REG - Antofagasta PLC - HALF YEARLY FINANCIAL REPORT <Origin Href="QuoteRef">ANTO.L</Origin> - Part 4
19/08/2016 12:35
- Part 4: For the preceding part double click ID:nRSP2314Hc
1,625.6
-
-
1,625.6
1,366.8
925.4
Debtors mark-to-market
-
23.2
-
23.2
-
1.3
Financial liabilities
Derivatives in designated hedge relationships
-
(4.0)
-
(4.0)
(5.7)
(3.5)
Creditors mark-to-market
-
-
-
-
(57.8)
(22.9)
Recurring fair value measurements are those that are required in the balance sheet at the end of each reporting period.
Non-recurring fair value measurements are those that are required in particular circumstances e.g. when the recoverable
amount of an asset is determined to be fair value less cost to sell according to IAS 36 Impairment of assets. There were no
non-recurring fair value measurements in the six months ending 30 June 2016.
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 2016 and 30 June 2015, 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
The balance sheet mark-to-market adjustments in respect of derivatives at the end of each period, and the total effect on
the income statement and reserves for each period are as follows. The impact on reserves is shown before tax and
non-controlling interests.
For the six months ended 30 June 2016
Impact on income statement Impact on reserves Fair value recorded on balance sheet
Realised gains/(losses) Losses resulting from mark-to-market adjustments on hedging instruments Total net loss Gains/(losses) resulting from mark-to-market adjustments on hedging instruments Net financial asset/(liability)
$m $m $m $m $m
Commodity Derivatives
Centinela 0.1 (0.3) (0.2) 0.4 0.4
Interest Derivatives
Centinela (2.7) - (2.7) 0.6 (2.4)
Railway and other transport services (1.0) - (1.0) (0.7) (1.6)
(3.6) (0.3) (3.9) 0.3 (3.6)
For the six months ended 30 June 2015
Impact on income statement Impact on reserves Fair value recorded on balance sheet
Realised gains/(losses) Losses resulting from mark-to-market adjustments on hedging instruments Total net gain/(loss) Gains/(losses) resulting from mark-to-market adjustments on hedging instruments Net financial asset/(liability)
$m $m $m $m $m
Commodity Derivatives
Centinela (0.1) - (0.1) (0.1) 0.1
Foreign Exchange Derivatives
Antucoya 0.2 - 0.2 3.8 -
Interest Derivatives
Centinela (1.9) - (1.9) 1.4 (4.6)
Railway and other transport services (0.7) - (0.7) (0.1) (1.1)
-- (2.5) - (2.5) 5.0 (5.6)
For the year ended 31 December 2015
Impact on income statement Impact on reserves Fair value recorded on balance sheet
Realised gains/(losses) Losses resulting from mark-to-market adjustments on hedging instruments Total net gain/(loss) Gains/(losses) resulting from mark-to-market adjustments on hedging instruments Net financial asset/(liability)
$m $m $m $m $m
Commodity Derivatives
Centinela (0.1) - (0.1) 0.4 0.1
Foreign Exchange Derivatives
Antucoya 0.2 - 0.2 4.0 -
Interest Derivatives
Centinela (3.6) - (3.6) (2.9) (2.9)
Railway and other transport services (2.3) - (2.3) (0.5) (0.5)
(5.8) - (5.8) 1.0 (3.3)
The gains/(losses) recognised in reserves are disclosed before non-controlling interests and tax.
The net financial asset/(liability) resulting from the balance sheet mark-to-market adjustments is analysed as follows: At 30.06.2016 At 30.06.2015 At 31.12.2015 $m $m $m Analysed between: Current assets 0.4 0.1 0.2 Current liabilities (1.9) (2.9) (2.0) Non-current liabilities (2.1) (2.8) (1.5) (3.6) (5.6) (3.3) (ii) Outstanding derivative financial instrumentsa) Commodity derivativesThe Group periodically uses commodity derivatives to manage its exposure to commodity price
fluctuations. - Min/max instruments At 30.06.2016 For instruments held at 30.06.2016 Copper production hedgedtonnes Weighted average remaining period from 1 July 2016months Covering a period up to: Weighted average floorUS cents/lb Weighted average capUS cents/lb Centinela 12,000 0.6 31.12.2016 465 594 b) Interest derivativesThe Group periodically uses interest derivatives to reduce its exposure to interest rate movements.- Interest rate swapsThe Group has used interest rate swaps to swap the
floating rate interest relating to the Centinela project financing and long-term loans at the Railway for fixed rate interest. At 30 June 2016 the Group had entered into the contracts outlined below. Start date Maturity date Actual notional amount Weighted Average Fixed Rate $m % Centinela 15.02.2011 15.08.2018 105.0 3.372 Railway and other transport services 12.08.2014 12.08.2019 120.0 1.634 The actual notional amount hedge depends upon the amount of the related debt currently outstanding.
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Analysed between:
Current assets 0.4 0.1 0.2
Current liabilities (1.9) (2.9) (2.0)
Non-current liabilities (2.1) (2.8) (1.5)
(3.6) (5.6) (3.3)
(ii) Outstanding derivative financial instrumentsa) Commodity derivativesThe Group periodically uses
commodity derivatives to manage its exposure to commodity price fluctuations. - Min/max instruments
At 30.06.2016 For instruments held at 30.06.2016
Copper production hedgedtonnes Weighted average remaining period from 1 July 2016months Covering a period up to: Weighted average floorUS cents/lb Weighted average capUS cents/lb
Centinela 12,000 0.6 31.12.2016 465 594
b) Interest derivativesThe Group periodically uses interest derivatives to reduce its exposure to interest rate
movements.- Interest rate swapsThe Group has used interest rate swaps to swap the floating rate interest relating to
the Centinela project financing and long-term loans at the Railway for fixed rate interest. At 30 June 2016 the Group had
entered into the contracts outlined below.
Start date Maturity date Actual notional amount Weighted Average Fixed Rate
$m %
Centinela 15.02.2011 15.08.2018 105.0 3.372
Railway and other transport services 12.08.2014 12.08.2019 120.0 1.634
The actual notional amount hedge depends upon the amount of the related debt currently outstanding.
6. Net finance expense
Six months Six months Year ended 31.12.2015
ended ended
30.06.2016 30.06.2015
$m $m $m
Investment income
Interest receivable 9.8 6.8 16.7
Fair value through profit or loss 3.7 2.0 1.4
13.5 8.8 18.1
Interest expense
Interest expense (31.9) (15.5) (33.5)
Preference dividends (0.1) (0.1) (0.2)
(32.0) (15.6) (33.7)
Other finance items
Time value element of changes in the fair value of derivatives options (0.3) 0.1 0.1
Unwinding of discount on provisions (4.9) (4.7) (9.1)
Impairment of available-for-sale investments - - (1.0)
Foreign exchange 6.0 0.2 (13.6)
0.8 (4.4) (23.6)
Net finance expense (17.7) (11.2) (39.2)
In the six months ended 30 June 2016, $8.9 million relating to net interest expense and other finance items at Antucoya
(six months ended 30 June 2015 - $24.0 million; year ended 31 December 2015 - $29.6 million), $19.0 million at Centinela
(six months ended 30 June 2015 - $12.7 million; year ended 31 December 2015 - $4.1 million) and $2.0 million at Los
Pelambres (six months ended 30 June 2015 - $0.6 million; year ended 31 December 2015 - $1.2 million) was capitalised during
the period, and is consequently not included within the above table.
7. Taxation
The tax charge for the period comprised the following:
Six months Six months Year ended 31.12.2015
ended ended
30.06.2016 30.06.2015
$m $m $m
Current tax charge
Corporate tax (principally first category tax in Chile) (57.1) (65.3) (41.6)
Mining tax (royalty) (13.2) (12.3) (20.4)
Withholding tax (8.3) (12.9) (12.9)
Exchange gain/(losses) on corporate tax balances 5.3 (0.3) (1.0)
(73.3) (90.8) (75.9)
Deferred tax credit/(charge)
Corporate tax (principally first category tax in Chile) (25.1) (13.7) (69.0)
Mining tax (royalty) (19.6) (11.0) (13.6)
Withholding tax provision - (1.9) (1.9)
(44.7) (26.6) (84.5)
Total tax charge (income tax expense) (118.0) (117.4) (160.4)
The rate of first category (i.e. corporate) tax in Chile is currently 24% (six months ended 30 June 2015 - 22.5%; year
ended 31 December 2015 - 22.5%).
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.
On 29 September 2014 a significant reform of the Chilean system was enacted into law. This introduced two alternative
future taxation systems - the partially-integrated system (the default system for the Group's Chilean subsidiaries) or the
attributable system. The Group has been accounting for deferred tax on the basis that it would apply the default
partially-integrated system. On 1 February 2016 a Simplification of the Tax Reform was enacted into law. This specifies
that for entities such as the Group's Chilean subsidiaries, whose members are corporate entities and not individual
persons, only the partially-integrated system can be applied. Given that the Group has already been accounting for deferred
tax on the basis that it would apply the default partially-integrated system this has not resulted in any accounting impact
for the Group.
Under the partially-integrated system the corporate tax rate will be 25.5% in 2017 and 27% from 2018 onwards. The immediate
shareholders of the Chilean subsidiaries will pay withholding tax based on the cash distributions made by those subsidiary
companies, as with the current tax system. If the subsidiary company's shareholders are tax resident in countries with
applicable tax treaties with Chile (as is the case for the Group) the withholding tax will be 35%, less first category tax
at the rate it was paid, so if the company distributes all of its earnings the total corporate and withholding tax burden
will be 35%.
The Group's mining operations are also subject to a mining tax (royalty). Production from Los Pelambres, El Tesoro Central
and Mirador pits at Centinela cathodes, Antucoya and Michilla are currently subject to a rate of 4% of taxable operating
profit and Centinela concentrates of 5%, and production from El 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.
Six months ended30.06.2016 Six months ended30.06.2015 Year ended31.12.2015
$m % $m % $m %
Profit before tax 276.1 297.3 259.4
Tax at the Chilean corporate tax rate of 24% (2015 - 22.5%) (66.3) 24.0 (66.9) 22.5 (58.4) 22.5
Effect of increase in future first category tax rates on deferred tax balances 1.7 (0.6) (11.5) 3.9 (8.9) 3.4
Items not subject to or deductible from first category tax (8.7) 3.1 (1.0) 0.3 (17.1) 6.6
Carry-back tax losses resulting in credits at historic tax rates (11.8) 4.3 - - (25.8) 9.9
Mining Tax (royalty) (32.8) 11.8 (23.3) 7.8 (34.0) 13.1
Withholding tax - - (14.8) 5.0 (14.8) 5.7
Withholding tax - adjustment to previous year (8.3) 3.0 - - - -
Tax effect of share of results of associates and joint ventures 2.3 (0.8) (0.3) 0.1 (0.5) 0.2
Net other items 5.9 (2.1) - - (0.9) 0.3
Tax expense and effective tax rate for the period (118.0) 42.7 (117.8) 39.6 (160.4) 61.8
The tax charge for 2016 was $118.0 million and the effective tax rate was 42.7 %. In 2016 the effective tax rate varied
from the statutory rate principally due to tax losses which under Chilean tax carry-back rules generated a credit at
historic tax rates below the current year statutory rate (impact of $11.8 million / 4.3%), the effect of expenses not
deductible for Chilean corporate tax purposes (principally the funding of expenses outside of Chile) (impact of $8.7
million / 3.1 %) and the mining tax (impact of $32.8 million / 11.8 %) and withholding tax charge (impact of $8.3 million
/ 3.0%).
There are no significant tax uncertainties which would require critical judgements, estimates or potential provisions.
8. Discontinued operations
(i) On 24 April 2015 the Group entered into a sale agreement to dispose of Aguas de Antofagasta S.A. ("ADASA"), which
carried out of the group´s water operations. The disposal was completed on 2 June 2015. On 28 August 2015, the Group
disposed of its 100% interest in Empresa Ferroviaria Andina S.A. ("FCA").The results of ADASA and FCA for the period prior
to disposal as well as the profit on disposal have been presented on the "Profit for the period from discontinued
operations" line in the income statement, reflecting the following amounts:
Six months Six months ended 30.06.2015 Year ended 31.12.2015
ended
30.06.2016
ADASA FCA Total ADASA FCA Total
$m $m $m $m $m $m $m
Turnover - 53.9 10.0 63.9 53.9 12.9 66.8
Total operating costs - (34.9) (14.1) (49.0) (34.9) (20.2) (55.1)
Net finance income - (0.1) - (0.1) (0.1) (0.2) (0.3)
Profit before tax - 18.9 (4.1) 14.8 18.9 (7.5) 11.4
Attributable tax expense - (3.9) (0.4) (4.3) (3.9) - (3.9)
Profit of discontinued operations - 15.0 (4.5) 10.5 15.0 (7.5) 7.5
Profit on disposal of discontinued operations1 - 857.6 - 857.6 853.2 (5.6) 847.6
Attributable tax expense2 - (253.1) - (253.1) (252.4) - (252.4)
Net profit attributable to discontinued operations (attributable to owners of the Company) - 619.5 (4.5) 615.0 615.8 (13.1) 602.7
1 Profit on disposal included a loss of $3.9 million and a profit of $2.1 million related to the accumulated currency
translation adjustment relating to ADASA and FCA respectively (2015 - $3.9 million and a profit of $2.1 million), which has
been reclassified from translation reserves in other comprehensive income to the income statement upon disposal.
2Tax expense includes $57.2 million (2015 - $57.2 million) related to withholding tax.
During 2015, Aguas de Antofagasta S.A., contributed $21.7 million to the Group´s net cash flow from operating activities,
$19.2 million in respect to net cash used in investing activities and paid $2.0 million in net cash provided in financing
activities.
During 2015, Empresa Ferroviaria Andina, contributed $2.2 million to the Group´s net cash flow from operating activities,
$2.1 million in respect to net cash used in investing activities and paid $0.1 million in net cash provided in financing
activities.
(ii) Disposal of Aguas de Antofagasta S.A.
On 2 June 2015, the Group disposed of its 100% interest in Aguas de Antofagasta S.A. ("ADASA").The proceeds on disposal of
$967.2 million were received in cash. The gain on disposal of ADASA is analysed below. No investment was retained in the
former subsidiary.
The net assets of Aguas de Antofagasta S.A. at the date of disposal were as follows:
At 31.05.2015
Proceeds $m
Cash and cash equivalents 962.8
Asset Disposed of:
Intangibles 113.7
Property, plant and equipment 64.1
Inventories 2.0
Current tax asset 2.5
Trade and other receivables 23.7
Cash and cash equivalents 19.9
Trade payables (18.3)
Borrowings (80.2)
Retirement benefit obligation (2.8)
Long-term provision (1.6)
Deferred tax liabilities (13.4)
Total carrying amount disposed 109.6
Profit on disposal of discontinued operations (before tax) 853.2
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents 962.8
Less: Cash and cash equivalents disposed of (19.9)
942.9
(iii) Disposal of Empresa Ferroviaria Andina S.A.
On 28 August 2015, the Group disposed of its 100% interest in Empresa Ferroviaria Andina S.A. ("FCA").The consideration of
$1.3 million will be received in partial instalments during the next years. The loss on disposal of FCA is analysed below.
No investment was retained in the former subsidiary.
At 31.08.2015
Proceeds $m
Cash and cash equivalents -
Asset Disposed of:
Property, plant and equipment 20.5
Trade and other receivables 6.6
Cash and cash equivalents 0.5
Other assets 4.6
Trade and other payables (2.7)
Borrowings (4.5)
Retirement benefit obligation (6.1)
Non-controlling interests (13.3)
Total carrying amount disposed 5.6
9. Earnings per share
Basic and diluted earnings per share is calculated on profit after tax and non-controlling interests giving net earnings of
$88.1 million (six months ended 30 June 2015 - $705.8 million, year ended 31 December 2015 - $608.2 million) and amounted
to 8.9 cents and based on 985,856,695 ordinary shares. There was no potential dilution of ordinary shares in any period.
10. Dividends
The Board has declared an interim dividend of 3.1 cents per ordinary share for the 2016 half year (2015 half year - 3.1
cents). Dividends are declared and paid gross. Dividends actually paid in the period and recognised as a deduction from
net equity under IFRS were nil per ordinary share (2015 half year - 9.8 cents), representing the final dividend declared in
respect of the previous year.
The interim dividend will be paid on 30 September 2016 to ordinary shareholders that are on the register at the close of
business on 9 September 2016. Shareholders can elect (on or before 12 September 2016) 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 15 September
2016). 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 +44 870 702 0159.
11. Intangible asset
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Balance at the beginning of the period 150.1 118.6 118.6
Additions - -
Acquisition - 150.1 150.1
Disposal - (113.7) (113.7)
Amortisation - (2.4) (2.4)
Foreign currency exchange difference - (2.5) (2.5)
Balance at the end of the period 150.1 150.1 150.1
In January 2015 the Group completed its acquisition of 100% of Duluth Metals Limited ("Duluth"). The principal asset of
Duluth was its 60% stake in Twin Metals Minnesota Limited ("Twin Metals"), a company in which the Group held the remaining
40% stake as at December 2014. This transaction has resulted in the Group consolidating 100% of the assets and liabilities
relating to Twin Metals with effect from January 2015, including the above $150.1 million intangible asset reflecting the
value of Twin Metals' mining property assets. The mining properties acquired will be amortised once production commences.
The prior year opening balance of $118.6 related to Aguas de Antofagasta S.A.'s ("ADASA") 30 year concession to operate the
water rights and facilities in the Antofagasta Region of Chile. This balance was disposed of as part of the sale of ADASA
on 2 June 2015, as disclosed in Note 8.
12. Property, plant and equipment
Mining Railway and other transport At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m $m $m
Balance at the beginning of the period 8,438.8 162.3 8,601.1 8,213.9 8,213.9
Additions 482.7 5.8 488.5 662.5 1,136.4
Acquisition - - - 20.8 20.8
Adjustment to capitalised decommissioning provisions - - - - (35.7)
Depreciation (240.0) (7.3) (247.3) (252.5) (590.7)
Depreciation capitalised (42.8) - (42.8) (40.4) (44.9)
Assets derecognized due to loss of control of subsidiary - - - - (84.6)
Asset disposals (0.3) (0.1) (0.4) (67.8) (12.3)
Foreign currency exchange difference - - - (1.4) (1.8)
Balance at the end of the period 8,638.4 160.7 8,799.1 8,535.1 8,601.1
At 30 June 2016 $46.8 million (30 June 2015 - $40.4 million; 31 December 2015 - $44.9 million) of depreciation in respect
of assets relating to Los Pelambres, Centinela, Antucoya and Michilla 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 3(a).
At 30 June 2016 the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to $975.1 million (30 June 2015 - $401.7 million; 31 December 2015 - $283.1 million).
There have been no indicators of potential impairments during the first six months of 2016, and accordingly no impairment
reviews have been performed as at 30 June 2016. The Group performed impairment reviews in respect of the Centinela and
Antucoya operations at the 2015 year-end. For both Centinela and Antucoya the recoverable amount indicated by the review
was greater than the carrying value of the assets, and accordingly no impairment charge was recognised. The following
sensitivities in respect of the valuation estimates of Centinela and Antucoya are still considered relevant to the assets
as at 30 June 2016. The assumptions used in the impairment review calculations which were considered to be subject to the
most estimation uncertainty were the long-term copper price and the discount rate. To illustrate the sensitivity of the
valuations of Centinela and Antucoya to negative movements in these parameters, a 5% decrease in the forecast long-term
copper price would have resulted in an impairment of $375 million at Centinela and an impairment of $95 million at
Antucoya, and an increase in the discount rate from 8% to 9% would have resulted in an impairment of $190 million at
Centinela and an impairment of $50 million at Antucoya. These are simple sensitivities, looking at illustrative movements
in the long-term copper price and discount rate in insolation. In reality, a deterioration in the long-term copper price
environment is likely to result in corresponding improvements in a range of input cost factors, as well as potential
operational changes, which could partly mitigate the above estimated potential impairment charges.
13. Available-for-sale investments
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Balance at the beginning of the period 2.7 15.6 15.6
Additions - - 0.2
Reclassification - (9.4) (9.4)
Movements in fair value 1.2 (1.3) (3.2)
Disposal - - (0.2)
Foreign currency exchange difference 0.2 (0.4) (0.3)
Balance at the end of the period 4.1 4.5 2.7
Available-for-sale investments represent those investments which are not subsidiaries, associates or joint ventures and are
not held for trading purposes. The fair value of all equity investments are based on quoted market prices.
The reclassification of $9.4 million is related with the acquisition of Duluth Metals Limited ("Duluth"). As at 31 December
2014 the Group held 17.2% of Duluth's share capital, with a fair value of $9.4 million, accounted for as an available for
sale investment. As explained in Note 14, in January 2015 the Group completed its acquisition of 100% of Duluth. Duluth
holds a 60% stake in Twin Metals Minnesota Limited ("Twin Metals"), a company in which the Group held a 40% stake as at
December 2014. Accordingly, as a consequence of the acquisition of Duluth the Group has a 100% interest in Duluth and as a
result of this a 100% interest in Twin Metals. From January 2015 Twin Metals has therefore been consolidated as a 100%
subsidiary of the Group, with this $9.4 million balance forming part of the total consideration reflected in the accounting
for the acquisition of the subsidiary.
14. Acquisition of 50% stake in Zaldívar
On 1 December 2015 Antofagasta completed its acquisition of a 50% stake in Compañia Minera Zaldívar SpA ("Zaldivar") from
Barrick Gold Corporation ("Barrick"), pursuant to an agreement entered into on 30 July 2015. As a result, Antofagasta has
become operator of the Zaldivar mine. Zaldivar is an open-pit, heap-leach copper mine located in Northern Chile, which
produces approximately 100,000 tonnes of copper cathodes annually.
Given that Antofagasta and Barrick have joint control over Zaldivar, Antofagasta is accounting for its 50% stake in
Zaldivar as a joint venture, using the equity method of accounting.
Total preliminary consideration for the transaction was $1,005.0 million in cash, subject to adjustments based on the net
debt and working capital levels of Zaldivar at the completion date. The net debt and working capital adjustments were
finalised in August 2016 and resulted in a final adjusted consideration of $949.7 million. Including capitalised
acquisition costs of $7.0 million the initial investment in joint venture balance is therefore $956.7 million. The
allocation of the fair values of the individual assets and liabilities effectively contained within the overall investment
in joint venture balance will be completed within 12 months of the acquisition date.
15. Borrowings
At 30.06.2016 At 30.06.2015 At 31.12.2015
$m $m $m
Los Pelambres
Corporate loans (34.6) (69.8) (52.3)
Short-term loan (272.1) (246.0) (312.1)
Finance leases (74.4) (10.1) (7.9)
Centinela
Project financing (senior debt) (817.5) (887.3) (889.8)
Shareholder loan (subordinated debt) (178.5) (170.6) (174.5)
Short-term loan (200.0) - (200.0)
Antucoya
Project financing (senior debt) (567.0) (623.3) (630.2)
Shareholder loan (subordinated debt) (322.7) (282.2) (308.7)
Short-term loan (104.9) - (30.0)
Finance leases - (0.6) -
Corporate and other items
Long-term loan (496.9) - -
Finance leases (26.3) (27.8) (24.6)
Railway and other transport services
Long-term loans (119.2) (148.6) (119.1)
Finance leases (2.5) (2.5) (2.9)
Andino
Bonds - (3.0) -
Short-term loans - (1.5) -
Preference shares (3.1) (3.1) (3.0)
Total (3,219.7) (2,476.4) (2,755.1)
At 30 June 2016 $100.7 million (30 June 2015 - $48.0 million; 31 December 2015 - $30.5 million) of the borrowings has fixed
rate interest and $3,119.1 million (30 June 2015 - $2,428.4 million; 31 December 2015 - $2,724.6 million) has floating rate
interest. The Group periodically enters into interest rate derivative contracts to manage its exposure to interest rates.
As explained in Note 5, these include interest rate swaps which have the effect of converting $225.0 million of floating
rate borrowings into fixed rate borrowings. Details of any derivative instruments held by the Group are given in Note
5(c).
During the period de Group entered into a loan agreement of $500.0 million. This borrowing has variable interest rate of
LIBOR six-months plus 1.5% spread with a duration of five years.
16. Share capital and share premium
There was no change in share capital or share premium in the six months ended 30 June 2016 or the comparative periods.
17. Other reserves and retained earnings
At At At
30.06.2016 30.06.2015 31.12.2015
$m $m $m
Hedging reserves (1)
At 1 January (44.1) (36.2) (36.2)
Parent and subsidiaries net cash flow hedge fair value gains/(losses) (3.6) 2.5 0.1
Parent and subsidiaries net cash flow hedge gains/(losses) transferred to the income statement 3.6 2.5 3.5
Share of other comprehensive losses of equity accounted units, net of tax (17.5) (3.9) (10.2)
Tax on the above 0.7 (0.3) (1.3)
At 30 June (60.9) (35.4) (44.1)
Available for sale revaluation reserves (2)
At 1 January (12.9) (10.7) (10.7)
Losses on available for sale investment 1.2 (1.3) (3.2)
Losses on available for sale securities transferred to the income statement - - 1.0
Tax on the above - - -
At 30 June (11.7) (12.0) (12.9)
Foreign currency translation reserves (3)
At 1 January (2.3) (0.5) (0.5)
Parent and subsidiaries currency translation and exchange adjustments - - -
Currency translation reclassified on disposal - (3.9) (1.8)
Tax on the above - - -
At 30 June (2.3) (4.4) (2.3)
Total other reserves per balance sheet (74.9) (51.8) (59.3)
Retained earnings (4)
At 1 January 6,416.4 5,932.1 5,932.1
Parent and subsidiaries profit for the period 78.4 706.0 614.0
Equity accounted units' loss after tax for the period 9.7 (0.2) (5.8)
Actuarial gains/(losses) (5) (1.5) (5.3) 4.5
Tax relating to components of other comprehensive income - 3.9 (1.2)
Total comprehensive income for the period 6,503.0 6,636.5 6,543.6
Change in ownership interest in subsidiaries - - -
Capital increase in non-controlling interest - - -
Dividends paid - (96.6) (127.2)
At 30 June 6,503.0 6,540.0 6,416.4
(1) The hedging reserve records gains or losses on cash flow hedges that are recognized initially in equity, as described
in Note 5.
(2) The available for sale revaluation reserves record fair value gains or losses relating to available for sale
investment, as described in Note 13.
(3) Exchange differences arising on the translation of the Group's net investment in foreign controlled companies are taken
to the foreign currency translation reserve. The cumulative differences relating to an investment are transferred to the
income statement when the investment is disposed of.
(4) Retained earnings and movements in reserves of subsidiaries include those arising from the Group's share of joint
operations.
(5) Actuarial gains or losses relating long - term employee benefits.
18. Reconciliation of profit before tax to net cash inflow from operating activities
Six months Six months Year ended 31.12.2015
ended ended
30.06.2016 30.06.2015
$m $m $m
Profit before tax from continuing and discontinued operations 276.1 1,173.8 1,118.4
Depreciation and amortisation 247.3 252.5 576.1
Net profit on disposals 0.2 1.3 10.2
Profit on disposal of discontinued operation - (857.6) (859.0)
Net finance expense 17.7 11.1 39.2
Share of results from associates and joint ventures (9.7) 0.2 5.8
(Increase)/decrease in inventories (13.8) (46.0) 60.5
Decrease in debtors 254.4 251.9 137.7
Increase in creditors and provisions 1.9 20.5 (230.6)
Cash flows from continuing and discontinued operations 774.1 807.7 858.3
19. Analysis of changes in net (debt)/cash
At 01.01.2016 Cash flows Other Exchange At 30.06.2016
$m $m $m $m $m
Cash and cash equivalents 807.5 (245.5) - 15.7 577.7
Liquid investments 924.1 678.3 - - 1,602.4
Total cash and cash equivalents and liquid
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