019 to the US
Bureau of Land Management (BLM) and Minnesota Department of Natural
Resources (DNR), respectively. However, over the past year, while
the Twin Metals project was advancing through environmental review,
several actions were taken by the federal government that have
changed the potential scenarios for the project.
In September 2021 the United States Forest Service (USFS)
submitted an application to withdraw approximately 225,000 acres of
land in the Superior National Forest from the scope of federal
mineral leasing laws, subject to valid existing rights. In October
2021, the United States Bureau of Land Management (BLM) rejected
Twin Metals' Preference Right Lease Applications (PRLAs) and
Prospecting Permit Applications (PPAs). In January 2022 the United
States Department of the Interior cancelled Twin Metals' MNES-1352
and MNES-1353 federal mineral leases. The PRLAs and federal mineral
leases form a significant proportion of the mineral resources
contained within Twin Metals' current project plan and,
accordingly, it was determined that these events collectively
represented an impairment trigger as at the balance sheet date.
Prior to the resulting impairment assessment being performed, as
at 31 December 2021 the Group had recognised an intangible asset of
$150.1 million and property, plant and equipment of $27.5 million
relating to the Twin Metals project. The intangible asset arose
upon the acquisition in 2015 of Duluth Metals, which owned a 60%
stake in the Twin Metals project, with the carrying value of the
intangible asset reflecting the consideration paid for that
acquisition. The property, plant and equipment balances reflected
the historical cost of acquiring those assets. These carrying
values prior to the impairment did not, therefore, reflect an
estimate of the commercial potential of the project as at 31
December 2021.
The Group believes that Twin Metals has a valid legal right to
the mining leases and a strong case to defend its legal rights.
Although the Group intends to pursue validation of those rights,
considering the time and uncertainty related to any legal action to
challenge the government decisions, an impairment has been
recognised as at 31 December 2021 in respect of the $177.6 million
of intangible assets and property, plant and equipment relating to
the Twin Metals project.
2021 - Recognition of previously unrecognised deferred tax
assets
At 31 December 2021 the Group recognised $90.6 million of
previously unrecognised deferred tax assets relating to tax losses
available for offset against future profits. In previous periods
the Group had reviewed these tax losses for potential recognition,
and concluded that it was not probable that future taxable profits
would be available against which the losses could be utilised, and
accordingly had not recognised a deferred tax asset in respect of
these losses. In making this assessment in previous periods the
Group had taken into account that the relevant Group entity had
consistently generated taxable losses in recent years, was
continuing to generate taxable losses in the then current period,
and was forecast to continue generating taxable losses in future
periods.
During 2021 there has been a significant improvement in the
current copper price (with the copper price reaching record levels
in nominal terms during the year) and also the near-term copper
price outlook. As a result of this improvement in the copper price
environment the relevant Group entity began to generate taxable
profits in 2021. The improved near-term outlook for the copper
price also means that the entity is now forecast to generate
sufficient future taxable profits to fully utilise its remaining
tax losses.
2020 - Impairment of the investment in Hornitos
On 31 March 2020 the Group agreed to dispose of its 40% interest
in Hornitos coal-fired power station to ENGIE Energía Chile S.A.
("ENGIE"), the owner of the remaining 60% interest. This was part
of the value accretive renegotiation of Centinela's power purchase
agreement which as a result will be wholly supplied from lower cost
renewable sources from the beginning of 2022. In accordance with
the terms of the agreement the Group disposed of its investment to
Engie in December 2021 for a nominal consideration and has not been
be entitled to receive any further dividend income from Hornitos
from the date of the agreement. Accordingly, the Group no longer
had any effective economic interest in the results or assets of
Hornitos from 31 March 2020 onwards, and therefore recognised an
impairment of $80.8 million in respect of its investment in
associate balance during 2020, and no longer recognised any share
of Hornitos' results. The post-tax impact of the impairment was
$61.1 million, of which $40.2 million was attributable to the
equity owners of the Company.
Non-controlling interests
Profit for 2021 attributable to non-controlling interests
(excluding exceptional items) was $917.4 million, compared with
$408.4 million in 2020, an increase of $509.0 million. This
reflected the increase in earnings analysed above.
Earnings per share
Year ended Year ended
31.12.21 31.12.20
$ cents $ cents
Underlying earnings per share (excluding
exceptional items and
discontinued operations) 142.5 54.7
Earnings per share (exceptional items) (11.6) (4.1)
Earnings per share (discontinued operations) - 0.7
----------- -----------
Earnings per share (including exceptional
items and discontinued operations) 130.9 51.3
=========== ===========
Earnings per share calculations are based on 985,856,695
ordinary shares.
As a result of the factors set out above, the underlying profit
attributable to equity shareholders of the Company (excluding
exceptional items and discontinued operations) was $1,404.4 million
compared with $539.3 million in 2020, giving underlying earnings
per share of 142.5 cents per share (2020 - 54.7 cents per share).
The profit attributable to equity shareholders (including
exceptional items and discontinued operations) was $1,290.2
million, resulting in earnings per share of 130.9 cents per share
(2020 - 51.3 cents per share).
Dividends
Dividends per share proposed in relation to the period are as
follows:
Year ended Year ended
31.12.21 31.12.20
$ cents $ cents
Ordinary dividends:
Interim 23.6 6.2
Final 118.9 48.5
----------- -----------
Total dividends to ordinary shareholders 142.5 54.7
=========== ===========
The Board determines the appropriate dividend each year based on
consideration of the Group's cash balance, the level of free cash
flow and underlying earnings generated during the year and
significant known or expected funding commitments. It is expected
that the total annual dividend for each year would represent a
payout ratio based on underlying net earnings for that year of at
least 35%.
The Board has recommended a final dividend for 2021 of 118.9
cents per ordinary share, which amounts to $1,172.1 million and
will be paid on 13 May 2022 to shareholders on the share register
at the close of business on 22 April 2022.
The Board declared an interim dividend for the first half of
2021 of 23.6 cents per ordinary share, which amounted to $232.7
million.
This gives total dividends proposed in relation to 2021
(including the interim dividend) of 142.5 cents per share or
$1,404.8 million in total (2020 - 54.7 cents per ordinary share or
$539.3 million in total) equivalent to a payout ratio of 100% of
underlying earnings.
Capital expenditure
Capital expenditure increased by $470.1 million from $1,307.4
million in 2020 to $1,777.5 million in the current year, mainly due
to expenditure on the Los Pelambres Expansion project, work on the
Esperanza Sur pit at Centinela, including the completion of the
pre-stripping, and increased mine development at Centinela.
NB: capital expenditure figures quoted in this report are on a
cash flow basis, unless stated otherwise.
Derivative financial instruments
The Group periodically uses derivative financial instruments to
reduce its exposure to commodity price, foreign exchange and
interest rate movements. The Group does not use such derivative
instruments for speculative trading purposes. At 31 December 2021
the derivative financial instruments are nil (2020 - negative $36.0
million).
Cash flows
The key features of the cash flow statement are summarised in
the following table.
Year ended Year ended
31.12.21 31.12.20
$m $m
Cash flows from continuing operations 4,507.7 2,431.1
Income tax paid (776.9) (319.7)
Net interest paid (53.3) (40.1)
Capital contributions and loans to associates (33.5) (7.2)
Purchases of property, plant and equipment (1,777.5) (1,307.4)
Dividends paid to equity holders of the
Company (710.8) (131.1)
Dividends paid to non-controlling interests (604.5) (280.0)
Capital increase from non-controlling
interest - 210.0
Dividends from associates and joint ventures 142.5 -
Other items 1.4 2.3
------------- -------------
Changes in net debt relating to cash
flows 695.1 557.9
Other non-cash movements (73.8) (68.0)
Effects of changes in foreign exchange
rates 1.2 (8.5)
------------- -------------
Movement in net debt in the period 622.5 481.4
Net debt at the beginning of the year (82.0) (563.4)
------------- -------------
Net cash/ (net debt) at the end of the
year 540.5 (82.0)
============= =============
Cash flows from continuing operations were $4,507.7 million in
2021 compared with $2,431.1 million in 2020. This reflected EBITDA
from subsidiaries for the year of $4,666.9 million (2020 - $2,647.2
million) adjusted for the negative impact of a net working capital
increase of $140.2 million (2020 - working capital increase of
$242.5 million) and a non-cash decrease in provisions of $19.4
million (2020 - increase of $26.4 million).
The working capital increase in 2021 was mainly due to an
increase in receivables, predominantly due to the higher sales
volumes in December 2021 compared with December 2020 and the higher
average mark-to-market price at 31 December 2021 of $4.42/lb (31
December 2020 - $3.52/lb) .
The net cash outflow in respect of tax in 2021 was $776.9
million (2020 - $319.7 million). This amount differs from the
current tax charge in the consolidated income statement (including
exceptional items) of $1,035.5 million (2020 - $515.3 million)
mainly because cash tax payments for corporate tax and the mining
tax include the settlement of outstanding balances in respect of
the previous year's tax charge of $30.9 million (2020 - $8.0
million), withholding tax payments of $222.9 million, payments on
account for the current year based on the prior year's profit
levels of $569.6 million, as well as the recovery of $46.5 million
in 2021 relating to prior years.
Contributions and loans to associates and joint ventures of
$33.5 million (2020 - $7.2 million) relate to Hornitos and
Tethyan.
Capital expenditure in 2021 was $1,777.5 million compared with
$1,307.4 million in 2020. This included expenditure of $880.4
million at Los Pelambres (2020 - $782.6 million), $791.8 million at
Centinela (2020 - $441.5 million), $49.6 million at Antucoya (2020
- $41.9 million), $24.4 million at the corporate centre (2020 -
$8.3 million) and $31.3 million at the Transport division (2020 -
$33.1 million). The increase at Centinela reflects work on the
Esperanza Sur pit, including the completion of the pre-stripping,
and increased mine development, and at Los Pelambres reflects
expenditure on the Expansion project.
Dividends paid to equity holders of the Company were $710.8
million (2020 - $131.1 million) of which $478.1 million related to
the payment of the final element of the previous year's dividend
and $232.7 million to the interim dividend declared in respect of
the current year.
Dividends paid by subsidiaries to non-controlling shareholders
were $604.5 million (2020 - $280.0 million).
Dividends received from associates and joint ventures was $142.5
million for 2021 (2020 - nil) .
A capital contribution of $210.0 million was received from
Marubeni during 2020, the minority partner at Antucoya, in order to
replace part of the subordinated debt financing with equity.
Financial position
At 31.12.21 At 31.12.20
$m $m
Cash, cash equivalents
and liquid investments 3,713.1 3,672.8
Total borrowings (3,172.6) (3,754.8)
------------ ------------
Net cash/(net debt)
at the end of the period 540.5 (82.0)
============ ============
At 31 December 2021 the Group had combined cash, cash
equivalents and liquid investments of $3,713.1 million (31 December
2020 - $3,672.8). Excluding the non-controlling interest share in
each partly-owned operation, the Group's attributable share of
cash, cash equivalents and liquid investments was $3,299.9 million
(31 December 2020 - $3,046.9 million).
Total Group borrowings at 31 December 2021 were $3,172.6
million, a decrease of $582.2 million on the prior year (31
December 2020 - $3,754.8 million). The decrease was mainly due to
the $222.8 million subordinated debt repayment by Centinela and
Antucoya to Marubeni, repayment of the senior loan by Los Pelambres
of $209.3 million, repayment of the senior loan by Centinela of
$111.1 million and the $141.0 million repayment of Antucoya's
senior loan and short term loan, and a net decrease of lease
liabilities of $27.1 million, partly offset by the $114.1 million
refinancing of the senior loan at Los Pelambres and the $35.0
million increase of the short term loan at Antucoya.
Excluding the non-controlling interest share in each
partly-owned operation, the Group's attributable share of the
borrowings was $2,409.6 million (31 December 2020 - $2,805.4
million).
This resulted in net cash at 31 December 2021 of $540.5 million
(31 December 2020 - net debt $82.0 million). Excluding the
non-controlling interest share in each partly-owned operation, the
Group had an attributable net cash position of $890.3 million (31
December 2020 - net cash $241.5 million).
Going concern
The financial information contained in this unaudited
preliminary announcement has been prepared on the going concern
basis. Details of the factors which have been taken into account in
assessing the Group's going concern status are set out in Note 1 to
the financial report.
Cautionary statement about forward-looking statements
This preliminary results announcement contains certain
forward-looking statements. All statements other than historical
facts are forward-looking statements. Examples of forward-looking
statements include those regarding the Group's strategy, plans,
objectives or future operating or financial performance, reserve
and resource estimates, commodity demand and trends in commodity
prices, growth opportunities, and any assumptions underlying or
relating to any of the foregoing. Words such as "intend", "aim",
"project", "anticipate", "estimate", "plan", "believe", "expect",
"may", "should", "will", "continue" and similar expressions
identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors that are beyond the
Group's control. Given these risks, uncertainties and assumptions,
actual results could differ materially from any future results
expressed or implied by these forward-looking statements, which
apply only as at the date of this report. Important factors that
could cause actual results to differ from those in the
forward-looking statements include: global economic conditions,
demand, supply and prices for copper and other long-term commodity
price assumptions (as they materially affect the timing and
feasibility of future projects and developments), trends in the
copper mining industry and conditions of the international copper
markets, the effect of currency exchange rates on commodity prices
and operating costs, the availability and costs associated with
mining inputs and labour, operating or technical difficulties in
connection with mining or development activities, employee
relations, litigation, and actions and activities of governmental
authorities, including changes in laws, regulations or taxation.
Except as required by applicable law, rule or regulation, the Group
does not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Past performance cannot be relied on as a guide to future
performance.
Consolidated Income Statement
Year
Year ended ended
31.12.2021 31.12.2020
(Unaudited) (Audited)
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Excluding Exceptional Exceptional
exceptional items Excluding items
items note exceptional note
3 Total items 3 Total
Notes $m $m $m $m $m $m
Group Revenue 2,6 7,470.1 - 7,470.1 5,129.3 - 5,129.3
Total operating
costs 2 (3,891.1) (177.6) (4,068.7) (3,537.1) - (3,537.1)
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Operating profit
from
subsidiaries 2,5 3,579.0 (177.6) 3,401.4 1,592.2 - 1,592.2
Net share of
results from
associates and
joint ventures 2,5 59.7 - 59.7 5.1 - 5.1
Impairment of
investment
in associate 3 - - - - (80.8) (80.8)
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Total profit from
operations,
associates and
joint ventures 3,638.7 (177.6) 3,461.1 1,597.3 (80.8) 1,516.5
Investment income 5.0 - 5.0 18.9 - 18.9
Interest expense (63.4) - (63.4) (77.1) - (77.1)
Other finance
items 74.4 - 74.4 (45.2) - (45.2)
-------------------------- ---------------------- ------------------ -------------------- -----------------
Net finance
income/(expense) 8 16.0 - 16.0 (103.4) - (103.4)
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Profit before tax 3,654.7 (177.6) 3,477.1 1,493.9 (80.8) 1,413.1
Income tax
expense 9 (1,332.9) 90.6 (1,242.3) (546.2) 19.7 (526.5)
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Profit for
continuing
operations 2,321.8 (87.0) 2,234.8 947.7 (61.1) 886.6
========================== ====================== ============================ ================== ==================== =================
Discontinued
operations
Profit for the
period from
discontinued
operations 10 - - - 7.3 - 7.3
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Profit for the
period 2,321.8 (87.0) 2,234.8 955.0 (61.1) 893.9
========================== ====================== ============================ ================== ==================== =================
Attributable to:
Non-controlling
interests 917.4 27.2 944.6 408.4 (20.9) 387.5
Profit for the period
attributable
to the owners of the
parent 1,404.4 (114.2) 1,290.2 546.6 (40.2) 506.4
-------------------------- ---------------------- ------------------ -------------------- -----------------
Basic earnings
per share
from continuing
operations 11 142.5 (11.6) 130.9 54.7 (4.1) 50.6
From discontinued
operations 11 - - - 0.7 - 0.7
-------------------------- ---------------------- ---------------------------- ------------------ -------------------- -----------------
Total continuing
and discontinued
operations 142.5 (11.6) 130.9 55.4 (4.1) 51.3
Consolidated Statement of Comprehensive Income
Year ended Year ended
31.12.2021 31.12.2020
(Unaudited) (Audited)
Notes $m $m
Profit for the year 2,234.8 893.9
Items that may be or were subsequently reclassified
to profit or loss:
Losses on cash flow hedges (90.9) (32.1)
Losses in fair value of cash flow hedges
transferred to the income statement 126.8 3.4
Currency translation adjustment (1.6) 0.9
Tax relating to these items (4.4) 2.4
Total items that may be or were subsequently
reclassified to profit or loss 29.9 (25.4)
Items that will not be subsequently reclassified
to profit or loss:
Actuarial gains on defined benefit plans 19 3.1 9.8
(Losses)/gains in fair value of equity investments 16 (2.1) 5.5
Tax relating to these items (2.5) (2.6)
Total Items that will not be subsequently
reclassified to profit or loss (1.5) 12.7
Total other comprehensive income/(expense) 28.4 (12.7)
Total comprehensive income for the period 2,263.2 881.2
========================= ======================
Attributable to:
Non-controlling interests 952.8 383.2
Equity holders of the Company 1,310.4 498.0
------------------------- ----------------------
Total comprehensive income for the year
- continuing operations 2,263.2 873.9
Total comprehensive income for the year
- discontinued operations - 7.3
-------------------------
2,263.2 881.2
========================= ======================
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021 (Unaudited)
Share Share Other Retained Net equity Non- Total
capital premium reserves earnings controlling
(Note (Note interests
23) 23)
$m $m $m $m $m $m $m
Balance at 1
January
2021 89.8 199.2 (30.6) 7,492.2 7,750.6 2,330.5 10,081.1
Profit for the
period - - - 1,290.2 1,290.2 944.6 2,234.8
Other
comprehensive
income
for period - - 20.2 - 20.2 8.2 28.4
Dividends - - - (710.8) (710.8) (604.5) (1,315.3)
------------------ ----------------- ------------------ -------------------- ----------------- -------------------- -----------------
Balance at 31
December
2021 89.8 199.2 (10.4) 8,071.6 8,350.2 2,678.8 11,029.0
================== ================= ================== ==================== ================= ==================== =================
For the year ended 31 December 2020 (Audited)
Other Retained
reserves earnings Non-
Share Share (Note (Note Net controlling
capital premium 23) 23) equity interests Total
$m $m $m $m $m $m $m
Balance at 1 January
2020 89.8 199.2 (18.1) 7,112.8 7,383.7 2,017.3 9,401.0
Capital increases from
non-controlling interest
(1) - - - - - 210.0 210.0
Profit for the year - - - 506.4 506.4 387.5 893.9
Other comprehensive
(expense)/income for
the year - - (12.5) 4.1 (8.4) (4.3) (12.7)
Dividends - - - (131.1) (131.1) (280.0) (411.1)
--------- --------- ---------- ---------- --------- ------------- ----------
Balance at 31 December
2020 89.8 199.2 (30.6) 7,492.2 7,750.6 2,330.5 10,081.1
========= ========= ========== ========== ========= ============= ==========
1. In 2020 a capital contribution of $210 million was received
from Marubeni, the minority partner at Antucoya, in order to
replace part of Antucoya's subordinated debt financing with
equity.
Consolidated Balance Sheet
At 31.12.2021 At 31.12.2020
(Unaudited) (Audited)
Non-current assets Notes $m $m
Intangible assets 13 - 150.1
Property, plant and equipment 14 10,538.5 9,851.9
Other non-current assets 1.3 2.6
Inventories 17 270.4 278.1
Investments in associates and
joint ventures 15 905.8 914.6
Trade and other receivables 51.2 55.9
Derivative financial instruments 7 - 0.3
Equity investments 16 8.7 11.1
Deferred tax assets 21 96.8 6.4
------------------------------------ -------------------------
11,872.7 11,271.0
------------------------------------ -------------------------
Current assets
Inventories 17 532.8 592.7
Trade and other receivables 1,146.1 1,016.9
Current tax assets 13.7 49.8
Derivative financial instruments 7 - 1.1
Liquid investments 25 2,969.7 2,426.0
Cash and cash equivalents 25 743.4 1,246.8
------------------------------------ -------------------------
5,405.7 5,333.3
------------------------------------ -------------------------
Total assets 17,278.4 16,604.3
==================================== =========================
Current liabilities
Short-term borrowings and leases 18 (337.1) (603.4)
Derivative financial instruments 7 - (37.4)
Trade and other payables (829.1) (808.8)
Short-term decommissioning &
restoration provisions 20 (33.8) (22.2)
Current tax liabilities (374.2) (153.9)
------------------------------------ -------------------------
(1,574.2) (1,625.7)
------------------------------------ -------------------------
Non-current liabilities
Medium and long-term borrowings
and leases 18 (2,835.5) (3,151.4)
Trade and other payables (16.8) (11.0)
Liabilities in relation to joint
ventures 15 (0.6) (1.1)
Post-employment benefit obligations 19 (107.5) (123.2)
Decommissioning & restoration
provisions 20 (302.3) (498.0)
Deferred tax liabilities 21 (1,412.5) (1,112.8)
------------------------------------ -------------------------
(4,675.2) (4,897.5)
------------------------------------ -------------------------
Total liabilities (6,249.4) (6,523.2)
==================================== =========================
Net assets 11,029.0 10,081.1
Equity
Share capital 22 89.8 89.8
Share premium 22 199.2 199.2
Other reserves 23 (10.4) (30.6)
Retained earnings 23 8,071.6 7,492.2
------------------------------------ -------------------------
Equity attributable to equity
holders of the Company 8,350.2 7,750.6
Non-controlling interests 2,678.8 2,330.5
------------------------------------ -------------------------
Total equity 11,029.0 10,081.1
==================================== =========================
The preliminary information was approved by the Board of
Directors on 21 February 2022.
Consolidated Cash Flow Statement
At 31.12.2021 At 31.12.2020
(Unaudited) (Audited)
Notes $m $m
Cash flows from operations 24 4,507.7 2,431.1
Interest paid (60.7) (52.7)
Income tax paid (776.9) (319.7)
----------------------------- -----------------------------
Net cash from operating activities 3,670.1 2,058.7
----------------------------- -----------------------------
Investing activities
Capital contributions and loans to
associates and joint ventures 15 (33.5) (7.2)
Dividends from associates 15 142.5 -
Acquisition of mining properties (4.5) (1.5)
Proceeds from sale of property, plant
and equipment 1.5 0.8
Purchases of property, plant and equipment (1,773.0) (1,305.9)
Net increase in liquid investments 25 (543.7) (886.3)
Interest received 7.4 12.6
----------------------------- -----------------------------
Net cash used in investing activities (2,203.3) (2,187.5)
----------------------------- -----------------------------
Financing activities
Dividends paid to equity holders of
the Company (710.8) (131.1)
Dividends paid to preference shareholders
of the Company (0.1) (0.1)
Dividends paid to non-controlling
interests (604.5) (280.0)
Capital increase from non-controlling
interest (1) - 210.0
Proceeds from issue of new borrowings 25 149.1 2,398.6
Repayments of borrowings 25 (694.7) (1,393.8)
Repayments of lease obligations 25 (88.9) (86.5)
Net cash (used in)/generated from
financing activities (1,949.9) 717.1
----------------------------- -----------------------------
Net (decrease)/increase in cash and
cash equivalents 25 (483.1) 588.3
============================= =============================
Cash and cash equivalents at beginning
of the period 1,246.8 653.7
Net (decrease)/increase in cash and
cash equivalents 25 (483.1) 588.3
Effect of foreign exchange rate changes 25 (20.3) 4.8
Cash and cash equivalents at end of
the period 25 743.4 1,246.8
============================= =============================
1. In 2020 a capital contribution of $210 million was received
from Marubeni, the minority partner at Antucoya, in order to
replace part of Antucoya's subordinated debt financing with
equity.
Notes
1. General information and accounting policies
a) General information
This preliminary results announcement is for the year ended 31
December 2021 and has been prepared in accordance with UK-adopted
International Accounting Standards. The consolidated financial
information has been prepared on the going concern basis.
Preliminary results announcement
The consolidated financial information for the year ended 31
December 2021 was approved for issue by the Board of Directors of
the Company on 21 February 2022. The consolidated financial
information is unaudited but is derived from the Group's full
financial accounts, which are in the final stages of being
prepared.
This preliminary results announcement has been prepared under
the accounting policies as set out in the statutory accounts for
the year ended 31 December 2020.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. Antofagasta plc
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 January 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework. The
consolidated financial statements of the Antofagasta plc Group for
the year ended 31 December 2021 are being prepared in accordance
with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The preliminary results announcement does not include all of the
notes of the type normally included in annual financial
statements.
The information contained in this announcement for the year
ended 31 December 2020 also does not constitute statutory accounts.
A copy of the statutory accounts for that year has been delivered
to the Registrar of Companies. The auditors' report on those
accounts was unqualified, with no matters by way of emphasis, and
did not contain statements under sections 498(2) or (3) of the
Companies Act 2006.
The information contained in Alternative performance measures
and P roduction and Sales Statistics section of this preliminary
results announcement is not derived from the statutory accounts for
the years ended 31 December 2021 and 2020 and is accordingly not
covered by the auditor's reports.
Going concern
The Directors have assessed the going concern status of the
Group, considering the period to 31 December 2023.
The Group's business activities, together with those factors
likely to affect its future performance, are set out in the
Directors' Comments, and in particular within the Review of
Operations. Details of the cash flows of the Group during the
period, along with its financial position at the period-end, are
set out in the Financial Review. The condensed consolidated
financial statements include details of the Group's cash, cash
equivalents and liquid investment balances in Note 25, and details
of borrowings are set out in Note 18.
When assessing the going concern status of the Group the
Directors have considered in particular its financial position,
including its significant balance of cash, cash equivalents and
liquid investments and the terms and remaining duration of the
borrowing facilities in place. The Group had a strong financial
position as at 31 December 2021, with combined cash, cash
equivalents and liquid investments of $3,713.1 million. Total
borrowings were $3,172.6 million, resulting in a net cash position
of $540.5million.
When assessing the prospects of the Group, the Directors have
considered the Group's copper price forecasts, the Group's expected
production levels, operating cost profile and capital expenditure.
These forecasts are based on the Group's budgets and life-of-mine
models, which are also used when assessing relevant accounting
estimates. This analysis has focused on the existing asset base of
the Group, without factoring in potential development projects,
which is considered appropriate for an assessment of the Group's
ability to manage the impact of a depressed economic environment.
The analysis has only included the draw-down of existing committed
borrowing facilities, and has not assumed that any new borrowing
facilities will be put in place. The Directors have assessed the
key risks which could impact the prospects of the Group over the
going concern period and consider the most relevant to be risks to
the copper price outlook, as this is the factor most likely to
result in significant volatility in earnings and cash generation.
Robust down-side sensitivity analyses have been performed,
assessing the impact of:
-- A significant deterioration in the future copper price
forecasts by 10% throughout the going concern period.
-- In addition to the above deterioration in the copper price
throughout the review period, an even more pronounced short-term
reduction of 15% in the copper price for a period of three
months.
-- The Group's most significant individual operational risks. In
respect of the El Mauro tailings storage facility at Los Pelambres,
the risk of a major failure is considered to be extremely low,
principally because of the nature of its design and construction,
as well as the rigorous on-going monitoring and controls and its
performance since it was built. Given this, it has not been
considered appropriate to include a scenario incorporating the
possible impact of a potential major dam failure within the
sensitivity analyses.
-- A shut-down of the Group's operations for a period of three
months as the result of COVID-19 or other issues.
-- The proposed new Chilean mining royalty.
These stress-tests each indicated results which could be managed
in the normal course of business. The analysis indicated that the
Group is expected to remain in compliance with all of the covenant
requirements of its borrowings throughout the review period and
retain sufficient liquidity. Based on their assessment of the
Group's prospects and viability, the Directors have formed a
judgement, at the time of approving the preliminary results
announcement, that there are no material uncertainties that the
Directors are aware of that cast doubt on the Group's going concern
status and that there is a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
period to 31 December 2023. The Directors therefore consider it
appropriate to adopt the going concern basis of accounting in
preparing this preliminary results announcement.
b) Adoption of new accounting standards
Other accounting standards
The following accounting standards, amendments and
interpretations became effective in the current reporting period
but the application of these standards and interpretations had no
material impact on the amounts reported in these condensed
consolidated financial statements:
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.
c) Accounting standards issued but not yet effective
The following accounting standards, interpretations and
amendments have been issued by the IASB, but are not yet
effective:
New Standards Effective date (Subject to
UK endorsement)
IFRS 17, Insurance Contracts Annual periods beginning on
or after January 1, 2023
----------------------------
Amendments to IFRSs Effective date (Subject to
UK endorsement)
----------------------------
Deferred Tax related to Assets and Liabilities Annual periods beginning on
arising from a Single Transaction (Amendments or after January 1, 2023
to IAS 12)
----------------------------
Classification of Liabilities as Current Annual periods beginning on
or Non-Current (Amendments to IAS 1) or after January 1, 2023
----------------------------
Disclosure of Accounting Policies - Amendments Annual periods beginning on
to IAS 1 and IFRS Practice Statement 2 or after January 1, 2023
----------------------------
Definition of Accounting Estimates - Amendments Annual periods beginning on
to IAS 8 or after January 1, 2023
----------------------------
Reference to the Conceptual Framework Annual periods beginning on
(Amendments to IFRS 3) or after January 1, 2022
----------------------------
Property, Plant and Equipment - Proceeds Annual periods beginning on
before Intended Use (Amendments to IAS or after January 1, 2022
16)
----------------------------
Onerous Contracts - Cost of Fulfilling Annual periods beginning on
a Contract (Amendments to IAS 37) or after January 1, 2022
----------------------------
Annual Improvements to IFRS Standards Annual periods beginning on
2018-2020 (Amendments to IFRS 1, IFRS or after January 1, 2022
9, IFRS 16 and IAS 41)
----------------------------
The item which is expected to have most relevance to the Group
is the amendment to IAS 16 Property, Plant and Equipment - Proceeds
before intended use. Currently the Group deducts amounts received
from the sale of products during the initial ramp-up of new
projects, before commercial production is achieved, from the
capital cost of the project. Under the amendment to IAS 16 such
amounts will instead be recognised as revenue in the income
statement along with a corresponding allocation of related
operating expenses, which is likely to result in increased revenue
and operating expenses and a higher initial capitalised amount. The
amendment will be applicable in the year beginning on 1 January
2022. The amendment would apply retrospectively only to relevant
projects in progress at 1 January 2021 which were generating
proceeds, and there were no such projects at 1 January 2021.
2. Total profit from operations, associates and joint ventures
Year ended Year ended
31.12.2021 31.12.2020
(Unaudited) (Audited)
$m $m
Revenue 7,470.1 5,129.3
Cost of sales (3,297.8) (2,856.9)
--------------------------- ----------------------
Gross profit 4,172.3 2,272.4
Administrative and distribution
expenses (550.4) (484.6)
Other operating income 31.8 27.0
Other operating expenses (252.3) (222.6)
--------------------------- ----------------------
Operating profit from subsidiaries 3,401.4 1,592.2
--------------------------- ----------------------
Net share of income from associates
and joint ventures 59.7 5.1
Impairment of investment in
associate - (80.8)
--------------------------- ----------------------
Total profit from operations,
associates and joint ventures 3,461.1 1,516.5
=========================== ======================
Other operating expenses comprise $103.2 million of exploration
and evaluation expenditure (2020 - $85.1 million), $19.8 million in
respect of the employee severance provision (2020 - $17.9 million),
$11.3 million in respect of the closure provision (2020 - $45.2
million) and $117.9 million of other expenses (2020 - $74.5
million).
3. Exceptional items
Exceptional items are material items of income and expense which
are non-regular or non-operating and typically non-cash, including
impairments and profits or losses on disposals. The tax effect of
items presented as exceptional is also classified as exceptional,
as are material deferred tax adjustments that relate to more than
one reporting period. The classification of these types of items as
exceptional is considered to be useful as it provides an indication
of the earnings generated by the on-going businesses of the
Group.
2021 - Impairment of Twin Metals' assets
Twin Metals Minnesota (Twin Metals) is a wholly owned copper,
nickel and platinum group metals (PGM) underground mining project,
which holds copper, nickel, cobalt-PGM deposits in north-eastern
Minnesota, US. In recent years, Twin Metals has been progressing
its Mine Plan of Operations (MPO) and Scoping Environmental
Assessment Worksheet Data Submittal, submitted in December 2019 to
the US Bureau of Land Management (BLM) and Minnesota Department of
Natural Resources (DNR), respectively. However, over the past year,
while the Twin Metals project was advancing through environmental
review, several actions were taken by the federal government that
have changed the potential scenarios for the project.
In September 2021, the United States Forest Service (USFS)
submitted an application to withdraw approximately 225,000 acres of
land in the Superior National Forest from the scope of federal
mineral leasing laws, subject to valid existing rights. In October
2021, the United States Bureau of Land Management (BLM) rejected
Twin Metals' Preference Right Lease Applications (PRLAs) and
Prospecting Permit Applications (PPAs). In January 2022, the United
States Department of the Interior cancelled Twin Metals' MNES-1352
and MNES-1353 federal mineral leases. The PRLAs and federal mineral
leases form a significant proportion of the mineral resources
contained within Twin Metals' current project plan and,
accordingly, it was determined that these events collectively
represented an impairment trigger as at the balance sheet date.
Prior to the resulting impairment assessment being performed, as
at 31 December 2021, the Group had recognised an intangible asset
of $150.1 million and property, plant and equipment of $27.5
million relating to the Twin Metals project. The intangible asset
arose upon the acquisition in 2015 of Duluth Metals, which owned a
60% stake in the Twin Metals project, with the carrying value of
the intangible asset reflecting the consideration paid for that
acquisition. The property, plant and equipment balances reflected
the historical cost of acquiring those assets. These carrying
values prior to the impairment did not, therefore, reflect an
estimate of the commercial potential of the project as at 31
December 2021.
The Group believes that Twin Metals has a valid legal right to
the mining leases and a strong case to defend its legal rights.
Although the Group intends to pursue validation of those rights,
considering the time and uncertainty related to any legal action to
challenge the government decisions, an impairment has been
recognised as at 31 December 2021 in respect of the $177.6 million
of intangible assets and property, plant and equipment relating to
the Twin Metals project.
2021 - Recognition of previously unrecognised deferred tax
assets
At 31 December 2021, the Group recognised $90.6 million of
previously unrecognised deferred tax assets relating to tax losses
available for offset against future profits. In previous periods,
the Group had reviewed these tax losses for potential recognition,
and concluded that it was not probable that future taxable profits
would be available against which the losses could be utilised, and
accordingly had not recognised a deferred tax asset in respect of
those losses. In making this assessment in previous periods, the
Group had taken into account that the relevant Group entity
(Antucoya) had consistently generated taxable losses in recent
years, was continuing to generate taxable losses in the then
current period, and was forecast to continue generating taxable
losses in future periods, and the Group could not use these taxable
losses to offset profits in other Group entities. During 2021,
there has been a significant improvement in the current copper
price (with the copper price reaching record levels in nominal
terms during the year) and also the near-term copper price outlook.
As a result of this improvement in the copper price environment,
the relevant Group entity began to generate taxable profits in
2021. The improved near-term outlook for the copper price also
means that the entity is now forecast to generate sufficient future
taxable profits to fully utilise its remaining tax losses. Current
forecasts indicate that the losses will be utilised over
approximately the next eight years (compared with the remaining
mine life for Antucoya of 22 years). The forecasts are based on
Antucoya's life-of-mine model. When the tax losses are utilised in
future years, it is expected that the impact will be recorded
within the underlying tax charge for that year, in order to match
with the similar classification of the corresponding taxable
profits of that year.
2020 - Impairment of the investment in Hornitos
On 31 March 2020, the Group agreed to dispose of its 40%
interest in Hornitos coal-fired power station to ENGIE Energía
Chile S.A. ("ENGIE"), the owner of the remaining 60% interest. This
was part of the value accretive renegotiation of Centinela's power
purchase agreement which as a result will be wholly supplied from
lower cost renewable sources from 2022. In accordance with the
terms of the agreement, the Group disposed of its investment to
ENGIE in December 2021 for a nominal consideration, and has not
been entitled to receive any further dividend income from Hornitos
from the date of the agreement. Accordingly, the Group no longer
had any effective economic interest in the results or assets of
Hornitos from 31 March 2020 onwards, and therefore recognised an
impairment of $80.8 million in respect of its investment in
associate balance during 2020, and no longer recognised any share
of Hornitos' results. The post-tax impact of the impairment was
$61.1 million, of which $40.2 million was attributable to the
equity owners of the Company.
4. Asset sensitivities
Based on an assessment of both qualitative and quantitative
factors, there were no indicators of potential impairment, or
reversal of previous impairments, for the Group's non-current
assets associated with its mining operations at the 2021 year-end,
and accordingly no impairment tests have been performed. The
quantitative element of the trigger assessment, which is based on
the Group's life-of-mine models, provides an indication of what the
approximate recoverable amount of the Group's operations would be,
were a full impairment test under IAS 36 to be performed. In order
to provide an indication of the sensitivities of the approximate
recoverable amount of the Group's mining operations, a sensitivity
analysis has been performed on the indicative valuation, prepared
as part of the Group's impairment indicator analysis.
This impairment indicator valuation exercise demonstrated
positive headroom for all of the Group's mining operations, with
the recoverable amount of the assets in excess of their carrying
value.
Relevant aspects of these indicative valuation estimates
include:
Fair value less costs of disposal and value in use
valuations
If a full IAS 36 impairment test were to be prepared, which was
not the case as at 31 December 2021, the recoverable amount is the
higher of fair value less costs of disposal and value in use. Fair
value less costs of disposal reflects the net amount the Group
would receive from the sale of the asset in an orderly transaction
between market participants. For mining assets, this would
generally be determined based on the present value of the estimated
future cash flows arising from the continued use, further
development or eventual disposal of the asset. Value in use
reflects the expected present value of the future cash flows which
the Group would generate through the operation of the asset in its
current condition, without taking into account potential
enhancements or further development of the asset. The fair value
less costs of disposal valuation will normally be higher than the
value in use valuation for mining companies, and accordingly the
Group typically applies this valuation estimate in its impairment
or valuation assessments.
Climate risks
The indicative valuations incorporate estimates of the potential
future costs relating to climate risks. The Group will report
against the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) in the 2021 Annual Report. This
process included scenario analyses assessing the potential future
impact of transition and physical risks. In preparing this
analysis, the Group used two climate scenarios to capture the
broadest possible spectrum of climate-related risks and
opportunities, an aggressive mitigation scenario and a high warming
scenario. The total of the estimated potential transition and
physical risk impacts under this approach is likely to overstate
the probable overall impact, for example because if relatively
aggressive actions are taken in order to minimise transition risks,
this should reduce the risk of relatively significant physical
impacts. However, in order to incorporate a simple and conservative
estimate of the potential future costs of climate risks we have
combined the estimates of the potential costs of the transition
risk and physical risk scenarios, and incorporated those total cost
forecasts into the indicative valuations.
Copper price outlook
The assumption to which the value of the assets is most
sensitive is the future copper price. The copper price forecasts
(representing the Group's estimates of the assumptions that would
be used by independent market participants in valuing the assets)
are based on the forward curve for the short term and consensus
analyst forecasts for the longer term. A long-term copper price of
$3.30/lb has been used in the base valuations used in the
impairment indicator assessment. As an additional down-side
sensitivity, a valuation was performed with a long-term copper
price of $2.97/lb, reflecting the lower quartile price in the
consensus of analyst forecasts. Los Pelambres, Centinela and
Zaldívar still showed positive headroom in this alternative
down-side scenario. However, the Antucoya valuation indicated a
potential deficit of $160 million. This was a simple sensitivity
exercise, looking at an illustrative change in the forecast
long-term copper price in isolation. In reality, a deterioration in
the long-term copper price environment is likely to result in
corresponding improvements in a range of input cost factors. In
particular, given that copper exports account for over 50% of
Chile's exports, movements in the US dollar/Chilean peso exchange
rate have historically been highly correlated to the copper price,
and a decrease in the copper price is likely to result in a
weakening of the Chilean peso, with a resulting reduction in the
Group's operating costs and capital expenditure. These likely cost
reductions, as well as potential operational changes which could be
made in a weaker copper price environment, could partly mitigate
the impact of the lower copper price modelled in these estimated
potential sensitivities.
The US dollar/Chilean peso exchange rate
The value of the assets is also sensitive to movements in the US
dollar/Chilean peso exchange rate. A long-term exchange rate of
Ch$770/$1 has been used in the base valuations used in the
impairment indicator assessment. As an additional downside
sensitivity, an indicative valuation was performed with a 10%
stronger long-term Chilean peso exchange rate assumption. Los
Pelambres, Centinela, and Zaldivar all still showed positive
headroom in this alternative downside scenario. In the case of
Antucoya, this downside scenario indicated a potential break-even
position. As noted above, movements in the US dollar/Chilean peso
exchange rate have historically been highly correlated to the
copper price and so, in reality, the exchange rate would not be
expected to move in isolation.
Other relevant assumptions
In addition to the impact of climate change risks, the future
copper price and the US dollar/Chilean peso exchange rate, the
indicative valuations are sensitive to the assumptions in respect
of future production levels, operating costs, sustaining and
development capital expenditure, potential changes in the Chilean
mining royalty regime and the discount rate used to determine the
present value of the future cash flows.
A real post-tax discount rate of 8% has been used in determining
the present value of the forecast future cash flow from the assets
as part of the impairment indicator assessment.
The COVID-19 situation is not expected to have a significant
negative impact on the future production or capital projects of the
Group's mining operations. The forecasts within the indicative
valuations reflect estimates of the expected on-going costs of
managing the situation over the near-term.
As indicated by the sensitivities for movements in the long-term
copper price and the US dollar/Chilean peso exchange rate described
above, Antucoya is particularly sensitive to movements in the input
assumptions. The impairment trigger assessments for Los Pelambres
and Centinela are not sensitive to movement in these assumptions.
While Zaldivar is also not particularly sensitive to changes in the
assumptions used in the indicative valuation prepared as part of
the quantitative impairment indicator assessment, the conclusion
that there are no impairment indicators at Zaldivar does reflect
certain assumptions about future operational considerations, which
include the following:
- an Environmental Impact Assessment (EIA) has been submitted to
extend the permits for water extraction (which currently expire
during 2025) and general mining activities (which currently expire
at the end of 2023) until 2031. Subsequent applications will be
required in due course to further extend the permits beyond 2031.
The indicative valuation assumes that essential permits will be
extended to the end of the mine life, and other permits can be
extended, or alternative solutions to enable the ongoing operation
of the mine can be implemented. However, if essential permits are
not extended, this is likely to be considered an indicator of a
potential impairment, requiring a full impairment assessment at
that point.
- Zaldívar's final pit phase, which represents approximately 20%
of current ore reserves, impacts a portion of Minera Escondida's
mine property, as well as infrastructure owned by third parties
(road, railway, powerline and pipelines). The indicative valuation
assumes that mining of the final pit phase, which is subject to
agreements or easements to access these areas and relocate this
infrastructure, will be possible.
Indicators of potential reversal of previous impairments
Antucoya recognised impairments totalling $716 million in 2012
and 2016. Of the original impairment amounts approximately $550
million remains in effect unamortised as at 31 December 2021. Based
on an assessment of both qualitative and quantitative factors,
there were no indicators of a potential reversal of these previous
impairments at the 2021 year-end. As noted above, the indicative
valuation exercise for Antucoya at the 2021 year-end indicated
positive headroom for Antucoya. However, the headroom position is
relatively marginal - the down-side sensitivity reflecting a 10%
reduction in the long-term copper price forecast resulted in a
potential deficit of $160 million; the sensitivity using a 10%
stronger long-term Chilean peso exchange rate assumption indicated
a potential break-even position. Given this marginal headroom
position, reasonably possible changes in the general market
environment, the operational performance of the mine or the
regulatory and taxation environment in Chile could result in a
break-even or a potential deficit position for Antucoya and hence
it was concluded that there was no impairment reversal trigger as
at 31 December 2021.
However, if there is a future significant improvement in the
performance and value of Antucoya, for example due to one, or a
combination of, the following - a significant increase in the
long-term copper price outlook, strong operational performance that
is expected to be sustained into the future, and/or positive
resolution of uncertainty with the regulatory and taxation
environment in Chile - a full or partial reversal of these
impairments could be triggered in future periods.
5. Segmental analysis
The Group's reportable segments are as follows:
-- Los Pelambres
-- Centinela
-- Antucoya
-- Zaldívar
-- Exploration and evaluation
-- Corporate and other items
-- Transport division
For management purposes, the Group is organised into two
business divisions based on their products - Mining and Transport.
The mining division is split further for management reporting
purposes to show results by mine and exploration activity. Los
Pelambres produces primarily copper concentrate and molybdenum as a
by-product. Centinela produces copper concentrate containing gold
as a by-product, molybdenum concentrates and copper cathodes.
Antucoya and Zaldívar produce copper cathodes. The transport
division provides rail and road cargo transport together with a
number of ancillary services. All the operations are based in
Chile. The Exploration and evaluation segment incurs exploration
and evaluation expenses. "Corporate and other items" comprises
costs incurred by the Company, Antofagasta Minerals S.A., the
Group's mining corporate centre and other entities, that are not
allocated to any individual business segment. Consistent with its
internal management reporting, the Group's corporate and other
items are included within the mining division.
The Chief Operating decision-maker (the Group's Chief Executive
Officer) monitors the operating results of the business segments
separately for the purpose of making decisions about resources to
be allocated and assessing performance. Segment performance is
evaluated based on the operating profit of each of the
segments.
a) Segment revenues and results
For the year ended 31.12.2021 (Unaudited)
Los Pelambres Centinela Antucoya Zaldívar Exploration Corporate Total Transport Total
and evaluation(2) and other Mining division
items
$m $m $m $m $m $m $m $m $m
Revenue 3,621.0 2,981.3 697.8 - - - 7,300.1 170.0 7,470.1
Operating costs
excluding
depreciation (1,095.0) (1,062.0) (360.7) - (103.2) (76.0) (2,696.9) (106.3) (2,803.2)
Depreciation and
amortisation (281.8) (654.7) (98.3) - - (13.0) (1,047.8) (30.9) (1,078.7)
Loss on
disposals (3.7) (4.0) (0.5) - - - (8.2) (1.0) (9.2)
Provision
against
the carrying
value
of assets(4) - - - - (177.6) - (177.6) - (177.6)
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ----------------- ----------------- -----------------
Operating
profit/(loss) 2,240.5 1,260.6 238.3 - (280.8) (89.0) 3,369.6 31.8 3,401.4
Net share of
income/(loss)
from associates
and joint
ventures - - - 68.5 - (9.0) 59.5 0.2 59.7
Investment
income 1.4 1.5 0.3 - - 1.7 4.9 0.1 5.0
Interest expense (3.5) (16.4) (15.5) - - (27.2) (62.6) (0.8) (63.4)
Other finance
items 41.1 26.1 4.9 - - 5.1 77.2 (2.8) 74.4
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ----------------- ----------------- -----------------
Profit/(loss)
before
tax 2,279.5 1,271.8 228.0 68.5 (280.8) (118.4) 3,448.6 28.5 3,477.1
Tax (743.7) (382.0) (7.1) - - (188.3) (1,321.1) (11.8) (1,332.9)
Tax -
exceptional
items (3) - - 90.6 - - - 90.6 - 90.6
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ----------------- ----------------- -----------------
Profit/(loss)
for
the period 1,535.8 889.8 311.5 68.5 (280.8) (306.7) 2,218.1 16.7 2,234.8
Non-controlling
interests 607.5 252.2 84.4 - - 0.5 944.6 - 944.6
Profit/(loss)
for
the period
attributable
to owners of
the
parent 928.3 637.6 227.1 68.5 (280.8) (307.2) 1,273.5 16.7 1,290.2
==================== ================== ================== ================ ===================== ==================== ================= ================= =================
EBITDA(1) 2,526.0 1,919.3 337.1 172.8 (103.2) (84.0) 4,768.0 68.2 4,836.2
Additions to
non-current
assets
Additions to
property,
plant and
equipment 903.1 826.4 62.7 - 0.6 30.4 1,823.2 32.7 1,855.9
Segment assets
and liabilities
Segment assets 5,667.1 5,924.2 1,735.9 - - 2,661.1 15,988.3 384.3 16,372.6
Investments in
associates and
joint ventures - - - 900.0 - - 900.0 5.8 905.8
Segment
liabilities (2,642.0) (1,797.0) (548.7) - - (1,174.5) (6,162.2) (87.2) (6,249.4)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) Operating cash outflow in the exploration and evaluation
segment was $49.9 million.
(3) During 2021, there was an exceptional item of $90.6 million
which reflects the recognition of a deferred tax asset at Antucoya
(see Note 3).
(4) An impairment has been recognised as at 31 December 2021 in
respect of the $177.6 million of intangible assets and property,
plant and equipment relating to the Twin Metals project, presented
as an exceptional item.
For the year ended 31 December 2020 (Audited)
Los Pelambres Centinela Antucoya Zaldívar Exploration Corporate Total Transport Total
and and other Mining division
evaluation(2) items
$m $m $m $m $m $m $m $m $m
Revenue 2,655.1 1,844.5 480.3 - - - 4,979.9 149.4 5,129.3
Operating costs
excluding
depreciation (992.1) (932.8) (314.5) - (85.1) (66.2) (2,390.7) (91.4) (2,482.1)
Depreciation and
amortisation (252.6) (662.9) (94.6) - - (7.8) (1,017.9) (30.8) (1,048.7)
Loss on
disposals (2.5) (1.8) - - - - (4.3) (2.0) (6.3)
------------------------ --------------------- --------------------- ------------- ------------- --------------- ------------------ -------------------- ------------------
Operating
profit/(loss) 1,407.9 247.0 71.2 - (85.1) (74.0) 1,567.0 25.2 1,592.2
Equity
accounting
profit /(loss) - - - 12.2 - (6.5) 5.7 (0.6) 5.1
Impairment of
investment
in associate(3) - (95.6) - - - - (95.6) 14.8 (80.8)
------------------------ --------------------- --------------------- ------------- ------------- --------------- ------------------ -------------------- ------------------
Net share of
results
from associates
and joint
ventures - (95.6) - 12.2 - (6.5) (89.9) 14.2 (75.7)
Investment
income 4.7 4.3 0.8 - - 9.0 18.8 0.1 18.9
Interest expense (4.3) (24.9) (25.5) - - (20.7) (75.4) (1.7) (77.1)
Other finance
items (26.0) (13.7) (4.0) - - (5.5) (49.2) 4.0 (45.2)
------------------------ --------------------- --------------------- ------------- ------------- --------------- ------------------ -------------------- ------------------
Profit/(loss)
before
tax 1,382.3 117.1 42.5 12.2 (85.1) (97.7) 1,371.3 41.8 1,413.1
Tax (435.8) (23.0) (0.3) - - (59.2) (518.3) (8.2) (526.5)
------------------------ --------------------- --------------------- ------------- ------------- --------------- ------------------ -------------------- ------------------
Profit/(loss)
for
the year from
continuing
operations 946.5 94.1 42.2 12.2 (85.1) (156.9) 853.0 33.6 886.6
Profit for the
period
from
discontinued
operations - - - - - 7.3 7.3 - 7.3
------------------------ --------------------- --------------------- ------------- ------------- --------------- ------------------ -------------------- ------------------
Profit/(loss)
for
the year 946.5 94.1 42.2 12.2 (85.1) (149.6) 860.3 33.6 893.9
Non-controlling
interests 371.5 12.9 3.1 - - - 387.5 - 387.5
Profit/(loss)
for
the period
attributable
to owners of
the
parent 575.0 81.2 39.1 12.2 (85.1) (149.6) 472.8 33.6 506.4
======================== ===================== ===================== ============= ============= =============== ================== ==================== ==================
EBITDA(1) 1,663.0 911.7 165.8 95.5 (85.1) (72.7) 2,678.2 61.0 2,739.2
Additions to
non-current
assets
Additions to
property,
plant and
equipment 827.3 441.8 44.6 - - 8.4 1,322.1 26.2 1,348.3
Segment assets
and
liabilities
Segment assets 5,475.9 5,898.8 1,641.5 - - 2,284.2 15,300.4 382.9 15,683.3
Deferred tax
assets - - - - - 2.7 2.7 3.7 6.4
Investments in
associates
and joint
ventures - - - 909.0 - - 909.0 5.6 914.6
Segment
liabilities (2,700.1) (1,823.2) (702.5) - - (1,202.6) (6,428.4) (94.8) (6,523.2)
(1) EBITDA refers to Earnings Before Interest, Tax, Depreciation
and Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
(2) Operating cash outflow in the exploration and evaluation
segment was $43.1 million
(3) On 31 March 2020, the Group agreed to dispose of its 40%
interest in Hornitos coal-fired power station to ENGIE Energía
Chile S.A. ("ENGIE"), the owner of the remaining 60% interest. This
has resulted in a $80.8 million impairment in respect of the
Group's investment in associate balance (see Note 3).
b) Entity wide disclosures
Revenue by product
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Copper
- Los Pelambres 3,097.0 2,269.2
- Centinela concentrates 1,735.4 908.6
- Centinela cathodes 774.1 599.1
- Antucoya 693.3 475.9
Provision of shipping services(1)
- Los Pelambres 57.8 54.4
- Centinela concentrates 46.8 31.8
- Centinela cathodes 4.3 4.8
- Antucoya 4.5 4.4
Gold
- Los Pelambres 91.0 106.4
- Centinela 345.4 251.3
Molybdenum
- Los Pelambres 329.2 181.8
- Centinela 37.2 27.7
Silver
- Los Pelambres 46.0 43.3
- Centinela 38.1 21.2
Total Mining 7,300.1 4,979.9
Transport division 170.0 149.4
----------------------------------- ----------------------
7,470.1 5,129.3
=================================== ======================
(1) These prior year figures have been re-presented to
separately analyse revenue from the sale of products and from the
provision of shipping services.
Revenue by location of customer
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Europe
- United Kingdom 54.4 123.3
- Switzerland 1,303.7 593.5
- Spain 67.6 29.3
- Germany 121.5 116.4
- Rest of Europe 177.4 92.3
Latin America
- Chile 282.0 224.4
- Rest of Latin America 214.7 182.0
North America
- United States 666.5 216.5
Asia Pacific
- Japan 1,842.3 1,631.1
- China 1,236.9 531.4
- Singapore 726.1 667.5
- South Korea 322,6 353.4
- Hong Kong 217.1 235.7
- Rest of Asia 237.3 132.5
---------------------------------- ---------------------
7,470.1 5,129.3
================================== =====================
Information about major customers
In the year ended 31 December 2021, the Group's mining revenue
included $1,015.1 million related to one large customer that
individually accounted for more than 10% of the Group's revenue
(year ended 31 December 2020 - one large customer representing
$763.4 million).
Non-current assets by location of asset
Year ended Year
31.12.2021 ended
31.12.2020
Restated
$m $m
- Chile 11,715.2 11,023.2
- USA 1.0 178.3
11,716.2 11,201.5
============================== ===================
The above amounts reflect non-current assets excluding financial
assets and deferred tax assets. The non-current assets shown above
exclude $96.7 million ($6.4 million - 2020) of deferred tax assets,
$51.1 million ($51.7 million - 2020) of receivables (being
financial assets), $8.7 million of equity investments ($11.1
million - 2020) and nil ($0.3 million - 2020) of derivative
instruments. The prior period comparatives have been restated to
exclude financial assets and deferred tax assets, resulting in a
reduction in respect of the assets located in Chile of $69.5
million as at 31 December 2020.
6. Group Revenue
Copper and molybdenum concentrate sale contracts and copper
cathode sale contracts 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 one to four months after shipment to the
customer. For sales contracts which contains provisional pricing
mechanisms, the total receivable balance is measured at fair value
through profit or loss. Gains and losses from the mark-to-market of
open sales are recognised through adjustments to revenue in the
income statement and to trade receivables 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 in the market price references for that
commodity in the majority of the Group's contracts.
With sales of concentrates, which are sold to smelters and
roasting plants for further processing into fully refined metal,
the price of the concentrate reflects the market value of the fully
refined metal less a "treatment and refining charge" deduction, to
reflect the lower value of this partially processed material
compared with the fully refined metal.
The shipping service represents a separate performance
obligation, and is recognised separately from the sale of the
material over time as the shipping service is provided.
The total revenue from contracts with customers and the impact
of provisional pricing adjustments in respect of concentrate and
cathode sales is as follows:
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Revenue from contracts with customers
Sale of products 6,809.0 4,617.3
Provision of shipping services associated
with the sale of products (1) 113.4 95.4
Transport division (2) 170.0 149.4
Provisional pricing adjustments in respect
of copper, gold and molybdenum 377.7 267.2
Total revenue 7,470.1 5,129.3
=========================== ======================
(1) The Group sells a significant proportion of its products on
Cost, Insurance & freight (CIF) incoterms, which means that the
Group is responsible for shipping the product to a destination port
specified by the customer
(2) The transport division provides rail and road cargo
transport together with a number of ancillary services.
The categories of revenue which are principally affected by
different economic factors are the individual product types. A
summary of revenue by product is set out in Note 5.
The following tables set out the impact of provisional pricing
adjustments, derivative commodity instruments and treatment and
refining charges for the more significant products. The revenue
from these products, along with the revenue from other products and
services, is reconciled to total revenue in Note 5.
For the year ended 31 December 2021
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Centinela Los Pelambres Centinela
Pelambres Pelambres
Copper Copper Copper Copper Gold Gold Molybdenum Molybdenum
concentrate concentrate cathodes cathodes in concentrate in concentrate concentrate concentrate
Provisionally
priced
sales of
products 2,966.6 1,685.3 824.3 749.7 93.3 354.8 322.1 38.4
Revenue from
freight
services 57.8 46.8 4.3 4.5 - - - -
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
3,024.4 1,732.1 828.6 754.2 93.3 354.8 322.1 38.4
Effects of
pricing
adjustments
to previous
year invoices
Reversal of
mark-to-market
adjustments at
the end
of the
previous year (58.7) (26.8) 0.1 (0.5) - (0.9) 0.2 (0.3)
Settlement of
sales invoiced
in the
previous year 175.1 74.7 1.8 1.5 (1.0) (4.0) 6.4 1.2
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
Total effect of
adjustments
to previous
year invoices
in the current
period 116.4 47.9 1.9 1.0 (1.0) (4.9) 6.6 0.9
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
Effects of
pricing
adjustments
to current
period invoices
Settlement of
sales invoiced
in the current
period 92.2 58.8 10.2 6.0 (1.1) (4.1) 30.6 5.8
Mark-to-market
adjustments
at the end of
the current
period 12.0 5.2 0.3 0.8 - 0.4 (5.7) (0.7)
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
Total effect of
adjustments
to current
period
invoices 104.2 64.0 10.5 6.8 (1.1) (3.7) 24.9 5.1
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
Total pricing
adjustments 220.6 111.9 12.4 7.8 (2.1) (8.6) 31.5 6.0
Realised losses
on commodity
derivatives - - (62.6) (64.2) - - - -
Revenue before
deducting
treatment and
refining
charges 3,245.0 1,844.0 778.4 697.8 91.2 346.2 353.6 44.4
Treatment and
refining
charges (90.2) (61.8) - - (0.2) (0.8) (24.4) (7.2)
Revenue 3,154.8 1,782.2 778.4 697.8 91.0 345.4 329.2 37.2
============== =============== ============ ============= ================ =============== ==================== ===================
The revenue from the individual products shown in the above
table excludes revenue from sales of silver and the transport
division, which are presented in the revenue by product table in
note 5 to reconcile to Group Revenue.
With sales of concentrates at Los Pelambres and Centinela, which
are sold to smelters and roasting plants for further processing
into fully refined metal, the price of the concentrate invoiced to
the customer reflects the market value of the fully refined metal
less a "treatment and refining charge" deduction, to reflect the
lower value of this partially processed material compared with the
fully refined metal. For accounting purposes, the revenue amount is
the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry
definition of cash costs, treatment and refining charges are
regarded as an expense and part of the total cash cost figure.
For the year ended 31 December 2020(1)
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres Centinela
Pelambres
Copper Copper Copper Copper Gold Gold Molybdenum Molybdenum
concentrate concentrate cathodes cathodes in in concentrate concentrate
concentrate concentrate
Provisionally
priced
sales of
products 2,202.3 917.5 590.0 470.4 104.9 250.6 205.0 31.6
Revenue from
freight
services 54.4 31.8 4.8 4.4 - - - -
------------ ------------ ---------- --------- -------------- -------------- -------------- -------------
2,256.7 949.3 594.8 474.8 104.9 250.6 205.0 31.6
Effects of
pricing
adjustments to
previous
year invoices
Reversal of
mark-to-market
adjustments at
the
end of the
previous
year (29.1) (15.2) (0.4) (0.4) - (1.2) 0.4 -
Settlement of
sales
invoiced in
the
previous year (43.6) (18.7) (0.3) (0.3) 0.2 3.7 (1.5) (0.2)
------------ ------------ ---------- --------- -------------- -------------- -------------- -------------
Total effect of
adjustments to
previous
year invoices
in
the current
period (72.7) (33.9) (0.7) (0.7) 0.2 2.5 (1.1) (0.2)
------------ ------------ ---------- --------- -------------- -------------- -------------- -------------
Effects of
pricing
adjustments to
current
period invoices
Settlement of
sales
invoiced in
the
current period 194.6 67.0 11.2 7.8 1.5 (2.0) 4.6 2.1
Mark-to-market
adjustments
at the end of
the
current period 58.7 26.8 (0.1) 0.5 - 0.9 (0.2) 0.3
------------ ------------ ---------- --------- -------------- -------------- -------------- -------------
Total effect of
adjustments to
current
period
invoices 253.3 93.8 11.1 8.3 1.5 (1.1) 4.4 2.4
------------ ------------ ---------- --------- -------------- -------------- -------------- -------------
Total pricing
adjustments 180.6 59.9 10.4 7.6 1.7 1.4 3.3 2.2
Realised losses
on commodity
derivatives - - (1.3) (2.1) - - - -
Revenue before
deducting
treatment and
refining
charges 2,437.3 1,009.2 603.9 480.3 106.6 252.0 208.3 33.8
Treatment and
refining
charges (113.6) (68.8) - - (0.2) (0.7) (26.5) (6.1)
Revenue 2,323.7 940.4 603.9 480.3 106.4 251.3 181.8 27.7
============ ============ ========== ========= ============== ============== ============== =============
The revenue from the individual products shown in the above
table is reconciled to total revenue in Note 5, excluding silver
revenue
(1) These prior year figures have been re-presented to
separately analyse revenue from the sale of products and from the
provision of shipping services.
With sales of concentrates at Los Pelambres and Centinela, which
are sold to smelters and roasting plants for further processing
into fully refined metal, the price of the concentrate invoiced to
the customer reflects the market value of the fully refined metal
less a "treatment and refining charge" deduction, to reflect the
lower value of this partially processed material compared with the
fully refined metal. For accounting purposes, the revenue amount is
the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry
definition of cash costs, treatment and refining charges are
regarded as an expense and part of the total cash cost figure.
(i) Copper concentrate
The typical period for which sales of copper concentrate remain
open until settlement occurs is a range of approximately three to
four months from shipment date.
At 31.12.2021 At 31.12.2020
Sales Tonnes 177,900 162,300
Average mark-to-market price $/lb 4.41 3.52
Average provisional invoice
price $/lb 4.37 3.28
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain
open until settlement occurs is approximately one month from
shipment date.
At 31.12.2021 At 31.12.2020
Sales Tonnes 15,000 13,800
Average mark-to-market price $/lb 4.42 3.52
Average provisional invoice
price $/lb 4.39 3.50
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain
open until settlement is approximately one month from shipment
date.
At 31.12.2021 At 31.12.2020
Sales Ounces 32,300 16,300
Average mark-to-market price $/oz 1,801 1,917
Average provisional invoice
price $/oz 1,791 1,861
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open
until settlement is approximately two months from shipment
date.
At 31.12.2021 At 31.12.2020
Open Sales Tonnes 2,400 2,000
Average mark-to-market price $/lb 18.60 9.34
Average provisional invoice
price $/lb 19.65 9.38
As detailed above, the effects of gains and losses from the
marking-to-market of open sales are recognised through adjustments
to revenue in the income statement and to trade receivables in the
balance sheet. The effect of mark-to-market adjustments on the
balance sheet at the end of each period are as follows:
Gain/(loss) on debtors
of period end
mark-to-market adjustments
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Los Pelambres - copper concentrate 12.0 58.7
Los Pelambres - molybdenum concentrate (5.7) (0.2)
Centinela - copper concentrate 5.2 26.8
Centinela - molybdenum concentrate (0.7) 0.3
Centinela - gold in concentrate 0.4 0.9
Centinela - copper cathodes 0.3 (0.1)
Antucoya - copper cathodes 0.8 0.5
12.3 86.9
=========================== ===========================
7. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
For the year ended 31.12.2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------
At fair value At fair value Held at amortised Total
through profit through other cost
and loss comprehensive
income
$m $m $m $m
Financial
assets
Equity
investments - 8.7 - 8.7
Loans and 1,011.7 - 83.3 1,095.0
receivables
Cash and
cash
equivalents - - 743.4 743.4
Liquid 2,969.7 - - 2,969.7
investments
---------------------------------------- ------------------------------------------------- ------------------------------------------ ---------------------------
3,981.4 8.7 826.7 4,816.8
---------------------------------------- ------------------------------------------------- ------------------------------------------ ---------------------------
Financial
liabilities
Trade and
other
payables - - (835.6) (835.6)
Borrowings
and leases - - (3,172.6) (3,172.6)
---------------------------------------- ------------------------------------------------- ------------------------------------------ ---------------------------
- - (4,008.2) (4,008.2)
For the year ended 31.12.2020
------------------------------------------------------------------------------------------------------------------------------------------------------------------
At fair value At fair value Held at amortised Total
through profit through other cost
and loss comprehensive
income
$m $m $m $m
Financial
assets
Derivative
financial
assets 1.4 - - 1.4
Equity
investments - 11.1 - 11.1
Loans and
receivables 808.0 - 184.6 992.6
Cash and
cash
equivalents - - 1,246.8 1,246.8
Liquid
investments 2,426.0 - - 2,426.0
---------------------------------------- ------------------------------------------------- ------------------------------------------ -------------------------
3,235.4 11.1 1,431.4 4,677.9
---------------------------------------- ------------------------------------------------- ------------------------------------------ -------------------------
Financial
liabilities
Derivative
financial
liabilities (37.4) - - (37.4)
Trade and (0.3) - (815.8) (816.1)
other
payables
Borrowings
and leases - - (3,754.8) (3,754.8)
---------------------------------------- ------------------------------------------------- ------------------------------------------ -------------------------
(37.7) - (4,570.6) (4,608.3)
---------------------------------------- ------------------------------------------------- ------------------------------------------ -------------------------
The fair value of the fixed rate bond included within the
"Borrowings and leases" category was $476.2 million at 31 December
2021 compared with its carrying value of $496.1 million. The fair
value of all other financial assets and financial liabilities
carried at amortised cost approximates the carrying value presented
above.
Year ended Year ended
31.12.2021 31.12.2020
Financial assets
Trade and other receivables (non-current)
per balance sheet 51.2 55.9
Trade and other receivables (current)
per balance sheet 1,146.1 1,016.9
------------------------- -------------------------
Total trade and other receivables
per balance sheet 1,197.3 1,072.8
Less: non-financial assets (including
prepayments and VAT receivables) (102.3) (80.2)
------------------------- -------------------------
Total loans and receivables (financial
assets) 1,095.0 992.6
------------------------- -------------------------
Financial liabilities
Trade and other payables (current)
per balance sheet (829.1) (808.8)
Trade and other payables (non-current)
per balance sheet (16.8) (11.0)
------------------------- -------------------------
Total trade and other payables
per balance sheet (845.9) (819.8)
Less: non-financial liabilities
(including VAT payables) 10.3 3.7
------------------------- -------------------------
Total loans and payables (financial
liabilities) (835.6) (816.1)
------------------------- -------------------------
Fair value of financial instruments
An analysis of financial assets and financial liabilities
measured at fair value is presented below:
For the year ended 31.12.2021
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Derivatives financial - - - -
assets (a)
Equity investments (b) 8.7 - - 8.7
Loans and receivables
(c) - 1,011.7 - 1,011.7
Liquid investment (d) - 2,969.7 - 2,969.7
8.7 3,981.4 - 3,990.1
Financial liabilities
Derivatives financial - - - -
liabilities (a)
Trade and other - - - -
payables
- - - -
For the year ended 31.12.2020
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Derivatives financial assets (a) - 1.4 - 1.4
Equity investments (b) 11.1 - - 11.1
Loans and receivables (c) - 808.0 - 808.0
Liquid investment (d) (restated) - 2,426.0 - 2,426.0
11.1 3,235.4 - 3,246.5
Financial liabilities
Derivatives financial liabilities (a) - (37.4) - (37.4)
Trade and other payables - (0.3) - (0.3)
- (37.7) - (37.7)
Recurring fair value measurements are those that are required in
the balance sheet at the end of each reporting year.
a) Derivatives in designated hedge accounting relationships are
valued using a discounted cash flow analysis valuation model, which
includes observable credit spreads and using the applicable yield
curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
These are level 2 inputs as described below. Hedging instruments in
place during 2021 and 2020 related to commodity and foreign
exchange options.
b) Equity investments are investments in shares on active
markets and are valued using unadjusted quoted market values of the
shares at the financial reporting date. These are level 1 inputs as
described below.
c) Provisionally priced metal sales for the period are
marked-to-market at the end of the period. Gains and losses from
the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and trade
receivables in the balance sheet. Forward prices at the end of the
period are used for copper sales while period-end average prices
are used for molybdenum concentrate sales. These are level 2 inputs
as described below.
d) Liquid investments are highly liquid current asset
investments that are valued reflecting market prices at the period
end. These are level 2 inputs as described below. The 2020
comparative figures have been restated to reclassify these amounts
from level 1 to level 2 inputs.
The inputs to the valuation techniques described above are
categorised into three levels, giving the highest priority to
unadjusted quoted prices in active markets (level 1) and the lowest
priority to unobservable inputs (level 3 inputs):
- Level 1 fair value measurement inputs are unadjusted quoted
prices in active markets for identical assets or liabilities.
- Level 2 fair value measurement inputs are derived from inputs
other than quoted market prices included in level 1 that are
observable for the asset or liability, either directly or
indirectly.
- Level 3 fair value measurement inputs are unobservable inputs for the asset or liability.
The degree to which inputs into the valuation techniques used to
measure the financial assets and liabilities are observable and the
significance of these inputs in the valuation are considered in
determining whether any transfers between levels have occurred. In
the year ended 31 December 2021, there were no transfers between
levels in the hierarchy.
b) Derivative financial instruments
The Group periodically 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 applied the hedge accounting
provisions of IFRS 9 Financial Instruments. The effective portion
of changes in the fair value of derivative financial instruments
that are designated and qualify as hedges of future cash flows have
been recognised directly in equity, with such amounts subsequently
recognised in profit or loss in the period when the hedged item
affects profit or loss. Any ineffective portion is recognised
immediately in profit or loss. Realised gains and losses on
commodity derivatives recognised in profit or loss are recorded
within revenue. The time value element of changes in the fair value
of derivative options is recognised within other comprehensive
income. Derivatives embedded in other financial instruments or
other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host
contracts and the host contracts are not carried at fair value.
Changes in fair value are reported in profit or loss for the
year.
8. Net finance income/(expense)
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Investment income
Interest receivable 3.4 3.4
Gains on liquid investments held at
fair value through profit or loss 1.6 15.5
5.0 18.9
Interest expense
Interest expense (63.4) (77.1)
(63.4) (77.1)
Other finance items
Unwinding of discount on provisions (5.4) (5.9)
Adjustment to provision discount rates 30.0 (11.8)
Effects of changes in foreign exchange
rates 49.9 (28.4)
Preference dividends (0.1) (0.1)
74.4 (45.2)
Net finance income/(expenses) 16.0 (103.4)
During 2021, amounts capitalised and consequently not included
within the above table were as follows: $2.1 million at Centinela (
year ended 31 December 2020 - $ 5.7 million) and $12.1 million at
Los Pelambres ( year
ended 31 December 2020 - $21.0 million).
The interest expense shown above includes $7.9 million in
respect of leases (2020 - $9.7 million).
9. Taxation
The tax charge for the period comprised the following:
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Current tax charge
Corporate tax (principally first category
tax in Chile) (560.8) (353.5)
Mining tax (royalty) (250.0) (106.1)
Withholding tax (224.7) (55.8)
Exchange gains on corporate tax balances - 0.1
(1,035.5) (515.3)
Deferred tax
Corporate tax (principally first category
tax in Chile) (237.4) (1.1)
Mining tax (royalty) 0.9 4.2
Withholding tax 29.7 (14.3)
(206.8) (11.2)
Total tax charge (income tax expense) (1,242.3) (526.5)
The rate of first category (i.e. corporate) tax in Chile is
27.0% (2020 - 27.0%).
In addition to first category tax and the mining tax, the Group
incurs withholding taxes on any remittance of profits from Chile.
Withholding tax is levied on remittances of profits from Chile at
35% less first category (i.e. corporation) tax already paid in
respect of the profits to which the remittances relate.
The Group's mining operations are also subject to a mining tax
(royalty). Production from Los Pelambres, Antucoya, Encuentro
(oxides), the Tesoro North East pit and the Run-of-Mine processing
at Centinela Cathodes is subject to a rate of between 5-14%,
depending on the level of operating profit margin, and production
from Centinela Concentrates and the Tesoro Central and Mirador pits
is subject to a rate of 5% of taxable operating profit.
Year ended Year ended Year ended Year ended
Excluding Including exceptional Excluding exceptional Including exceptional
exceptional items items items items
31.12.2021 31.12.2021 31.12.2020 31.12.2020
$m % $m % $m % $m %
Profit before
tax 3,654.7 3,477.1 1,493.9 1,413.1
Tax at the
Chilean
corporate tax
rate of 27% (986.8) 27 (938.8) 27 (403.4) 27.0 (381.5) 27.0
Mining Tax
(royalty) (243.8) 6.7 (243.8) 7.0 (101.3) 6.8 (101.3) 7.2
Deduction of
mining royalty
as an
allowable
expense in
determination
of first
category tax 67.8 (1.9) 67.8 (1.9) 28.1 (1.9) 28.1 (2.0)
Items not
deductible
from first
category tax (31.6) 0.9 (31.6) 0.9 (9.8) 0.7 (9.8) 0.6
Adjustment in
respect of
prior years (12.1) 0.3 (12.1) 0.3 (1.6) 0.1 (1.6) 0.1
Withholding tax (195.0) 5.3 (195.0) 5.6 (70.0) 4.7 (70.0) 5.0
Tax effect of
share of
profit of
associates and
joint ventures 16.1 (0.4) 16.1 (0.5) 1.4 (0.1) 1.4 (0.1)
Impact of
previously
unrecognised
tax losses on
current tax 52.5 (1.4) 52.5 (1.5) 10.5 (0.7) 10.5 (0.7)
Impact of
recognition of
previously
unrecognised
tax losses on
deferred tax - - 90.6 (2.6) - - - -
Impairment of
investment in
associate - - - - - - (2.2) 0.2
Provision
against
carrying value
of assets - - (48.0) 1.4 - - - -
Net other items - - - - (0.1) - (0.1) -
Tax expense and
effective tax
rate for the
Year ended (1,332.9) 36.5 (1,242.3) 35.7 (546.2) 36.6 (526.5) 37.3
=========
The effective tax rate excluding exceptional items of 36.5%
varied from the statutory rate principally due to the mining tax
(royalty) (net impact of $176.0 million / 4.8% including the
deduction of the mining tax (royalty) as an allowable expense in
the determination of first category tax), the withholding tax
relating to the remittance of profits from Chile (impact of $195.0
million / 5.3%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile
(impact of $31.6 million / 0.9%) and adjustments in respect of
prior years (impact of $12.1 million / 0.3%), partly offset by the
impact of previously unrecognised tax losses (impact of $52.5
million / 1.4%) and the impact of the recognition of the Group's
share of profit from associates and joint ventures, which are
included in the Group's profit before tax net of their respective
tax charges (impact of $16.1 million / 0.4%).
The impact of the exceptional items on the effective tax rate
including exceptional items was $42.6 million / 1.2%.
The main factors which could impact the sustainability of the
Group's existing effective tax rate are:
-- The level of future distributions made by the Group's Chilean
subsidiaries out of Chile, which could result in increased
withholding tax charges.
-- The impact of expenses which are not deductible for Chilean
first category tax. Some of these expenses are relatively fixed
costs, and so the relative impact of these expenses on the Group's
effective tax rate will vary depending on the Group's total profit
before tax in a particular year.
There are no significant tax uncertainties which would require
critical judgements, estimates or potential provisions.
10. Discontinued operation
There were no profits from discontinued operations in the year
ended 2021.
In 2016, the Group disposed of Minera Michilla SA, with the
profit on disposal, along with the results for that year, being
presented on the "Profit for the period from discontinued
operations" line in the income statement. The Group retained
certain residual options over the Michilla operation, and in
December 2020 the current owner of Michilla paid the Group $10.0
million in order to extinguish those options, resulting in a
post-tax gain for the Group of $7.3 million. Consistent with the
original presentation in 2016, this gain was reflected on the
"Profit for the period from discontinued operations" line in the
income statement for the year ended 2020.
11. Earnings per share
Year ended Year ended
31.12.2021 31.12.2020
$m $m
Profit for the period attributable to equity
holders of the Company (exc. exceptional items) 1,404.4 546.6
Exceptional Items (114.2) (40.2)
Less profit from discontinued operations - (7.3)
Profit for the period attributable to equity
holders of the Company (inc. exceptional items)
from continuing operations 1,290.2 499.1
Number Number
Ordinary shares in issue throughout each period 985,856,695 985,856,695
Year ended Year ended
31.12.2021 31.12.2020
US cent US cent
Basic earnings per share (exc. exceptional
items) from continuing operations 142.5 54.7
Basic earnings per share (exceptional items)
from continuing operations (11.6) (4.1)
Basic earnings per share (inc. exceptional
items) from continuing operations 130.9 50.6
Basic earnings per share from discontinued
operations - 0.7
Total continuing and discontinued operations
(inc. exceptional items) 130.9 51.3
Basic earnings per share are calculated as profit after tax and
non-controlling interests, based on 985,856,695 (2020: 985,856,695)
ordinary shares.
There was no potential dilution of earnings per share in either
year set out above, and therefore diluted earnings per share did
not differ from basic earnings per share as disclosed above.
Reconciliation of basic earnings per share from continuing
operations:
Year ended Year ended
31.12.2021 31.12.2020
Profit for the year attributable to equity
holders of the Company including exc. Items $m 1,290.2 506.4
Less: profit for discontinued operations
attributable to equity holders of the Company - (7.3)
Profit from continuing operations attributable
to equity holders of the Company 1,290.2 499.1
Ordinary shares number 985,856,695 985,856,695
Basic earnings per share from continuing
operations 130.9 50.6
12. Dividends
The Board has recommended a final dividend of 118.9 cents per
ordinary share or $1,172.1 million in total (2020 - 48.5 cents per
ordinary share or $478.1 million in total). The interim dividend of
23.6 cents per ordinary share or $232.7 million in total was paid
on 1 October 2021 (2020 interim dividend of 6.2 cents per ordinary
share or $61.1 million in total). This gives total dividends
proposed in relation to 2021 (including the interim dividend) of
142.5 cents per share or $1,404.8 million in total (2020 - 54.7
cents per share or $539.3 million in total).
Dividends per share actually paid in the year and recognised as
a deduction from net equity under IFRS were 72.1 cents per ordinary
share or $710.8 million in total (2020 - 13.3 cents per ordinary
share or $131.1 million in total) being the interim dividend for
the year and the final dividend proposed in respect of the previous
year.
Further details of the currency election timing and process
(including the default currency of payment) are available on the
Antofagasta plc website (www.antofagasta.co.uk) or from the
Company's registrar, Computershare Investor Services PLC on +44 370
702 0159.
13. Intangible asset
At 31.12.2021 At 31.12.2020
$m $m
Balance at the beginning
of the year 150.1 150.1
Provision against (150.1) -
carrying value
Balance at the end
of the period - 150.1
The $150.1 million intangible asset reflects the value of Twin
Metals' mining licences assets included within the corporate
segment. As explained in note 3, an impairment provision has been
recognised in respect of this asset as at 31 December 2021.
14. Property, plant and equipment
Railway
and other
Mining transport At 31.12.2021 At 31.12.2020
$m $m $m $m
Balance at the
beginning of
the year 9,582.7 269.2 9,851.9 9,556.7
Additions 1,823.2 32.7 1,855.9 1,348.3
Additions -
depreciation
capitalised 72.0 - 72.0 67.8
Reclassifications (2.2) 0.6 (1.6) -
Capitalisation of
critical
spare parts 0.4 0.5 0.9 10.2
Capitalisation of
interest 14.2 - 14.2 8.0
Adjustment to
capitalised
decommissioning
provisions (Note
20) (119.9) - (119.9) 59.4
Depreciation
expensed in the
year (1,047.8) (30.9) (1,078.7) (1,048.7)
Depreciation
capitalised in
PP&E (72.0) - (72.0) (67.8)
Net effect of
depreciation
capitalised in
inventories 54.1 - 54.1 (74.8)
Asset disposals 292.1 (302.9) (10.8) (7.2)
Provision against
carrying
value (27.5) - (27.5) -
Balance at the end
of the period 10,569.3 (30.8) 10,538.5 9,851.9
During the year ended 31 December 2021, the net effect of
depreciation capitalised within property, plant and equipment or
inventories in respect of assets relating to Los Pelambres,
Centinela and Antucoya is $17.9million (31 December 2020 - $142.6
million), and has accordingly been excluded from the depreciation
charge recorded in the income statement as shown in Note 5.
At 31 December 2021, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $890.6 million (31 December 2020 - $849.5
million).
As explained in note 3, an impairment provision has been
recognised in respect of $27.5 million of property, plant and
equipment relating to the Twin Metals project.
Depreciation capitalised in property, plant and equipment of
$72.0 million related to the depreciation of assets used in mine
development (operating stripping) at Centinela, Los Pelambres and
Antucoya (at 31 December 2020 - $67.8 million).
15. Investment in associates and joint ventures
For the
For the year ended
Minera Tethyan year ended Restated
ATI(ii) Zaldívar(iii) Copper(iv) 31.12.2021 31.12.2020
$m $m $m $m $m
Balance at the
beginning of
the year 5.6 909.0 - 914.6 1,024.8
Obligations on
behalf of JV
at the beginning
of the year - - (1.1) (1.1) (1.8)
Capital
contribution - - 9.5 9.5 31.1
Impairment of
investment in
associate (i) - - - - (80.8)
Share of
profit/(loss)
before
tax 0.2 99.0 (9.0) 90.2 12.2
Share of tax - (30.5) - (30.5) (7.1)
Share of
profit/(loss) from
associate 0.2 68.5 (9.0) 59.7 5.1
Dividends
receivable - (77.5) - (77.5) (65.0)
Balance at the end
of the period 5.8 900.0 - 905.8 914.6
Obligations on
behalf of JV
at the end of the
year - - (0.6) (0.6) (1.1)
For the
For the year ended
Minera Tethyan year ended Restated
ATI Zaldívar Copper 31.12.2021 31.12.2020
$m $m $m $m $m
Share of
profit/(loss) from
associates and
joint ventures 0.2 68.5 (9.0) 59.7 5.1
The investments which are included in the $905.2 million balance
at 31 December 2021 are set out below:
Investment in associates
(i) On 31 March 2020, the Group agreed to dispose of its 40%
interest in Hornitos coal-fired power station to ENGIE Energía
Chile S.A. ("ENGIE"), the owner of the remaining 60% interest. This
was part of the value accretive renegotiation of Centinela's power
purchase agreement which as a result will be wholly supplied from
lower cost renewable sources from 2022. In accordance with the
terms of the agreement, the Group disposed of its investment to
ENGIE in December 2021 for a nominal consideration, and has not
been entitled to receive any further dividend income from Hornitos
from the date of the agreement. Accordingly, the Group no longer
had any effective economic interest in the results or assets of
Hornitos from 31 March 2020 onwards, and therefore recognised an
impairment of $80.8 million in respect of its investment in
associate balance during 2020, and no longer recognised any share
of Hornitos' results. The post-tax impact of the provision was
$61.1 million, of which $40.2 million was attributable to the
equity owners of the Company.
(ii) The Group's 30% interest in ATI, which operates a
concession to manage installations in the port of Antofagasta.
Investment in joint ventures
(iii) The Group's 50% interest in Minera Zaldívar SpA ("Zaldívar").
(iv) The Group's 50% interest in Tethyan Copper Company Limited
("Tethyan"), which is a joint venture with Barrick Gold Corporation
in respect of the Reko Diq project in the Islamic Republic of
Pakistan ("Pakistan"). Tethyan has been pursuing arbitration claims
against Pakistan following the unlawful denial of a mining lease
for the project in 2011. Details in respect of the arbitration are
set out in Note 27.
As the net carrying value of the interest in Tethyan is negative
it is included within non-current liabilities, as the Group is
liable for its share of the joint venture's obligations.
Summarised financial information for the associates at December
2021 is as follows:
ATI Total Total
31.12.2021 31.12.2021 31.12.2020
$m $m $m
Cash and cash equivalents 1.2 1.2 0.2
Current assets 13.7 13.7 11.3
Non-current assets 99.3 99.3 108.2
Current liabilities (22.5) (22.5) (19.9)
Non-current liabilities (75.0) (75.0) (83.5)
Revenue 47.2 47.2 40.4
Profit/(loss) from
continuing operations 1.3 1.3 (1.9)
Total comprehensive
income/(expense) 1.3 1.3 (1.9)
Summarised financial information for the joint ventures at
December 2021 is as follows:
Minera Tethyan Total Total
Zaldívar Copper
31.12.2021 31.12.2021 31.12.2021 31.12.2020
$m $m $m $m
Cash and cash equivalents 170.7 3.6 174.3 285.2
Current assets 759.2 - 759.2 677.2
Non-current assets 1,792.5 - 1,792.50 1,856.3
Current liabilities (224.5) (5.1) (229.6) (296.2)
Non-current liabilities (662.7) (0.1) (662.8) (670.5)
Revenue 849.2 - 849.2 599.3
Profit/(loss) after
tax 137.1 (18.0) 119.1 11.4
Total comprehensive
income/(expense) 137.1 (18.0) 119.1 11.4
The above summarised financial information is based on the
amounts included in the IFRS Financial Statements of the associate
or joint venture (100% of the results or balances of the associate
or joint venture, rather than the Group's proportionate share),
after the Group's fair value adjustments.
16. Equity investments
At 31.12.2021 At 31.12.2020
$m $m
Balance at the beginning of the year 11.1 5.1
Movements in fair value (2.1) 5.5
Foreign currency exchange difference (0.3) 0.5
Balance at the end of the period 8.7 11.1
Equity investments represent those investments which are not
subsidiaries, associates or joint ventures and are not held for
trading purposes. The fair value of all equity investments are
based on quoted market prices.
17. Inventories
At 31.12.2021 At 31.12.2020
$m $m
Current:
Raw materials and consumables 155.6 178.2
Work in progress 316.5 339.3
Finished goods 60.7 75.2
532.8 592.7
Non-current:
Work in progress 270.4 278.1
Total current and non-current
inventories 803.2 870.8
18. Borrowings and leases
Note At 31.12.2021 At 31.12.2020
$m $m
Los Pelambres
Senior loan (i) (1,188.3) (1,288.1)
Leases (ii) (54.8) (91.4)
Centinela
Senior loan (iii) (386.8) (496.5)
Subordinated debt (iv) - (203.0)
Leases (v) (59.8) (78.0)
Antucoya
Senior loan (vi) (196.3) (261.1)
Subordinated debt (vii) (184.5) (191.5)
Short-term loan (viii) (35.0) (75.0)
Leases (ix) (23.4) (19.9)
Corporate and other items
Senior loan (x) (497.3) (496.6)
Bond (xi) (496.1) (495.6)
Leases (xii) (20.4) (18.6)
Railway and other transport
services
Senior loan (xiii) (25.8) (36.5)
Leases (xiv) (1.4) (0.3)
Preference shares (xv) (2.7) (2.7)
Total (3,172.6) (3,754.8)
(i) The senior loan at Los Pelambres are divided in three
tranches. The first tranche has a remaining duration of 4 years and
has an interest rate of US LIBOR six-month rate plus 1.05%. The
second tranche has a remaining duration of 7 years and has an
interest rate of US LIBOR six-month rate plus 0.85%. The third
tranche has a remaining duration of 6.5 years and has an interest
rate of US LIBOR six-month rate plus 1.10%. As at 31 December 2021,
$1,420 million of the loan facility had been drawn-down and $209
million had been repaid. The loans are subject to financial
covenants which require that specified net debt to EBITDA and
EBITDA to finance expense ratios are maintained.
(ii) Leases at Los Pelambres are denominated in US dollars with
an average interest rate of US LIBOR six-month rate plus 1.74% and
a remaining duration of 0.5 years.
(iii) The senior loan at Centinela is US dollars denominated
with a duration of 4 years and an interest rate of US LIBOR
six-month rate plus 0.95%. The loan is subject to financial
covenants which require that specified net debt to EBITDA and
EBITDA to finance expense ratios are maintained.
(iv) The US dollar denominated subordinated debt at Centinela
was repaid on 19 November 2021.
(v) Leases at Centinela are denominated in US dollars with an
average interest rate of US LIBOR six-month rate plus 4.8% and a
remaining duration of 5 years.
(vi) The senior loan at Antucoya represents a US dollar
denominated syndicated loan. This loan has a remaining duration of
3 years and has an interest rate of US LIBOR six-month rate plus
1.3%. The loan is subject to financial covenants which require that
specified net debt to EBITDA and EBITDA to finance expense ratios
are maintained.
(vii) Subordinated debt at Antucoya is US dollar denominated,
provided to Antucoya by Marubeni Corporate with a remaining
duration of 3 years and an interest rate of US LIBOR six-month rate
plus 3.65%. Subordinated debt provided by Group companies to
Antucoya has been eliminated on consolidation.
(viii) The short- duration loan at Antucoya is US dollar
denominated, comprising a working capital loan for an average
period of 0.8 years and has an interest rate of US LIBOR six-month
rate plus a weighted average spread of 0.25%.
(ix) Leases at Antucoya are denominated in US dollars with an
average interest rate of US LIBOR six-month rate plus 2.0% and a
remaining duration of 2.5 years.
(x) Senior loan at Corporate (Antofagasta plc) is US dollar
denominated with an interest rate of US LIBOR six-month rate plus
2.25% and has a remaining duration of 4 years.
(xi) Antofagasta plc in October 2020 issued a corporate bond for
$500 million with a 10 year tenor and a yield of 2.415%.
(xii) Leases at Corporate and other items are denominated in
Unidades de Fomento (inflation-linked Chilean pesos) and have a
remaining duration of 5 years and are at fixed rates with an
average interest rate of 5.2%.
(xiii) Long-term loans at The Transport division are US dollar
denominated, and remaining duration of 1.5 years and an interest
rate of US LIBOR six-month rate plus 1.06%.
(xiv) Leases at The Transport division are US dollar denominated
in with an average interest rate of US LIBOR six-month rate plus
3.2% and a remaining duration of 5 years.
(xv) The preference shares are Sterling-denominated and issued
by Antofagasta plc. There were 2 million shares of GBP1 each
authorised, issued and fully paid at 31 December 2018. The
preference shares are non-redeemable and are entitled to a fixed
cumulative dividend of 5% per annum. On winding up, they are
entitled to repayment and any arrears of dividend in priority to
ordinary shareholders, but are not entitled to participate further
in any surplus. Each preference share carries 100 votes in any
general meeting of the Company.
At 31.12.2021 At 31.12.2020
$m $m
Short-term borrowings (337.1) (603.4)
Medium and long-term borrowings (2,835.5) (3,151.4)
Total (3,172.6) (3,754.8)
At 31 December 2021, $639.5 million (31 December 2020 - $673.1
million) of the borrowings has fixed rate interest and $2,533.1
million (December 2020 - $3,079.0 million) has floating rate
interest. The Group periodically enters into interest rate
derivative contracts to manage its exposure to interest rates.
19. Post-employment benefit obligation
For the For the
year ended year ended
31.12.2021 31.12.2020
$m $m
Balance at the beginning
of the year (123.2) (118.7)
Current service cost (19.8) (17.9)
Actuarial gains 3.1 9.8
Unwinding of discount on
provisions (2.8) (3.3)
Adjustment to provision
discount rates (0.8) (1.6)
Paid in the year 16.4 14.5
Foreign currency exchange
difference 19.6 (6.0)
Balance at the end of the
year (107.5) (123.2)
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.
20. Decommissioning and restoration and other long term
provisions
For the For the
year ended year ended
31.12.2021 31.12.2020
$m $m
Balance at the beginning
of the year (520.2) (413.3)
Charge to operating profit
in the year (11.3) (45.2)
Unwinding of discount
on provisions (2.6) (2.6)
Adjustment to provision
discount rates 30.8 (9.2)
Capitalised adjustment
to provision 119.9 (59.4)
Utilised in the year 33.8 22.2
Foreign currency exchange
difference 13.5 (12.7)
Balance at the end of
the year (336.1) (520.2)
For the For the
year ended year ended
31.12.2021 31.12.2020
$m $m
Short-term provisions (33.8) (22.2)
Long-term provisions (302.3) (498.0)
Total (336.1) (520.2)
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 independent formal review
by Sernageomin, the Chilean government agency which regulates the
mining industry in Chile. There have not been any significant
updates to the mining operations closure plans approved by
Sernageomin during the year. During 2019, the Los Pelambres,
Centinela and Zaldívar balances were updated to reflect new plans
approved by Sernageomin during that year. The provision balance
reflects the present value of the forecast future cash flows
expected to be incurred in line with the closure plans, discounted
using Chilean real interest rates with durations corresponding with
the timings of the closure activities. At 31 December 2021, the
real discount rates ranged from 2.31% to 2.54% (31 December 2020:
0.5% to 0.9%).
It is estimated that the provision will be utilised from 2021
until 2064 based on current mine plans, with approximately 22% of
the total provision balance expected to be utilised between 2021
and 2030, approximately 46% between 2031 and 2040, approximately 9%
between 2041 and 2050 and approximately 23% between 2051 and
2068.
Given the long-term nature of these balances, it is possible
that future climate risks could impact the appropriate amount of
these provisions, both in terms of the nature of the
decommissioning and site rehabilitation activities that are
required, or the costs of undertaking those activities. The Group
will report against the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD) in the 2021 Annual
Report. This process included scenario analyses assessing the
potential future transition and physical risks. As a simple
high-level sensitivity, we have considered whether the level of
estimated costs relating to the potential future risks identified
under the scenario analysis could indicate a general level of
future cost increases as a consequence of climate risks which could
indicate a significant potential impact on these provision
balances. This analysis did not indicate a significant potential
impact on the decommissioning and restoration provision balances.
However, more detailed specific analysis of the potential impacts
of climate risks in future periods could result in adjustments to
these provision balances. When future updates to the closure plans
are prepared and submitted to Sernageomin for review and approval,
it is likely that there will be more detailed consideration of
potential climate risk impacts which may need to be incorporated
into the plan assumptions. In addition, Sernageomin may introduce
new regulations or guidance in respect of climate risks which may
need to be addressed in future updates to the Group's closure
plans.
21. Deferred tax assets and liabilities
At 31.12.2021 At 31.12.2020
$m $m
Net position at the
beginning of the year (1,106.4) (1,097.0)
Charge to tax on profit
in year (206.8) (11.2)
Deferred tax recognised
directly in equity (2.5) 1.7
Disposal - 0.1
Net position at the
end of the year (1,315.7) (1,106.4)
Analysed between:
Net deferred tax assets 96.8 6.4
Net deferred tax liabilities (1,412.5) (1,112.8)
Net position (1,315.7) (1,106.4)
The deferred tax balance of $1,315.7 million (2020 - $1,106.4
million) includes $1,274.6 million (2020 - $1,053.4 million)
expected to crystalise in more than one year. All amounts are shown
as non-current on the face of the balance sheet as required by IAS
12 Income Taxes.
Deferred tax assets and deferred tax liabilities have been
offset where they relate to income taxes levied by the same
taxation authority and the relevant Group entity has a legally
enforceable right to set off current tax assets against current tax
liabilities.
At 31 December 2021, the Group recognised $90.6 million of
previously unrecognised deferred tax assets relating to tax losses
available for offset against future profits. In previous periods,
the Group had reviewed these tax losses for potential recognition,
and concluded that it was not probable that future taxable profits
would be available against which the losses could be utilised, and
accordingly had not recognised a deferred tax asset in respect of
those losses. In making this assessment in previous periods, the
Group had taken into account that the relevant Group entity
(Antucoya) had consistently generated taxable losses in recent
years, was continuing to generate taxable losses in the then
current period, and was forecast to continue generating taxable
losses in future periods. During 2021, there has been a significant
improvement in the current copper price (with the copper price
reaching record levels in nominal terms during the year) and also
the near-term copper price outlook. As a result of this improvement
in the copper price environment, the relevant Group entity began to
generate taxable profits in 2021. The improved near-term
outlook
for the copper price also means that the entity is now forecast
to generate sufficient future taxable profits to fully utilise its
remaining tax losses. Current forecasts indicate that the losses
will be utilised over approximately the next eight years (compared
with the remaining mine life for Antucoya of 22 years). The
forecasts are based on Antucoya's life-of-mine model. When the tax
losses are utilised in future years, it is expected that the impact
will be recorded within the underlying tax charge for that year, in
order to match with the similar classification of the corresponding
taxable profits of that year.
22. Share capital and share premium
There was no change in share capital or share premium in the
year ended 2021 or 2020. Details are shown in the Consolidated
Statement of Changes in Equity.
23. Other reserves and retained earnings
At 31.12.2021 At 31.12.2020
$m $m
Share premium
At 1 January and 31 December 199.2 199.2
Hedging reserve (1)
At 1 January (23.9) (5.0)
Parent and subsidiaries' net cash
flow hedge fair value losses (100.4) (24.2)
Parent and subsidiaries' net cash
flow hedge losses transferred to
the income statement 126.8 3.4
Tax on the above (2.5) 1.9
At 31 December - (23.9)
Equity investment revaluation reserve
(2)
At 1 January (5.3) (10.8)
(Losses)/gains on equity investment (2.1) 5.5
At 31 December (7.4) (5.3)
Foreign currency translation reserve
(3)
At 1 January (1.4) (2.3)
Currency translation adjustment (1.6) 0.9
At 31 December (3.0) (1.4)
Total other reserves per balance
sheet (10.4) (30.6)
Retained earnings
At 1 January 7,492.2 7,112.8
Parent and subsidiaries' profit
for the year 1,230.5 582.1
Equity accounted units' profit/(loss)
after tax for the year 59.7 (75.7)
Actuarial gains/(loss) (4) - 4.1
8,782.4 7,623.3
Dividends paid (710.8) (131.1)
At 31 December 8,071.6 7,492.2
(1) The hedging reserve records gains or losses on cash flow
hedges that are recognised initially in equity, as described in
Note 7.
(2) The equity investment revaluation reserves record fair value
gains or losses relating to equity investments, as described in
Note 16.
(3) Exchange differences arising on the translation of the
Group's net investment in foreign-controlled companies are taken to
the foreign currency translation reserve.
(4) Actuarial gains or losses relate to long-term employee
benefits.
24. Reconciliation of profit before tax to net cash inflow from
operating activities
At 31.12.2021 At 31.12.2020
$m $m
Profit before tax 3,477.1 1,413.1
Depreciation 1,078.7 1,048.7
Net loss on disposals 9.2 6.3
Net finance income/(expense) (16.0) 103.4
Share of profit of associates and joint
ventures (exc. exceptional items) (59.7) (5.1)
Provisions for impairment 177.6 80.8
Decrease/(Increase) in inventories 10.9 (13.6)
Increase in debtors (206.8) (259.9)
Increase in creditors 55.7 31.0
(Decrease)/Increase in provisions (19.0) 26.4
Cash flow from operations 4,507.7 2,431.1
25. Analysis of changes in net debt
Fair Amortisation
Cash value New of finance Capitalisation
At 31.12.2020 flows gains leases costs of interest Other Reclassification Exchange At 31.12.2021
$m $m $m $m $m $m $m $m $m $m
Cash and
cash
equivalents 1,246.8 (483.1) - - - - - - (20.3) 743.4
Liquid
investments 2,426.0 543.7 - - - - - - - 2,969.7
Total 3,672.8 60.6 - - - - - - (20.3) 3,713.1
Borrowings
due within
one year (529.8) 545.6 - - - - 10.4 (294.2) - (268.0)
Borrowings
due after
one year (3,013.8) - - - (5.7) (16.6) - 294.2 (0.2) (2,742.1)
Leases due
within one
year (73.6) 88.9 - - - - - (84.4) - (69.1)
Leases due
after one
year (134.9) - - (61.8) - - - 84.4 21.6 (90.7)
Preference
shares (2.7) - - - - - - - - (2.7)
Total
borrowings (3,754.8) 634.5 - (61.8) (5.7) (16.6) 10.4 - 21.4 (3,172.6)
Net
cash/(debt) (82.0) 695.1 - (61.8) (5.7) (16.6) 10.4 - 1.1 540.5
Net cash/(debt)
Net cash/(debt) at the end of each period was as follows:
At 31.12.2021 At 31.12.2020
$m $m
Cash, cash equivalents and liquid
investments 3,713.1 3,672.8
Total borrowings (3,172.6) (3,754.8)
Net cash/(debt) 540.5 (82.0)
26. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
associates and joint ventures are disclosed below.
The transactions which Group companies entered into with related
parties who are not members of the Group are set out below. There
are no guarantees given or received and no provisions for doubtful
debts related to the amount of outstanding balances.
a) Quiñenco SA
Quiñenco SA ("Quiñenco") is a Chilean financial and industrial
conglomerate, the shares of which are traded on the Santiago Stock
Exchange. The Group and Quiñenco are both under the control of the
Luksic family, and two Directors of the Company, Jean-Paul Luksic
and Andronico Luksic, who are also directors of Quiñenco.
The following transactions took place between the Group and the
Quiñenco group of companies, all of which were on normal commercial
terms at market rates:
- the Group earned interest income of nil (2020 - $1.7 million)
during the year on deposits with Banco de Chile SA, a subsidiary of
Quiñenco. Deposit balances at the end of the year were nil (2020 -
nil);
- the Group earned interest income of $0.1 million (2020 - $0.3
million) during the year on investments with BanChile Corredores de
Bolsa SA, a subsidiary of Quiñenco. Investment balances at the end
of the year were $2.2 million (2020 - nil);
- the Group made purchases of fuel from ENEX SA, a subsidiary of
Quiñenco, of $263.9 million (2020 - $212.6 million). The balance
due to ENEX SA at the end of the year was $20.4 million (2020 -
nil).
- the Group purchased shipping services from Hapag Lloyd, an
associate of Quiñenco, for $8.9 million (2020 - $7.0 million). The
balance due to Hapag Lloyd at the end of the year was $0.4 million
(2020 - nil).
b) Compañía de Inversiones Adriático SA
In 2021, the Group leased office space on normal commercial
terms from Compañía de Inversiones Adriático SA, a company in which
members of the Luksic family are interested, at a cost of $0.8
million (2020 - $0.7 million)
c) Antomin 2 Limited and Antomin Investors Limited
The Group holds a 51% interest in Antomin 2 Limited ("Antomin
2") and Antomin Investors Limited ("Antomin Investors"), which own
a number of copper exploration properties. The Group originally
acquired its 51% interest in these properties for a nominal
consideration from Mineralinvest Establishment, which continues to
hold the remaining 49% of Antomin 2 and Antomin Investors.
Mineralinvest is owned by the E. Abaroa Foundation, in which
members of the Luksic family are interested. During 2021, the Group
incurred $0.1 million (2020 - $0.1 million) of exploration costs at
these properties.
d) Tethyan Copper Company Limited
As explained in Note 15, the Group has a 50% interest in Tethyan
Copper Company Limited ("Tethyan"), which is a joint venture with
Barrick Gold Corporation over Tethyan's mineral interests in
Pakistan. During 2020, the Group contributed $9.5 million (2020 -
$7.2 million) to Tethyan.
e) Compañía Minera Zaldívar SpA
The Group has a 50% interest in Zaldívar, which is a joint
venture with Barrick Gold Corporation. Antofagasta is the operator
of Zaldívar. The balance due from Zaldívar to group companies at
the end of the year was $2.5 million (2020 - $0.5 million). During
2021, Zaldivar declared dividends of $77.5 million to the Group
(2020 - $65.0 million).
f) Inversiones Hornitos SA
As explained in Note 3, on 31 March 2020, the Group agreed to
dispose of its 40% interest in Hornitos coal-fired power station to
ENGIE Energía Chile S.A. ("ENGIE"), the owner of the remaining 60%
interest. Under the terms of this agreement the Group agreed to
make a final capital contribution to Hornitos of $24 million, the
payment of which took place during 2021. During 2020, the Group
paid $128.2 million to Inversiones Hornitos in relation to the
energy supply contract at Centinela. During 2020 and 2021, the
Group has not received dividends from Inversiones Hornitos S.A.
g) Other related parties
The ultimate parent company of the Group is Metalinvest
Establishment, which is controlled by the E. Abaroa Foundation, in
which members of the Luksic family are interested. The Company's
subsidiaries, in the ordinary course of business, enter into
various sale and purchase transactions with companies also
controlled by members of the Luksic family, including Banco de
Chile S.A., Madeco S.A. and Compañía Cervecerías Unidas S.A., which
are subsidiaries of Quiñenco S.A., a Chilean industrial and
financial conglomerate the shares of which are traded on the
Santiago Stock Exchange. These transactions, all of which were on
normal commercial terms, are in total not considered to be
material.
27. Tethyan arbitration award
In July 2019, the World Bank Group's International Centre for
Settlement of Investment Disputes ("ICSID") awarded $5.84 billion
in damages (compensation and accumulated interest as at the date of
the award) to Tethyan Copper Company Pty Limited ("Tethyan"), the
joint venture held equally by the Company and Barrick Gold
Corporation, in relation to an arbitration claim filed against the
Islamic Republic of Pakistan ("Pakistan") following the unlawful
denial of a mining lease for the Reko Diq project in Pakistan in
2011.
Damages include compensation of $4.087 billion by reference to
the fair market value of the Reko Diq project at the time of the
mining lease denial, and interest until the date of the award of
$1.753 billion. The Tribunal also awarded Tethyan just under $62
million in costs incurred in enforcing its rights. Compound
interest applies to the compensation and cost awards from 12 July
2019 at a rate of US Prime +1% per annum until the award is
paid.
In November 2019, Pakistan requested that ICSID annul the award.
In March 2020, ICSID appointed a committee to consider Pakistan's
request for annulment and a hearing on Pakistan's annulment
application took place in May 2021. The Committee is expected to
issue a decision on Pakistan's annulment application in the coming
months.
On 14 March 2021, Pakistan applied to ICSID for revision of the
award. On 5 April 2021, the ICSID tribunal that issued the award
was reconstituted to consider Pakistan's revision application.
Tethyan has filed an application to dismiss Pakistan's revision
application as manifestly meritless.
Tethyan is permitted to enforce 50% of the award plus accrued
interest on the condition that any amounts collected through
enforcement of the award must be put into escrow and returned if
the award is annulled or if Pakistan's revision application is
successful. Tethyan continues to take steps to enforce the award in
accordance with these conditions.
As at 31 December 2021, the outstanding award amount was
approximately $6.45 billion.
It is expected that the proceeds of the award will only be
recognised in Antofagasta's financial statements once they are
received by the Group.
28. Litigation and contingent liabilities
The Group is subject from time to time to legal proceedings,
claims, complaints and investigations arising out of the ordinary
course of business. The Group cannot predict the outcome of
individual legal actions or claims or complaints or investigations.
As a result, the Group may become subject to liabilities that could
affect the Group's business, financial position and reputation.
Litigation is inherently unpredictable and large judgments may at
times occur. The Group may incur, in the future, judgments or enter
into settlements of claims that could lead to material cash
outflows. The Group considers that no material loss to the Group is
expected to result from the legal proceedings, claims, complaints
and investigations that the Group is currently subject to.
Provision is made for all liabilities that are expected to
materialise through legal claims against the Group.
29. Currency translation
Assets and liabilities denominated in foreign currencies are
translated into US dollars and sterling at the year-end rates of
exchange. Results denominated in foreign currencies have been
translated into US dollars at the average rate for each year.
2021 2020
Year-end rate $1,349=GBP1; $1 = Ch$844.7 $1,360=GBP1; $1 = Ch$710.95
Average rates $1,375=GBP1; $1 = Ch$759.8 $1,2820=GBP1; $1 = Ch$792.07
30. Distribution
The Annual Report and Financial Statements for the year ended 31
December 2021, together with the Notice of the 2022 Annual General
Meeting, will be posted to all shareholders in April 2022 .
Alternative performance measures (not subject to audit or
review)
This preliminary results announcement includes a number of
alternative performance measures, in addition to IFRS amounts.
These measures are included because they are considered to provide
relevant and useful additional information to users of the
accounts. Set out below are definitions of these alternative
performance measures, explanations as to why they are considered to
be relevant and useful, and reconciliations to the IFRS
figures.
a) Underlying earnings per share
Underlying earnings per share is earnings per share from
continuing operations, excluding exceptional items. This measure is
reconciled to earnings per share from continuing and discontinued
operations (including exceptional items) on the face of the income
statement. This measure is considered to be useful as it provides
an indication of the earnings generated by the on-going businesses
of the Group, excluding the impact of exceptional items which are
irregular or non-operating in nature.
b) EBITDA
EBITDA refers to Earnings Before Interest, Tax, Depreciation and
Amortisation. EBITDA is calculated by adding back depreciation,
amortisation, profit or loss on disposals and impairment charges to
operating profit. This comprises 100% of the EBITDA from the
Group's subsidiaries, and the Group's proportional share of the
EBITDA of its associates and joint ventures.
EBITDA is considered to provide a useful and comparable
indication of the current operational earnings performance of the
business, excluding the impact of the historical cost of property,
plant & equipment or the particular financing structure adopted
by the business.
For the year ended 31 December 2021
Los Pelambres Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
and evaluation and other and other
items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 2,240.5 1,260.6 238.3 - (280.8) (89.0) 3,369.6 31.8 3,401.4
Depreciation
and
amortisation 281.8 654.7 98.3 - - 13.0 1,047.8 30.9 1,078.7
Profit on
disposals 3.7 4.0 0.5 - - - 8.2 1.0 9.2
Provision
against
the carrying
value
of assets - - - - 177.6 - 177.6 - 177.6
EBITDA from
subsidiaries 2,526.0 1,919.3 337.1 - (103.2) (76.0) 4,603.2 63.7 4,669.9
Proportional
share
of the EBITDA
from
associates
and JVs - - - 172.8 - (8.0) 164.8 4.5 169.3
Total EBITDA 2,526.0 1,919.3 337.1 172.8 (103.2) (84.0) 4,768.0 68.2 4,836.2
For the year ended 31 December 2020
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and and other
evaluation other transport
items services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 1,407.9 247.0 71.2 - (85.1) (74.0) 1,567.0 25.2 1,592.2
Depreciation
and
amortisation 252.6 662.9 94.6 - - 7.8 1,017.9 30.8 1,048.7
Profit on
disposals 2.5 1.8 - - - - 4.3 2.0 6.3
EBITDA from
subsidiaries 1,663.0 911.7 165.8 - (85.1) (66.2) 2,589.2 58.0 2,647.2
Proportional
share
of the EBITDA
from
associates
and JVs - - - 95.5 - (6.5) 89.0 3.0 92.0
Total EBITDA 1,663.0 911.7 165.8 95.5 (85.1) (72.7) 2,678.2 61.0 2,739.2
c) Net Earnings
Net Earnings represent profit for the period attributable to the
owners of the parent
d) Cash costs
Cash costs are a measure of the cost of operational production
expressed in terms of cents per pound of payable copper
produced.
This is considered to be a useful and relevant measure as it is
a standard industry measure applied by most major copper mining
companies which reflects the direct costs involved in producing
each pound of copper. It therefore allows a straightforward
comparison of the unit production cost of different mines, and
allows an assessment of the position of a mine on the industry cost
curve. It also provides a simple indication of the profitability of
a mine when compared against the price of copper (per lb).
With sales of concentrates at Los Pelambres and Centinela, which
are sold to smelters and roasting plants for further processing
into fully refined metal, the price of the concentrate invoiced to
the customer reflects the market value of the fully refined metal
less a "treatment and refining charge" deduction, to reflect the
lower value of this partially processed material compared with the
fully refined metal. For accounting purposes, the revenue amount is
the net of the market value of fully refined metal less the
treatment and refining charges. Under the standard industry
definition of cash costs, treatment and refining charges are
regarded as an expense and part of the total cash cost figure.
For the For the
year ended year ended
31.12.2021 31.12.2020
Reconciliation of cash costs excluding treatment
and refining charges and by-product revenue:
Total Group operating costs (Note 5) ($m) 3,891.1 3,537.1
Zaldívar operating costs 231.7 190.9
Less:
Total - Depreciation and amortisation (Note 5)
($m) (1,078.7) (1,048.7)
Total - Loss on disposal (Note 5) ($m) (9.2) (6.3)
Elimination of non-mining operations
Corporate and other items - Total operating cost
(Note 5) ($m) (75.5) (64.3)
Exploration and evaluation - Total operating cost
(Note 5) ($m) (103.2) (85.1)
Railway and other transport services - Total operating
cost (Note 5) ($m) (106.3) (91.4)
Closure provision and other expenses not included
within cash costs ($m) (91.2) (105.8)
Inventories Variations 2.1 11.1
Total cost relevant to the mining operations'
cash costs ($m) 2,660.8 2,337.5
Copper production volumes (tonnes) 721,450 733,920
Cash costs excluding treatment and refining charges
and by-product revenue ($/tonne) 3,688 3,185
Cash costs excluding treatment and refining charges
and by-product revenue ($/lb) 1.68 1.43
At 31.12.2021 At 31.12.2020
Reconciliation of cash costs before deducting
by-products:
Treatment and refining charges - copper and by-product-
Los Pelambres (Note 5) 115.4 113.6
Treatment and refining charges - copper and by-product-
Centinela (Note 5) 70.4 68.8
Treatment and refining charges - copper - total 185.8 182.4
Copper production volumes (tonnes) 721,450 733,920
Treatment and refining charges ($/tonne) 257.6 248.5
Treatment and refining charges ($/lb) 0.11 0.13
Cash costs excluding treatment and refining charges
and by-product revenue ($/lb) 1.68 1.43
Treatment and refining charges ($/lb) 0.11 0.13
Cash costs before deducting by-product (S/lb) 1.79 1.56
d) Cash costs (continued)
At 31.12.2021 At 31.12.2020
Reconciliation of cash costs (net of by-products):
Gold revenue - Los Pelambres (Note 5) ($m) 91.2 106.4
Gold revenue - Centinela (Note 5) ($m) 346.2 251.3
Molybdenum revenue - Los Pelambres (Note 5)
($m) 353.6 181.8
Molybdenum revenue - Centinela (Note 5) ($m) 44.4 27.7
Silver revenue - Los Pelambres (Note 5) ($m) 46.6 43.3
Silver revenue - Centinela (Note 5) ($m) 38.7 21.2
Total by-product revenue ($m) 920.7 631.7
Copper production volumes (tonnes) 721,450 733,920
By-product revenue ($/tonne) 1,276.0 860.7
By-product revenue ($/lb) 0.59 0.42
Cash costs before deducting by-producs (S/lb) 1.79 1.56
By-product revenue ($/lb) (0.59) (0.42)
Cash costs (net of by-product) ($/lb) 1.20 1.14
The totals in the tables above may include some small apparent
differences as the specific individual figures have not been
rounded.
e) Attributable cash, cash equivalents & liquid investments, borrowings and net debt
Attributable cash, cash equivalents & liquid investments,
borrowings and net debt reflects the proportion of those balances
which are attributable to the equity holders of the Company, after
deducting the proportion attributable to the non-controlling
interests in the Group's subsidiaries.
This is considered to be a useful and relevant measure as the
majority of the Group's cash tends to be held at the corporate
level and therefore 100% attributable to the equity holders of the
Company, whereas the majority of the Group's borrowings tend to be
at the level of the individual operations, and hence only a
proportion is attributable to the equity holders of the
Company.
December December
2021 2020
Total Attributable Attributable Total Attributable Attributable
amount share amount amount share amount
$m $m $m $m
Cash, cash
equivalents
and liquid
investments:
Los Pelambres 427.9 60% 256.7 904.8 60% 542.9
Centinela 625.3 70% 437.7 736.3 70% 515.4
Antucoya 181.5 70% 127.1 143.6 70% 100.5
Corporate 2,436.5 100% 2,436.5 1,843.4 100% 1,843.4
Railway and
other
transport
services 41.9 100% 41.9 44.7 100% 44.7
Total 3,713.1 3,299.9 3,672.8 3,046.9
Borrowings:
Los Pelambres
(Note 18) (1,243.1) 60% (745.9) (1,379.5) 60% (827.7)
Centinela
(Note 18) (446.6) 70% (312.6) (777.5) 70% (544.2)
Antucoya
(Note 18) (439.2) 70% (307.5) (547.5) 70% (383.3)
Corporate
(Note 18) (1,016.5) 100% (1,016.4) (1,013.5) 100% (1,013.5)
Railway and
other
transport
services
(Note 18) (27.2) 100% (27.2) (36.8) 100% (36.8)
Total (Note
18) (3,172.6) (2,409.6) (3,754.8) (2,805.5)
Net
cash/(debt) 540.5 890.3 (82.0) 241.4
Production and Sales Statistics (not subject to audit or
review)
a) Production and sales volumes for copper, gold and molybdenum
Production Sales
Year ended Year ended Year ended Year ended
31.12.2021 31.12.2020 31.12.2021 31.12.2020
Copper 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 324.7 359.6 324.5 366.0
Centinela 274.2 246.8 276.1 247.7
Antucoya 78.6 79.3 80.4 76.5
Zaldívar 44 48.2 44.6 48.3
Group total 721.5 733.9 725.6 738.5
Gold 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 53.2 60.4 51.1 58.4
Centinela 199.0 143.7 193.5 141.2
Group total 252.2 204.1 244.6 199.6
Molybdenum 000 tonnes 000 tonnes 000 tonnes 000 tonnes
Los Pelambres 9.2 10.9 9.2 10.8
Centinela 1.3 1.7 1.2 1.7
Group total 10.5 12.6 10.4 12.5
Silver 000 ounces 000 ounces 000 ounces 000 ounces
Los Pelambres 1,927.5 2,073.9 1,856.8 2,020.3
Centinela 1,578.3 1,118.4 1,565.7 1,064.3
Group total 3,505.8 3,192.3 3,422.5 3,084.6
b) Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold
Cash costs Realised prices
Year ended Year Year
31.12.2021 Year ended ended ended
31.12.2020 31.12.2021 31.12.2020
$/lb $/lb $/lb $/lb
Copper
Los Pelambres 0.89 0.81 4.54 3.02
Centinela 1.13 1.27 4.31 2.95
Antucoya 2.04 1.82 3.94 2.85
Zaldivar (attributable
basis - 50%) 2.39 1.80 - -
Group weighted average
(net of by-products) 1.20 1.14 4.37 2.98
Group weighted average
(before deducting
by-products) 1.79 1.57
Group weighted average
(before deducting
by-products
and excluding treatment
and refining charges from
concentrate) 1.68 1.43
Cash costs at Los Pelambres
comprise:
On-site and shipping costs 1.43 1.10
Treatment and refining
charges for concentrates 0.15 0.18
Cash costs before deducting
by-product credits 1.59 1.27
By-product credits
(principally
molybdenum) (0.70) (0.46)
Cash costs (net of by-product
credits) 0.89 0.81
Cash costs at Centinela
comprise:
On-site and shipping costs 1.75 1.71
Treatment and refining
charges for concentrates 0.12 0.14
Cash costs before deducting
by-product credits 1.87 1.85
By-product credits
(principally
gold) (0.74) (0.58)
Cash costs (net of by-product
credits) 1.13 1.27
LME average copper price 4.23 2.80
Gold $/oz $/oz
Los Pelambres 1,783 1,827
Centinela 1,789 1,784
Group weighted average 1,788 1,797
Market average price 1,799 1,770
Molybdenum $/lb $/lb
Los Pelambres 17.5 8.8
Centinela 17.2 8.9
Group weighted average 17.4 8.8
Market average price 15.9 8.7
Silver $/oz $/oz
Los Pelambres 25.1 21.7
Centinela 24.7 20.4
Group weighted average 24.9 21.3
Market average price 25.2 20.5
Notes to the production and sales statistics
(i) For the Group's subsidiaries, the production and sales
figures reflect the total amounts produced and sold by the mine,
not the Group's share of each mine. The Group owns 60% of Los
Pelambres, 70% of Centinela and 70% of Antucoya. For the Zaldívar
joint venture, the production and sales figures reflect the Group's
proportional 50% share.
(ii) Los Pelambres produces copper and molybdenum concentrates,
Centinela produces copper concentrate and copper cathodes and
Antucoya and Zaldívar produce copper cathodes. The figures for Los
Pelambres and Centinela are expressed in terms of payable metal
contained in concentrate and in cathodes. Los Pelambres and
Centinela are also credited for the gold and silver contained in
the copper concentrate sold. Antucoya and Z aldívar 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, with sales of concentrates at Los Pelambres and
Centinela, which are sold to smelters and roasting plants for
further processing into fully refined metal, the price of the
concentrate invoiced to the customer reflects the market value of
the fully refined metal less a "treatment and refining charge"
deduction, to reflect the lower value of this partially processed
material compared with the fully refined metal. For accounting
purposes, the revenue amount is the net of the market value of
fully refined metal less the treatment and refining charges. Under
the standard industry definition of cash costs, treatment and
refining charges are regarded as an expense and part of the total
cash cost figure. Cash costs are stated net of by-product credits.
Cash costs exclude depreciation, financial income and expenses,
hedging gains and losses, exchange gains and losses and corporate
tax for all four operations .
(iv) Realised copper prices are determined by comparing revenue
from copper sales (before deducting treatment and refining charges
for concentrates) with sales volumes for each mine in the period.
Realised molybdenum and gold prices are calculated on a similar
basis. Realised prices reflect gains and losses on commodity
derivatives, which are included within revenue.
(v) The totals in the tables above may include some small
apparent differences as the specific individual figures have not
been rounded.
(vi) The production information and the cash cost information is
derived from the Group's production report for the fourth quarter
of 2021, published on 19 January 2022 .
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END
FR FIFVEFDIFFIF
(END) Dow Jones Newswires
February 22, 2022 02:00 ET (07:00 GMT)
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