REG - Antofagasta PLC - PRELIMINARY RESULTS FOR THE YEAR ENDED 2016 <Origin Href="QuoteRef">ANTO.L</Origin> - Part 2
14/03/2017 07:07
- Part 2: For the preceding part double click ID:nRSN3337Za
provision for this
amount has been recognised. The sale agreement is subject to certain closing conditions, and the transaction is expected to
complete during the first half of 2017.
Further details are given in Note 3 to the preliminary results announcement.
Operating profit from subsidiaries
As a result of the above factors, operating profit from subsidiaries increased in 2016 by 61.6% to $467.0 million. Of the
exceptional impairment provisions outlined above $456.6 million was recorded within operating expenses, and therefore
excluding the exceptional impairment provisions, operating profit was $923.6 million, a 219.6% increase compared to 2015.
Share of results from associates and joint ventures
The Group's share of results from associates and joint ventures was a loss of $134.7 million in 2016, compared with a loss
of $5.8 million in 2015. This was largely a reflection of the exceptional impairment provisions. Of the total impairment
provision outlined above, $134.7 million was recorded within the share of results from associates and joint ventures.
Excluding the impact of the exceptional impairment, the share of results from associates and joint ventures was a profit of
$23.5 million (2015 - loss of $5.8 million). The improvement compared with the prior year mainly reflected a full year's
contribution from from Zaldívar.
Net finance expense
Net finance expense in 2016 was $71.1 million, compared with $40.4 million in 2015.
Year ended 31.12.16$m Year ended 31.12.15$m
Investment income 26.9 17.5
Interest expense (86.1) (33.7)
Other finance items (11.9) (24.2)
Net finance expense (71.1) (40.4)
Interest income increased from $17.5 million in 2015 to $26.9 million in 2016 due to an increase in operating cash invested
as a result of increased revenue in 2016.
Interest expense increased from $33.7 million in 2015 to $86.1 million in 2016, mainly due to interest charges at Antucoya
being expensed since the start of commercial production on 1 April 2016. Additionally, there was higher corporate interest
expense reflecting a new long-term loan of $500 million taken out during the period.
Other finance items comprised a loss of $11.9 million (2015 - loss of $24.2 million) arising mainly from foreign exchange
losses of $2.9 million in 2016, compared with a loss of $14.8 million in 2015.
Profit before tax
As a result of the factors set out above, profit before tax increased by 17.2% to $284.6 million (2015 - $242.8 million).
Excluding exceptional items, profit before tax was $875.9 million, a 260.7% increase compared with the prior year.
Income tax expense
The tax charge for 2016 was $108.6 million and the effective tax rate was 38.2%. The exceptional impairment provisions had
an impact on the overall tax charge and the reconciliation of the effective tax rate. Excluding these exceptional
impairment provisions, the 2016 tax charge was $313.5 million and the effective tax rate was 35.8%.
31.12.2016 31.12.2016 Year ended
BEFORE EXCEPTIONAL ITEMS AFTER EXCEPTIONAL ITEMS 31.12.2015 (Restated)
$m % $m % $m %
Profit before tax 875.9 - 284.6 242.8
Tax at the Chilean corporate rate tax of 24% (2015 - 22.5%) (210.2) 24.0 (68.3) 24.0 (54.6) 22.5
Provision against carrying value of assets (exceptional items) - - 63.0 (22.1) - -
Effect of increase in future first category tax rates on deferred tax balances (24.6) 2.8 (24.6) 8.6 (8.9) 3.7
Items not deductible from first category tax (23.7) 2.7 (23.7) 8.3 (21.2) 8.7
Items not subject to first category tax 8.5 (1.0) 8.5 (2.9) 4.1 (1.7)
Carry-back tax losses resulting in credits at historic tax rates (5.4) 0.6 (5.4) 1.8 (25.8) 10.6
Mining tax (royalty) (60.1) 6.9 (60.1) 21.1 (31.8) 13.1
Withholding taxes - - - - (14.8) 6.1
Withholding taxes - adjustment to previous year (3.8) 0.4 (3.8) 1.3 - -
Tax effect of share of results of associates and joint ventures 5.6 (0.6) 5.6 (1.9) (0.5) 0.2
Net other items 0.2 (0.0) 0.2 (0.0) (0.9) 0.4
Tax expense and effective tax rate for the year (313.5) 35.8 (108.6) 38.2 (154.4) 63.6
This effective tax rate (excluding exceptional items) varied from the statutory rate principally due to the effect of
increases in future first category tax rates on deferred tax balances (impact of $24.6 million / 2.8%), the effect of
expenses not deductible for Chilean corporate tax purposes (principally the funding of expenses outside of Chile) and items
not subject to first category tax (impact of $15.2 million / 1.7%), and the mining tax (impact of $60.1 million / 6.9%).
Further details are given in Note 8 to the preliminary results announcement.
Profit from discontinued operations
On 30 December 2016 the Group completed the disposal of Minera Michilla and the resulting profit of $38.3 million has been
reflected as a profit from discontinued operations. In the prior year a profit from discontinued operations of $613.3
million was recognised, mainly relating to the disposal of Aguas de Antofagasta in that year.
Non-controlling interests
Profit for 2016 attributable to non-controlling interests was $56.3 million (2015 - $93.5 million). Before exceptional
items the profit attributable to non-controlling interests was $220.9 million.
Earnings per share
Year ended 31.12.16 Year ended31.12.15
$ cents $ cents
Total including exceptional items
Earnings per share from continuing operations 12.1 (0.5)
Earnings per share from discontinued operations 3.9 62.2
Total earnings per share from continuing and discontinued operations 16.0 61.7
Excluding exceptional items
Earnings per share from continuing operations 34.7 (0.5)
Earnings per share from discontinued operations 3.9 62.2
Total earnings per share from continuing and discontinued operations 38.6 61.7
Earnings per share calculations are based on 985,856,695 ordinary shares.
As a result of the factors set out above, profit attributable to equity shareholders of the Company was $158.0 million
compared with $608.2 million in 2015, and total earnings per share from continuing and discontinued operations was 16.0
cents per share (2015 - 61.7 cents per share).
Profit from continuing operations and excluding exceptional items attributable to equity shareholders of the Company was
$341.5 million compared with a loss of $5.1 million in 2015, and earnings per share from continuing operations excluding
exceptional items was 34.7 cents per share (2015 - loss of 0.5 cents per share).
Dividends
Dividends per share declared in relation to the period are as follows:
Year ended 31.12.16 Year ended31.12.15
$ cents $ cents
Ordinary -
Interim 3.1 3.1
Final 15.3 -
Total dividends to ordinary shareholders 18.4 3.1
The Board determines the appropriate dividend each year based on consideration of the Group's cash balance, the level of
free cash flow and underlying earnings generated during the year and significant known or expected funding commitments. It
is expected that the total annual dividend for each year would represent a payout ratio based on underlying net earnings
for that year of at least 35%.
The Board has declared a final dividend of 2016 of 15.3 cents per ordinary share, which amounts to $150.8 million and will
be paid on 26 May 2017 to shareholders on the share register at the close of business on 28 April 2017.
The Board declared an interim dividend for the first half of 2016 of 3.1 cents per ordinary share, which amounted to $30.6
million and was paid on 30 September 2016 to shareholders on the share register at the close of business on 9 September
2016.
This gives total dividends proposed in relation to 2016 (including the interim dividend) of 18.4 cents per share or $181.4
million in total (2015 - 3.1 cents per ordinary share or $30.6 million in total).
Capital expenditure
Capital expenditure decreased by $253.4 million from $1,048.5 million in 2015 to $795.1 million in the year. This was
mainly due to decreased construction costs at Antucoya, which is now in operation, partly offset by increased expenditure
at Los Pelambres, relating mainly to capitalised stripping costs.
NB: Capital expenditure figures quoted in this report are on a cash flow basis, unless stated otherwise.
Derivative financial instruments
The Group periodically uses derivative financial instruments to reduce exposure to commodity price movements. At 31
December 2016 the Group had entered into min/max contracts at Centinela for a notional amount of 72,000 tonnes of copper
production covering a period up to 31 December 2017, with an average minimum price of $2.25/lb and an average maximum price
of $2.84/lb. The Group also periodically uses interest rate swaps to swap the floating rate interest for fixed rate
interest. At 31 December 2016 the Group had entered into contracts at Centinela for a maximum notional amount of $70
million at a weighted average fixed rate of 3.372 % maturing in August 2018. The Group had also entered into contracts in
relation to a financing loan at the FCAB for a maximum notional amount of $90 million at a weighted average fixed rate of
1.634% maturing in August 2019.
Cash flows
The key features of the Group cash flow statement are summarised in the following table.
Year ended 31.12.16 Year ended 31.12.15
$m $m
Cash flows from continuing and discontinued operations 1,457.3 858.3
Income tax paid (272.6) (427.1)
Net interest paid (31.9) (27.6)
Capital contributions and loans to associates (10.1) (112.0)
Acquisition of joint ventures 20.0 (972.8)
Disposal of subsidiary 10.0 942.9
Acquisition of mining properties (7.0) (78.0)
Purchases of property, plant and equipment (795.1) (1,048.5)
Dividends paid to equity holders of the Company (30.6) (127.2)
Dividends paid to non-controlling interests (260.0) (80.0)
Dividends from associates 10.2 12.1
Other items 0.4 19.1
Changes in net debt relating to cash flows 90.6 (1,040.8)
Other non-cash movements (149.0) 50.0
Exchange 10.2 (31.1)
Movement in net debt in the period (48.2) (1,021.9)
Net debt at the beginning of the year (1,023.5) (1.6)
Net debt at the end of the year (1,071.7) (1,023.5)
Cash flows from continuing and discontinued operations were $1,457.3 million in 2016 compared with $858.3 million in 2015.
This reflected EBITDA from subsidiaries for the year of $1,521.7 million1 (2015 - $876.6 million) adjusted for a net
working capital increase of $64.4 million (2015 - working capital increase of $32.4 million).
Cash tax payments in 2016 were $272.6 million, broadly in line with the current tax charge for the year of $261.2m.
However, within this amount the payments on account for the current year were only $186.3m, as they were based on the prior
year's profit levels. In addition to these payments on account there were other tax payments of $194.6 million, mainly
comprising tax relating to the disposal of Aguas de Antofagasta S.A. in 2015, as well as the recovery of $108.3 million
relating to prior years.
In 2016 the disposal of subsidiary amount of $10.0 million related to the disposal of Michilla (2015 - $947.3 million
related to the disposal of Aguas de Antofagasta S.A.).
Contributions and loans to associates and joint ventures of $10.1 million relate to the Group's share of the funding of the
costs of Tethyan Copper Company and Energia Andina.
Cash disbursements relating to capital expenditure in 2016 were $795.1 million compared with $1,048.5 million in 2015. This
included expenditure of $534.7 million at Centinela (2015 - $559.4 million), $215.3 million at Los Pelambres (2015 - $203.1
million) and $9.4 million at Antucoya (2015 - $143.4 million).
At 31 December 2016 dividends paid to ordinary shareholders of the Company were $30.6 million, which related to the payment
of the interim dividend declared in respect of the current year (2015 - $127.2 million).
Dividends paid by subsidiaries to non-controlling shareholders were $260.0 million (2015 - $80.0 million).
Financial position
At 31.12.16 At 31.12.15
$m $m
Cash, cash equivalents and liquid investments 2,048.5 1,731.6
Total borrowings (3,120.2) (2,755.1)
Net debt at the end of the period (1,071.7) (1,023.5)
At 31 December 2016 the Group had combined cash, cash equivalents and liquid investments of $2,048.5 million (31 December
2015 - $1,731.6 million). Excluding the non-controlling interest share in each partly-owned operation, the Group's
attributable share of cash, cash equivalents and liquid investments was $1,830.2 million (31 December 2015 - $1,410.8
million).
New borrowings in 2016 were $938.8 million (2015 - $725.9 million), including new short-term borrowings at Los Pelambres of
$312.0 million, Centinela of $100.0 million, Antucoya of $30.0 million and new long-term borrowings at Corporate of $496.8
million. Repayments of borrowings and finance leasing obligations in 2016 were $724.4 million, relating mainly to
repayments at Los Pelambres of $373.1 million, Centinela $250.0 million, Antucoya $66.1 million and the transport division
of $31.5 million.
Total Group borrowings at 31 December 2016 were $3,120.2 million (at 31 December 2015 - $2,755.1 million). Of this,
$2,329.7 million (at 31 December 2015 - $1,936.2 million) is proportionally attributable to the Group after excluding the
non-controlling interest shareholdings in partly-owned operations.
Cautionary statement about forward-looking statements
This preliminary results announcement contains certain forward-looking statements. All statements other than historical
facts are forward-looking statements. Examples of forward-looking statements include those regarding the Group's strategy,
plans, objectives or future operating or financial performance, reserve and resource estimates, commodity demand and trends
in commodity prices, growth opportunities, and any assumptions underlying or relating to any of the foregoing. Words such
as "intend", "aim", "project", "anticipate", "estimate", "plan", "believe", "expect", "may", "should", "will", "continue"
and similar expressions identify forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that are beyond
the Group's control. Given these risks, uncertainties and assumptions, actual results could differ materially from any
future results expressed or implied by these forward-looking statements, which speak only as at the date of this report.
Important factors that could cause actual results to differ from those in the forward-looking statements include: global
economic conditions, demand, supply and prices for copper and other long-term commodity price assumptions (as they
materially affect the timing and feasibility of future projects and developments), trends in the copper mining industry and
conditions of the international copper markets, the effect of currency exchange rates on commodity prices and operating
costs, the availability and costs associated with mining inputs and labour, operating or technical difficulties in
connection with mining or development activities, employee relations, litigation, and actions and activities of
governmental authorities, including changes in laws, regulations or taxation. Except as required by applicable law, rule or
regulation, the Group does not undertake any obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Past performance cannot be relied on as a guide to future performance.
Consolidated Income Statement
Year ended 31.12.2016 Year ended31.12.2015(restated)
Before exceptional items Exceptional items(Note 3) Total Total
Notes $m $m $m $m
Group revenue 2,5 3,621.7 - 3,621.7 3,225.7
Total operating costs (2,698.1) (456.6) (3,154.7) (2,936.7)
Operating profit from subsidiaries 2,4 923.6 (456.6) 467.0 289.0
Net share of results from associates and joint ventures 2,4 23.4 (134.7) (111.3) (5.8)
Total profit from operations, associates and joint ventures 947.0 (591.3) 355.7 283.2
Investment income 26.9 - 26.9 17.5
Interest expense (86.1) - (86.1) (33.7)
Other finance items (11.9) - (11.9) (24.2)
Net finance expense 7 (71.1) - (71.1) (40.4)
Profit before tax 875.9 (591.3) 284.6 242.8
Income tax expense 8 (313.5) 204.9 (108.6) (154.4)
Profit for the financial year from continuing operations 562.4 (386.4) 176.0 88.4
Discontinued operationsProfit for the financial year from discontinued operations 9 38.3 - 38.3 613.3
Profit for the year 600.7 (386.4) 214.3 701.7
Attributable to:
Non-controlling interests 220.9 (164.6) 56.3 93.5
Profit for the period attributable to the owners of the parent 379.8 (221.8) 158.0 608.2
Basic earnings per share US cents US cents US cents US cents
From continuing operations 10 34.7 (22.6) 12.1 (0.5)
From discontinued operations 10 3.9 - 3.9 62.2
Total continuing and discontinued operations 38.6 (22.6) 16.0 61.7
Consolidated Statement of Comprehensive Income
Year ended 31.12.2016 Year ended 31.12.2015
Notes $m $m
Profit for the financial year 214.3 701.7
Items that may be or were reclassified subsequently to profit or loss:
(Losses)/gains in fair value of cash flow hedges deferred in reserves (3.5) 1.7
Share of other comprehensive income/(losses) of equity accounted units, net of tax 14 4.4 (16.0)
Gains/(losses) in fair value of available for sale investments 15 1.7 (3.2)
Currency translation adjustment - (1.8)
Deferred tax effects arising on cash flow hedges deferred in reserves 0.6 -
Losses in fair value of cash flow hedges transferred to the income statement 6c)(i) 5.8 5.8
Share of other comprehensive income of equity accounted units transferred to the income statement 3 52.6 -
Losses in fair value of available- for- sale investments transferred to income statement - 1.0
Deferred tax effects arising on amounts transferred to the income statement (1.4) (1.3)
Total items that may be or were reclassified subsequently to loss 60.2 (13.8)
Items that will not be subsequently reclassified to profit or loss:
Actuarial gains on defined benefit plans 19 7.8 3.8
Tax on items recognized through OCI which will not be reclassified to profit or loss in the future (1.3) (1.2)
Total items that will not be subsequently reclassified to loss 6.5 2.6
Total other comprehensive income 66.7 (11.2)
Total comprehensive income for the year 281.0 690.5
Attributable to:
Non-controlling interests 24.9 90.9
Equity holders of the Company 256.1 599.6
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share capital Share premium Other reserves (note 23) Retained earnings (note 23) Net equity Non- controlling interests Total
$m $m $m $m $m $m $m
Balance at 1 January 2016 89.8 199.2 (59.3) 6,416.4 6,646.1 1,873.2 8,519.3
Profit for the year - - - 158.0 158.0 56.3 214.3
Other comprehensive income for the year - - 37.0 4.8 41.8 24.9 66.7
Dividends - - - (30.6) (30.6) (260.0) (290.6)
Balance at 31 December 2016 89.8 199.2 (22.3) 6,548.6 6,815.3 1,694.4 8,509.7
For the year ended 31 December 2015
Share capital Share premium Other reserves (note 23) Retained earnings (note 23) Net equity Non- controlling interests Total
$m $m $m $m $m $m $m
Balance at 1 January 2015 89.8 199.2 (47.4) 5,932.1 6,173.7 1,861.0 8,034.7
Profit for the year - - - 608.2 608.2 93.5 701.7
Other comprehensive (expense)/income for the year - - (11.9) 3.3 (8.6) (2.6) (11.2)
Loss of control in subsidiaries - - - - - (13.3) (13.3)
Capital contribution from non-controlling interests - - - - - 14.6 14.6
Dividends - - - (127.2) (127.2) (80.0) (207.2)
Balance at 31 December 2015 89.8 199.2 (59.3) 6,416.4 6,646.1 1.873.2 8,519.3
Consolidated Balance Sheet
At 31.12.2016 At 31.12.2015
Non-current assets Notes $m $m
Intangible assets 12 150.1 150.1
Property, plant and equipment 13 8,737.5 8,601.1
Other non-current assets 2.6 2.0
Inventories 17 157.3 263.9
Investment in associates and joint ventures 14 1,086.6 1,149.1
Trade and other receivables 66.7 292.9
Derivative financial instruments 0.2 -
Available for sale investments 15 4.6 2.7
Deferred tax assets 21 82.8 124.6
10,288.4 10,586.4
Current assets
Inventories 393.4 297.1
Trade and other receivables 736.1 604.8
Current tax assets 255.2 319.5
Derivative financial instruments 6 2.2 0.2
Liquid investments 25 1,332.2 924.1
Cash and cash equivalents 25 716.3 807.5
3,435.4 2,953.2
Total assets 13,723.8 13,539.6
Current liabilities
Short-term borrowings 18 (836.8) (758.9)
Derivative financial instruments 6 (2.0) (2.0)
Trade and other payables (595.8) (478.9)
Current tax liabilities (119.4) (198.8)
(1,554.0) (1,438.6)
Non-current liabilities
Medium and long-term borrowings 18 (2,283.4) (1,996.2)
Derivative financial instruments 6 (0.5) (1.5)
Trade and other payables (7.9) (24.4)
Liabilities in relation to joint venture 14 (3.1) (2.5)
Post-employment benefit obligations 19 (92.2) (86.9)
Decommissioning & restoration and other long term provisions 20 (392.1) (394.0)
Deferred tax liabilities 21 (880.9) (1,076.2)
(3,660.1) (3,581.7)
Total liabilities (5,214.1) (5,020.3)
Net assets 8,509.7 8,519.3
Equity
Share capital 22 89.8 89.8
Share premium 22 199.2 199.2
Other reserves 23 (22.3) (59.3)
Retained earnings 23 6,548.6 6,416.4
Equity attributable to equity holders of the Company 6,815.3 6,646.1
Non-controlling interests 1,694.4 1,873.2
Total equity 8,509.7 8,519.3
The preliminary information was approved by the Board of Directors on 13 March 2017.
Consolidated Cash Flow Statement
Year ended 31.12.2016 Year ended 31.12.2015
Notes $m $m
Cash flow from continuing and discontinuing operations 24 1,457.3 858.3
Interest paid (46.3) (38.6)
Income tax paid (272.6) (427.1)
Net cash from continuing and discontinued activities 1,138.4 392.6
Investing activities
Capital contributions and loans to associates and joint ventures 14 (10.1) (112.0)
Acquisition of joint ventures 14 20.01 (972.8)
Dividends from associate 14 10.2 12.1
Acquisition of available for sale investments 15 - (0.2)
Disposals of subsidiaries 9 10.0 942.9
Acquisition of mining properties 13 (7.0) (78.0)
Proceeds from sale of property plant and equipment 0.5 1.6
Purchases of property, plant and equipment (795.1) (1,048.5)
Net (increase)/decrease in liquid investments (408.1) 605.0
Interest received 14.4 11.0
Net cash used in investing activities (1,165.2) (638.9)
Financing activities
Dividends paid to equity holders of the Company (30.6) (127.2)
Dividends paid to preference shareholders of the Company (0.1) (0.2)
Dividends paid to non-controlling interests (260.0) (80.0)
Capital increase from non-controlling interests - 14.6
Net proceeds from issue of new borrowings 18 938.8 725.9
Repayments of borrowings 18 (693.1) (276.4)
Repayments of obligations under finance leases 18 (31.3) (11.9)
Net cash (used in)/from financing activities (76.3) 244.8
Net decrease in cash and cash equivalents (103.1) (1.5)
Cash and cash equivalents at beginning of the year 807.5 845.4
Net decrease in cash and cash equivalents 25 (103.1) (1.5)
Effect of foreign exchange rate changes 25 11.9 (36.4)
Cash and cash equivalents at end of the year 25 716.3 807.5
1Represents cash refunded to the Group as part of the final adjustments to the consideration relating to the acquisition of
the 50% stake in Zaldivar as detailed in Note 14.
Notes
1. General information and accounting policies
a) General information
This preliminary results announcement is for the year ended 31 December 2016. While the financial information contained in
this preliminary results announcement has been prepared in accordance with International Financial Reporting Standards
("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. For these purposes, IFRS
comprise the Standards issued by the International Accounting Standards Board ("IASB") and IFRS Interpretations Committee
("IFRS IC") that have been endorsed by the European Union. The Group will send its full financial statements that comply
with IFRS to shareholders in April 2017.
The financial information contained in this preliminary results announcement has been prepared on the going concern basis.
Details of the factors which have been taken into account in assessing the Group's going concern status are set out within
the Financial Review.
This preliminary results announcement does not constitute the Group's statutory accounts as defined in section 434 of the
Companies Act 2006 (the "Act") but is derived from those accounts. The statutory accounts for the year ended 31 December
2016 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual
General Meeting which will be held on 24 May 2017. The auditor has reported on those accounts and their report was
unqualified, with no matters by way of emphasis, and did not contain statements under section 498(2) of the Act (regarding
adequacy of accounting records and returns) or under section 498(3) (regarding provision of necessary information and
explanations).
The information contained in this announcement for the year ended 31 December 2015 also does not constitute statutory
accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's
report on those accounts was unqualified, with no matters by way of emphasis, and did not contain statements under sections
498(2) or (3) of the Companies Act 2006.
The information contained in Note 30 of this preliminary results announcement is not derived from the statutory accounts
for the years ended 31 December 2015 and 2016 and is accordingly not covered by the auditor's reports.
b) Significant events during 2016
The Antucoya operation achieved commercial production on 1 April 2016, and its revenue and costs have accordingly been
recognised in the income statement from that date onwards.
In 2015 Antofagasta acquired a 50% stake in Compañia Minera Zaldívar SpA ("Zaldívar") from Barrick Gold Corporation. 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.
The Group completed the sale of Minera Michilla SA ("Michilla") to Haldeman Mining Company S.A. on 30 December 2016. In
these financial statements the net results of Michilla for the twelve months to December 2016 are shown in the income
statement on the line for "Profit for the period from discontinued operations". The comparative results for the prior year
have been restated in order to present the comparative net result on the "Profit for the period from discontinued
operations" line.
Impairment charges have been recognised during 2016 in respect of the investments in Alto Maipo, the property, plant &
equipment of Minera Antucoya SA, and the Energia Andina joint venture.
The investment in associate balance relating to Tethyan Copper Company Limited ("Tethyan") is a negative balance $3.1
million. The negative balance has been recognised because the Group funds the on-going expenses and liabilities of Tethyan.
Given the balance is negative it has been included within non-current liabilities. The prior year negative balance of $2.5
million has been reclassified to non-current liabilities.
c) Change in estimation
The Group has revised its estimation of deferred stripping costs which has resulted in the capitalisation of $118.1 million
of deferred stripping costs for Los Pelambres mine during 2016.
d) Going concern
Having reassessed the principal risks of the Group, the Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the annual financial statements report.
e) Accounting policies
The following International Financial Reporting Standards (IFRS), amendments and interpretations are effective for the
first time in the current period.
f) Adoption of new accounting standards
The following accounting standards, amendments and interpretations became effective in the current reporting period:
- IFRS 14, Regulatory Deferral Accounts
- IAS 19, Defined Benefit Plans, Employee Contributions (Amendments to IAS 19)
- Annual improvements 2010 - 2012 Cycle - improvements to six IFRSs
- Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
- Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
- Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
- Equity Method in Separate Financial Statements (Amendments to IAS 27)
- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, (Amendments to IFRS 10 and IAS
28)
- Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
- Disclosure Initiative (Amendments to IAS 1)
- Annual improvements 2012 - 2014 Cycle - improvements to four IFRSs
The application of these standards and interpretations effective for the first time in the current year has had no
significant impact on the amounts reported in these financial statements.
Accounting standards issued but not yet effective applied
The following accounting standards, interpretations and amendments have been issued by the IASB, but are not yet
effective:
New Standards Effective date (Subject to EU endorsement)
IFRS 9, Financial Instruments Annual periods beginning on or after January 1, 2018
IFRS 15, Revenue from Contracts with Customers Annual periods beginning on or after January 1, 2018
IFRS 16, Leases Annual periods beginning on or after January 1, 2019
IFRIC 22, Foreign Currency Transactions and Advance Consideration Annual periods beginning on or after January 1, 2018
Amendments to IFRSs Effective date (Subject to EU endorsement)
Recognition of Deferred Tax Assets for Unrealized Losses (Amendments to IAS 12 Annual periods beginning on or after January 1, 2017
Disclosure Initiative (Amendments to IAS 7) Annual periods beginning on or after January 1, 2017
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) Annual periods beginning on or after January 1, 2018
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4) Annual periods beginning on or after January 1, 2018
Transfers of Investment Property (Amendments to IAS 40) Annual periods beginning on or after January 1, 2018
Annual Improvements to three IFRS Standards 2014-2016 Cycle Annual periods beginning on or after January 1, 2018
The Group is continuing to evaluate in detail the potential impact of IFRS 9 and IFRIC 22.
In respect of IFRS 15 Revenue from contracts the current expectation is that the principal impact will relate to situations
where the Group is effectively providing a shipping service to customers who have purchased copper from the Group, to
transport that copper to a destination port specified by the customer. Such shipping services will represent a separate
performance obligation and should be accounted for over time separately from the sale of goods. The impact of recognising
shipping revenue over time rather than at a point in time is not expected to have a material impact on the financial
statements.
IFRS 16 Leases will result in most of the Group's existing operating leases being accounted for similar to finance leases
under the current IAS 17, resulting in the recognition of additional assets within property, plant and equipment in respect
of the right of use of the lease assets, and additional lease liabilities. The operating lease charges currently reflected
within operating expenses (and EBITDA) will be eliminated, and instead depreciation and finance charges will be recognised
in respect of the lease assets and liabilities. Based on the operating leases in place at 31 December 2016 it is currently
estimated that this would result in the recognition of additional lease assets within property, plant & equipment and
additional lease liabilities as at 1 January 2017 of approximately $100 million in each case. It is also estimated that
this would result in a decrease in annual operating expenses before depreciation (and therefore an increase in EBITDA) of
approximately $75m, an increase in annual depreciation of approximately $70 million, an increase in finance costs of less
than $15m, and a net impact on profit before tax of less than $15 million.
2. Total profit from operations, associates and joint ventures
Year ended 31.12.2016 Year ended 31.12.2015(restated) $m $m Group revenue 3,621.7 3,225.7 Cost of sales (2,087.0) (2,349.0) Gross profit 1,534.7 876.7 Administrative and distribution expenses (479.1) (437.5) Provision against carrying value of assets (456.6) - Other operating income 20.2 33.9 Other operating expenses (152.2) (184.1) Operating results from subsidiaries 467.0 289.0 Equity accounting results 23.4 (5.8) Provision against carrying value of assets (134.7) - Net share of income from associates
and joint ventures (111.3) (5.8) Total profit from operations, associates and joint ventures 355.7 283.2
Year ended 31.12.2016
Year ended 31.12.2015(restated)
$m
$m
Group revenue
3,621.7
3,225.7
Cost of sales
(2,087.0)
(2,349.0)
Gross profit
1,534.7
876.7
Administrative and distribution expenses
(479.1)
(437.5)
Provision against carrying value of assets
(456.6)
-
Other operating income
20.2
33.9
Other operating expenses
(152.2)
(184.1)
Operating results from subsidiaries
467.0
289.0
Equity accounting results
23.4
(5.8)
Provision against carrying value of assets
(134.7)
-
Net share of income from associates and joint ventures
(111.3)
(5.8)
Total profit from operations, associates and joint ventures
355.7
283.2
3. Exceptional items and asset sensitivities
Exceptional items are material items of income and expense which are non-regular or non-operational and typically non-cash
movements. The exceptional items in the year ended 31 December 2016 and their impact on the results are set out below.
There were no exceptional items in 2015.
Operating profit SHARE OF RESULTS FROM ASSOCIATES AND JOINT VENTURES Profit before tax Earnings per share
Year ended Year ended Year ended Year ended Year ended Year ended Year ended Year ended
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
$m $m $m $m $m $m US cents US cents
Beforeexceptionalitems 923.6 289.0 23.4 (5.8) 875.9 242.8 38.6 61.7
Provision against the carrying value of assets - - - - - -
Alto Maipo - Loan (241.0) - - - (241.0) - 6.3 -
Alto Maipo - Investment - - (126.6) - (126.6) - 5.8 -
Antucoya - PP&E (215.6) - - - (215.6) - 10.7 -
Energia Andina - Investment - - (8.1) - (8.1) - (0.2) -
Total Provision against the carrying value of assets (456.6) - (134.7) - (591.3) - (22.6) -
After exceptional items 467.0 289.0 (111.3) (5.8) 284.6 242.8 16.0 61.7
(i) Alto Maipo
The Group has a 40% interest in Alto Maipo SPA ("Alto Maipo"), which is developing two run-of-river hydroelectric power
stations located in the upper section of the Maipo River, approximately 50 kilometres to the southeast of Santiago. The
remaining 60% interest is held by AES Gener SA ("Gener"). The Group has been reviewing its options with respect to its
investment in Alto Maipo following the announcement of a significant forecast cost overrun for the project. In January 2017
the Group entered into an agreement with Gener to dispose of its stake in Alto Maipo to Gener for a nominal consideration.
Accordingly, an impairment provision of $367.6 million has been recognised in respect of the total carrying value relating
to the project, comprising the $74.0 million investment in associate balance and $52.6 million of mark-to-market losses in
respect of derivative financial instruments held by Alto Maipo previously deferred
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