REG - Antofagasta PLC - PRELIMINARY RESULTS FOR THE YEAR ENDED 2016 <Origin Href="QuoteRef">ANTO.L</Origin> - Part 3
14/03/2017 07:07
- Part 3: For the preceding part double click ID:nRSN3337Zb
in reserves, resulting in a $126.6
million loss reflected on the profit from associates and joint ventures line, and $241.0 million of loan financing
(including accrued interest) reflected in operating cost. This impairment provision resulted in a deferred tax credit of
$95.0 million and so the post-tax impact is $272.6 million.
(ii) Antucoya
An impairment review has been conducted for the Antucoya operation. Following the completion of construction, Antucoya
achieved commercial production in April 2016 and then reached full production capacity in August 2016. This process was
slower than originally forecast, meaning that the costs capitalised during the ramp-up period were greater than originally
forecast and net depreciation of the assets commenced later than originally anticipated. The achievement of commercial
production and full capacity during the year has allowed a final determination of the total capital cost of the project,
including costs capitalised during the ramp-up to commercial production, along with an understanding of the actual
operational performance of the mine.
The impairment review determined that the recoverable amount (fair value less costs of disposal) of Antucoya's assets was $
1,502.3 million, compared with the carrying value of $1,717.9 million, and accordingly an impairment provision of $215.6
million (on a pre-tax basis) has been reflected in respect of Antucoya. This impairment provision resulted in a deferred
tax credit of $99.4 million and so the post-tax impact is $116.2 million. All of the provision has been allocated against
Antucoya's property, plant and equipment.
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 the forward curve for the
short-term and consensus analyst forecasts including both investment banks and commodity consultants for the longer-term. A
long-term copper price of 300 c/lb has been used in the 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.
To illustrate the sensitivity of the valuation of Antucoya to negative movements in these parameters, a 5% decrease in the
forecast long-term copper price would result in an increase in the impairment of $121.0 million, and an increase in the
discount rate from 8% to 9% would result in an increase in the impairment of $89.0 million. 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 these estimated potential
sensitivities.
(iii) Energia Andina
The Group's Energia Andina joint venture holds an investment in the Javiera solar plant in Chile. In February 2017 the
disposal of the interest in Javiera was agreed. The terms of the sale agreement indicate a recoverable value for the
interest in Javiera which is $8.1 million below the carrying value, and accordingly an impairment provision for this amount
has been recognised. The terms of the sale agreement is subject to certain closing conditions, and the transaction is
expected to complete during the first half of 2017.
(iv) Other asset sensitivities
There were no indicators of impairment for the Group's other mining operations, and accordingly no detailed impairment
reviews have been performed for those operations. However, in order to provide an indication of the sensitivities of the
valuations of these assets, a sensitivity analysis has been performed. For all of the other mining operations a valuation
exercise using assumptions consistent with those used in the Antucoya impairment review confirmed that the recoverable
amount of the assets was in excess of their carrying value. The recoverable amount of the assets still remained in excess
of their carrying value for all of the other mining operations with either a 5% decrease in the forecast long-term copper
price or an increase in the discount rate from 8% to 9%.
4. Segmental analysis
The Group's reportable segments are as follows:
· Los Pelambres
· Centinela
· Michilla (sold in 2016)
· Antucoya
· Zaldívar
· Exploration and evaluation
· Railway and other transport services
· Water concession (sold in 2015)
· Corporate and other items
For management purposes, the Group is organised into two business divisions based on their products - Mining and Railway
and other transport services. The Group disposed of its Water division in 2015. The mining division is split further for
management reporting purposes to show results by mine and exploration activity. Following the completion of construction,
the Antucoya mine achieved commercial production in April 2016. The Group acquired a 50% stake in the Zaldívar mine in
December 2015. The Michilla mine was placed on care and maintenance at the end of 2015, and was disposed of in December
2016. Los Pelambres produces primarily copper concentrate and molybdenum as a by-product. Centinela produces primarily
copper concentrate containing gold as a by-product and copper cathodes. Antucoya and Zaldívar produce copper cathodes, as
did Michilla. The transport division provides rail cargo (based in Chile and formerly Bolivia) and road cargo (based in
Chile) together with a number of ancillary services (based in Chile). The water division, which produced and distributed
potable water to domestic customers and untreated water to industrial customers in Chile's Antofagasta Region, was sold
during 2015. The Exploration and evaluation segment incurs exploration and evaluation expenses. "Corporate and other items"
comprises costs incurred by the Company, Antofagasta Minerals SA, the Group's mining corporate centre and other entities,
that are not allocated to any individual business segment. Consistent with its internal management reporting, the Group's
corporate and other items are included within the mining division.
The Chief Operating decision makers monitors the operating results of business segments separately for the purpose of
making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on
the operating profit of each of the segments.
a) Segment revenues and results
For the year ended 31 December 2016
Los Pelambres Centinela Antucoya Zaldívar Exploration and evaluation2 Corporate and other items Mining Railway and other transport services Total
$m $m $m $m $m $m $m $m $m
Revenue 1,845.6 1,338.0 277.9 - - - 3,461.5 160.2 3,621.7
Operating costs excluding depreciation (923.8) (775.5) (213.0) - (44.3) (56.5) (2,013.1) (86.9) (2,100.0)
Depreciation and amortisation (195.7) (299.4) (62.7) - - (5.2) (563.0) (15.4) (578.4)
Loss on disposals (0.2) (17.1) - - - (0.6) (17.9) (1.8) (19.7)
Provision against the carrying value of assets (241.0) - (215.6) - - - (456.6) - (456.6)
Operating profit/(loss) 484.9 246.0 (213.4) - (44.3) (62.3) 410.9 56.1 467.0
Equity accounting results 0.4 - - 29.5 - (11.2) 18.7 4.7 23.4
Provision against the carrying value of assets (126.6) - - - - (8.1) (134.7) - (134.7)
Net share of results from associates and joint ventures (126.2) - - 29.5 - (19.3) (116.0) 4.7 (111.3)
Investment income 15.7 5.3 0.6 - - 4.7 26.3 0.6 26.9
Interest expense (6.5) (32.0) (30.5) - - (14.6) (83.6) (2.5) (86.1)
Other finance items (2.7) (5.4) (5.0) - - 3.0 (10.1) (1.8) (11.9)
Profit/(loss) before tax 365.2 213.9 (248.3) 29.5 (44.3) (88.5) 227.5 57.1 284.6
Tax (117.4) (73.3) 94.3 - - 5.3 (91.1) (17.5) (108.6)
Profit/(loss) for the period from continuing operations 247.8 140.6 (154.0) 29.5 (44.3) (83.2) 136.4 39.6 176.0
Profit for the period from discontinued operations - - - - - 38.3 38.3 - 38.3
Profit/(loss) for the period 247.8 140.6 (154.0) 29.5 (44.3) (44.9) 174.7 39.6 214.3
Non-controlling interests (97.9) (32.8) 74.3 - - 0.1 (56.3) - (56.3)
Profit/(loss) for the period attributable to the owners of the parent 149.9 107.8 (79.7) 29.5 (44.3) (44.8) 118.4 39.6 158.0
EBITDA1 921.0 562.5 64.9 85.1 (44.3) (50.8) 1,538.4 87.7 1,626.1
Additions to non-current assets
Capital expenditure 316.6 617.4 27.4 - - 31.0 992.4 16.9 1,009.3
Segment assets and liabilities
Segment assets 3,606.2 5,008.0 1,740.5 - 9.5 1,867.2 12,231.4 323.0 12,554.4
Deferred tax assets - - - - - 78.6 78.6 4.2 82.8
Investment in associates and joint ventures - - - 983.7 - 25.1 1,008.8 77.8 1,086.6
Segment liabilities (1,368.2) (1,979.3) (1,085.3) - (4.5) (638.3) (5,075.6) (138.5) (5,214.1)
1EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back
depreciation, amortisation, profit or loss on disposals and impairment charges to operating profit. This comprises 100% of
the EBITDA from the Group´s subsidiaries, and the Group´s proportional share of the EBITDA of its associates and joint
ventures.
2 During the year, operating cash flow from exploration and evaluation was $22.1 million
For the year ended 31 December 2015 (Restated)
Los Pelambres Centinela Michilla Antucoya Zaldívar 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 $m
Revenue 1,807.2 1,266.1 - - - - - 3,073.3 152.4 - 3,225.7
Operating cost excluding depreciation (1,057.9) (1,027.7) - - - (101.9) (67.6) (2,255.1) (94.0) (2,349.1)
Depreciation and amortisation (191.6) (367.6) - - - - (3.1) (562.3) (13.8) - (576.1)
Loss on disposals (2.7) (1.8) - - - - (4.4) (8.9) (2.6) - (11.5)
Operating profit/(loss) 555.0 (131.0) - - - (101.9) (75.1) 247.0 42.0 - 289.0
Share of results from associates and joint ventures (3.7) - - - (2.8) - (7.5) (14.0) 8.2 - (5.8)
Investment income 10.2 4.3 - - - - 2.2 16.7 0.8 - 17.5
Interest expense (1.8) (27.1) - - - - (1.8) (30.7) (3.0) - (33.7)
Other finance items (4.6) (9.7) - (3.4) - - (7.5) (25.2) 1.0 - (24.2)
Profit/(loss) before tax 555.1 (163.5) - (3.4) (2.8) (101.9) (89.7) 193.8 49.0 - 242.8
Tax (161.8) 49.6 - (21.8) - - 1.8 (132.2) (22.2) - (154.4)
Profit/(loss) for the period from continuing operations 393.3 (113.9) - (25.2) (2.8) (101.9) (87.9) 61.6 26.8 - 88.4
Profit/(loss) for the period from discontinued operations - - 10.6 - - - - 10.6 (13.1) 615.8 613.3
Profit/(loss) for the period 393.3 (113.9) 10.6 (25.2) (2.8) (101.9) (87.9) 72.2 13.7 615.8 701.7
Non-controlling interests (151.8) 46.5 (0.2) 11.9 - - - (93.6) 0.1 - (93.5)
Profit/(loss) for the period attributable to the owners of the parent 241.5 (67.4) 10.4 (13.3) (2.8) (101.9) (87.9) (21.4) 13.8 615.8 608.2
EBITDA1 748.7 238.4 - - 6.8 (101.9) (60.7) 831.3 78.8 - 910.1
Additions to non-current assets
Capital expenditure 188.3 535.1 - 147.9 - - 111.0 982.3 13.9 16.4 1,012.6
Segment assets and liabilities
Segment assets 3,753.3 4,969.5 122.7 1,974.4 - - 950.9 11,770.8 497.6 - 12,268.4
Deferred tax assets - 43.5 - - - - 78.0 121.5 3.1 - 124.6
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) - - (154.1) (4,660.4) (359.9) - (5,020.3)
1EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation. EBITDA is calculated by adding back
depreciation, amortisation, profit or loss on disposals and impairment charges to operating profit. This comprises 100% of
the EBITDA from the Group´s subsidiaries, and the Group´s proportional share of the EBITDA of its associates and joint
ventures.
2 During the year, operating cash flow from exploration and evaluation was $38.3 million
b) Entity wide disclosures
Revenue by product
Year ended 31.12.2016 Year ended 31.12.2015(Restated)
$m $m
Copper
- Los Pelambres 1,627.0 1,606.7
- Centinela concentrates 778.7 626.6
- Centinela cathodes 278.1 432.3
- Antucoya 277.9 -
Gold
- Los Pelambres 78.5 60.7
- Centinela 261.2 191.3
Molybdenum
- Los Pelambres 94.0 105.3
Silver
- Los Pelambres 46.1 34.5
- Centinela 20.0 15.9
Total Mining 3,461.5 3,073.3
Railway and transport services 160.2 152.4
3,621.7 3,225.7
Revenue by location of customer
Year ended 31.12.2016 Year ended 31.12.2015(Restated)
$m $m
Europe
- United Kingdom - 19.1
- Switzerland 217.7 175.2
- Spain 115.6 54.1
- Germany 38.5 167.0
- Rest of Europe 157.3 68.9
Latin America
- Chile 105.2 165.5
- Rest of Latin America 126.4 74.1
North America
- United States 49.5 105.2
Asia Pacific
- Japan 1,483.5 1,147.0
- China 771.9 623.8
- Rest of Asia 556.1 625.8
3,621.7 3,225.7
Information about major customers
In the year ended 31 December 2016 the Group´s mining revenues included $694.7 million related to one large customer that
individually accounted for more than 10% of the Group's revenues (year ended 31 December 2015 - one large customer
representing $426.0 million).
Non-current assets by location of asset
Year ended 31.12.2016 Year ended 31.12.2015
$m $m
- Chile 9,996.3 10,287.1
- USA 204.4 171.2
- Other 0.1 0.8
10,200.8 10,459.1
Notes to geographical information
The non-current assets balance disclosed by location of assets excludes financial instruments, available-for-sale
investments and deferred tax assets.
5. 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 6.
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 2016 $m $m $m $m $m $m $m Los Pelambres Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5 Effects of pricing adjustments to previous year invoices Reversal of mark-to-market adjustments at the end of the previous year 14.5 6.2 (0.2) - - 2.2
(1.0) Settlement of sales invoiced in the previous year (18.9) (7.8) - - (0.1) (1.0) 1.7 Total effect of adjustments to previous year invoices in the current year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7 Effects of pricing adjustments to current year invoices Settlement of sales invoiced in the current year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4 Mark-to-market adjustments at the end of the current year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7) Total effect of adjustments to current year invoices 108.5 44.0 3.7 3.7 (0.1)
(2.9) 1.7 Total pricing adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4 Realised loss on commodity derivatives - - (2.2) - - - - Revenue before deducting tolling charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9 Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9) Revenue net of tolling charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0 For the year ended 31 December 2015 $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 2,001.6 805.8 443.4 173.3 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
$m $m $m $m $m $m $m
Los Pelambres Centinela Centinela Antucoya Los Pelambres Centinela Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
Provisionally invoiced gross sales 1,715.1 845.2 276.8 274.2 78.9 263.9 105.5
Effects of pricing adjustments to previous year invoices
Reversal of mark-to-market adjustments at the end of the previous year 14.5 6.2 (0.2) - - 2.2 (1.0)
Settlement of sales invoiced in the previous year (18.9) (7.8) - - (0.1) (1.0) 1.7
Total effect of adjustments to previous year invoices in the current year (4.4) (1.6) (0.2) - (0.1) 1.2 0.7
Effects of pricing adjustments to current year invoices
Settlement of sales invoiced in the current year 80.5 28.7 4.1 4.3 (0.1) (1.6) 2.4
Mark-to-market adjustments at the end of the current year 28.0 15.3 (0.4) (0.6) - (1.3) (0.7)
Total effect of adjustments to current year invoices 108.5 44.0 3.7 3.7 (0.1) (2.9) 1.7
Total pricing adjustments 104.1 42.4 3.5 3.7 (0.2) (1.7) 2.4
Realised loss on commodity derivatives - - (2.2) - - - -
Revenue before deducting tolling charges 1,819.2 887.6 278.1 277.9 78.7 262.2 107.9
Tolling charges (192.2) (108.9) - - (0.2) (1.0) (13.9)
Revenue net of tolling charges 1,627.0 778.7 278.1 277.9 78.5 261.2 94.0
For the year ended 31 December 2015
$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 2,001.6 805.8 443.4 173.3 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
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 31.12.2016 At 31.12.2015
Sales Tonnes 199,900 184,400
Average mark-to-market price $/lb 2.51 2.13
Average provisional invoice price $/lb 2.41 2.18
(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 31.12.2016 At 31.12.2015
Sales Tonnes 13,200 7,700
Average mark-to-market price $/lb 2.51 2.13
Average provisional invoice price $/lb 2.54 2.12
(iii) Gold in concentrate
The typical period for which sales of gold in concentrate remain open is approximately one month from shipment date.
At 31.12.2016 At 31.12.2015
Sales Ounce 36,400 50,300
Average mark-to-market price $/oz 1,167 1,061
Average provisional invoice price $/oz 1,203 1,105
(iv) Molybdenum concentrate
The typical period for which sales of molybdenum remain open is approximately two months from shipment date.
At 31.12.2016 At 31.12.2015
Sales Tonnes 1,300 1,900
Average mark-to-market price $/lb 6.6 5.1
Average provisional invoice price $/lb 6.9 4.8
As detailed above, the effects of gains and losses from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors in the balance sheet. The effect of mark-to-market
adjustments on the balance sheet at the end of each year are as follows:
Effect on debtors of year end
mark to market adjustments
At 31.12.2016$m At 31.12.2015$m
Los Pelambres - copper concentrate 28.0 (14.5)
Los Pelambres - molybdenum concentrate (0.7) 1.0
Centinela - copper concentrate 15.3 (6.2)
Centinela - gold in concentrate (1.3) (2.2)
Centinela - copper cathodes (0.4) 0.2
Antucoya - copper cathodes (0.6) -
Michilla - copper cathodes - 0.1
40.3 (21.6)
6. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities is shown below:
At 31.12.2016 At 31.12.2015
$m $m
Financial assets
Derivatives in designated hedge accounting relationships 2.4 0.2
Available-for-sale-investments 4.6 2.7
Loans and receivables at amortised cost (including cash 1,519.1 1,703.9
and cash equivalents)
Fair value through profit and loss (liquid investments and mark-to-mark debtors) 1,375.5 925.4
Financial liabilities
Derivatives in designated hedge relationships (2.5) (3.5)
Financial liabilities measured at amortised cost (3,725.5) (3,235.5)
Fair value through profit and loss (mark-to-mark creditors) (3.0) (22.9)
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 31.12.2016 At 31.12.2015 Recurring fair value measurements $m $m $m $m $m Financial assets Derivatives in designated hedge accounting relationships - 2.4 - 2.4 0.2 Available for sale investments 4.6 - - 4.6 2.7 Fair value through profit and loss 1,332.2 - - 1,332.2 924.1 Debtors mark-to-market - 43.3 - 43.3 1.3 Financial liabilities Derivatives in designated hedge relationships - (2.5) - (2.5) (3.5) Creditors mark-to-market - (3.0) - (3.0) (22.9)
At 31.12.2015
Recurring fair value measurements
$m
$m
$m
$m
$m
Financial assets
Derivatives in designated hedge accounting relationships
-
2.4
-
2.4
0.2
Available for sale investments
4.6
-
-
4.6
2.7
Fair value through profit and loss
1,332.2
-
-
1,332.2
924.1
Debtors mark-to-market
-
43.3
-
43.3
1.3
Financial liabilities
Derivatives in designated hedge relationships
-
(2.5)
-
(2.5)
(3.5)
Creditors mark-to-market
-
(3.0)
-
(3.0)
(22.9)
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. The only
non-recurring fair value measurements in the year ended 31 December 2016 was the impairment relating to Antucoya, with an
impact of $215.6 million (see Note 3).
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 2016 there were no transfers between levels in the hierarchy.
b) Embedded derivatives
As explained in Note 5, copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally
provide for provisional pricing of sales at the time of shipment, with final pricing being based on the monthly average
London Metal Exchange copper price or monthly average molybdenum price for specified future periods. The provisional
pricing mechanism within the sale agreements is an embedded derivative under IFRS. Details of the provisional pricing
arrangements are included in Note 5.
c) Derivative financial instruments
The Group periodically uses derivative financial instruments to reduce its exposure to commodity price, foreign exchange
and interest rate movements. The Group does not use such derivative instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39 "Financial Instruments: Recognition and Measurement".
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash
flows have been recognised directly in 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 2016
Impact on income statement for year ended 31.12.2016 Impact on reserves for year ended at 31.12.2016 Fair value recorded on balance sheet 31.12.2016
Realised gains/(losses) Gains resulting from mark-to-market adjustments on hedging instruments Total net gain/(loss) Gains resulting from mark-to-market adjustments on hedging instruments Net financial asset/(liability)
$m $m $m $m $m
Commodity Derivatives
Centinela (2.2) 1.0 (1.2) - 1.1
Interest Derivatives
Centinela (2.6) - (2.6) 1.8 (1.2)
Railway and other transport services (1.0) - (1.0) 0.5 -
(5.8) 1.0 (4.8) 2.3 (0.1)
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) Gains 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
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