TIDMANTO
RNS Number : 6312V
Antofagasta PLC
11 August 2022
NEWS RELEASE, 11 AUGUST 2022
HALF YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 JUNE 2022
Antofagasta plc CEO Iván Arriagada said : "Although we have
experienced significant challenges over the half year - a volatile
copper price as a result of macro developments, the continued
drought in Chile, and an incident with our concentrate pipeline at
Los Pelambres - the actions we have taken, coupled with the quality
of our assets and balance sheet, have meant that we were able to
weather the storm. Sales volumes during the period were lower as
were copper prices and this is reflected in the 30% decline in
revenue. As we previously announced, with the fall in production
and higher input prices, cash costs were higher. And although we
have experienced general inflation, the impact was offset by the
weak Chilean peso.
"As we continue to decarbonise our business, we successfully
moved all our mining operations away from using fossil fuels for
energy generation and as of April this year, they are now all using
100% renewable energy.
"We expect the remainder of the year to look very different from
the first half - as production improves quarter-on-quarter, we ship
and sell the concentrate that was impacted by the concentrate
pipeline incident, and the desalination plant at Los Pelambres
starts, significantly alleviating the issue of water availability.
We remain on track to produce our revised guidance of 640-660,000
tonnes of copper for the full year.
"While the short-term outlook remains uncertain for copper,
inflation, global economics and geopolitics, we remain committed to
maintaining our operating discipline and cost control, and a strong
balance sheet.
"Copper's critical role in the development of low-carbon
technologies is essential for the energy transition and the
long-term fundamentals for copper remain favourable. I am confident
that Antofagasta's strategy of developing mining for a better
future is the right one and will deliver long-term value for all
our stakeholders.
"In line with our normal 35% pay-out ratio for interims, the
Board has declared an interim dividend of 9.2 cents per share."
HIGHLIGHTS
Financial performance
-- Revenue for the first half of 2022 was $2,528 million , 29.6%
lower than the same period in 2021 mainly because of lower copper
and by-product sales volumes and lower realised copper prices
-- EBITDA(1) was $1,238 million , 47.5% lower than in the same
period last year on lower revenue and operating costs that
increased by 6.9% mainly due to higher input prices
-- EBITDA margin(2) was 49.0% , compared with 65.6% in H1 2021
and 64.7% for the full year 2021
-- The Cost and Competitiveness Programme generated savings and
productivity improvements of $35 million in the first half of 2022,
equivalent to 6c/lb of unit cash costs
-- Profit before tax was $680 million, a $1,104 million decrease on the same period in 2021
-- Continuing strong balance sheet with a net debt to EBITDA
ratio at the end of the period of 0.13 times. The cash, cash
equivalents and liquid investments balance at 30 June 2022 was
$2,878 million, a decrease from $3,713 million at the end of 2021 ,
largely reflecting the $1,172 million payment of the 2021 final
dividend
-- Cash flow from operations reduced to $1,683 million compared
with $2,461 million in the first half of 2021
-- Capital expenditure of $831 million was 44% of full year guidance
-- Earnings per share of 26.4 cents, 41.1 cents lower than the same period in 2021
-- Interim dividend of 9.2 cents per share, equivalent to a
pay-out ratio of 35% of underlying net earnings in line with the
Company's capital allocation framework
Production and cost performance (as previously announced on 20
July 2022)
-- Group copper production in the first six months of the year
was 268,600 tonnes , 25.7% lower than in the same period last year
mainly due to the expected temporary reduction in throughput at Los
Pelambres as a result of the drought and the concentrate pipeline
incident and expected lower grades at Centinela Concentrates.
Throughput at Los Pelambres was 36.2% lower than in H1 2021, and
the grades at Centinela Concentrates were 25.4% lower
-- Cash costs before by-product credits for the first half of
the year were $2.37/lb , 37.0% higher than in the same period last
year mainly due to the temporary decrease in production and higher
input prices, particularly for diesel and sulphuric acid. General
inflation was largely offset by the weaker Chilean peso
-- Net cash costs were $1.82/lb for the first half of the year ,
compared with $1.14/lb in the first half of 2021, reflecting the
increase in cash costs before by-product credits and slightly lower
by-product credits due to lower by-product production, partially
offset by higher realised prices
2022 Guidance (as previously announced)
-- Full year copper production for the Group is expected to be
640-660,000 tonnes. This includes the impact of the concentrate
pipeline incident, and the impact of the water shortage at Los
Pelambres due to the drought
-- The drought has continued at Los Pelambres during the period
although there has been heavier precipitation since then. The
revised guidance range incorporates a negative outlook for water
availability for the rest of the year, which we consider to be low
probability. Strict water management protocols remain in place to
optimise water usage and mitigate the impact of low water
availability
-- With increases in diesel and other input prices, net cash
cost guidance is $1.65/lb, assuming market consensus estimates of
by-product prices and the Chilean Peso exchange rate for the rest
of the year
-- As announced in April, expected Group capital expenditure for
the year is unchanged at $1.9 billion
-- The Group is on track to achieve its Cost and Competitiveness
Programme savings target of at least $50 million for the full
year
Growth projects
-- As previously announced, at the end of H1 the Los Pelambres
Expansion project was 82% complete
-- Completion of the desalination plant is expected in Q4 2022
and of the concentrator plant expansion in early 2023
-- On completion of the desalination plant, the Group's exposure to water scarcity risk will be substantially reduced. An application to further expand the plant is underway
-- As previously announced, the Zaldívar Chloride Leach project
was completed in January 2022 on budget
-- Since the period end, mining with the Group's first fleet of
autonomous trucks has started at Esperanza Sur and the ore is being
processed at the Centinela concentrator
-- Following the completion of a detailed review of the
Centinela Second Concentrator project, the capital cost estimate
has been revised to $3.7 billion (up from $2.7 billion in the 2015
prefeasibility study). This estimate includes a new water system
and the increase reflects design changes, inflation, heightened
environmental and other regulatory requirements, and the results of
advanced engineering and a more detailed execution plan. The
decision on whether to proceed with the project is scheduled for
early 2023
-- The expansion at Centinela will increase production by an
average of 170,000 tonnes per annum of copper equivalent and move
Centinela into the first cost quartile, and takes advantage of the
Group's large resource base in the Centinela district
Sustainability
-- As previously announced, from April this year all mining
operations have been operating solely using renewable energy,
significantly reducing the Company's Scope 2 emissions
-- The Group's Sustainability Report was published in April and
its first Tax Report was published in July
-- In August, Antucoya obtained the Copper Mark, for compliance
with this independently verified responsible production standard,
joining Centinela and Zaldívar who received it in 2021
Other
-- As previously announced, there was a discharge from the
concentrate pipeline at Los Pelambres during the period and the
pipeline resumed operations on 26 June. There was no material
environmental impact and the pipeline was approved for reopening by
the relevant local regulator. A review is underway to ensure
enhanced safety conditions are incorporated into pipeline
operations ahead of the replacement of the pipeline which is
currently being permitted and is expected to be completed in 2025.
Engagement with members of the local communities concerned about
the safety of the pipeline by the Company together with the local
authorities were also concluded successfully
-- The Constitutional Convention completed the draft of the new
constitution on 4 July. A national referendum to accept or reject
the new constitution will be held on 4 September
-- The government presented a tax reform bill to Congress on 7
July and a new proposal for the mining royalty on 11 July. This
proposal is being evaluated by the mining industry. The initial
view is that it is more onerous than the proposal made by the
Senate Mining and Energy Committee in January, but less onerous
than the original proposal made by the lower house in May 2021. The
new draft will now be reviewed by the Senate before being passed to
the lower house for its consideration
UNAUDITED RESULTS SIX MONTHSED 30
JUNE 2022 2021 %
-------- --------
Revenue $m 2,528.2 3,591.0 (29.6)
EBITDA(1) $m 1,237.7 2,357.1 (47.5)
EBITDA margin(1, 2) % 49.0 65.6 (25.3)
Profit before tax (including exceptional
items) $m 679.6 1,783.5 (61.9)
Earnings per share (continuing and discontinued
operations including exceptional items) cents 26.4 67.5 (60.9)
Dividend per share cents 9.2 23.6 (61.0)
Cash flow from operations (continuing
and discontinued) $m 1,682.5 2,460.5 (31.6)
Capital expenditure(3) $m 831.0 781.9 6.3
Net debt/(cash) at period end $m 491.4 (701.3) N/A
Realised copper price $/lb 4.13 4.42 (6.6)
-------
Copper sales(4) kt 240.4 325.1 (26.1)
Gold sales koz 73.6 103.7 (29.0)
Molybdenum sales kt 3.9 5.7 (31.6)
Cash costs before by-product credits(1) $/lb 2.37 1.73 37.0
Net cash costs(1) $/lb 1.82 1.14 59.6
------------------------------------------------- ------- -------- -------- -------
Note : The financial results are for continuing operations and
are prepared in accordance with IFRS unless otherwise noted
below.
(1) Non-IFRS measures. Refer to the alternative performance
measures section on page 60 in the half-year financial report
below.
(2) Calculated as EBITDA/Revenue. If Associates and JVs' revenue
is included EBITDA Margin was 44.6% in HY 2022 and 61.8% in HY
2021.
(3) On a cash basis.
(4) Does not include 22,700 tonnes of sales by Zaldívar in HY
2022 and 21,100 tonnes in HY 2021, as it is equity accounted.
A recording and copy of the 2022 Half 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 2:00pm BST
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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FINANCIAL AND OPERATING REVIEW
FINANCIAL HIGHLIGHTS
Group revenue was $2,528.2 million, 29.6% lower than in the same
period last year mainly as a result of copper sales volumes falling
by 26.1%, the realised copper price decreasing by 6.6%, and as
by-product revenues decreased by 25.3%, mainly due to lower
molybdenum and gold volumes, partially offset by higher realised
by-product prices.
EBITDA during the first six months was $1,237.7 million, 47.5%
lower than in the same period in 2021, reflecting lower revenue and
higher cost of sales which increased by 6.9%.
Profit before tax including exceptional items was $679.6
million, 61.9% lower than in the same period in 2021 reflecting the
lower EBITDA.
Earnings per share from continuing operations including
exceptional items for the year were 26.4 cents, a decrease of 60.9%
compared with 2021.
Cash flow from operations was $1,682.5 million, a 31.6% decrease
compared with the same period last year, reflecting the Group's
lower EBITDA.
The Board has declared an interim ordinary dividend of 9.2 cents
per share, equal to a 35% pay-out ratio in both periods and in line
with our dividend policy.
SUSTAINABILITY
Safety and health
Antofagasta prioritises the safety and wellbeing of its
people.
Given that our safety management system prioritises eliminating
fatalities, the Group's focus is on high potential incidents
(HPIs), and we are using this measure as our key lead indicator of
safety performance. During the first half of 2022, the Group
recorded 23 HPIs, 21% less than the same period in the previous
year, with improvements seen in both our Mining and Transport
divisions.
The Group's Lost Time Injury Frequency Rate (LTIFR) was 0.92 per
million hours worked, 23% less than in 2021. All incidents with
lost time are now being investigated to identify and learn from the
organisational causes.
Communities
We seek to engage in long-term sustainable relationships with
the communities near to our operations 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.
Following the concentrate pipeline incident at Los Pelambres,
engagement with several rural communities ensued with the
participation of local and regional authorities. Agreements reached
include initiatives focused on participatory monitoring through
enhanced information sharing about parts of the company's
infrastructure, and financing social projects related to drinking
water, sanitation, health, education and public spaces. In line
with the Group's community relations model, most of these projects
will be in partnership with the public sector.
Over recent years, Los Pelambres has strengthened its water
strategy to contribute to the mitigation of communities' challenges
arising from water scarcity. Projects have been developed to
provide assistance during emergencies and improve the quantity and
quality of water available to local communities. Los Pelambres has
also implemented projects to improve the efficient use of water for
irrigation, financing the lining of more than 200 kilometres of
irrigation canals over the last 10 years and the construction of
some 200,000 m(3) of water storage. Additionally, innovation and
technology have been used to automate sluice gates on the Illapel
River to improve the efficiency and use of water.
In recent months Zaldívar has advanced its relationship with the
community of Peine, an indigenous Atacameño village located in the
Salar de Atacama, approximately 100km from the operation and close
to its water well field. The community has established an elected
committee to work with the company and the local and regional
authorities in supporting the community's development.
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 many low-carbon
technologies such as electromobility and the generation of
renewable energy.
After meeting our 2018-2022 GHG emissions reduction target two
years early in 2020, the Company announced two new targets.
The first 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. And the second is for the Group 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 conversion of our operations
to electricity generated solely from renewable sources, which was
achieved in April 2022. At the same time, we are working to reduce
and, ultimately, eliminate the use of diesel at our mining
operations by using alternative power sources and a portfolio of
energy efficiency initiatives.
More details of our Climate Change Strategy can be found in our
2021 Climate Change Report.
Water
One clear impact of climate change is the 13-year drought in
central Chile, which is where Los Pelambres is located. In 2018, we
took the decision to build a 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 Q4 2022 and to double its
capacity as soon as the necessary permitting is obtained.
Our Centinela and Antucoya operations in the north of Chile
already almost only use sea water and Zaldívar will use continental
water until 2025 or 2031 (see below). 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 (which expires at the end of
2023). This has involved government agencies reviewing the
application and a consultation process with the indigenous
community in Peine, led by the environmental authority.
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 mine life is to 2036. 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 as is the use of the Group's
Cuprochlor-T technology.
To safeguard the availability of water resources for our
operations, communities and the environment, we published our first
Water Policy earlier this year, which commits us to increasing our
water efficiency, implementing robust and transparent water
governance practices, and collaborating with other stakeholders on
environmentally responsible and sustainable water management.
Suppliers
The Group is requiring improved sustainability practices from
its suppliers with the purpose of working with them to ensure
alignment with leading standards on environmental, social and
governance (ESG) matters.
This strategy includes applying an internal carbon price to
tenders as well as other ESG criteria. The use of an internal
carbon price is being rolled out and during the half year was used
with larger suppliers for specific goods and services contracts,
such as explosives and mine haulage trucks. The new measures
complement the energy efficiency and safety criteria already used
in bid evaluations.
At the same time, as part of supply chain management,
Antofagasta is holding workshops to help micro, small and
medium-sized suppliers near our operations to comply with these
conditions so as to take advantage of their inherent advantage of
having short transport distances and enhance trustworthy supplier
relationships built on shared value creation.
PRODUCTION AND CASH COSTS
Group copper production in the first half of 2022 was 268,600
tonnes, 25.7% lower than in the same period last year, mainly due
to the expected temporary reduction in throughput at Los Pelambres
as a result of the drought, the concentrate pipeline incident and
expected lower grades at Centinela Concentrates.
Group gold production for the first six months decreased by
38.8% to 73,800 ounces.
Molybdenum production was 4,000 tonnes, 31.0% lower than in the
same period last year.
Group cash costs before by-product credits in the first half of
2022 were $2.37/lb, 64c/lb higher than last year, a result of the
temporary decrease in production and higher input prices,
particularly for diesel and sulphuric acid. General inflation was
largely offset by the weaker Chilean peso.
Net cash costs for the first half of 2022 were $1.82/lb, 68c/lb
higher than in the same period last year reflecting the higher cash
costs before by-product credits, and slightly lower by-product
credits due to lower by-product production, partially offset by
higher realised by-product prices.
COST AND COMPETITIVENESS PROGRAMME
During the first half of the year, the Cost and Competitiveness
Programme achieved savings of $35 million, equivalent to $6c/lb as
the Group has managed to reduce cash expenditure in some areas by
optimising and negotiating third party services and increasing
productivity. The Group is on track to achieve its savings target
of at least $50 million for the full year.
EXPLORATION AND EVALUATION COSTS
Exploration and evaluation costs for the first half of the year
were $51.4 million, similar to the same period last year.
TAXATION
The effective tax rate for the period was 36.5%, which compares
with 37.1% during the same period in 2021 and 36.5% (before
exceptional items) for the full year 2021.
CAPITAL EXPITURE AND DEPRECIATION & AMORTISATION
Group capital expenditure on a cash basis was $831.0 million
during the period of which $301.4 million was mine development,
$188.0 million was sustaining (mining) and $323.8 million was
development, of which $218.5 million was on the Los Pelambres
Expansion project. The balance was at the Transport division and at
the corporate centre. Group capital expenditure for the full year
is expected to be $1.9 billion.
Depreciation and amortisation for the first half of 2022 was
$489.0 million, an increase of $6.5 million compared with the same
period in 2021.
NET DEBT
Net debt at the end of the period was $491.4 million, reflecting
the $1,172.2 million payment of the final dividend. The Net Debt to
EBITDA ratio at the end of the period was 0.13 times. Cash flow
from operations reduced to $1,682.5 million compared with $2,460.5
million in the first half of 2021.
CORPORATE BOND
The Group successfully issued its second bond, a $500 million
5.625% note due 2032. This financing further diversifies funding
sources and extends the maturity profile of the Group.
DIVIDS
The Board has declared an interim dividend of 9.2 cents per
share, equivalent to $90.7 million and a pay-out ratio of 35%,
consistent with the Company's policy and previous interim
dividends. Any distribution of excess cash for the year, as defined
under the policy, will be made as part of the final dividend.
LABOUR AGREEMENTS
A labour negotiation with the supervisors' union at Antucoya was
successfully concluded during the period before the November 2022
deadline.
There are three other labour agreements that will expire during
the year, with the workers at Antucoya (September) and the
supervisors at Los Pelambres (October) and Zaldívar (August).
PROPOSED MINING ROYALTY
The government presented a tax reform bill to Congress on 7 July
and a new proposal for the mining royalty on 11 July. This proposal
is being evaluated by the mining industry. The initial view is that
it is more onerous than the proposal made by the Senate Mining and
Energy Committee in January, but less onerous than the original
proposal made by the lower house in May 2021. The new draft will
now be reviewed by the Senate before being passed to the lower
house for its consideration.
CONSTITUTIONAL CONVENTION
The Constitutional Convention completed the draft of the new
constitution on 4 July. A national referendum to accept or reject
the new constitution will be held on 4 September.
MINERAL RESOURCES
As announced on 14 June, the Company has released maiden mineral
resource figures for the Encierro deposit in Chile of 522Mt of
Inferred Resources at 0.79% copper equivalent. The deposit is
jointly held with Barrick Gold, with Antofagasta the majority
shareholder and operator.
Note: Inferred Resources are compliant with the Australasian
Joint Ore Reserves Committee Code for Reporting of Exploration
Results, Minerals Resources and Reserves 2012 edition (JORC Code).
A cut-off grade of 0.5% copper has been applied. The geological
model and resource estimation have been reviewed and validated by
registered Competent Person (Chile) Mr. Osvaldo Galvez.
CUPROCHLOR -T(R)
During the first quarter of 2022 we finalised a large-scale
pilot programme to validate our in-house patented primary sulphides
leaching technology (Cuprochlor-T(R)). We conducted
industrial-scale trials at Centinela using a 40,000-tonne heap of
Centinela's primary sulphides. 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 and bring forward the
profitable processing of ore otherwise scheduled to be mined in
many years' time or that was previously considered to be
uneconomic.
We are currently progressing studies for the primary sulphide
orebody that lies below the Zaldívar reserves to evaluate if
Cuprochlor-T leaching is a viable processing route.
An alternative is for idle leach pad and SX-EW capacity to be
used to process material using the Cuprochlor-T technology and one
area of flexibility is that the existing EW plant can process
blended solutions from both oxide and chloride leach. This allows
the technology to be gradually deployed during the life of each
mine as appropriate for the specific situation and the use of this
option is being investigated by Centinela and Antucoya as part of
their annual mine planning processes.
REKO DIQ PROJECT'S ARBITRATION
In March 2022 the Company reached an agreement in principle with
Barrick Gold and the Governments of Pakistan and Balochistan on a
framework that provides for the reconstitution of the Reko Diq
project, and a pathway for the Company to exit the project. If
definitive agreements are executed and the conditions to closing
are satisfied, a consortium comprising various Pakistani
state-owned enterprises will acquire an interest in the project for
consideration of approximately $900 million to jointly develop the
project with Barrick, and Antofagasta would exit. If all the
conditions are satisfied during 2022, we would expect to receive
the proceeds in 2023.
AUDIT TER
The Group intends to undertake a competitive tender process
during the second half of 2022 in respect of the appointment of the
Group's external auditor with effect from 2024 onwards. The Group
previously conducted a tender process during 2014, which resulted
in PwC replacing the previous auditor and being appointed with
effect from 2015 onwards. The tender process in respect of the 2024
audit is one year in advance of the regulatory requirement to
undertake a tender at least every ten years.
FUTURE GROWTH
The Group has a pipeline of embedded growth projects across our
significant mineral resource base which we are currently advancing
through a disciplined process of project evaluation.
The Zaldívar Chloride Leach project was completed in January on
budget and pre-stripping of the Esperanza Sur pit project was
completed in July. The Los Pelambres Expansion project was 82%
complete as at the end of H1 with the completion of the
desalination plant expected in Q4 2022 and of the concentrator
plant expansion in early 2023.
A detailed review of the Centinela Second Concentrator Plant
schedule and costs has recently been updated. The capital cost
estimate has been revised to $ 3 .7 billion (up from $2.7 billion
in the 2015 prefeasibility study). This increase reflects design
improvements, inflation, and the results of advanced engineering
and a detailed execution plan. The decision on whether to proceed
with the project is scheduled for early 2023.
OUTLOOK
As previously announced, considering the impact of the
concentrate pipeline incident and the risk of continued low water
shortages at Los Pelambres, Group copper production guidance for
the full year has been revised from 660-690,000 tonnes to
640-660,000 tonnes. The increased rate of production in H2 is based
on the precipitation levels to date, the stockpiled concentrates at
Los Pelambres and the expected increase in grade at Centinela
Concentrates.
Following increases in diesel and other input prices, net cash
cost guidance is increased to $1.65/lb, assuming market consensus
estimates at the period end of by-product prices, the Chilean Peso
exchange rate and inflation for the rest of the year.
The significant decline in the copper price since the beginning
of June has reinforced our commitment to control costs,
particularly during this period of higher input prices and general
inflation.
Although the copper price traded strongly at the beginning of
the year averaging $4.49/lb in the first five months, it weakened
rapidly in June, ending the half year at $3.74/lb as concerns about
the speed of the economic recovery in China and the likelihood of a
recession in the United States and Europe increased. These concerns
were further heightened by the ongoing conflict in Ukraine and its
impact on the availability of energy supplies, trade and stability,
particularly in Europe. Given the current global environment of
rising inflation and rising interest rates, commodity price
volatility is expected to continue over the rest of the year,
however the longer term fundamentals for copper remain strong.
REVIEW OF OPERATIONS AND PROJECTS
MINING DIVISION
LOS PELAMBRES
Financial performance
EBITDA at Los Pelambres was $510.6 million in the first half of
2022, a 62.1% decrease compared with $1,346.9 million in the first
six months of 2021. This decrease was mainly due to a lower copper
sales tonnage (41.8%) and the lower realised copper price, which
was partially offset by lower operating costs during the
period.
Production
In the first six months of 2022, copper production decreased by
41.9% to 98,400 tonnes compared with the same period last year,
mainly driven by the expected reduced throughput, which was down
36.2% compared with the same period last year due to water
restrictions arising from the drought. This decrease also includes
the impact of the concentrate pipeline incident, with unfiltered
copper produced during the incident but not shipped expected to be
recorded as production during the balance of 2022.
Molybdenum production for the first six months of the year
decreased to 2,700 tonnes from 5,100 in H1 2021, due to lower
throughput and molybdenum grades.
Costs
Cash costs before by-product credits for the first six months of
2022 were $2.02/lb, 33.8% higher than in the same period last year.
This was due to the decrease in production, higher input prices,
mainly diesel and explosives, and general inflation, partially
offset by the weaker Chilean peso.
For the first six months of 2022, by-product credits were
$0.70/lb, in line with the same period last year.
Net cash costs for the year to date increased by 59.0% to
$1.32/lb. This reflected the higher cash costs before by-product
credits.
Capital expenditure
Capital expenditure in the first six months of 2022 was $404.0
million in total of which $115.5 million was sustaining capital
expenditure, $67.0 million mine development and $221.5 million was
on the Los Pelambres Expansion project.
CENTINELA
Financial performance
EBITDA for the first six months of 2022 was $526.9 million, a
decrease of 36.6% compared with the first half of 2021. This
decrease was due to lower copper and gold sales volumes, higher
operating costs and the lower copper realised price compared with
the same period last year.
Production
Total copper production in H1 2022 was 111,300 tonnes, 15.7%
lower than in H1 2021 due to expected lower ore grades at Centinela
Concentrates, slightly offset by higher grades at Centinela
Cathodes.
Production of copper in concentrates was 66,200 tonnes for the
half year, 26.8% lower than in the same period last year, mainly
due to the expected lower copper grade of 0.44% compared with 0.59%
in H1 2021. This was partially offset by increased throughput, with
the concentrator averaging above design capacity over the half
year.
Copper cathode production for the first six months was 45,100
tonnes, 8.2% higher than in the same period last year primarily due
to expected higher grades and recoveries.
Gold production in H1 was 58,400 ounces, 36.9% lower than H1
last year as grades, which are correlated to copper grades, and
recoveries decreased.
Molybdenum production in H1 2022 increased to 1,300 tonnes from
700 tonnes in H1 2021, due to higher grades.
Costs
Cash costs before by-product credits for the first six months of
2022 were $2.68/lb, 48.9% higher than the same period in 2021
primarily due to lower production and higher input costs,
particularly for diesel, sulphuric acid and explosives. General
inflation was largely offset by the weaker Chilean peso.
For the first six months of 2022, by-product credits were
$0.70/lb, 2c/lb lower than in the same period last year.
Net cash costs during the first six months of the year were
$1.98/lb, 90c/lb higher than in H1 2021 reflecting the increase in
cash costs before by-product credits and the slightly lower
by-product credits.
Capital expenditure
Capital expenditure in the first six months of 2022 was $387.2
million of which $51.5 million was sustaining capex, $233.5 million
was mine development and $102.2 million was development capex , of
which $44.7 million was on the Centinela Second Concentrator
project.
ANTUCOYA
Financial performance
For the first half of the year, EBITDA was $153.4 million, a
decrease of 3.5% compared with $159.0 million in the same period
last year, due to lower copper sales volumes and higher operating
costs, largely offset by the higher copper realised price.
Production
Production in the first six months of 2022 was 36,400 tonnes,
7.8% lower than the same period last year due to expected lower
grades, partially offset by higher throughput.
Costs
During the first six months, cash costs were 22.5% higher than
in H1 2021 at $2.50/lb due to lower production and increased input
costs, particularly for sulphuric acid, diesel and explosives.
General inflation was largely offset by the weaker Chilean
peso.
Capital expenditure
Capital expenditure in the first six months of the year was
$21.9 million, almost all of which was sustaining capital
expenditure.
ZALDÍVAR
Financial performance
Attributable EBITDA at Zaldívar was $104.8 million in the first
half of 2022, compared with $76.4 million in the same period last
year largely because of higher sales volumes, lower operating costs
and the higher realised copper price.
Production
Copper production at Zaldívar for the year to date was 22,500
tonnes, 9.2% higher compared with the same period last year due to
higher copper grades and recoveries. Following completion of the
Chloride Leach project during the period, recoveries are projected
to increase as the project ramps up.
Costs
Cash costs during the first six months of 2022 were $2.14/lb
compared with $2.46/lb in the same period in 2021, mainly due to
higher production partially offset by higher input prices.
Capital expenditure
In the first six months of 2022, attributable capital
expenditure was $25.1 million of which $17.4 million was sustaining
capital expenditure and $7.7 million was development capital
expenditure.
TRANSPORT DIVISION
Financial performance
EBITDA at the Transport division was $37.4 million in the first
half of 2022, a 3.9% improvement on the same period last year, as a
result of higher revenue.
Transport volumes
For the first six months of the year, transport volumes
increased by 11.8% as new rail transport contracts ramped up during
the period.
Capital expenditure
Capital expenditure for the first half of the year was $13.7
million.
GROWTH PROJECTS AND OPPORTUNITIES
Los Pelambres Expansion
This expansion project is divided into two phases. Phase 1 is
expected to be completed in early 2023 and Phase 2 by the end of
2025.
Phase 1
This phase is designed to optimise throughput within the limits
of the existing operating, environmental and water extraction
permits.
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 expansion is divided into two sub-projects, the
construction of a desalination plant and water pipeline from the
coast to the El Mauro tailings storage facility, and the expansion
of the concentrator plant , which includes the installation of an
additional SAG mill and ball mill, and six additional flotation
cells.
Annual copper production will be increased 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 the higher milling capacity is
fully realised.
In 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 of the project, from 400 l/s to 800 l/s. However,
the amount of work that can be done on the expansion of the
desalination plant during Phase 1 is limited by what is allowed
under the permits that have already been issued. These additional
costs are included as part of the total Phase 1 capital cost.
As at the end of H1 the Los Pelambres Expansion project was
81.7% complete. The desalination plant is expected to be completed
in Q4 2022 and the concentrator plant expansion in early 2023.
The desalination plant and the water pipeline are 87.5% complete
and preparation for pre-commissioning is underway. The concentrator
expansion site is 75.9% complete and the principal equipment (SAG
and ball mills, and flotation cells) have been installed.
A detailed review of the project schedule and costs was
completed in Q1 2022 resulting in the capital cost estimate for
Phase 1 being increased to $2.2 billion (from $1.7 billion). Of
this increase, approximately $220 million was related to the impact
of COVID-19 on costs and the construction schedule, $170 million to
general inflation, including increased input prices, wages, labour
incentives and logistics costs, with the balance reflecting other
adjustments to implementation plans and an updated contingency
provision.
Phase 2 - Further expansion
Following the decision to increase the size of the desalination
plant, Phase 2 of the expansion now requires two separate
Environmental Impact Assessment (EIA) applications, one for the
expansion of the desalination plant and one for the extension of
the mine life of Los Pelambres through the permitting of an
increase in the size of the El Mauro tailings storage facility. The
latter EIA will also provide for the option to further increase the
throughput capacity of the concentrator plant.
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. The project cost will be reported as part of the
Group's sustaining capital expenditure.
The project includes 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. In 2021 Los Pelambres
submitted the EIA required for this project, which includes the
desalination plant expansion and two other sustaining capital
infrastructure projects, the replacement of the concentrate
pipeline and the construction of certain planned enclosures at the
El Mauro tailings storage facility. The EIA is expected to be
approved in time for the project to be completed in 2025 at which
time over 95% of Los Pelambres's water needs will be from either
desalinated or recycled water.
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 and the mine waste dumps. This will
extend the mine's life by a minimum of 15 years, accessing a larger
portion of Los Pelambres's six billion tonnes of mineral resources.
The EIA will also provide for the option to increase throughput to
205,000 tonnes of ore per day, increasing copper production by
35,000 tonnes per year.
The feasibility study is underway and includes repowering the
conveyor that runs from the primary crusher in the pit to the
concentrator plant which will support the additional
throughput.
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 and the El Mauro tailings facility.
Community consultation is ongoing and the EIA application is being
prepared.
Esperanza Sur pit
Esperanza Sur pit 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, 0.13g/t of
gold and 0.012% of molybdenum.
Pre- stripping by a contractor has been completed and Centinela
has taken over the operation of the pit using a fleet of 11
autonomous trucks. These are the first autonomous trucks to be used
by the Group. Ore from the pit is now being processed at the
Centinela concentrator.
The opening of the Esperanza Sur pit improves Centinela's
flexibility to supply its concentrator and, 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 with how much
would be produced if material was solely supplied from 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.
Zaldívar Chloride Leach
The project is expected to increase copper recoveries by
approximately 10 percentage points with further upside in
recoveries 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.
The project was completed on-budget in early 2022 at a total
capital cost of $190 million. The project required an upgrade of
the Solvent Extraction (SX) plant, new reagents facilities and the
construction of additional washing ponds for controlling the
chlorine levels. Ramp-up to achieve the full improvement in
recoveries is currently underway.
As the Group equity accounts for its interest in Zaldívar,
capital expenditure at the operation is not included in Group total
capital expenditure amounts.
Centinela Second Concentrator
The project has two phases, the first being the construction of
a new concentrator and its associated infrastructure, and the
second its possible expansion. The EIA for both phases was approved
in 2016.
Detailed engineering and costings have recently been updated for
Phase 1 of the project and key contracts finalised. The capacity of
the new concentrator will be 95,000 tonnes of ore per day producing
on average approximately 170,000 tonnes of copper equivalent a year
over the first 10 years of operation. This will move Centinela into
the first cost quartile of producers.
The Phase 1 capital cost is estimated at $ 3.7 billion,
including the cost of the new water supply system. The increase on
the previously quoted 2015 pre-feasibility estimate of $2.7 billion
reflects inflation, design improvements, heightened environmental
and other regulatory requirements, and the results of advanced
engineering and a more detailed execution plan. The estimate
includes a concentrator plant, capitalised stripping, mining
equipment, a new tailings storage facility, a water pipeline and
other infrastructure, pre commercial production operating costs
plus owner's and other costs.
The decision by the Board on whether to proceed with the project
is scheduled for early 2023. Work on Phase 2 would only start once
construction of Phase 1 is completed and it is operating
successfully.
The second concentrator, and its potential further expansion to
150,000 tonnes of ore per day, will source ore initially from the
recently opened Esperanza Sur pit and later from the Encuentro pit.
The sulphide ore in the Encuentro pit lies under the Encuentro
Oxides reserves, which are expected to be depleted by 2026. These
expansions will be further steps towards Centinela maximising the
potential of its large mineral resource base.
In late 2020 a tender process was started to invite third
parties to provide water for Centinela's current and future
operations, by acquiring the existing water supply system, and
building the new water pipeline. This process is expected to be
completed in Q4 2022. The outsourcing of the water supply will only
proceed if it improves the net present value of the project.
Twin Metals Minnesota (TMM)
Twin Metals Minnesota (Twin Metals) is a wholly owned copper,
nickel and platinum group metals (PGM) underground mining project,
which holds copper, nickel/cobalt and 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 potential outcomes for the project.
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 prevented Twin Metals from proceeding with the
project.
BLM also rejected advancing Twin Metals' preference right lease
applications (PRLAs) and prospecting permit applications (PPAs),
using the potential withdrawal as a rationale. Twin Metals is
challenging this rejection, and has made minor changes to the
project's configuration to address it.
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' 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 rights.
In early 2022, BLM also stopped its evaluation of Twin Metals'
MPO, and an administrative court dismissed Twin Metals' appeal of
that decision.
Unless reversed, these actions prevent Twin Metals from
continuing the project as configured in the MPO. Considering the
time and uncertainty related to any legal action to challenge the
government decisions, an impairment was 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 SIX MONTHSED 30 JUNE 2022
Results (unaudited)
Six months Six months
ended ended
30.06.2022 30.06.2021
------------------------------------------ ------------ ------------
Total Total
------------------------------------------ ------------ ------------
$m $m
Revenue 2,528.2 3,591,0
------------------------------------------ ------------ ------------
EBITDA (including share of EBITDA from
associates and joint ventures) 1,237.7 2,357.1
------------------------------------------ ------------ ------------
Total operating costs (1,886.9) (1,790.4)
------------ ------------
Operating profit from subsidiaries 641.3 1,800.6
Net share of results from associates
and joint ventures 49.1 19.4
Total profit from operations, associates
and joint ventures 690.4 1,820.0
Net finance expense (10.8) (36.5)
------------
Profit before tax 679.6 1,783.5
Income tax expense (247.9) (661.9)
------------ ------------
Profit for the year 431.7 1,121.6
Attributable to:
------------ ------------
Non-controlling interests 171.4 456.3
Profit attributable to the owners of
the parent 260.3 665.3
------------ ------------
Basic earnings per share cents cents
Basic earnings per share from continuing
operations 26.4 67.5
------------ ------------
The $405.0 million decrease in the profit for the financial
period attributable to the owners of the parent from $665.3 million
in the first six months of 2021 to $260.3 million in the current
period reflected the following factors:
$m
Profit for the financial period attributable to the
owners of the parent in H1 2021 665.3
Decrease in revenue (1,062.8)
Increase in total operating costs (96.5)
Increase in net share of profit from associates and
joint ventures 29.7
Decrease in net finance expenses 25.7
Decrease in income tax expense 414.0
Decrease in non-controlling interests 284.9
(405.0)
Profit for the financial period attributable to the
owners of the parent in H1 2022 260.3
----------
Revenue
The $1,062.8 million decrease in revenue from $3,591.0 million
in the first six months of 2021 to $2,528.2 million in the current
period reflected the following factors:
$m
Revenue in the first six months of 2021 3,591.0
Decrease in copper sales volumes (824.4)
Decrease in realised copper price (152.8)
Decrease in treatment and refining charges 12.6
Decrease in gold revenue (44.4)
Decrease in molybdenum revenue (42.8)
Decrease in silver revenue (16.7)
Increase in transport division revenue 5.7
----------
(1,062.8)
----------
Revenue in the first six months of 2022 2,528.2
----------
Revenue from the Mining division
Revenue in the first half of 2022 from the Mining division
decreased by $1,068.5 million, or 30.5%, to $2,436.2 million,
compared with $3,504.7 million in the first six months of 2021. The
decrease reflected a $964.6 million decrease in copper sales and
$103.9 million decrease in by-product revenue.
Revenue from copper sales
Revenue from copper concentrate and copper cathode sales
decreased by $964.6 million, or 31.2%, to $2,129.7 million,
compared with $3,094.3 million in the first six months of 2021. The
decrease reflected the impact of $824.4 million from lower sales
volumes and $152.8 million from lower realised prices, offset
slightly by a $12.6 million benefit from lower treatment and
refining charges.
(i) Copper volumes
Copper sales volumes reflected within revenue decreased by 26.1%
from 325,100 tonnes in 2021 to 240,400 tonnes in 2022, decreasing
revenue by $824.4 million. This decrease was due to lower copper
sales volumes at Los Pelambres (69,200 tonnes decrease) as a result
of its decreased production volumes due to the expected impact of
the drought and the temporary closure of the concentrate pipeline
in June, and lower sales volumes at Centinela (12,400 tonnes
decrease) due to decreased production volumes reflecting expected
lower ore grades.
(ii) Realised copper price
The average realised price decreased by 6.6% to $4.13/lb in the
first six months of 2022 (first half of 2021 - $4.42/lb), resulting
in a $152.8 million decrease in revenue. The LME average market
price increased by 7.3% in H1 2022 to $4.43/lb (first half of 2021
- $4.13/lb). In the first half of 2022 there was a $206.8 million
negative impact from provisional pricing adjustments, mainly
reflecting the decrease in the period-end mark-to-mark copper price
to $3.75/lb at 30 June 2022, compared with $4.42/lb at 31 December
2021. Conversely there had been a $282.1 million positive impact
from provisional pricing adjustments in the first six months of
2021, which mainly reflected the increase in the period-end copper
price to $4.26/lb at 30 June 2021, compared with $3.52/lb at 31
December 2020. In addition, during the first six months of 2022
there was nil impact in respect of realised losses from commodity
hedging instruments, as all commodity hedges had matured by 31
December 2021, whereas in the first six months of 2021 there had
been an $73.5 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 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 condensed consolidated interim financial
statements.
(iii) Treatment and refining charges
Treatment and refining charges (TC/RCs) for copper concentrate
decreased by $12.6 million to $57.0 million in 2022, compared with
$69.6 million in 2021, reflecting the decrease in the concentrate
sales volumes at Los Pelambres and Centinela.
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. However, under the standard
industry definition of unit cash costs, treatment and refining
charges are regarded as an expense and part of cash costs.
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 decreased by $103.9 million or
25.3% to $306.5 million in the first half of 2022, compared with
$410.4 million in the first six months of 2021. This decrease was
mainly due to lower molybdenum and gold sales volumes.
Revenue from gold sales (net of treatment and refining charges)
was $139.4 million (first half of 2021 - $183.8 million), a
decrease of $44.4 million which reflected a decrease in volumes
slightly offset by a 6.9% higher realised price. Gold sales volumes
decreased by 29.1% from 103,700 ounces in the first half of 2021 to
73,600 ounces in the first six months of 2022, mainly due to lower
gold grades and recoveries at Centinela and the expected lower
throughput and gold grades at Los Pelambres. The realised gold
price was $1,899.3/oz in the first half of 2022 compared with
$1,776.3/oz in the first six months of 2021, reflecting the average
market price for 2022 of $1,873.4/oz (2021 - $1,807.5/oz) and a
positive provisional pricing adjustment of $3.7 million.
Revenue from molybdenum sales (net of roasting charges) was
$141.9 million (first half of 2021 - $184.7 million), a decrease of
$42.8 million. The decrease was due to lower sales volumes of 3,900
tonnes (first half of 2021 - 5,700 tonnes) partially offset by a
11.8% higher realised price of $18.0/lb (first half of 2021 -
$16.1/lb).
Revenue from silver sales decreased by $16.7 million to $25.2
million (first six months of 2021 - $41.9 million). The decrease
was due to lower sales volumes of 1.1 million ounces (first half of
2021 - 1.6 million ounces) and a 12.6% lower realised silver price
of $23.5/oz (first six months of 2021 - $26.9/oz).
Revenue from the Transport division
Revenue from the Transport division (FCAB) increased by $5.7
million or 6.6% to $92.0 million (first six months of 2021 - $86.3
million), as a result of increased volumes transported, offset
slightly by the impact of the weakening of the Chilean peso on
sales denominated in the local currency.
Total operating costs
The $96.5 million increase in total operating costs from
$1,790.4 million in the first half of 2021 to $1,886.9 million in
the first six months of 2022 reflected the following factors:
$m
Total operating costs in the first half
of 2021 1,790.4
Increase in mine-site operating costs 82.0
Decrease in closure provision and other
mining expenses (4.1)
Decrease in exploration and evaluation costs (0.9)
Increase in corporate costs 8.5
Increase in Transport division operating
costs 5.1
Increase in depreciation, amortisation and
loss on disposals 5.9
96.5
Total operating costs in the first six
months of 2022 1,886.9
--------
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Mining division
Operating costs (excluding depreciation, amortisation and loss
on disposals) at the Mining division increased by $85.5 million to
$1,340.3 million in the first half of 2022, an increase of 6.8%. Of
this increase, $82.0 million was attributable to higher mine-site
operating costs. This increase in mine-site costs reflected higher
key input prices and general inflation, partly offset by the weaker
Chilean peso, decreased sales volumes in the period and the cost
savings from the Group's Cost and Competitiveness Programme. On a
unit cost basis, weighted average cash costs excluding treatment
and refining charges and by-product revenue increased from $1.61/lb
in the first six months of 2021 to $2.25/lb in the first half of
2022. As detailed in the alternative performance measures section
on page 60 of the half-year financial report, for accounting
purposes by-product credits and treatment and refining charges both
form part of revenue, and don't therefore impact operating
expenses.
The Cost and Competitiveness Programme was implemented to reduce
the Group's cost base and improve its competitiveness within the
industry. During 2022 the programme achieved benefits of $34.7
million in the mining division, of which $33.7 million reflected
cost savings and $1.0 million reflected the value of productivity
improvements. Of the $33.7 million of cost savings, $19.4 million
related to Los Pelambres, Centinela and Antucoya, and therefore
impacted the Group's operating costs, and $14.3 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 $4.1
million. Exploration and evaluation costs decreased by $0.9 million
to $51.4 million (2021 - $52.3 million), reflecting decreased
expenditure in respect of the Twin Metals project and the
desalination plant expansion pre-feasibility study at Los
Pelambres, offset by increased exploration expenditure, principally
in Chile. Corporate costs increased by $8.5 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 $5.1 million
to $57.6 million (first half of 2021 - $52.5 million), mainly due
to higher diesel prices.
Depreciation, amortisation and disposals
The depreciation and amortisation charge increased by $5.9
million in the first half of 2022 to $489.0 million (first half of
2021 - $483.1 million). This increase is mainly due to higher
amortisation of IFRIC 20 stripping costs at Centinela, largely
offset by the impact of depreciation deferred in inventory at
Centinela and Los Pelambres. The loss on disposal of property,
plant & equipment was nil (2021 - $0.6 million).
Operating profit from subsidiaries
As a result of the above factors, operating profit from
subsidiaries decreased by $1,159.3 million or 64.4% in 2022 to
$641.3 million (first half of 2021 - $1,800.6 million).
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures
increased by $29.7 million to a profit of $49.1 million in the
first six months of 2022, compared with $19.4 million in the first
half of 2021. Of this increase, $24.1 million was due to the higher
profit from Zaldívar, reflecting increased copper sales volumes and
reduced cash costs.
EBITDA
EBITDA (earnings before interest, tax, depreciation and
amortisation) decreased by $1,119.4 million or 47.5% to $1,237.7
million (first half of 2021 - $2,357.1 million). EBITDA includes
the Group's proportional share of EBITDA from associates and joint
ventures.
EBITDA from the Mining division decreased by $1,120.8 million or
48.3% from $2,321.1 million in the first six months of 2021 to
$1,200.3 million this half year. This reflected the lower revenue
and higher mine-site costs, slightly offset by higher EBITDA from
associates and joint ventures.
EBITDA at the Transport division increased by $1.4 million to
$37.4 million in 2022 ($36.0 million - first half of 2021),
reflecting the higher revenue and slightly increased EBITDA from
associates and joint ventures, offset by the higher operating costs
(linked to the price of diesel and inflation).
Commodity price and exchange rate sensitivities
The following sensitivities show the estimated approximate
impact on EBITDA for the first six months of 2022 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 the
first six months of 2022, and the impact of the movement in the
average exchange rate reflects the estimated impact on Chilean peso
denominated operating costs during the period. 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 period-end.
Average market Impact of a
commodity price 10% movement
/ average exchange in the commodity
rate during price / exchange
the six months rate on EBITDA
ended 30.06.22 for the six
months ended
30.06.22
$m
Copper price $4.43/lb 257
Molybdenum price $18.7/lb 16
Gold price $1,873/oz 14
US dollar / Chilean peso exchange
rate 826 71
Net finance expense
Net finance expense decreased by $25.7 million to $10.8 million,
compared with $36.5 million in 2021.
Six months Six months
ended ended
30.06.22 30.06.21
$m $m
Investment income 4.3 2.9
Interest expense (34.8) (33.5)
Other finance items 19.7 (5.9)
----------- -----------
Net finance expense (10.8) (36.5)
----------- -----------
Investment income increased from $2.9 million in 2021 to $4.3
million in 2022, mainly due to an increase in average interest
rates partially offset by lower average cash and liquid investment
balances.
Interest expense increased marginally from $33.5 million in 2021
to $34.8 million in 2022, reflecting an increase in the average
relevant borrowing balances and an increase in the average interest
rates.
Other finance items were a net gain of $19.7 million, compared
with a net loss of $5.9 million in 2021, a variance of $25.6
million. This was mainly due to the foreign exchange impact of the
retranslation of Chilean peso denominated assets and liabilities,
which resulted in a $26.4 million gain in 2022 compared with a $2.4
million loss in 2021. In addition, there was an expense of $6.8
million in respect of the unwinding of the discounting of
provisions (first half of 2021 - expense of $3.4 million).
Profit before tax
As a result of the factors set out above, profit before tax
decreased by 61.9% to $679.6 million in the first half of 2022
(first half of 2021 - $1,783.5 million).
Income tax expense
The tax charge in the first half of 2022 decreased by $414.0
million to $247.9 million (first half of 2021 - $661.9 million) and
the effective tax rate was 36.5% (first half of 2021 - 37.1%).
Six months Six months
ended ended
30.06.2022 30.06.2021
ítems ítems
$m % $m %
Profit before tax 679.6 1,783.5
Tax at the Chilean corporate
tax rate of 27% (183.5) 27.0 (481.6) 27.0
Mining Tax (royalty) (41.0) 6.0 (128.5) 7.2
Deduction of mining royalty
as an allowable expense
in determination of first
category tax 11.7 (1.7) 36.0 (2.0)
Withholding tax (32.0) 4.7 (111.3) 6.2
Items not deductible from
first category tax (13.7) 2.0 (7.2) 0.4
Adjustment in respect of
prior years (2.5) 0.4 0.8 -
Tax effect of share of
profit of associates and
joint ventures 13.0 (1.9) 5.2 (0.3)
Impact of unrecognised
tax losses on current tax 0.1 0.0 24.7 (1.4)
Tax expense and effective
tax rate for the period (247.9) 36.5 (661.9) 37.1
-------- ------ -------- ---------
The effective tax rate of 36.5% varied from the statutory rate
principally due to the mining tax (royalty) (net impact of $29.3
million / 4.3% 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 $32.0 million / 4.7%), items not deductible
for Chilean corporate tax purposes, principally the funding of
expenses outside of Chile (impact of $13.7 million / 2.0%) and
adjustments in respect of prior years (impact of $2.5 million /
0.4%), partly offset by 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 $13.0 million / 1.9%).
Non-controlling interests
Profit for the first half of the year attributable to
non-controlling interests was $171.4 million, compared with $456.3
million in the first half of 2021, a decrease of $284.9 million.
This reflected the decrease in earnings analysed above.
Earnings per share
Six months Six months
ended ended
30.06.22 30.06.21
$ cents $ cents
Basic earnings per share 26.4 67.5
----------- -----------
Earnings per share calculations are based on 985,856,695
ordinary shares.
As a result of the factors set out above, profit attributable to
equity shareholders of the Company was $260.3 million, compared
with $665.3 million in the first half of 2021, and total earnings
per share were 26.4 cents for the first half of 2022 (first half of
2021 - 67.5 cents per share).
Dividends
Dividends per share declared in relation to the period are as
follows:
Six months Six months
ended ended
30.06.22 30.06.21
$ cents $ cents
Ordinary dividends:
Interim 9.2 23.6
Total dividends to ordinary shareholders 9.2 23.6
----------- -----------
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 declared an interim dividend for the first half of
2022 of 9.2 cents per ordinary share, which amounts to $90.7
million. The interim dividend will be paid on 30 September 2022 to
ordinary shareholders that are on the register at the close of
business on 2 September 2022.
Capital expenditure
Capital expenditure increased by $49.1 million from $781.9
million in the first half of 2021 to $831.0 million in the current
period. The capital expenditure in the first six months of 2022
included $301.4 million of IFRIC 20 stripping costs and $218.5
million in respect of the Los Pelambres Expansion project.
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 30 June 2022 there
were no derivative financial instruments in place (30 June 2021 -
negative fair value of $51.1 million).
Cash flows
The key features of the cash flow statement are summarised in
the following table.
Six months Six months
ended 30.06.22 ended
30.06.21
$m $m
Cash flows from continuing operations 1,682.5 2,460.5
Income tax paid (620,6) (348.1)
Net interest paid (26.2) (26.5)
Capital contributions and loans to associates - (5.5)
Purchases of property, plant and equipment (831.0) (781.9)
Dividends paid to equity holders of the
Company (1,172.2) (478.1)
Dividends paid to non-controlling interests (80.0) (40.0)
Dividends from associates and joint ventures 50.0 65.0
Other items (0.1) 1.7
----------------- -------------
Changes in net debt relating to cash
flows (997.6) 847.1
Other non-cash movements (23.0) (59.3)
Effects of changes in foreign exchange
rates (11.3) (4.5)
----------------- -------------
Movement in net debt in the period (1,031.9) 783.3
Net cash/(debt) at the beginning of the
year 540.5 (82.0)
----------------- -------------
Net (debt) / cash at the end of the
period (491.4) 701.3
----------------- -------------
Cash flows from continuing operations were $1,682.5 million in
the first half of 2022 compared with $2,460.5 million in the first
half of 2021. This reflected EBITDA from subsidiaries for the
period of $1,130.3 million (first half of 2021 - $2,283.7 million)
adjusted for the positive impact of a net working capital decrease
of $569.7 million (first half of 2021 - positive impact of $187.6
million from a net working capital decrease), partly offset by the
negative impact of a decrease in provisions of $17.5 million (first
half of 2021 - negative impact of a decrease in provisions of $10.8
million).
The working capital decrease in the first six months of 2022 was
mainly due to a decrease in receivables, reflecting lower sales
volumes towards the end of the current period compared with the end
of 2021, as well as the impact of a negative mark-to-market
adjustment of $173.8 million at 30 June 2022 compared with a
positive mark-to-market adjustment of $12.3 million at 31 December
2021.
The net cash outflow in respect of tax in the first half of 2022
was $620.6 million (first half of 2021 - $348.1 million). This
amount differs from the current tax charge in the consolidated
income statement of $276.1 million (first half of 2021 - $543.4
million) mainly because cash tax payments for corporate tax and the
mining tax include payments on account for the current year (based
on prior periods' profit levels) of $272.3 million (first half of
2021 - $286.4 million), withholding tax payments of $21.2 million
(first half of 2021 - $55.1 million), the settlement of outstanding
balances in respect of the previous year's tax charge of $332.2
million (first half of 2021 - $30.8 million), as well as the
recovery of $5.1 million in 2021 relating to prior years (first
half of 2021 - recovery of $20.0 million).
There were no contributions and loans to associates and joint
ventures in the first six months of 2022 (first half of 2021 - $5.5
million).
Capital expenditure in the first half of 2022 was $831.0 million
compared with $781.9 million in the first half of 2021. This
included expenditure of $404.0 million at Los Pelambres (first half
of 2021 - $386.7 million), $387.2 million at Centinela (first half
of 2021 - $347.9 million), $21.9 million at Antucoya (first half of
2021 - $30.8 million), $4.1 million at Corporate (first half of
2021 - $6.1 million) and $13.8 million at the Transport division
(first half of 2021 - $10.4 million). The increase at Centinela and
Los Pelambres reflects higher mine development expenditure, partly
offset by decreased expenditure at the Los Pelambres Expansion
project.
Dividends paid to equity holders of the Company in the first
half of 2022 were $1,172.2 million (first half of 2021 - $478.1
million), related to the payment of the final dividend declared in
respect of 2021.
Dividends paid by subsidiaries to non-controlling shareholders
were $80.0 million for the first half of 2022 (first half of 2021
was $40.0 million).
Financial position
At 30.06.22 At 31.12.21
$m $m
Cash, cash equivalents
and liquid investments 2,878.2 3,713.1
Total borrowings (3,369.6) (3,172.6)
------------ ------------
Net cash/(debt) at the
end of the period (491.4) 540.5
------------ ------------
At 30 June 2022 the Group had combined cash, cash equivalents
and liquid investments of $2,878.2 million (31 December 2021 -
$3,713.1). Excluding the non-controlling interest share in each
partly-owned operation, the Group's attributable share of cash,
cash equivalents and liquid investments was $2,378.1 million (31
December 2021 - $3,299.9 million).
Total Group borrowings at 30 June 2022 were $3,369.6 million (at
31 December 2021 - $3,172.6 million). The increase of $197.0
million was mainly due to the $488.8 million receipt from the issue
of the new corporate bond during the period, $327.0 million
additional draw-down of the borrowing at Los Pelambres relating to
the Expansion project, $50.0 million refinancing of the senior loan
at Antucoya and $13.5 million of new finance leases, partly offset
by a $580.6 million repayment of the senior loans at Corporate
($500.0 million), Centinela ($55.6 million) and Los Pelambres
($25.0 million), $35.0 million repayment of Antucoya's short term
loan and $19.6 million of subordinated debt repayment by
Antucoya.
Excluding the non-controlling interest share in each
partly-owned operation, the Group's attributable share of the
borrowings was $2,513.7 million (31 December 2021 - $2,409.6
million).
This resulted in net debt at 30 June 2022 of $491.4 million (31
December 2021 - net cash $540.5 million). Excluding the
non-controlling interest share in each partly-owned operation, the
Group had an attributable net debt position of $135.5 million (31
December 2021 - net cash $890.3 million).
Going concern
The financial information contained in this half-year financial
report 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 half-year
financial report.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The risks and uncertainties which were analysed in the 2021 Annual
Report are as follows:
-- Talent management
-- Labour relations
-- Safety and health
-- Environmental management
-- Climate change
-- Community relations
-- Political, legal and regulatory
-- Corruption
-- Operations
-- Tailing storage
-- Strategic resources
-- Cyber security
-- Liquidity
-- Commodity prices and exchange rates
-- Growth of mineral resource base and opportunities
-- Project execution
-- Innovation and digitisation
-- External risks
There have been no changes to the above categories of key risks
in the first six months of 2022.
A detailed explanation of the risks summarised above can be
found in the Risk Management section of the 2021 Annual Report,
which is available at www.antofagasta.co.uk.
Cautionary statement about forward-looking statements
This half-year 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: natural events, 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
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
For the six months ended 30.06.2021
(Unaudited)
Equity
attributable
to equity
holders Non-
Share Share Other Retained of the controlling
capital premium reserves earnings Company interests Total
$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 - - - 665.3 665.3 456.3 1,121.6
Other
comprehensive
expense
for period - - (10.0) (1.5) (11.5) (4.4) (15.9)
Dividends - - - (478.1) (478.1) (240.0) (718.1)
------------------ ----------------- ------------------ ---------------- ---------------- -------------------- ---------
Balance at 30
June 2021 89.8 199.2 (40.6) 7,677.9 7,926.3 2,542.4 10,468.7
================== ================= ================== ================ ================ ==================== =========
For the year ended 31 December 2021 (Audited)
Equity
attributable
to equity
holders Non-
Share Share Other Retained of the controlling
capital premium reserves earnings Company interests Total
$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
================== ================= ================== ==================== ================= ==================== =================
Consolidated Balance Sheet
The condensed consolidated interim financial statements were
approved by the Board of Directors on 10 August 2022 and signed on
their behalf by
Jean-Paul Luksic Tony Jensen
Chairman Senior Independent Director
Consolidated Cash Flow Statement
Notes
1. General information and accounting policies
a) General information
These condensed consolidated interim financial statements for
the half-year reporting period ended 30 June 2022 have been
prepared in accordance with UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The condensed consolidated interim financial statements are
unaudited. They should be read in conjunction with the Group's 2021
Annual Report and Financial Statements. The information for the
year ended 31 December 2021 does not constitute the Group's
statutory accounts as defined in section 434 of the Companies Act
2006 (the "Act") but is derived from those accounts. The statutory
accounts for the year ended 31 December 2021 have been approved by
the Board and have been delivered to the Registrar of Companies.
The auditors have reported on those accounts and their report was
unqualified, with no matters included by way of emphasis, and did
not contain statements under section 498(2) of the Act (regarding
adequacy of accounting records and returns) or under section 498(3)
(regarding provision of necessary information and
explanations).
These condensed consolidated interim financial statements have
been prepared under the accounting policies as set out in the
statutory accounts for the year ended 31 December 2021, other than
any changes required by the implementation of new accounting
standards as set out below.
The condensed consolidated interim financial statements do not
include all of the notes of the type normally included in annual
financial statements. Accordingly, they are to be read in
conjunction with the annual report for the year ended 31 December
2021, which was prepared in accordance with UK-adopted
International Accounting Standards.
The financial information contained in these condensed
consolidated interim financial statements has been prepared on the
going concern basis.
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 half-year financial report
includes details of the Group's cash, cash equivalents and liquid
investment balances in Note 17, and details of borrowings are set
out in Note 15.
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 30 June 2022, with combined cash, cash equivalents
and liquid investments of $2,878.2 million. Total borrowings were
$3,369.6 million, resulting in a net debt position of $491.4
million.
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 downside sensitivity analyses have been performed, assessing
the impact of:
-- A significant deterioration in the future copper price
forecasts by 20% 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 50 c/lb in the copper price for a period of three
months.
-- The Group's most significant individual operational risks.
The stability of tailings storage facilities represents a
potentially significant operational risk for mining operations
globally. The Group's tailings storage facilities are designed to
international standards, constructed using downstream methods,
subject to rigorous monitoring and reporting, and reviewed
regularly by an international panel of independent experts. Given
these standards of design, development, operations and review, the
impact of a potential tailings dam failure has not been included in
the sensitivity analysis.
-- A shut-down of the Group's operations for a period of three months.
-- Potential changes to the Chilean mining royalty, taking into
account the Group's existing tax stability agreements.
These downside sensitivity analyses 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 half-year
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 half-year results announcement.
b) Critical accounting judgements and key sources of estimation uncertainty
The Group's critical accounting judgements and key sources of
estimation uncertainty are detailed in Note 3 to the 2021 annual
report which is available at www.antofagasta.co.uk
The critical judgements relate to:
-- Non-financial assets impairment
-- Capitalisation of project costs within property, plant and equipment
The key sources of estimation uncertainty relate to:
-- Deferred taxation
There has been no significant change to these judgements and
uncertainties during the first six months of 2022.
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
----------------------------
2. Total profit from operations, associates and joint ventures
Other operating expenses comprise $51.4 million of exploration
and evaluation expenditure (30 June 2021 - $52.3 million), $7.2
million in respect of the employee severance provision (30 June
2021 - $8.1 million), $6.6 million in respect of the closure
provision (30 June 2021 - $4.6 million) and $58.2 million of other
expenses (30 June 2021 - $57.1 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 underlying earnings generated by the ongoing businesses of
the Group.
There were no exceptional items in the six months ended 30 June
2022.
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 and 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 31 December 2021.
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 was 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 respect of
Antucoya.
Antucoya continued to generate taxable profits during the first
six months of 2022, supporting the continued recognition of the
remaining deferred tax asset.
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 30 June 2022, 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.
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 30 June 2022, 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.
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.
Climate risks
The indicative valuations incorporate estimates of the potential
future costs relating to climate risks. The Group reported 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 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.
Chilean mining royalty
We have considered potential changes to the Chilean mining
royalty as part of the indicative valuation exercise. In July 2022
the Chilean government announced its proposals for a comprehensive
reform of the tax system, including proposed changes to the mining
royalty. These proposals are subject to review and approval by the
Chilean Congress, and so there is no certainty as to the exact
nature of changes which may finally be enacted into law.
Other relevant assumptions
In addition to the above factors, the indicative valuations are
sensitive to the assumptions in respect of future production
levels, operating costs, the US dollar/Chilean peso exchange rate,
sustaining and development capital expenditure 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.
In addition, the conclusion that there are no impairment
indicators at Zaldívar 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). Mining of the final pit
phase is subject to agreements or easements to access these areas
and relocate this infrastructure.
As noted above, the impairment indicator valuation exercise,
taking into account the factors outlined above, demonstrated
positive headroom for all of the Group's mining operations, with
the recoverable amount of the assets in excess of their carrying
value. However, for Antucoya the headroom position was more
marginal relative to the other operations, and additional future
negative factors (such as significant reductions in the medium- or
long-term copper price outlook) may be considered indicators of
potential impairment for that operation, requiring a full
impairment assessment at that point.
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
(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 $40.7 million.
For the six months ended
30.06.2021 (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 1,878.7 1,289.6 336.4 - - - 3,504.7 86.3 3,591.0
Operating costs
excluding
depreciation (531.8) (458.1) (177.4) - (52.3) (35.2) (1,254.8) (52.5) (1,307.3)
Depreciation
and
amortisation (132.5) (282.5) (46.9) - - (5.6) (467.5) (15.0) (482.5)
Loss on
disposals - - - - - - - (0.6) (0.6)
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ------------------- ----------------- -----------------
Operating
profit/(loss) 1,214.4 549.0 112.1 - (52.3) (40.8) 1,782.4 18.2 1,800.6
Net share of
income/(loss)
from associates
and joint
ventures - - - 24.5 - (5.1) 19.4 - 19.4
Investment
income 0.9 0.8 0.2 - - 1.0 2.9 - 2.9
Interest expense (1.9) (9.2) (7.4) - - (14.5) (33.0) (0.5) (33.5)
Other finance
items (2.7) (2.3) (0.4) - - (0.1) (5.5) (0.4) (5.9)
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ------------------- ----------------- -----------------
Profit/(loss)
before tax 1,210.7 538.3 104.5 24.5 (52.3) (59.5) 1,766.2 17.3 1,783.5
Tax (395.1) (157.6) (3.2) - - (96.9) (652.8) (9.1) (661.9)
-------------------- ------------------ ------------------ ---------------- --------------------- -------------------- ------------------- ----------------- -----------------
Profit/(loss)
for the period 815.6 380.7 101.3 24.5 (52.3) (156.4) 1,113.4 8.2 1,121.6
Non-controlling
interests 322.9 106.8 26.5 - - 0.1 456.3 - 456.3
Profit/(loss)
for the period
attributable
to owners of
the parent 492.7 273.9 74.8 24.5 (52.3) (156.5) 657.1 8.2 665.3
==================== ================== ================== ================ ===================== ==================== =================== ================= =================
EBITDA(1) 1,346.9 831.5 159.0 76.4 (52.3) (40.4) 2,321.1 36.0 2,357.1
Additions to
non-current
assets
Capital
expenditure
(3) 464.4 368.0 40.5 - - 12.2 839.0 10.6 895.7
Segment assets
and liabilities
Segment assets 6,171.1 6,236.6 1,704.4 - - 1,794.9 15,907.0 383.9 16,290.9
Investments
in associates
and joint
ventures - - - 933.5 - - 933.5 5.6 939.1
Segment
liabilities (2,873.6) (1,875.5) (673.2) - - (1,246.3) (6,668.6) (92.7) (6,761.3)
(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 $40.0 million.
(3) The capital expenditure comparative figures have been
restated to include $46.3 million in relation to leases that were
previously only disclosed within a footnote beneath the table.
For the year ended 31.12.2021 (Audited)
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.
b) Entity wide disclosures
Revenue by product
(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
Information about major customers
In the first half of 2022 the Group's mining revenue included
$363.4 million related to one large customer that individually
accounted for more than 10% of the Group's revenue (six months
ended 30 June 2021 - one large customer representing $458.1
million; year ended 31 December 2021 - one large customer
representing $1,015.1 million).
Non-current assets by location of asset
The above amounts reflect non-current assets excluding financial
assets and deferred tax assets. The non-current assets shown above
exclude $74.3 million ($7.2 million - 30 June 2021) of deferred tax
assets, $56.2 million ($67.5 million - 30 June 2021) of receivables
(being financial assets), and $6.4 million of equity investments
($9.8 million - 30 June 2021).
6. 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 contain 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 (which is the amount recorded as
revenue) 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.
An analysis of the Group's revenue is as follows:
(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 table above sets 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.
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 period
ended
30 June 2021
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Centinela Los Centinela
Pelambres Pelambres Pelambres
Copper Copper Copper Copper Gold Gold Molybdenum Molybdenum
concentrate concentrate cathodes cathodes in concentrate in concentrate concentrate
concentrate
Provisionally
invoiced
gross sales 1,484.0 706.4 349.3 365.0 47.6 144.6 136.7 20.9
Revenue from
freight
services 26.3 20.1 1.9 2.3
------------ ------------- ---------- ---------- ---------------------- ------------- ------------- ------------
1,510.3 726.5 351.2 367.3 47.6 144.6 136.7 20.9
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 107.5 59.3 8.8 7.0 (1.0) (0.9) 19.9 2.4
Mark-to-market
adjustments
at the end of
the current
period (45.0) (21.2) (0.6) (0.9) - (0.2) 10.8 3.1
------------ ------------- ---------- ---------- ---------------------- ------------- ------------- ------------
Total effect of
adjustments
to current
period
invoices 62.5 38.1 8.2 6.1 (1.0) (1.1) 30.7 5.5
------------ ------------- ---------- ---------- ---------------------- ------------- ------------- ------------
Total pricing
adjustments 178.9 86.0 10.1 7.1 (2.0) (6.0) 37.3 6.4
Realised losses
on commodity
derivatives - - (35.5) (38.0) - - - -
------------ ------------- ---------- ---------- ---------------------- ------------- ------------- ------------
Treatment and
refining
charges (43.0) (26.6) - - (0.1) (0.3) (12.8) (3.8)
Revenue 1,646.2 785.9 325.8 336.4 45.5 138.3 161.2 23.5
============ ============= ========== ========== ====================== ============= ============= ============
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 2021
$m $m $m $m $m $m $m $m
Los Centinela Centinela Antucoya Los Centinela Los Centinela
Pelambres 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) - - - -
-------------- --------------- ------------ ------------- ---------------- --------------- -------------------- -------------------
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.
(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.
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain
open until settlement occurs is approximately one month from
shipment date.
(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.
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open
until settlement is approximately two months from shipment
date.
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:
The trade and other receivables balance at 30 June 2022 was
$366.5 million compared with $1,146.1 million at 31 December 2021.
This decrease reflected lower sales volumes towards the end of the
current period compared with the end of 2021, as well as the impact
of the negative mark-to-market adjustment of $173.8 million at 30
June 2022 compared with a positive mark-to-market adjustment of
$12.3 million at 31 December 2021 as shown above.
7. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities
is shown below:
Six months ended 30.06.2021
-----------------------------------------------------------------
At fair value At fair value Held at amortised Total
through through other cost
profit and comprehensive
loss income
Restated(1)
$m $m $m $m
Financial assets
Derivative financial
assets 0.3 - - 0.3
Equity investments - 9.8 - 9.8
Trade and other receivables 541.9 - 107.4 649.3
Cash and cash equivalents
(restated(1) ) - - 778.5 778.5
Liquid investments
(restated(1) ) 3,461.4 - - 3,461.4
-------------- --------------- ------------------ --------------
4,003.6 9.8 885.9 4,899.3
-------------- --------------- ------------------ --------------
Financial liabilities
Derivative financial
liabilities (51.4) - - (51.4)
Trade and other payables - - (1,018.4) (1,018.4)
Borrowings and leases - - (3,538.6) (3,538.6)
-------------- --------------- ------------------ --------------
(51.4) - (4,557.0) (4,608.4)
-------------- --------------- ------------------ --------------
1. The 30 June 2021 financial assets have been restated to
reclassify $481.5 million previously presented as cash and cash
equivalents to liquid investments and this resulted in a
corresponding restatement of the "at fair value through profit and
loss" and "Held at amortised cost" columns in the categories of
financial instruments.
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
Trade and other 1,011.7 - 83.3 1,095.0
receivables
Cash and cash
equivalents - - 743.4 743.4
Liquid investments 2,969.7 - - 2,969.7
----------------------------------------- ------------------------------------------------- ------------------------------------------ ---------------------------
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)
----------------------------------------- ------------------------------------------------- ------------------------------------------ ---------------------------
The fair value of the fixed rate bonds included within the
"Borrowings and leases" category was $877.8 million at 30 June 2022
(six months ended 30 June 2021- $483.6 million; year ended 31
December 2021 - $476.2 million) compared with their carrying value
of $985.1 million (six months ended 30 June 2021 - $495.7 million;
year ended 31 December 2021 - $496.1 million). The fair value of
all other financial assets and financial liabilities carried at
amortised cost approximates the carrying value presented above.
Fair value of financial instruments
An analysis of financial assets and financial liabilities
measured at fair value is presented below:
Six months ended 30.06.2021
-------------------------------------------------------------
Level Level Level Total
1 2 3
Restated(1)
$m $m $m $m
Financial assets
Derivatives financial assets (a) - 0.3 - 0.3
Equity investments (b) 9.8 - - 9.8
Trade and other receivables (c) - 541.9 - 541.9
Liquid investments (d) - 3,461.4 - 3,461.4
9.8 4,003.6 - 4,013.4
---------------------------- ------------- ------ --------
Financial liabilities
Derivatives financial liabilities (a) - (51.4) - (51.4)
Trade and other payables - - - -
- (51.4) - (51.4)
---------------------------- ------------- ------ --------
1. The 30 June 2021 financial assets have been restated to
reclassify $481.5 million previously presented as cash and cash
equivalents to liquid investments and this resulted in a
corresponding restatement of the "at fair value through profit and
loss" and "Held at amortised cost" columns in the categories of
financial instruments.
For the year ended 31.12.2021
--------------------------------------------------------------------------------------------
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Equity investments (b) 8.7 - - 8.7
Trade and other
receivables (c) - 1,011.7 - 1,011.7
Liquid investments (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
---------------------- ---------------------- ------------------- -----------------------
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.
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 HY 2021
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 six months ended 30 June 2022, 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)
In the six months ended 30 June 2022, amounts capitalised and
consequently not included within the above table were as follows:
$14.5 million at Los Pelambres (six months ended 30 June 2021 -
$10.0 million; year ended 31 December 2021 - $12.1 million) and
$0.4 million at Centinela (six months ended 30 June 2021 - $0.9
million; year ended 31 December 2021 - $2.1 million). The interest
expense shown above includes $3.1 million in respect of leases (six
months ended 30 June 2021 - $4.2 million; year ended 31 December
2021 - $7.9 million).
9. Taxation
The tax charge for the period comprised the following:
The rate of first category (i.e. corporate) tax in Chile is
27.0% (2021 - 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.
Six months Six months Year ended Year ended
ended ended
Excluding Including
exceptional exceptional
items items
30.06.2022 30.06.2021 31.12.20201 31.12.2021
$m % $m % $m % $m %
Profit before tax 679.6 1,783.5 3,654.7 3,477.1
Tax at the Chilean corporate
tax rate of 27% (183.5) 27.0 (481.6) 27.0 (986.8) 27.0 (938.8) 27.0
Mining Tax (royalty) (41.0) 6.0 (128.5) 7.2 (243.8) 6.7 (243.8) 7.0
Deduction of mining royalty
as an allowable expense in
determination of first
category
tax 11.7 (1.7) 36.0 (2.0) 67.8 (1.9) 67.8 (1.9)
Withholding tax (including
subtitute tax at 30% rate) (32.0) 4.7 (111.3) 6.2 (195.0) 5.3 (195.0) 5.6
Items not deductible from
first category tax (13.7) 2.0 (7.2) 0.4 (31.6) 0.9 (31.6) 0.9
Adjustment in respect of
prior
years (2.5) 0.4 0.8 - (12.1) 0.3 (12.1) 0.3
Tax effect of share of
profit
of associates and joint
ventures 13.0 (1.9) 5.2 (0.3) 16.1 (0.4) 16.1 (0.5)
Impact of previously
unrecognised
tax losses on current tax 0.1 - - - 52.5 (1.4) 52.5 (1.5)
Impact of recognition of
previously
unrecognised tax losses on
deferred tax - - 24.7 (1.4) - - 90.6 (2.6)
Provision against carrying
value of assets - - - - - - (48.0) 1.4
--------
Tax expense and effective
tax rate for the period (247.9) 36.5 (661.9) 37.1 (1,332.9) 36.5 (1,242.3) 35.7
======== ====== ======== ====== ========== ====== ========== ======
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 $29.3 million / 4.3% 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 $32.0
million / 4.7%), items not deductible for Chilean corporate tax
purposes, principally the funding of expenses outside of Chile
(impact of $13.7 million / 2.0%) and adjustments in respect of
prior years (impact of $2.5 million / 0.4%), partly offset by 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
$13.0 million / 1.9%).
The main factors which could impact the sustainability of the
Group's existing effective tax rate are:
-- The government presented a tax reform bill to Congress on 7
July and a new proposal for the mining royalty on 11 July. The
royalty proposal will be reviewed by the Senate before being passed
to the lower house for its consideration. Any future changes
enacted to the Chilean tax and royalty regimes as a result of this
process could have a significant impact on the Group's future
effective tax rate.
-- 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. Earnings per share
Basic earnings per share are calculated as profit after tax and
non-controlling interests, based on 985,856,695 (2021: 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.
11. Dividends
The Board has declared an interim dividend of 9.2 cents per
ordinary share for the 2022 half year (2021 half year - 23.6 cents
per ordinary share). Dividends are declared and paid gross.
Dividends actually paid in the period and recognised as a deduction
from net equity under IFRS were 118.9 cents per ordinary share
(2021 half year - 48.5 cents per ordinary share), representing the
final dividend declared in respect of the previous year.
The interim dividend will be paid on 30 September 2022 to
ordinary shareholders that are on the register at the close of
business on 2 September 2022. Shareholders can elect (on or before
5 September 2022) to receive this interim dividend in US Dollars,
Pounds Sterling or Euro, and the exchange rate to be applied to
interim dividends to be paid in Pounds Sterling or Euro will be set
as soon as reasonably practicable after that date (which is
currently anticipated to be on 9 September 2022).
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.
12. Intangible asset
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 was
recognised in respect of this asset as at 31 December 2021.
13. Property, plant and equipment
During the six months ended 30 June 2022, $90.3 million of
depreciation in respect of assets relating to Los Pelambres,
Centinela and Antucoya has been capitalised within property, plant
and equipment or inventories, and accordingly is excluded from the
depreciation charge recorded in the income statement as shown in
Note 5(a) (six months ended 30 June 2021- $47.6 million; year ended
31 December 2021 - $17.9 million).
At 30 June 2022, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to $915.0 million (30 June 2021 - $1,170.4 million; 31
December 2021 - $599.3 million).
Depreciation capitalised in property, plant and equipment of
$34.3 million related to the depreciation of assets used in mine
development (operating stripping) at Centinela, Los Pelambres and
Antucoya (30 June 2021 - $37.8 million; 31 December 2021 - $72.0
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.
14. Investment in associates and joint ventures
The investments which are included in the $904.3 million balance
at 30 June 2022 are set out below:
Investment in associates
(i) The Group's 30% interest in ATI, which operates a concession
to manage installations in the port of Antofagasta.
Investment in joint ventures
(ii) The Group's 50% interest in Minera Zaldívar SpA ("Zaldívar").
(iii) 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 20.
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.
1. The prior period comparatives have been restated to reflect
the net position in respect of deferred tax assets/liabilities
($410.5 million) and to reclassify liquid investments which had
been included within the cash and cash equivalents line ($179.9
million).
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.
15. Borrowings and leases
At 30 June 2022, $1,122.2 million (30 June 2021 - $682.3
million; 31 December 2021 - $642.7 million) of the borrowings has
fixed rate interest and $2,247.4 million (30 June 2021 - $2,856.3
million; 31 December 2021 - $2,529.9 million) has floating rate
interest. The Group periodically enters into interest rate
derivative contracts to manage its exposure to interest rates.
In May 2022, Antofagasta plc issued a new corporate bond for
$500 million with a 10-year tenor with a base spread of Treasuries
plus 287.5 bps and a coupon of 5.625%.
16. Reconciliation of profit before tax to net cash inflow from
operating activities
17. Analysis of changes in net debt
Net cash/(debt)
Net cash/(debt) at the end of each period was as follows:
1. The 30 June 2021 comparative balances have been restated to
reclassify $481.5 million previously presented as cash and cash
equivalents to liquid investments. This has no impact on the
combined total cash, cash equivalents and liquid investments
balance shown above. This also resulted in a corresponding
restatement of the "net (increase)/decrease in liquid investments",
"net cash used in investing activities" and "net
increase/(decrease) in cash and cash equivalents" lines in the cash
flow statement.
18. Related party transactions
a) Joint ventures
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 the six months
ended 30 June 2022, the Group contribution to Tethyan was nil (six
months ended 30 June 2021 - $5.5 million; year ended 31 December
2021 - $9.5 million).
The Group has a 50% interest in Minera Zaldívar, which is a
joint venture with Barrick Gold Corporation. During the six months
ended 30 June 2022, the Group has received dividends from Minera
Zaldívar of $50 million (six months ended 30 June 2021 - $65.0
million; year ended 31 December 2021 - $142.5 million).
b) 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., BanChile Corredores de Bolsa S.A., ENEX S.A. and
Compañía de Inversiones Adriático S.A. These transactions were all
on normal commercial terms.
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, a company
controlled by the Luksic family, which continues to hold the
remaining 49% of Antomin 2 and Antomin Investors. The Group is
responsible for any exploration costs relating to the properties
held by these entities. During the six months ended 30 June 2022,
the Group incurred $0.1 million (30 June 2021 - $0.1 million; 31
December 2021 - $0.1 million) of exploration costs at these
properties.
19. 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.
In March 2022, the Company reached an agreement in principle
with Barrick Gold and the Governments of Pakistan and Balochistan
on a framework that provides for the reconstitution of the Reko Diq
project, and a pathway for the Company to exit the project. If
definitive agreements are executed and the conditions to closing
are satisfied, a consortium comprising various Pakistani
state-owned enterprises will acquire an interest in the project for
consideration of approximately $900m to jointly develop the project
with Barrick, and Antofagasta would exit. If all the conditions are
satisfied during 2022, we would expect to receive the proceeds in
2023.
No amounts have been recognised as at 30 June 2022 pending
satisfaction of the conditions to closing and reasonable certainty
over the receipt of the related proceeds.
20. 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.
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
b) the half yearly financial report includes a fair review of
the information required by DTR 4.2.7R (being an indication of
important events that have occurred during the first six months of
the financial year, and their impact on the half yearly financial
report and a description of the principal risks and uncertainties
for the remaining six months of the financial year); and
c) the half yearly financial report includes a fair review of
the information required by DTR 4.2.8R (being disclosure of related
party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial
position or the performance of the Group during that period and any
changes in the related party transactions described in the last
annual report that could have a material effect on the financial
position or performance of the Group in the first six months of the
current financial year).
By order of the Board
Jean-Paul Luksic Tony Jensen
Chairman Senior Independent Director
Independent review report to Antofagasta plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Antofagasta plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the half yearly financial report of Antofagasta plc for the six
month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2022;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half yearly
financial report of Antofagasta plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by the directors. The directors are responsible for
preparing the half yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the half yearly
financial report, including the interim financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the half yearly financial report based on
our review. Our conclusion, including our Conclusions relating to
going concern, is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion
paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
10 August 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 ongoing 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 six months ended 30 June 2022
For the six months ended 30 June 2021
Los Centinela Antucoya Zaldívar Exploration Corporate Mining Railway Total
Pelambres and and other and other
evaluation items transport
services
$m $m $m $m $m $m $m $m $m
Operating
profit/(loss) 1,214.4 549.0 112.1 - (52.3) (40.8) 1,782.4 18.2 1,800.6
Depreciation
and
amortisation 132.5 282.5 46.9 - - 5.6 467.5 15.0 482.5
Profit on
disposals - - - - - - - 0.6 0.6
---------- -------- ---------- --------
EBITDA from
subsidiaries 1,346.9 831.5 159.0 - (52.3) (35.2) 2,249.9 33.8 2,283.7
Proportional
share of the
EBITDA from
associates
and JVs - - - 76.4 - (5.2) 71.2 2.2 73.4
---------- ---------- --------- -------------- ------------ ---------- -------- ---------- --------
Total EBITDA 1,346.9 831.5 159.0 76.4 (52.3) (40.4) 2,321.1 36.0 2,357.1
========== ========== ========= ============== ============ ========== ======== ========== ========
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
Provision
against the
carrying
value of
assets(1) - - - - 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 4,666.9
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
================ ================ ================ ============== =================== ============ ======== ================ ==============
1. 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.
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.
d) Cash costs (continued)
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.
Production and Sales Statistics (not subject to audit or
review)
a) Production and sales volumes for copper, gold and molybdenum
b) Cash costs per pound of copper produced and realised prices
per pound of copper and molybdenum sold
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 second quarter
of 2022, published on 20 July 2022 .
This information is provided by RNS, the news service of the
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END
IR FLFLTTAIILIF
(END) Dow Jones Newswires
August 11, 2022 02:00 ET (06:00 GMT)
Antofagasta (LSE:ANTO)
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