REG - Antofagasta PLC - HALF YEARLY FINANCIAL REPORT JUNE 2017 <Origin Href="QuoteRef">ANTO.L</Origin> - Part 3
22/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSV5934Ob
Capital expenditure 114.0 296.4 52.2 - - 1.3 463.9 12.2 476.1
Segment assets and liabilities
Segment assets 3,580.9 5,213.1 1,759.5 - - 1,727.9 12,281.4 351.5 12,632.9
Investment in associates and joint ventures - - - 21.8 - 1,003.7 1,025.5 75.2 1,100.7
Segment liabilities (1,298.5) (1,875.1) (1,078.8) - - (635.4) (4,887.8) (131.3) (5,019.1)
1EBITDA 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.
2During the period, operating cash outflow from exploration and evaluation was $38.8 million
For the six months ended 30 June 2016 (Restated)
Los Pelambres Centinela Antucoya Zaldivar Exploration and evaluation2 Corporate and other items Total Mining Railway and other transport services Total
$m $m $m $m $m $m $m $m $m
Revenue 847.5 449.3 67.3 - - - 1,364.1 80.1 1,444.2
Cost of sales (412.1) (364.5) (51.1) - (18.9) (21.4) (868.0) (41.1) (909.1)
Depreciation and amortisation (96.7) (123.4) (16.7) - - (3.2) (240.0) (7.3) (247.3)
(Loss)/gain on disposals (0.2) - - - - - (0.2) - (0.2)
Operating profit/(loss) 338.5 (38.6) (0.5) - (18.9) (24.6) 255.9 31.7 287.6
Share of profit/(loss) from associates and joint ventures 1.2 - - 12.2 - (5.7) 7.7 2.0 9.7
Investment income 7.6 3.1 0.2 - - 1.8 12.7 0.4 13.1
Interest expense (3.0) (15.0) (9.7) - - (3.0) (30.7) (1.3) (32.0)
Other finance items 1.1 (4.0) 0.8 - - 1.1 (1.0) (0.9) (1.9)
Profit/(loss) before tax 345.4 (54.5) (9.2) 12.2 (18.9) (30.4) 244.6 31.9 276.5
Tax (91.7) (0.8) (11.1) - - (3.9) (107.5) (10.5) (118.0)
Profit/(loss) for the period from continuing operations 253.7 (55.3) (20.3) 12.2 (18.9) (34.3) 137.1 21.4 158.5
(Loss)/profit for the period from discontinued operations - - - - - (0.4) (0.4) - (0.4)
Profit/(loss) for the period 253.7 (55.3) (20.3) 12.2 (18.9) (34.7) 136.7 21.4 158.1
Non-controlling interests (101.6) 21.7 9.9 - - - (70.0) - (70.0)
Profit/(loss) for the period attributable to owners of the parent 152.1 (33.6) (10.4) 12.2 (18.9) (34.7) 66.7 21.4 88.1
EBITDA1 435.0 85.4 16.2 37.1 (18.9) (26.2) 528.6 46.5 575.1
Additions to non-current assets
Capital expenditure 182.0 289.7 7.3 - - 24.1 503.1 5.8 508.9
Segment assets and liabilities
Segment assets 4,099.6 4,911.3 2,015.4 - 9.5 1,514.0 12,549.8 351.3 12,901.1
Investment in associates and joint ventures 18.3 - - 966.2 - 31.7 1,016.1 71.6 1,087.7
Segment liabilities (1,404.1) (2,040.3) (1,244.8) - (4.5) (199.4) (5,193.1) (175.4) (5,368.5)
1EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. 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.
2During the period, operating cash outflow from exploration and evaluation was $17.6 million
For the year ended 31 December 2016
Los Pelambres Centinela Antucoya Zaldívar Exploration and evaluation2 Corporate and other items Mining Railway and other transport services Total
$m $m $m $m $m $m $m $m $m
Revenue 1,845.6 1,338.0 277.9 - - - 3,461.5 160.2 3,621.7
Operating costs excluding depreciation (923.8) (775.5) (213.0) - (44.3) (56.5) (2,013.1) (86.9) (2,100.0)
Depreciation and amortization (195.7) (299.4) (62.7) - - (5.2) (563.0) (15.4) (578.4)
Loss on disposals (0.2) (17.1) - - - (0.6) (17.9) (1.8) (19.7)
Provision against the carrying value of assets (241.0) - (215.6) - - - (456.6) - (456.6)
Operating profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Equity accounting profit/(loss) 0.4 - - 29.5 - (11.2) 18.7 4.7 23.4
Provision against the carrying value of assets (126.6) - - - - (8.1) (134.7) - (134.7)
Net share of profit/(loss) from associates and joint ventures (126.2) - - 29.5 - (19.3) (116.0) 4.7 (111.3)
Investment income 15.7 5.3 0.6 - - 4.7 26.3 0.6 26.9
Interest expense (6.5) (32.0) (30.5) - - (14.6) (83.6) (2.5) (86.1)
Other finance items (2.7) (5.4) (5.0) - - 3.0 (10.1) (1.8) (11.9)
Profit/(loss) before tax 365.2 213.9 (248.3) 29.5 (44.3) (88.5) 227.5 57.1 284.6
Tax (117.4) (73.3) 94.3 - - 5.3 (91.1) (17.5) (108.6)
Profit/(loss) for the period from continuing operations 247.8 140.6 (154.0) 29.5 (44.3) (83.2) 136.4 39.6 176.0
Profit for the period from discontinued operations - - - - - 38.3 38.3 - 38.3
Profit/(loss) for the period 247.8 140.6 (154.0) 29.5 (44.3) (44.9) 174.7 39.6 214.3
Non-controlling interests (97.9) (32.8) 74.3 - - 0.1 (56.3) - (56.3)
Profit/(loss) for the period attributable to the owners of the parent 149.9 107.8 (79.7) 29.5 (44.3) (44.8) 118.4 39.6 158.0
EBITDA1 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
Additions to non-current assets
Capital expenditure 316.6 617.4 27.4 - - 31.0 992.4 16.9 1,009.3
Segment assets and liabilities
Segment assets 3,606.2 5,008.0 1,740.5 - 9.5 1,945.8 12,310.0 327.2 12,637.2
Investment in associates and joint ventures - - - 983.7 - 25.1 1,008.8 77.8 1,086.6
Segment liabilities (1,368.2) (1,979.3) (1,085.3) - (4.5) (638.3) (5,075.6) (138.5) (5,214.1)
1EBITDA 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 During the year, operating cash flow from exploration and evaluation was $22.1 million
b) Entity wide disclosures
Revenue by product
Six months Six months Year ended 31.12.2016
ended ended
30.06.2017 30.06.2016
$m $m $m
Copper
- Los Pelambres 828.1 741.7 1,627.0
- Centinela concentrates 491.1 245.9 778.7
- Centinela cathodes 177.0 113.3 278.1
- Antucoya 229.6 67.3 277.9
Gold
- Los Pelambres 30.1 40.1 78.5
- Centinela 115.1 84.5 261.2
Molybdenum
- Los Pelambres 68.5 43.8 94.0
Silver
- Los Pelambres 16.6 21.9 46.1
- Centinela 10.8 5.6 20.0
Corporate
- Electricity Services 1.5 - -
Total Mining 1,968.4 1,364.1 3,461.5
Railway and transport services 80.8 80.1 160.2
2,049.2 1,444.2 3,621.7
Revenue by location of customer
Six months Six months Year ended 31.12.2016
ended ended
30.06.2017 30.06.2016
$m $m $m
Europe
- United Kingdom 33.0 0.1 -
- Switzerland 319.7 93.5 217.7
- Spain 90.5 48.8 115.6
- Germany 45.1 15.9 38.5
- Rest of Europe 52.1 58.7 157.3
Latin America
- Chile 101.0 101.5 105.2
- Rest of Latin America 94.8 29.3 126.4
North America
- United States 68.5 14.1 49.5
Asia Pacific
- Japan 735.6 613.0 1,483.5
- China 214.8 250.2 771.9
- Rest of Asia 294.1 219.1 556.1
2,049.2 1,444.2 3,621.7
Information about major customers
In the first half of 2017 the Group´s mining revenue included $227.3 million related to one large customer that
individually accounted for more than 10% of the Group's revenue (six months ended 30 June 2016 - one large customer
representing $279.2 million; year ended 31 December 2015 - one large customer representing $694.7 million).
Non-current assets by location of asset
Six months Six months Year ended 31.12.2015
ended ended
30.06.2017 30.06.2016
$m $m $m
- Chile 10,072.4 10,384.6 9,996.3
- USA 216.9 170.6 204.4
- Other 0.1 (0.1) 0.1
10,289.4 10,555.1 10,200.8
Notes to geographical information
The non-current assets balance disclosed by location of assets excludes financial instruments, available-for-sale
investments and deferred tax assets.
5. Revenue
Copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally provide for provisional
pricing of sales at the time of shipment, with final pricing being based on the monthly average London Metal Exchange
copper price or monthly average molybdenum price for specified future periods. This normally ranges from one to five months
after shipment to the customer. The provisional pricing mechanism within the sale agreements is an embedded derivative
under IFRS. Gains and losses from the marking-to-market of open sales are recognised through adjustments to revenue in the
income statement and to trade debtors in the balance sheet. The Group determines mark-to-market prices using forward prices
at each period end for copper concentrate and cathode sales, and period-end month average prices for molybdenum concentrate
sales due to the absence of a futures market in the market price references for that commodity in the majority of the
Group's contracts.
In addition to mark-to-market and final pricing adjustments, revenue also includes realised gains and losses relating to
derivative commodity instruments. Details of these realised gains or losses are shown in the tables below. Further details
of derivative commodity instruments in place at the period end are given in Note 6.
Copper and molybdenum concentrate sales are stated net of deductions for tolling charges, as shown in the tables below.
For the period ended 30 June 2017 $m $m $m $m $m $m $m Los Pelambres Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 868.0 507.3 177.7 227.8 30.9 114.7 77.6 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year (28.0) (15.3) 0.4 0.6 -
1.3 0.7 Settlement of sales invoiced in the previous year 53.3 37.6 - 0.7 (0.9) (2.2) 2.0 Total effect of adjustments to previous year invoices in the current period 25.3 22.3 0.4 1.3 (0.9) (0.9) 2.7 Effects of pricing adjustments to current period invoices Settlement of sales invoiced in the current period (10.9) (1.8) (2.4) (0.7) 0.1 1.9 - Mark-to-market adjustments at the end of the current period 26.0 14.0 2.6 1.2 - (0.2) (3.8) Total effect of adjustments to current period
invoices 15.1 12.2 0.2 0.5 0.1 1.7 (3.8) Total pricing adjustments 40.4 34.5 0.6 1.8 (0.8) 0.8 (1.1) Realised gains/(losses) on commodity derivatives - - - - - - - Revenue before deducting tolling charges 908.4 541.8 178.3 229.6 30.2 115.5 76.5 Tolling charges (80.3) (52.0) - - (0.1) (0.4) (8.0) Revenue net of tolling charges 828.1 489.8 178.3 229.6 30.1 115.1 68.5
$m $m $m $m $m $m $m
Los Pelambres Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
Provisionally invoiced gross sales 868.0 507.3 177.7 227.8 30.9 114.7 77.6
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year (28.0) (15.3) 0.4 0.6 - 1.3 0.7
Settlement of sales invoiced in the previous year 53.3 37.6 - 0.7 (0.9) (2.2) 2.0
Total effect of adjustments to previous year invoices in the current period 25.3 22.3 0.4 1.3 (0.9) (0.9) 2.7
Effects of pricing adjustments to current period invoices
Settlement of sales invoiced in the current period (10.9) (1.8) (2.4) (0.7) 0.1 1.9 -
Mark-to-market adjustments at the end of the current period 26.0 14.0 2.6 1.2 - (0.2) (3.8)
Total effect of adjustments to current period invoices 15.1 12.2 0.2 0.5 0.1 1.7 (3.8)
Total pricing adjustments 40.4 34.5 0.6 1.8 (0.8) 0.8 (1.1)
Realised gains/(losses) on commodity derivatives - - - - - - -
Revenue before deducting tolling charges 908.4 541.8 178.3 229.6 30.2 115.5 76.5
Tolling charges (80.3) (52.0) - - (0.1) (0.4) (8.0)
Revenue net of tolling charges
828.1 489.8 178.3 229.6 30.1 115.1 68.5
For the period ended 30 June 2016 Los Pelambres Centinela Centinela Michilla Antucoya Los Pelambres Centinela Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate $m $m $m $m $m $m $m $m Provisionally invoiced gross sales 816.6 280.6 113.9 4.1 67.4 39.9 78.9 40.4 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year 14.5
6.2 (0.2) (0.1) - - 2.2 (1.0) Settlement of sales invoiced in the previous year (19.0) (7.8) - (0.3) - (0.1) (1.0) 1.5 Total effect of adjustments to previous year invoices in the current period (4.5) (1.6) (0.2) (0.4) - (0.1) 1.2 0.5 Effects of pricing adjustments to current period invoices Settlement of sales invoiced in the current period 9.3 1.2 (0.6) 0.1 (1.1) 0.3 2.4 7.8 Mark-to-market adjustments at the end of the current period 13.3 4.3 0.1 - 0.9 - 2.3 2.1 Total effect of adjustments to current
period invoices 22.6 5.5 (0.5) 0.1 (0.1) 0.3 4.7 9.9 Total pricing adjustments 18.1 4.0 (0.7) (0.4) (0.1) 0.2 5.9 10.4 Realised gains/(losses) on commodity derivatives - - 0.1 - - - - - Revenue before deducting tolling charges 834.7 284.6 113.3 3.8 67.3 40.1 84.9 50.8 Tolling charges (93.0) (38.7) - - - (0.1) (0.3) (7.0) Revenue net of tolling charges 741.7 245.9 113.3 3.8 67.3 40.0 84.5 43.8 For the year ended 31 December 2016 $m $m $m $m $m $m $m Los Pelambres Centinela Centinela Antucoya Los
Pelambres Centinela Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year 14.5 6.2 (0.2) - - 2.2 (1.0) Settlement of sales invoiced in the previous year (18.9) (7.8) - - (0.1) (1.0) 1.7 Total effect of
adjustments to previous year invoices in the current year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7 Effects of pricing adjustments to current year invoices Settlement of sales invoiced in the current year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4 Mark-to-market adjustments at the end of the current year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7) Total effect of adjustments to current year invoices 108.5 44.0 3.7 3.7 (0.1) (2.9) 1.7 Total pricing adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4 Realised loss on commodity
derivatives - - (2.2) - - - - Revenue before deducting tolling charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9 Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9) Revenue net of tolling charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0 The revenue from the individual products shown in the above tables is reconciled to total revenue in Note 3(b).
Los Pelambres Centinela Centinela Michilla Antucoya Los Pelambres Centinela Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
$m $m $m $m $m $m $m $m
Provisionally invoiced gross sales 816.6 280.6 113.9 4.1 67.4 39.9 78.9 40.4
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year 14.5 6.2 (0.2) (0.1) - - 2.2 (1.0)
Settlement of sales invoiced in the previous year (19.0) (7.8) - (0.3) - (0.1) (1.0) 1.5
Total effect of adjustments to previous year invoices in the current period (4.5) (1.6) (0.2) (0.4) - (0.1) 1.2 0.5
Effects of pricing adjustments to current period invoices
Settlement of sales invoiced in the current period 9.3 1.2 (0.6) 0.1 (1.1) 0.3 2.4 7.8
Mark-to-market adjustments at the end of the current period 13.3 4.3 0.1 - 0.9 - 2.3 2.1
Total effect of adjustments to current period invoices 22.6 5.5 (0.5) 0.1 (0.1) 0.3 4.7 9.9
Total pricing adjustments 18.1 4.0 (0.7) (0.4) (0.1) 0.2 5.9 10.4
Realised gains/(losses) on commodity derivatives - - 0.1 - - - - -
Revenue before deducting tolling charges 834.7 284.6 113.3 3.8 67.3 40.1 84.9 50.8
Tolling charges (93.0) (38.7) - - - (0.1) (0.3) (7.0)
Revenue net of tolling charges 741.7 245.9 113.3 3.8 67.3 40.0 84.5 43.8
For the year ended 31 December 2016
$m $m $m $m $m $m $m
Los Pelambres Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
Provisionally invoiced gross sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year 14.5 6.2 (0.2) - - 2.2 (1.0)
Settlement of sales invoiced in the previous year (18.9) (7.8) - - (0.1) (1.0) 1.7
Total effect of adjustments to previous year invoices in the current year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7
Effects of pricing adjustments to current year invoices
Settlement of sales invoiced in the current year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4
Mark-to-market adjustments at the end of the current year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7)
Total effect of adjustments to current year invoices 108.5 44.0 3.7 3.7 (0.1) (2.9) 1.7
Total pricing adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4
Realised loss on commodity derivatives - - (2.2) - - - -
Revenue before deducting tolling charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9
Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9)
Revenue net of tolling charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0
The revenue from the individual products shown in the above tables is reconciled to total revenue in Note 3(b).
(i) Copper concentrate
The typical period for which sales of copper concentrate remain open until settlement occurs is a range of approximately
three to five months from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 148,400 161,400 199,900
Average mark-to-market price $/lb 2.69 2.20 2.51
Average provisional invoice price $/lb 2.57 2.15 2.41
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain open until settlement occurs is approximately one month from
shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 10,300 5,400 13,200
Average mark-to-market price $/lb 2.69 2.15 2.51
Average provisional invoice price $/lb 2.60 2.07 2.54
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain open is approximately one month from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Ounce 16,300 34,900 36,400
Average mark-to-market price $/oz 1,242 1,317 1,167
Average provisional invoice price $/oz 1,254 1,251 1,203
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is approximately two months from shipment date.
At 30.06.2017 At 30.06.2016 At 31.12.2016
Sales Tonnes 1,900 1,000 1,300
Average mark-to-market price $/lb 7.2 7.9 6.6
Average provisional invoice price $/lb 8.2 6.9 6.9
As detailed above, the effects of gains and losses from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors in the balance sheet. The effect of mark-to-market
adjustments on the balance sheet at the end of each period are as follows:
Gain/(loss) on debtors of period end
mark-to-market adjustments
Six months Six months Year ended 31.12.2016$m
ended ended
30.06.2017$m 30.06.2016 $m
Los Pelambres - copper concentrate 26.0 13.3 28.0
Los Pelambres - molybdenum concentrate (3.8) 2.1 (0.7)
Centinela - copper concentrate - 4.3 15.3
Centinela - gold in concentrate (0.2) 2.3 (1.3)
Centinela - copper cathodes 16.6 0.1 (0.4)
Antucoya - copper cathodes 1.2 0.9 (0.6)
39.8 23.0 40.3
6. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities is shown below:
Six months Six months Year ended 31.12.2016
ended ended
30.06.2017 30.06.2016
$m $m $m
Financial assets
Derivatives in designated hedge accounting relationships 0.1 0.4 2.4
Available-for-sale-investments 4.4 4.1 4.6
Loans and receivables at amortised cost (including cash 1,268.4 1,271.7 1,519.1
and cash equivalents)
Fair value through profit and loss (liquid investments and mark-to-mark debtors) 1,464.9 1,625.6 1,365.5
Financial liabilities
Derivatives in designated hedge relationships (4.3) (4.0) (2.5)
Financial liabilities measured at amortised cost (3,479.4) (3,688.9) (3,725.9)
Fair value through profit and loss (mark-to-mark creditors) (4.0) - (3.0)
The fair value of financial assets and financial liabilities carried at amortised cost is not materially different from 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:
Level 1 Level 2 Level 3 Six months
ended
30.06.2017 Six months
ended
30.06.2016 Year ended 31.12.2016 Recurring fair value measurements $m $m $m $m $m $m Financial assets Derivatives in designated hedge accounting relationships - 0.1 - 0.1 0.4 2.4 Available-for-sale investments 4.4 - - 4.4 4.1 4.6 Fair value through profit and loss 1,421.1 - - 1,463.7 1,602.4 1,322.2 Debtors mark-to-market - 43.8 - 43.8 23.2 43.3 Financial liabilities Derivatives in designated hedge relationships - (4.3) - (4.3) (4.0) (2.5) Creditors mark-to-market - (4.0) - (4.0) - (3.0)
Six months
ended
30.06.2016
Year ended 31.12.2016
Recurring fair value measurements
$m
$m
$m
$m
$m
$m
Financial assets
Derivatives in designated hedge accounting relationships
-
0.1
-
0.1
0.4
2.4
Available-for-sale investments
4.4
-
-
4.4
4.1
4.6
Fair value through profit and loss
1,421.1
-
-
1,463.7
1,602.4
1,322.2
Debtors mark-to-market
-
43.8
-
43.8
23.2
43.3
Financial liabilities
Derivatives in designated hedge relationships
-
(4.3)
-
(4.3)
(4.0)
(2.5)
Creditors mark-to-market
-
(4.0)
-
(4.0)
-
(3.0)
Recurring fair value measurements are those that are required in the balance sheet at the end of each reporting period.
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.
Available-for-sale 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.
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 debtors 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.
Financial assets measured at fair value through profit and loss are highly liquid current asset investments that are valued
using market prices at the period end. These are level 1 inputs as described below.
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 ending 30 June 2017 and 30 June 2016, there were no transfers between
levels in the hierarchy.
b) Embedded derivatives
As explained in Note 5, copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally
provide for provisional pricing of sales at the time of shipment, with final pricing being based on the monthly average
London Metal Exchange copper price or monthly average molybdenum price for specified future periods. The provisional
pricing mechanism within the sale agreements is an embedded derivative under IFRS. Details of the provisional pricing
arrangements are included in Note 5.
c) 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.
The Group has applied the hedge accounting provisions of IAS 39 "Financial Instruments: Recognition and Measurement".
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash
flows have been recognised directly in other comprehensive income, with such amounts subsequently recognised in the income
statement in the period when the hedged item has been recognised in the income statement within revenue. The time value
element of changes in the fair value of derivative options is excluded from the designated hedging relationship, and is
therefore recognised directly in the income statement within other finance items.
(i) Mark-to-market adjustments and income statement impact
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