REG - Antofagasta PLC - Preliminary Results Announcement <Origin Href="QuoteRef">ANTO.L</Origin> - Part 4
15/03/2016 07:06
- Part 4: For the preceding part double click ID:nRSO0969Sc
potential provisions.
8. Discontinued operations
(i) Profit for the period from discontinued operations
On 02 June, 2015 the Group completed the disposal of its Water division, Aguas de Antofagasta S.A. ("ADASA"). On 28 August,
2015 the
Group completed the disposal of its transport operation in Bolivia, 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:
ADASA FCA Year ended ADASA FCA Year ended
31 December 31 December
2015 2014
$m $m $m $m $m $m
Turnover 53.9 12.9 66.8 124.9 19.9 144.8
Total operating costs (34.9) (20.2) (55.1) (63.4) (25.3) (88.7)
Net finance income (0.1) (0.2) (0.3) 2.1 (0.3) 1.8
Profit/(loss) before tax 18.9 (7.5) 11.4 63.6 (5.7) 57.9
Attributable tax expense (3.9) - (3.9) (19.9) (0.6) (20.5)
Profit/(loss) of discontinued operations 15.0 (7.5) 7.5 43.7 (6.3) 37.4
Profit/(loss) on disposal of discontinued operations1 853.2 (5.6) 847.6 - - -
Attributable tax expense2 (252.4) - (252.4) - - -
Net profit attributable to discontinued operations (attributable to owners of the Company) 615.8 (13.1) 602.7 43.7 (6.3) 37.4
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, which has been reclassified from translation reserves in
other comprehensive income to the income statement upon disposal.
2 Tax expense includes $57.2 million related to withholding tax.
During the period, Aguas de Antofagasta S.A., contributed $21.7 million (2014 - $63.6 million) to the Group´s net cash flow
from operating activities, $19.2 million (2014 - $25.7 million) in respect to net cash used in investing activities and
paid $2.0 million (2014 - $27.9 million) in net cash provided in financing activities.
During the period, Empresa Ferroviaria Andina, contributed $2.2 million (2014 - $4.8 million) to the Group´s net cash flow
from operating activities, $2.1 million (2014 - $4.5 million) in respect to net cash used in investing activities and paid
$0.1 million (2014 - $0.3 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
$962.8 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 May 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 August 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
$608.2 million (2014 - $459.8 million) and amounted to 61.7 cents and based on 985,856,695 ordinary shares. There was no
potential dilution of ordinary shares in either year.
10. Dividends
The Board has recommended a final dividend of nil. The interim dividend of 3.1 cents per share was an ordinary dividend and
was paid on October which amounts to $30.6 million.
The dividend proposed in relation to 2014 was 21.5 cents, which comprised an interim ordinary dividend of 11.7 cents per
share and a final ordinary dividend of 9.8 cents per share.
Dividends per share actually paid in the year and recognised as a deduction from net equity under IFRS were 12.9 cents
(2014 -97.8 cents) being the interim dividend for the year and the final dividend proposed in respect of the previous
year.
Further details of the currency election timing and process (including the default currency of payment) are available on
the Antofagasta plc website (www.antofagasta.co.uk) or from the Company's registrar, Computershare Investor Services PLC on
+44 870 702 0159.
11. Intangible assets
Year ended 31.12.2015 Year ended 31.12.2014
$m $m
Balance at the beginning of the year 118.6 133.0
Additions - 14.1
Acquisition 150.1 -
Disposal (113.7) -
Amortisation (2.4) (10.9)
Foreign currency exchange difference (2.5) (17.6)
Balance at the end of the year 150.1 118.6
As disclosed in Note 13, 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 balance 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 Water Concession Year ended 31.12.2015 Year ended 31.12.2014
$m $m $m $m $m
Balance at the beginning of the year 7,963.4 198.3 52.2 8,213.9 7,424.8
Additions 982.3 13.9 16.4 1,012.6 1,581.0
Reclassification 124.0 - - 123.8 (14.0)
Acquisition 20.8 - - 20.8 -
Adjustment to capitalised decommissioning provisions (35.7) - - (35.7) (48.1)
Depreciation (562.0) (25.9) (2.8) (590.7) (595.1)
Depreciation capitalised (44.9) - - (44.9) (26.4)
Assets derecognized due to loss of control of subsidiary - (20.5) (64.1) (84.6) (94.4)
Asset disposals (8.9) (3.4) - (12.3) (6.3)
Foreign currency exchange difference - (0.1) (1.7) (1.8) (7.6)
Balance at the end of the year 8,438.8 162.3 - 8,601.1 8,213.9
Depreciation of $44.9 million (31 December 2014 - $26.4 million) has been capitalised within property, plant & equipment or
inventory, and accordingly excluded from the depreciation charge recorded in the income statement as shown in note 3(a).
Future capital commitments at 31 December 2015 were $283.1 million (31 December 2014 - $253.2 million) of which $138.6
million were related to the development of Oxides Encuentro project.
Additions include $20.8 million related to property plant and equipment of Twin Metals as part of the Duluth acquisition
(see Note 16).
Reclassifications additions are mainly related to profits and losses at Antucoya while is commissioning.
13. Impairment review
Given the recent deterioration in commodity market conditions the Group has reviewed its assets for indicators of
impairment, and has performed impairment reviews in respect of the Centinela and Antucoya operations.
In both cases fair value less costs of disposal (FVLCD) calculations have been used, based on discounted cash flow models
incorporating estimates of assumptions that would be used by independent market participants in valuing the assets. The
cash flow models are based on the operations' detailed life-of-mine plans.
The key assumptions to which the value of the assets are most sensitive are future commodity prices, the discount rate used
to determine the present value of the future cash flows, future operating costs, sustaining and development capital
expenditure and ore reserve estimates. The commodity 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 consensus forecasts, information
disclosed by other mining companies and prices implied by recent market transactions. A long-term copper price of 300 c/lb
has been used in the FVLCD calculations. 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.
For both Centinela and Antucoya the recoverable amount indicated by the FVLCD calculations was greater than the carrying
value of the assets, and accordingly no impairment charge has been recorded.
The assumptions used in the FVLCD calculations which are considered to be subject to the most estimation uncertainty are
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 result 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 result 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.
14. Investment in associates and joint ventures
Inversiones Hornitos ATI El Arrayan Alto Maipo Twin Metals Zaldivar Energía Andina Tethyan Copper Year ended Year ended
31.12.2015 31.12.2014
$m $m $m $m $m $m $m $m $m $m
Balance at the beginning of the year 78.3 8.8 24.5 8.3 67.4 - 11.2 (0.4) 198.1 175.2
Capital contribution - - - 42.8 - - 1.3 4.0 48.1 21.6
Acquisition - - - - - 1,001.7 - - 1,001.7 -
Gains/(losses) in fair value of cash flow hedges deferred in reserves of associates - - (0.4) (13.9) - - (1.7) - (16.0) (42.0)
Fair value of investment in associate upon reclassification to subsidiary - - - - (67.4) - - - (67.4) 67.4
Share of profit/(loss) before tax 12.3 (0.9) (0.4) (6.2) - (2.4) (0.7) (6.1) (4.4) (1.2)
Share of tax (3.4) 0.2 (0.5) 2.5 - (0.4) 0.2 - (1.4) (2.9)
Share of income/(loss) from associate 8.9 (0.7) (0.9) (3.7) - (2.8) (0.5) (6.1) (5.8) (4.1)
Dividends received (12.1) - - - - - - - (12.1) (20.0)
Balance at the end of the year 75.1 8.1 23.2 33.5 - 998.9 10.3 (2.5) 1,146.6 198.1
The investments which are included in the $1,146.6 million balances at 31 December 2015 are set out below:
Investment in associates
(i) The Group's 40% interest in Inversiones Hornitos S.A., which owns the 165MW Hornitos thermoelectric power
plant operating in Mejillones, in Chile's Antofagasta Region. The Group has a 16-year power purchase agreements with
Inversiones Hornitos S.A. for the provision of up to 40MW of electricity for Centinela.
(ii) The Group's 30% interest in ATI, which operates a concession to manage installations in the port of
Antofagasta.
(iii) The Group´s 30% interest in El Arrayan, which operates an 115MW wind-farm project, which entered into
operation in June 2014. The Group has a 20-year power purchase agreements with El Arrayan for the provision of up to 40MW
of electricity for Los Pelambres. The Group did not make any capital contributions to El Arrayan during the year (2014 -
$2.6 million).
(iv) The Group's interest in Alto Maipo SPA ("Alto Maipo"), which will develop, construct, own and operate two
run-of-river hydroelectric power stations located in the upper section of the Maipo River, approximately 50 kilometres to
the southeast of Santiago, with a total installed capacity of 531MW. In July 2013, the Group exercised an option to acquire
a 40% interest in Alto Maipo for a consideration of $50.2 million, and is responsible for its share of development costs.
Alto Maipo has used derivatives financial instrument to reduce its exposure to interest rate movements in relation to the
project financing and foreign exposure. A fair value loss of $14.4 million (2014 - $42.3 million loss) was recognised in
relation to the mark-to-market of these derivative financial instruments with this amount deferred in reserves at it forms
part of a designated cash flow hedging relationship. During 2015 the Group made capital contributions of $42.8 million
(2014 - nil). During the year the Group also provided $63.9 million of loan financing (2014 - $105.4 million) to Alto
Maipo. The balance due from Alto Maipo to the Group at 31 December 2015 was $229.7 million (2014 - $152.4 million)
representing loan financing with an interest rate of LIBOR six-months plus 4.25%.
(v) As at 31 December 2014 the Group had a 40% interest in Twin Metals Minnesota LLC ("Twin Metals"), which is
seeking to develop a copper-nickel-PGM deposit in north-eastern Minnesota. The remaining 60% interest in Twin Metals was
held by Duluth Metals Limited ("Duluth"). As detailed in Note 14 in January 2015 the Group completed its acquisition of
100% of Duluth Metals Limited ("Duluth"), resulting in the Group holding a 100% interest in Twin Metals from that point.
This has resulted in the Group consolidating 100% of the assets and liabilities relating to Twin Metals with effect from
January 2015, and accordingly the investment in associate balance relating to Twin Metals was derecognised at that point.
Investment in joint ventures
(vi) The Group's 50% interest in Minera Zaldivar SpA ("Zaldivar"), which was acquired on 1 December 2015 (see Note
17). Zaldivar is an open-pit, heap-leach copper mine located in Northern Chile, which produces approximately 100,000 tonnes
of copper cathodes annually. The total provisional consideration for the acquisition of the Group's 50% stake (including
acquisition costs) was $1,001.7 million. The consideration is subject to adjustments based on the net debt and working
capital levels of Zaldivar at the completion date, and it is currently expected that these adjustments will be finalized
during the first half of 2016, allowing a final determination of the total consideration and the fair value of the share of
assets and liabilities acquired.
(vii) The Group's 50.1% (2014 - 50.1%) interest in Energia Andina, which is a joint venture with Origin Geothermal
Chile Limitada for the evaluation and development of potential sources of geothermal and solar energy.
(viii) The Group's 50% interest in Tethyan Copper Company Limited ("Tethyan"), which is a joint venture with Barrick
Gold Corporation over Tethyan's mineral interest in Pakistan, which is now subject to international arbitration as set out
in Note 27 below.
15. Available for sale investments
Year ended 31.12.2015 Year ended 31.12.2014
$m $m
Balance at the beginning of the year 15.6 16.6
Additions 0.2 5.9
Reclassification (9.4) -
Movement in fair value (3.2) (6.1)
Disposal (0.2) -
Foreign currency exchange differences (0.3) (0.8)
Balance at the end of the year 2.7 15.6
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 US$9.4 million, accounted for as an available for
sale investment. As explained in Note 16, 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.
16. Duluth Metals Limited transaction
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. The principal asset of Twin Metals is its copper-nickel-PGM deposit in north-eastern
Minnesota, and the transaction has accordingly been accounted for as the acquisition by the Group of the remaining 60%
interest in that asset.
Immediately prior to the completion of the transaction the Group held 17.2% of Duluth's share capital. The fair value of
the consideration transferred to acquire the remaining 82.8% of the share capital of Duluth in January 2015 was $44.3
million, reflecting the agreed acquisition price of C$0.45 per share. In addition, transaction costs of $6.3 million have
been included as part of the cost of the asset acquisition. The carrying value of the Group's existing investment in
associate balance relating to its 40% interest in Twin Metals at the date of the transaction in January 2015 was $67.4
million, and the carrying value of the Group's existing available for sale investment balance relating to its 17.2% holding
of Duluth's share capital at that date was $9.4 million. As part of the acquisition agreement the Group also agreed to
redeem convertible debentures previously issued by Duluth at a cash cost of $31.7 million, and has also acquired the other
sundry net liabilities of Duluth.
This has resulted in the Group consolidating 100% of the assets and liabilities relating to Twin Metals with effect from
January 2015. The principal assets recognised at that date were an intangible asset balance of $150.1 million reflecting
the value of the mining property assets, and a property, plant & equipment balance of $20.8 million relating to land and
buildings. In addition, a liability of $31.7 million was recognised in respect of the Duluth convertible debentures which
were subsequently redeemed by the Group, along with $11.8 million of other sundry net liabilities of Duluth and Twin
Metals.
17. 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.
Total consideration for the transaction was US$1,005.0 million, subject to adjustments based on the net debt and working
capital levels of Zaldivar at the completion date. The consideration is wholly in cash, with $980.0 million payable upon
closing (subject to the net debt and working capital adjustments), and five annual payments of $5.0 million per year,
starting in 2016. Provisional estimated adjustments in respect of the net debt and working capital levels of Zaldivar at 1
December 2015 resulted in a provisional reduction in the consideration of $10.3 million to $994.7 million. Including
capitalized acquisition costs of $7.0 million the initial investment in joint venture balance is therefore $1,001.7
million.
It is currently expected that the net debt and working capital adjustments will be finalized during the first half of 2016,
allowing a final determination of the total consideration and the fair value of the share of assets and liabilities
acquired.
18. Inventories
Year ended Year ended
31.12.2015 31.12.2014
$m $m
Current:
Raw materials and consumables 162.0 177.9
Work in progress 97.7 136.7
Finished goods 37.4 67.9
297.1 382.5
Non-current:
Work in progress 263.9 247.8
263.9 630.3
Non-current work-in-progress is expected to be processed more than 12 months after the balance sheet date.
19. Borrowings
Notes At 31.12.2015 At 31.12.2014
$m $m
Los Pelambres
Corporate loans (i) (52.3) (87.2)
Short-term loan (ii) (312.1) (206.0)
Finance leases (iii) (7.9) (12.5)
Centinela
Project financing (senior debt) (iv) (889.8) (884.1)
Shareholder loan (subordinated debt) (v) (174.5) (167.0)
Short-term loan (vi) (200.0) -
Finance leases - (0.1)
Antucoya
Project financing (senior debt) (vii) (630.2) (572.7)
Shareholder loan (subordinated debt) (viii) (308.7) (241.7)
Short-term loan (ix) (30.0) -
Finance leases (x) - (1.1)
Corporate and other items
Finance leases (xi) (24.6) (29.7)
Railway and other transport services
Long-term loans (xii) (119.1) (148.6)
Finance leases (xiii) (2.9) (3.2)
Water concession
Long-term loan (xiv) - (14.6)
Andino
Bonds (xv) - (3.0)
Short-term loans (xvi) - (1.5)
Preference shares (xvii) (3.0) (3.1)
Total (2,755.1) (2,376.1)
(i) Corporate loans at Los Pelambres are unsecured and US dollar denominated. These loans have a remaining term 2.5 years
and have an interest rate of LIBOR six-month plus margins of between 0.9% - 1.6%.
(ii) Short-term loan (PAE) are US dollar denominated, comprises a working capital loan for an average period of 1 year and
have an interest rate of LIBOR six-months rate plus margins of between 0.05% - 0.16%.
(iii) Finance leases at Los Pelambres are US dollar denominated, comprising $10.1 million at fixed rate of 0.47% with a
remaining duration of 2.5 years.
(iv) Senior debt at Centinela is US dollar denominated, comprises $887.3 million in respect of syndicated loans. These
loans are for a remaining term of 4.5 years and have an interest rate of LIBOR six-month rate plus 1%. The loans are
subject to financial covenants which require that specified net debt to EBITDA and EBITDA to finance expense ratios are
maintained.
The Group has used interest rate swaps to swap the floating rate interest for fixed rate interest. At 30 June 2015 the
current notional amount hedged of the senior debt at Centinela was $122.5 million.
(v) This balance includes long-term subordinated debt are US dollar denominated, provided to Centinela by Marubeni
Corporation with a duration of 6.5 years and weighted average interest rate of LIBOR six-months plus 3.75%. Long term
subordinated debt provided by Group companies to Centinela has been eliminated on consolidation
(vi) Short-term loan (PAE) are US dollar denominated, comprises a working capital loan for an average period of 1 year and
have an interest rate of LIBOR six-month plus margins of between 0.1% - 0.3%
(vii) Finance leases at Centinela are US dollar denominated, with a remaining duration of 0.5 year and with an average
interest fixed rate at approximately 1.3%.
(viii) Senior debt at Antucoya is US dollar denominated, comprises $623.3 million in respect of syndicated loans. These
loans are for a remaining term of 11.5 years and have an interest rate of LIBOR 180 days plus 1.9%.
(ix) This balance includes long-term subordinated debt is US dollar denominated, provided to Antucoya by Marubeni with
duration of 11.5 years and an interest rate of LIBOR six-months plus 3.65%. Long-term subordinated debt provided by Group
companies to Antucoya has been eliminated on consolidation.
(x) Short-term loan are US dollar denominated, comprises a working capital loan for an average period of 1 year and has an
interest rate of LIBOR six-month rate plus 0.9%
(xi) Finance leases at Antucoya are US dollar denominated, with a maximum remaining duration of 0.5 year and with an
average interest fixed rate at approximately LIBOR three-months plus 2.89%.
(xii) Finance leases at Corporate and other items are denominated in Unidades de Fomento (i.e. inflation-linked Chilean
pesos) and have a remaining duration of 12.5 years and are fixed rate with an average interest rate of 5.29%.
(xiii) Long-term loans at Railway and other transport services are US dollar denominated, mainly comprise a loan for $148.6
million with a duration of 4.5 years and with an interest rate of LIBOR six-month plus 0.48%.The Group has used interest
rate swaps to swap the floating rate interest for fixed rate interest. At 30 June 2015 the current notional amount hedged
of the long-term debt at Railway and other transport services was $150.0 million.
(xiv) Finance leasing at Railway and other transport services are Chilean pesos denominated, with a maximum remaining
duration of 2.5 years and with a fixed interest rate 4.8%
(xv) Long-term loan at ADASA denominated in Unidades de Fomento (i.e. inflation-linked Chilean pesos) was derecognised as
part of the ADASA sale.
(xvi) Disposal of Andino (FCA) included the derecongised of short term bond as part of the FCA sale.
(xvii) Disposal of Andino (FCA) included the derecongised of short-term loans as part of the FCA sale.
(xviii) The preference shares are sterling-denominated and issued by the Company. There were 2 million shares of £1 each
authorised, issued and fully paid at 31 December 2014. The preference shares are non-redeemable and are entitled to a fixed
cumulative dividend of 5% per annum. On winding up they are entitled to repayment and any arrears of dividend in priority
to ordinary shareholders, but are not entitled to participate further in any surplus. Each preference share carries 100
votes in any general meeting of the Company.
Maturity of borrowings
At 31.12.2015 At 31.12.2014
$m $m
Short-term borrowings (758.9) (284.5)
Medium and long-term borrowings (1,996.2) (2,091.6)
Total (2,755.1) (2,376.1)
At 31 December 2015 $38.4 million (2014 - $67.5 million) of the borrowings has fixed rate interest and $2,716.7 million
(2014 - $2,308.6 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.
20. Post-employment benefit obligation
Year ended Year ended
31.12.2015 31.12.2014
$m $m
Balance at the beginning of the year (103.0) (91.2)
Current service cost (16.6) (17.2)
Actuarial gains/(losses) 2.3 (18.0)
Interest cost (4.1) (3.5)
Charge/(credit) capitalised (3.6) 0.1
Reclassification (0.3) 1.1
Paid in the year 14.0 13.7
Disposal 8.9 -
Foreign currency exchange difference 15.5 12.0
Balance at the end of the year (86.9) (103.0)
The post-employment benefit obligation relates to the provision for severance indemnities which are payable when an
employment contract comes to an end, in accordance with normal employment practice in Chile and other countries in which
the Group operates. The severance indemnity obligation is treated as an unfunded defined benefit plan, and the calculation
is based on valuations performed by an independent actuary.
21. Decommissioning & restoration and other long term provisions
Year ended Year ended
31.12.2015 31.12.2014
$m $m
Balance at the beginning of the year (434.3) (494.3)
(Charge)/credit to operating profit in the year (25.8) 7.4
Release of discount to net interest in the year (5.0) (5.6)
Actuarial gain - 0.6
Capitalised adjustment to provision 35.7 48.1
Reclassification - 0.9
Utilised in the year 30.1 6.2
Disposal 1.5 -
Foreign currency exchange difference 3.8 2.4
Balance at the end of the year (394.0) (434.3)
Analysed as follows:
Decommissioning and restoration (394.0) (432.6)
Termination of water concession - (1.7)
Balance at the end of the year (394.0) (434.3)
Decommissioning and restoration costs relate to the Group's mining operations. Costs are estimated on the basis of a formal
closure plan and are subject to regular independent formal review. It is estimated that the provision will be utilised from
2024 until 2059 based on current mine plans.
During the year ended 31 December 2015, the decommissioning and restoration provisions at the Group's mining operations
decreased by a net total of $38.6 million.
The balance at the end of the year includes $31.7 million of provision related to Michilla. Following the cessation of
production at Michilla the current expectation is that the majority of the closure costs will be incurred during the next
three years.
22. Deferred tax assets and liabilities
Year ended Year ended
31.12.2015 31.12.2014
$m $m
Net position at the beginning of the year (875.2) (889.0)
(Charge)/credit to tax on profit in year (84.1) 6.4
Deferred tax recognised directly in equity (1.4) 2.4
Reclassification (0.8) 0.3
Disposal 8.8 -
Foreign currency exchange difference 1.1 2.9
Net position at the end of the year (951.6) (875.2)
Analysed between:
Deferred tax assets 124.6 104.6
Deferred tax liabilities (1,076.2) (979.8)
Net position (951.6) (875.2)
The deferred tax balance of $951.6 million (2014 - $875.2 million) includes $965.0 million (2014 - $951.6 million) due in
more than one year. All amounts are shown as non-current on the face of the balance sheet as required by IAS 12.
23. Share capital and share premium
There was no change in share capital or share premium in the year ended 2015 or 2014.
24. Other reserves and retained earnings
Year ended Year ended
31.12.2015 31.12.2014
$m $m
Hedging reserves(1)
At 1 January (36.2) (6.8)
Parent and subsidiaries net cash flow hedge fair value gains/(losses) 0.1 (0.2)
Parent and subsidiaries net cash flow hedge gains/(losses) transferred to the income statement 3.5 (8.5)
Share of other comprehensive losses of equity accounted units, net of tax (10.2) (25.2)
Tax on the above (1.3) 4.5
At 31 December (44.1) (36.2)
Available for sale revaluation reserves(2)
At 1 January (10.7) (30.9)
Losses on available for sale investment (3.2) (6.1)
Losses on available for sale securities transferred to the income statement 1.0 26.3
Tax on the above - -
At 31 December (12.9) (10.7)
Foreign currency translation reserves(3)
At 1 January (0.5) 25.7
Parent and subsidiaries currency translation and exchange adjustments - (26.2)
Currency translation reclassified on disposal (1.8) -
Tax on the above - -
At 31 December (2.3) (0.5)
Total other reserves per balance sheet (59.3) (47.4)
Retained earnings(4)
At 1 January 5,932.1 6,447.5
Parent and subsidiaries profit for the year 614.0 463.4
Equity accounted units' loss after tax for the year (5.8) (3.6)
Actuarial gains/(losses)(5) 4.5 (13.2)
Tax relating to components of other comprehensive income (1.2) 3.4
Total comprehensive income for the year 6,543.6 6,897.5
Change in ownership interest in subsidiaries - 1.5
Capital increase in non-controlling interest - (2.7)
Dividends paid (127.2) (964.2)
At 31 December 6,416.4 5,932.1
(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 15.
(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, as described in note 20.
25. Reconciliation of profit before tax to net cash inflow from operating activities
Year ended 31.12.2015 Year ended 31.12.2014
$m $m
Profit before tax from continuing and discontinued operations 1,118.4 1,573.5
Depreciation and amortisation 576.1 606.0
Net (profit)/loss on disposals 10.2 (24.1)
Profit on disposal of discontinued operations (859.0) (57.9)
Net finance expense 39.2 62.1
Share of results from associates and joint ventures 5.8 4.1
Decrease in inventories 60.5 32.1
Decrease in debtors 137.7 124.8
Increase in creditors and provisions (230.6) 129.3
Cash flows from operations 858.3 2,507.8
26. Analysis of changes in net debt
At 1.1.2015 Cash flows Other Exchange At 31.12.2015
$m $m $m $m $m
Cash and cash equivalents 845.4 (1.5) - (36.4) 807.5
Liquid investments 1,529.1 (605.0) - - 924.1
Total cash and cash equivalents and liquid investments 2,374.5 (606.6) - (36.4) 1,731.6
Bank borrowings due within one year (276.0) (306.9) (171.3) 0.8 (753.4)
Bank borrowings due after one year (2,050.5) (139.2) 225.0 1.4 (1,963.3)
Finance leases due within one year (8.5) 11.5 (8.5) - (5.5)
Finance leases due after one year (38.0) 0.3 4.8 3.0 (29.9)
Preference shares (3.1) - - 0.1 (3.0)
Total borrowings (2,376.1) (434.3) 50.0 5.3 (2,755.1)
Net debt (1.6) (1,040.8) 50.0 (31.1) (1,023.5)
Net debt
Net debt at the end of each year was as follows:
At 31.12.2015 At 31.12.2014
$m $m
Cash, cash equivalents and liquid investments 1,731.6 2,374.5
Total borrowings (2,755.1) (2,376.1)
(1,023.5) (1.6)
The "other" movements mainly reflect the derecognition of $80.2 million of borrowings at Aguas Antofagasta S.A. and $4.5
million loan at Empresa Ferroviaria Andina S.A. as a result of the disposal of those businesses.
27. Litigation and Contingent liabilities
Antofagasta plc or its subsidiaries is subject to various claims which arise in the ordinary course of business. No
provision has been made in the financial statements and none of these claims are currently expected to result in any
material loss to the Group. Details of the principal claims in existence either during, or at the end of, the period and
the current status of these claims are set out below:
Los Pelambres - Mauro tailings dam
As previously announced, during 2008 Los Pelambres entered into binding settlements in respect of litigation relating to
the Mauro tailings dam. Since then, there have been a series of civil claims filed by some members of the Caimanes
community (which is located near the Mauro tailings dam) seeking to stop the operation of the dam. Many of these claims
have been rejected by the relevant courts.
Two of these claims are currently ongoing and Los Pelambres is continuing to take necessary steps to protect its position.
In the first claim, the plaintiffs have argued that the tailings dam affects their alleged water rights and the
environment. This allegation is based on assertions that the dam interferes with the flow and quality of the water in the
Pupío stream, a stream that passes through the valley in which the dam is built down to the Caimanes community. This claim
was rejected by the trial Court of Los Vilos in a judgment issued in November 2012, which was then affirmed by the Court of
Appeals of La Serena in August 2013. In October 2014, the Supreme Court, by a 3-2 majority decision, upheld the appeal and
ordered Los Pelambres to submit back to the trial Court of Los Vilos, within one month, an implementation plan for works
that would ensure that the operation of the dam does not affect the normal flow and quality of the waters of the Pupío
stream. Los Pelambres believes that the requirements of this order have already been met as Los Pelambres has undertaken
significant works to ensure that the flow of the Pupío stream is not altered and that the operation of the tailings dam
does not affect the quantity or quality of these waters - something that has been confirmed by accredited independent
assessors and other public services in Chile and confirmed by the Supreme Court in a parallel decision. Nevertheless, on 21
November 2014, Los Pelambres submitted this plan to the trial Court of Los Vilos. On 6 March 2015 that Court found that the
plan submitted by Los Pelambres was not sufficient to address the requirements of the Supreme Court order, and as a
consequence Los Pelambres must destroy part, or all, of the tailings dam wall. Los Pelambres appealed the Court's decision
and in December 2015 the Court of Appeals ordered that, before it issues its decision, a Court appointed engineer must
review the plan submitted by Los Pelambres and issue a report explaining whether or not the proposed works are enough to
ensure that the flow of the Pupío stream to the Caimanes community is not altered by the operation of the tailings dam and,
if the proposed works are not deemed to be sufficient to achieve this purpose, what additional or other works must be
performed by Los Pelambres to achieve this goal. That report is currently pending.
In the second claim, the plaintiffs are seeking demolition of the dam wall on the basis of the risk that its collapse would
pose to the community. The Civil Court in Los Vilos issued a decision in May 2014 denying the demolition request but
ordering Minera Los Pelambres to undertake some additional measures to ensure protection of the community, in the event of
a major earthquake or similar natural event. These measures would need to be reviewed and agreed with the technically
competent bodies responsible for supervision of the dam. The decision of the Court of Los Vilos was appealed by both the
plaintiffs and Los Pelambres to the Court of Appeal of La Serena. In April 2015 the Court of Appeal of La Serena upheld Los
Pelambres's appeal, overturning the decision of the Court of Los Vilos and rejecting completely the plaintiff's claim. The
decision of the Court of Appeal has been appealed by the plaintiffs to the Supreme Court. The Supreme Court is expected to
hear oral arguments and issue a final decision within the next few months.
Los Pelambres - Cerro Amarillo Waste Dump
In 2004, Los Pelambres received all of the required authorisations from the Chilean government to deposit a waste-rock dump
("Cerro Amarillo Waste Dump") in its current location which, according to the then official Chilean maps (1996), was
located within Chile. In 2007 Chile modified the official maps in this area without making the changes public. Los
Pelambres stopped using the relevant area of the Cerro Amarillo Waste Dump in 2011.
In February 2012, a binational border commission, established to clarify the exact position of the Chile/Argentina border,
determined accurately the location of the border in the area of the Cerro Amarillo Waste Dump, which showed that part of
the Cerro Amarillo Waste Dump was located in Argentina.
In May 2014 Xstrata Pachón S.A. ("Xstrata Pachón"), a subsidiary of Glencore and the holder of the mining properties on the
Argentinian side of the border, filed a claim against Los Pelambres before the Federal Court of San Juan, Argentina,
alleging that Los Pelambres had unlawfully deposited waste-rock on its property.
Xstrata Pachón has also filed a criminal complaint before a different Federal Court of San Juan alleging that Los Pelambres
had violated several Argentinian laws relating to the misappropriation of land, unlawful appropriation of water bodies and
that people's health was in jeopardy from the alleged contamination that the Cerro Amarillo Waste Dump might generate.
In both cases, Los Pelambres submitted preliminary objections to the Argentinian courts. These objections are still pending
in relation to the civil claim each party may appeal any decision on these preliminary objections to higher courts.
In the criminal proceeding the first instance Court dismissed the preliminary objections made by Los Pelambres but this
decision has been appealed.
The Cerro Amarillo Waste Dump is a pile of inert waste rock and any potential future environmental impact could be easily
prevented with the implementation of an environmental closure plan, which is the accepted and recommended practice.
Los Pelambres has offered to implement a closure plan in line with the requirements of the Provincial Authorities of San
Juan, but Xstrata Pachón has rejected this proposal
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