REG - Antofagasta PLC - Preliminary Results Announcement <Origin Href="QuoteRef">ANTO.L</Origin> - Part 3
15/03/2016 07:06
- Part 3: For the preceding part double click ID:nRSO0969Sb
5,013.0 122.7 1,974.4 - - 1,026.4 11,889.8 500.7 - 12,390.5
Investment in associates and joint ventures 33.5 - - - 998.9 - 31.0 1,063.4 83.2 - 1,146.6
Segment liabilities (1,205.9) (2,068.9) (46.0) (1,185.5) - - (151.6) (4,657.9) (359.9) - (5,017.8)
1EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back
depreciation, amortization, profit or loss on disposals and impairment charges to operating profit from subsidiaries and
joint ventures
2 During the year, operating cash flow from exploration and evaluation was $38.3 million
For the year ended 31 December 2014 (Restated)
Los Pelambres Centinela Michilla Antucoya Exploration and evaluation2 Corporate and other items Mining Railway and other transport services Water concession Total
$m $m $m $m $m $m $m $m $m $m
Revenue 2,663.6 1,985.7 335.4 - - - 4,984.7 160.9 - 5,145.6
EBITDA1 1,518.6 767.2 58.7 - (167.5) (99.2) 2,077.8 63.6 - 2,141.4
Depreciation and amortisation (178.3) (301.5) (87.3) - - (2.6) (569.7) (12.0) - (581.7)
Gain/(loss) on disposals (2.5) (1.3) (0.4) - - 28.7 24.5 (0.6) - 23.9
Operating profit/(loss) 1,337.8 464.4 (29.0) - (167.5) (73.1) 1,532.6 51.0 - 1,583.6
Share of results from associates and joint ventures (1.3) - - - - (9.3) (10.6) 6.5 - (4.1)
Investment income 7.5 4.2 0.7 - - 3.9 16.3 0.5 - 16.8
Interest expense (3.8) (36.6) - - - (2.4) (42.8) (1.6) - (44.4)
Other finance items (2.5) 2.9 (8.3) 3.3 - (31.4) (36.0) (0.3) - (36.3)
Profit/(loss) before tax 1,337.7 434.9 (36.6) 3.3 (167.5) (112.3) 1,459.5 56.1 - 1,515.6
Tax (441.7) (214.9) 1.3 (9.7) - 25.0 (640.0) (62.3) - (702.3)
Profit for the period from continuing operations 896.0 220.0 (35.3) (6.4) (167.5) (87.3) 819.5 (6.2) - 813.3
Profit for the period from discontinued operations - - - - - - - (6.3) 43.7 37.4
Profit for the period 896.0 220.0 (35.3) (6.4) (167.5) (87.3) 819.5 (12.5) 43.7 850.7
Non-controlling interests (352.3) (56.2) 0.3 3.8 - 12.4 (392.0) 1.1 - (390.9)
Net earnings/(losses) 543.7 163.8 (35.0) (2.6) (167.5) (74.9) 427.5 (11.4) 43.7 459.8
Additions to non-current assets
Capital expenditure 229.6 535.6 11.1 707.1 - 51.4 1,534.8 21.2 25.0 1,581.0
Segment assets and liabilities
Segment assets 3,671.9 5,152.9 181.9 1,619.8 - 1,455.2 12,081.7 322.9 212.4 12,617.0
Investment in associates and joint ventures 8.3 - - - - 102.7 111.0 87.1 - 198.1
Segment liabilities (1,255.2) (2,014.6) (114.6) (994.7) - (138.2) (4,517.3) (212.1) (51.0) (4,780.4)
1EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back
depreciation, amortization, profit or loss on disposals and impairment charges to operating profit from subsidiaries and
joint ventures
2 During the year, operating cash flow from exploration and evaluation was $60.2 million
b) Entity wide disclosures
Revenue by product
Year ended 31.12.2015 Year ended 31.12.2014(Restated)
$m $m
Copper
- Los Pelambres 1,606.7 2,348.6
- Centinela concentrates 626.6 1,073.8
- Centinela cathodes 432.3 631.9
- Michilla 168.9 335.4
Gold
- Los Pelambres 60.7 80.5
- Centinela 191.3 256.3
Molybdenum
- Los Pelambres 105.3 182.8
Silver
- Los Pelambres 34.5 51.7
- Centinela 15.9 23.7
Total Mining 3,242.2 4,984.7
Railway and transport services 152.4 160.9
3,394.6 5,145.6
Revenue by location of customer
Year ended 31.12.2015 Year ended 31.12.2014(Restated)
$m $m
Europe
- United Kingdom 19.1 8.2
- Switzerland 175.2 138.5
- Spain 54.1 160.6
- Germany 167.0 146.1
- Rest of Europe 70.6 137.7
Latin America
- Chile 167.0 215.3
- Rest of Latin America 74.1 161.0
North America
- United States 107.3 133.7
Asia Pacific
- Japan 1,147.0 1,965.4
- China 782.4 1,253.1
- Rest of Asia 630.8 826.0
3,394.6 5,145.6
Information about major customers
In the year ended 31 December 2015 the Group´s mining revenues included $426.0 million related to one large customer that
individually accounted for more than 10% of the Group's revenues (year ended 31 December 2014 - one large customer
representing $804.3 million).
Non-current assets by location of asset
Year ended 31.12.2015 Year ended 31.12.2014
$m $m
- Chile 10,284.6 8,934.8
- Bolivia - 30.9
- USA 171.2 67.4
- Other 0.8 0.6
10,456.6 9,033.7
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.
4. Revenues
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 (including gold by-product sales) 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 year ended are given in Note 5.
Copper and molybdenum concentrate sales are stated net of deductions for tolling charges, as shown in the tables below.
For the period ended 31 December 2015 $m $m $m $m $m $m $m Los Pelambres Centinela Centinela Micilla 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 2,001.6 805.8 443.4 173.3 63.0 200.7 147.0 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year 45.5 19.6 1.4 0.4 - 1.8 2.0
Settlement of sales invoiced in the previous year (100.4) (49.8) (5.6) (2.3) - 3.6 (7.1) Total effect of adjustments to previous year invoices in the current year (54.9) (30.2) (4.2) (1.9) - 5.4 (5.1) Effects of pricing adjustments to current year invoices Settlement of sales invoiced in the current year (126.7) (47.6) (7.1) (2.6) (2.1) (11.8) (19.8) Mark-to-market adjustments at the end of the current year (14.5) (6.2) 0.2 0.1 - (2.2) 1.0 Total effect of adjustments to current year invoices (141.2) (53.8)
(6.9) (2.5) (2.1) (14.0) (18.8) Total pricing adjustments (196.1) (84.0) (11.1) (4.4) (2.1) (8.6) (23.9) Realised gains on commodity derivatives - - - - - - - Revenue before deducting tolling charges 1,805.5 721.8 432.3 168.9 60.9 192.1 123.1 Tolling charges (198.8) (95.2) - - (0.2) (0.8) (17.8) Revenue net of tolling charges 1,606.7 626.6 432.3 168.9 60.7 191.3 105.3 For the year ended 31 December 2014 $m $m $m $m $m $m $m Los Pelambres Centinela Centinela Michilla 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 2,642.5 1,226.8 640.6 322.0 80.4 267.8 213.7 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year (27.1) (8.8) (1.0) 0.1 - 4.5 1.2 Settlement of sales invoiced in the previous year (27.7) (9.8) 1.2 (0.3) 0.4 (2.0) 0.2 Total effect of adjustments to previous
year invoices in the current year (54.8) (18.6) 0.2 (0.2) 0.4 2.5 1.4 Effects of pricing adjustments to current year invoices Settlement of sales invoiced in the current year (29.8) (19.7) (7.7) (4.3) - (11.7) (15.2) Mark-to-market adjustments at the end of the current year (45.5) (19.6) (1.3) (0.4) - (1.8) (2.0) Total effect of adjustments to current year invoices (75.3) (39.3) (9.0) (4.7) - (13.5) (17.2) Total pricing adjustments (130.1) (57.9) (8.8) (4.9) 0.4 (11.0) (15.8) Realised gains on commodity
derivatives - - 0.1 18.3 - - - Revenue before deducting tolling charges 2,512.4 1,168.9 631.9 335.4 80.8 256.8 197.9 Tolling charges (163.8) (95.1) - - (0.3) (0.5) (15.1) Revenue net of tolling charges 2,348.6 1,073.8 631.9 335.4 80.5 256.3 182.8
$m
$m
$m
$m
$m
$m
$m
Los Pelambres
Centinela
Centinela
Micilla
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
2,001.6
805.8
443.4
173.3
63.0
200.7
147.0
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year
45.5
19.6
1.4
0.4
-
1.8
2.0
Settlement of sales invoiced in the previous year
(100.4)
(49.8)
(5.6)
(2.3)
-
3.6
(7.1)
Total effect of adjustments to previous year invoices in the current year
(54.9)
(30.2)
(4.2)
(1.9)
-
5.4
(5.1)
Effects of pricing adjustments to current year invoices
Settlement of sales invoiced in the current year
(126.7)
(47.6)
(7.1)
(2.6)
(2.1)
(11.8)
(19.8)
Mark-to-market adjustments at the end of the current year
(14.5)
(6.2)
0.2
0.1
-
(2.2)
1.0
Total effect of adjustments to current year invoices
(141.2)
(53.8)
(6.9)
(2.5)
(2.1)
(14.0)
(18.8)
Total pricing adjustments
(196.1)
(84.0)
(11.1)
(4.4)
(2.1)
(8.6)
(23.9)
Realised gains on commodity derivatives
-
-
-
-
-
-
-
Revenue before deducting tolling charges
1,805.5
721.8
432.3
168.9
60.9
192.1
123.1
Tolling charges
(198.8)
(95.2)
-
-
(0.2)
(0.8)
(17.8)
Revenue net of tolling charges
1,606.7
626.6
432.3
168.9
60.7
191.3
105.3
For the year ended 31 December 2014
$m $m $m $m $m $m $m
Los Pelambres Centinela Centinela Michilla 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 2,642.5 1,226.8 640.6 322.0 80.4 267.8 213.7
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year (27.1) (8.8) (1.0) 0.1 - 4.5 1.2
Settlement of sales invoiced in the previous year (27.7) (9.8) 1.2 (0.3) 0.4 (2.0) 0.2
Total effect of adjustments to previous year invoices in the current year (54.8) (18.6) 0.2 (0.2) 0.4 2.5 1.4
Effects of pricing adjustments to current year invoices
Settlement of sales invoiced in the current year (29.8) (19.7) (7.7) (4.3) - (11.7) (15.2)
Mark-to-market adjustments at the end of the current year (45.5) (19.6) (1.3) (0.4) - (1.8) (2.0)
Total effect of adjustments to current year invoices (75.3) (39.3) (9.0) (4.7) - (13.5) (17.2)
Total pricing adjustments (130.1) (57.9) (8.8) (4.9) 0.4 (11.0) (15.8)
Realised gains on commodity derivatives - - 0.1 18.3 - - -
Revenue before deducting tolling charges 2,512.4 1,168.9 631.9 335.4 80.8 256.8 197.9
Tolling charges (163.8) (95.1) - - (0.3) (0.5) (15.1)
Revenue net of tolling charges 2,348.6 1,073.8 631.9 335.4 80.5 256.3 182.8
The revenue from the individual products shown in the above tables is reconciled to total Group revenue in Note 4.
(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 31 December 2015, sales totalling 184,400 tonnes remained open as to price, with an average mark-to-market price of
$2.13/lb compared with an average provisional invoice price of $2.18/lb.
At 31 December 2014, sales totalling 199,200 tonnes remained open as to price, with an average mark-to-market price of
$2.86/lb compared with an average provisional invoice price of $3.01/lb.
(ii) Copper cathodes
The typical period for which sales of copper cathodes remain open until settlement occurs is approximately one month from
shipment date.
At 31 December 2015, sales totalling 7,700 tonnes remained open as to price, with an average mark-to-market price of $2.13
/lb compared with an average provisional invoice price of $2.12 /lb.
At 31 December 2014, sales totalling 13,800 tonnes remained open as to price, with an average mark-to-market price of
$2.88/lb compared with an average provisional invoice price of $2.94 /lb.
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain open is approximately one month from shipment date.
At 31 December 2015, sales totalling 50,300 ounces remained open as to price, with an average mark-to-market price of
$1,061/oz compared with an average provisional invoice price of $1,105/oz.
At 31 December 2014, sales totalling 81,600 ounces remained open as to price, with an average mark-to-market price of
$1,186/oz compared with an average provisional invoice price of $1,209/oz.
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is approximately two months from shipment date.
At 31 December 2015, sales totalling 1,900 tonnes remained open as to price, with an average mark-to-market price of
$5.1/lb compared with an average provisional invoice price of $4.8/lb.
At 31 December 2014, sales totalling 1,900 tonnes remained open as to price, with an average mark-to-market price of
$9.0/lb compared with an average provisional invoice price of $9.4/lb.
As detailed above, the effects of gains and losses from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors in the balance sheet. The effect of mark-to-market
adjustments on the balance sheet at the end of each year are as follows:
Effect on debtors of year end
mark to market adjustments
At 31.12.2015$m At 31.12.2014$m
Los Pelambres - copper concentrate (14.5) (45.5)
Los Pelambres - molybdenum concentrate 1.0 (2.0)
Centinela - copper concentrate (6.2) (19.6)
Centinela - gold in concentrate (2.2) (1.8)
Centinela - copper cathodes 0.2 (1.3)
Michilla - copper cathodes 0.1 (0.4)
(21.6) (70.6)
5. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities is shown below:
At 31.12.2015 At 31.12.2014
$m $m
Financial assets
Derivatives in designated hedge accounting relationships 0.2 0.2
Available-for-sale-investments 2.7 15.6
Loans and receivables at amortised cost (including cash 1,703.9 1,895.2
and cash equivalents)
Fair value through profit and loss (liquid investments and mark-to-mark debtors) 925.4 1,529.1
Financial liabilities
Derivatives in designated hedge relationships (3.5) (11.0)
Financial liabilities measured at amortised cost (3,235.5) (3,104.1)
Fair value through profit and loss (mark-to-mark creditors) (22.9) (70.6)
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 At 31.12.2015 At 31.12.2014 Recurring fair value measurements $m $m $m $m $m Financial assets Derivatives in designated hedge accounting relationships - 0.2 - 0.2 0.2 Available for sale investments 2.7 - - 2.7 15.6 Fair value through profit and loss 925.4 - - 925.4 1,529.1 Debtors mark-to-market - 1.3 - 1.3 - Financial liabilities Derivatives in designated hedge relationships - (3.5) - (3.5) (11.0) Creditors mark-to-market - (22.9) - (22.9) (70.6)
At 31.12.2014
Recurring fair value measurements
$m
$m
$m
$m
$m
Financial assets
Derivatives in designated hedge accounting relationships
-
0.2
-
0.2
0.2
Available for sale investments
2.7
-
-
2.7
15.6
Fair value through profit and loss
925.4
-
-
925.4
1,529.1
Debtors mark-to-market
-
1.3
-
1.3
-
Financial liabilities
Derivatives in designated hedge relationships
-
(3.5)
-
(3.5)
(11.0)
Creditors mark-to-market
-
(22.9)
-
(22.9)
(70.6)
Recurring fair value measurements are those that are required in the balance sheet at the end of each reporting year.
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 year ended 31 December 2015.
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 year are marked-to-market at the end of the year. 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 year are used for copper sales while year-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 year 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 year ended 31 December 2015 there were no transfers between levels in the hierarchy.
b) Embedded derivatives
As explained in Note 4, 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 4.
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 equity, with such amounts subsequently recognised in the income statement in the
period when the hedged item affects derivatives recognise in the income statement have been recorded 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 gains or losses recorded in the income statement or in reserves during the year, and the fair value recorded on the
balance sheet at the year are as follows. The impact on reserves is shown before tax and non-controlling interests.
For the year ended 31 December 2015
Impact on income statement for year ended 31.12.2015 Impact on reserves for year ended at 31.12.2015 Fair value recorded on balance sheet 31.12.2015
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
Exchange Derivatives
Antucoya 0.2 - 0.2 4.0 -
Interest Derivatives
Centinela (3.6) - (3.6) 3.1 (2.9)
Railway and other transport services (2.3) - (2.3) 0.5 (0.5)
(5.8) - (5.8) 7.5 (3.3)
For the year ended 31 December 2014
Impact on income statement for year ended 31.12.2014 Impact on reserves for year ended at 31.12.2014 Fair value recorded on balance sheet 31.12.2014
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 0.6 0.2
Michilla 18.3 (5.0) 13.3 (6.2) -
Exchange Derivatives
Michilla (4.1) - (4.1) (1.7) -
Antucoya - (0.1) (0.1) (3.8) (4.0)
Interest Derivatives
Centinela (4.8) - (4.8) 3.4 (6.0)
Railway and other transport services (1.0) - (1.0) (1.0) (1.0)
8.5 (5.1) 3.4 (8.7) (10.8)
The gains/(losses) recognised in reserves are disclosed before non-controlling interests and tax.
The net financial asset resulting from the balance sheet mark-to-market adjustments is analysed as follows: At 31.12.2015 At 31.12.2014 $m $m Analysed between: Current assets 0.2 0.2 Current liabilities (2.0) (7.5) Non-current liabilities (1.5) (3.5) (3.3) (10.8) (ii) Outstanding derivative financial instrumentsCommodity derivativesThe Group periodically uses commodity derivatives to manage its exposure to commodity price fluctuations. - Futures - arbitrageThe Group has futures for
copper production, to swap COMEX price exposure to LME prices according to the Group's pricing policy. At 31.12.2015 For instruments held at 31.12.2015 Copper production hedged Weighted average remaining period from 1 January 2016 Covering a period up 000 tonnes Months to: Centinela 300 0.1 31-01-2016 Exchange derivativesThe Group periodically uses foreign exchange derivatives to reduce its exposure to fluctuations in the exchange rates influencing operating costs and the fair value of non-US dollar
denominated assets or liabilities. The Group had no such instruments in place at 31 December 2015. 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 31 December 2015 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 31.12.2015
At 31.12.2014
$m
$m
Analysed between:
Current assets
0.2
0.2
Current liabilities
(2.0)
(7.5)
Non-current liabilities
(1.5)
(3.5)
(3.3)
(10.8)
(ii) Outstanding derivative financial instrumentsCommodity derivativesThe Group periodically uses commodity
derivatives to manage its exposure to commodity price fluctuations. - Futures - arbitrageThe Group has futures for
copper production, to swap COMEX price exposure to LME prices according to the Group's pricing policy.
At 31.12.2015 For instruments held at 31.12.2015
Copper production hedged Weighted average remaining period from 1 January 2016 Covering a period up
000 tonnes Months to:
Centinela 300 0.1 31-01-2016
Exchange derivativesThe Group periodically uses foreign exchange derivatives to reduce its exposure to fluctuations in the
exchange rates influencing operating costs and the fair value of non-US dollar denominated assets or liabilities. The Group
had no such instruments in place at 31 December 2015. 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 31 December 2015 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
Year ended 31.12.2015 Year ended 31.12.2014(Restated)
$m $m
Investment income
Interest receivable 16.7 14.2
Fair value through profit or loss 1.4 2.6
18.1 16.8
Interest expense
Interest expense (33.5) (44.2)
Preference dividends (0.2) (0.2)
(33.7) (44.4)
Other finance items
Time value effect of derivatives 0.1 (5.1)
Unwinding of discount on provisions (9.1) (8.9)
Impairment of available for sale investments (1.0) (26.3)
Foreign exchange (13.6) 4.0
(23.6) (36.3)
Net finance expense (39.2) (63.9)
At 31 December 2015, $29.6 million relating to net interest expense and other finance items at Antucoya (year ended 31
December 2014 - $27.4 million), $4.1 million at Centinela (year ended 31 December 2014 - $4.8 million) and $1.2 million at
Los Pelambres (year ended 31 December 2014 - $3.8 million) was capitalised during the year, and is consequently not
included within the above table.
The fair value through profit or loss line represents the fair value gains relating to liquid investments.
7. Taxation
The tax charge for the year comprised the following:
Year ended 31.12.2015 Year ended 31.12.2014(Restated)
$m $m
Current tax charge
Corporate tax (principally first category tax in Chile) (41.6) (360.9)
Mining tax (royalty) (20.4) (71.9)
Withholding tax (12.9) (279.3)
Exchange losses on corporate tax balances (1.0) (0.6)
(75.9) (712.7)
Deferred tax credit/(charge)
Corporate tax (principally first category tax in Chile) (69.0) 10.2
Adjustment to deferred tax attributable to changes in tax rates - (215.1)
Mining tax (royalty) (13.6) (7.2)
Withholding tax provision (1.9) 222.5
(84.5) 10.4
Total tax charge (income tax expense) (160.4) (702.3)
The rate of first category (i.e. corporate) tax in Chile is currently 22.5% (2014-21%). The rate will increase to 24% in
2016.
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 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.
Year ended Year ended
31.12.2015 31.12.2014(Restated)
$m % $m %
Profit before tax 259.4 1,515.6
Tax at the Chilean corporate rate tax of 22.5% (2014 - 21%) (58.4) 22.5 (318.3) 21.0
Effect of increase in future first category tax rates on deferred tax balances (8.9) 3.4 (215.1) 14.2
Items not subject to or deductible from first category tax (17.1) 6.6 (33.5) 2.2
Carry-back tax losses resulting in credits at historic tax rates (25.8) 9.9 - -
Mining tax (royalty) (34.0) 13.1 (79.1) 5.2
Withholding tax (14.8) 5.7 (56.8) 3.7
Tax effect of share of results of associates and joint ventures (0.5) 0.2 (0.9) 0.1
Net other items (0.9) 0.3 1.4 (0.1)
Tax expense and effective tax rate for the year (160.4) 61.8 (702.3) 46.3
The tax charge for 2015 was $160.4 million and the effective tax rate was 61.8%. In 2015 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 $25.8 million / 9.9%), the effect of expenses not deductible for
Chilean corporate tax purposes (principally the funding of expenses outside of Chile) (impact of $17.1 million / 6.6%) and
the mining tax (impact of $34.0 million / 13.1%) and withholding tax charge (impact of $14.8 million / 5.7%). In 2014, the
effective tax rate varied from the standard rate (comprising corporate (first category) tax) principally due to the one-off
deferred tax charge of $215.1 million reflecting the increase in tax rates as a result of the Chilean tax reform enacted in
that year.
There are no significant tax uncertainties which would require critical judgements, estimates or
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