REG - Antofagasta PLC - HALF YEARLY FINANCIAL REPORT <Origin Href="QuoteRef">ANTO.L</Origin> - Part 3
29/10/2014 15:04
- Part 3: For the preceding part double click ID:nRSZ9632Pb
Revenue 1,416.4 680.2 367.1 146.6 - - - 2,610.3 96.0 71.1 2,777.4
EBITDA 809.1 349.8 220.7 7.3 - (149.6) (40.1) 1,197.2 38.3 40.0 1,275.5
Depreciation and amortisation (82.4) (78.1) (22.5) (15.6) - - (25.6) (224.2) (7.4) (8.2) (239.8)
(Loss)/gain on disposals - - (1.7) - - - (0.7) (2.4) 0.2 (3.8) (6.0)
Operating profit 726.7 271.7 196.5 (8.3) - (149.6) (66.4) 970.6 31.1 28.0 1,029.7
Share of results from associates and joint ventures - - - - - - (10.6) (10.6) 6.5 - (4.1)
Investment income 0.9 0.9 0.7 0.1 - - 2.6 5.2 0.6 0.3 6.1
Interest expense (4.4) (25.0) (2.2) - - - (2.0) (33.6) (0.1) - (33.7)
Other finance items (3.2) 1.1 (1.5) (2.6) - - (10.6) (16.8) 0.1 (0.3) (17.0)
Profit before tax 720.0 248.7 193.5 (10.8) - (149.6) (87.0) 914.8 38.2 28.0 981.0
Tax (164.8) (58.4) (44.4) 3.5 - - (12.8) (276.9) (37.2) (6.1) (320.2)
Non-controlling interests (205.3) (52.3) (33.9) 2.8 - - 22.7 (266.0) 0.2 - (265.8)
Net earnings 349.9 138.0 115.2 (4.5) - (149.6) (77.1) 371.9 1.2 21.9 395.0
Additions to non-current assets
Capital expenditure 92.4 134.5 71.7 10.9 199.7 - 10.7 519.9 13.1 7.9 540.9
Segment assets and liabilities
Segment assets 3,671.3 3,357.5 1,192.8 288.6 350.4 - 2,428.1 11,288.7 434.9 247.6 11,971.2
Segment liabilities (1,132.0) (1,343.1) (317.2) (85.2) (274.5) - (276.4) (3,428.6) (55.8) (50.2) (3,534.6)
For the year ended 31 December 2013
Los Pelambres Centinela concentrates Centinela cathodes Michilla Antucoya Exploration and evaluation Corporate and other items Mining Railway and other transport services Water concession Total
US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Revenue 3,129.4 1,454.4 747.4 307.9 - - - 5,639.1 196.6 135.9 5,971.6
EBITDA 1,814.0 649.2 426.4 16.3 - (274.9) (83.3) 2,547.7 76.8 77.7 2,702.2
Depreciation and amortisation (175.9) (173.1) (52.1) (58.9) - - (26.2) (486.2) (14.6) (16.9) (517.7)
(Loss)/gain on disposals (2.8) (1.6) (3.8) (0.5) (0.7) - (0.2) (9.6) 0.8 (3.6) (12.4)
Operating profit/(loss) 1,635.3 474.5 370.5 (43.1) (0.7) (274.9) (109.7) 2,051.9 63.0 57.2 2,172.1
Share of results from associates and joint ventures - - - - - - (27.4) (27.4) 13.0 - (14.4)
Investment income 2.2 2.0 1.0 0.3 - - 5.6 11.1 0.9 0.6 12.6
Interest expense (8.4) (46.0) (3.8) - - - (3.6) (61.8) (0.2) - (62.0)
Other finance items (7.9) 2.0 (2.6) (6.5) (4.2) - (5.8) (25.0) - 0.2 (24.8)
Profit/(loss) before tax 1,621.2 432.5 365.1 (49.3) (4.9) (274.9) (140.9) 1,948.8 76.7 58.0 2,083.5
Tax (374.8) (109.6) (84.6) 12.4 4.6 - (216.6) (768.6) (64.2) (10.9) (843.7)
Non-controlling interests (477.7) (88.1) (67.6) 11.5 1.6 - 39.9 (580.4) 0.2 - (580.2)
Net earnings/(losses) 768.7 234.8 212.9 (25.4) 1.3 (274.9) (317.6) 599.8 12.7 47.1 659.6
Additions to non-current assets
Capital expenditure 208.9 325.3 155.6 17.2 678.9 - 30.7 1,416.6 28.7 13.4 1,458.7
Segment assets and liabilities
Segment assets 3,748.9 3,373.6 1,285.2 226.6 764.4 - 2,346.3 11,745.0 409.9 234.7 12,389.6
Segment liabilities (1,183.8) (1,333.2) (290.2) (93.1) (378.5) - (342.3) (3,621.1) (55.3) (49.6) (3,726.0)
b) Entity wide disclosures
Revenue by product
Six months Six months Year ended 31 December 2013
ended ended
30 June 2014 30 June 2013
US$'m US$'m US$'m
Copper
- Los Pelambres 1.192.3 1,259.7 2,821.0
- Centinela concentrates 534.3 498.7 1,121.7
- Centinela cathodes 313.5 367.1 747.4
- Michilla 164.0 146.6 307.9
Gold
- Los Pelambres 40.3 35.9 77.0
- Centinela concentrates 129.3 166.6 305.5
Molybdenum
- Los Pelambres 97.7 96.1 180.3
Silver
- Los Pelambres 26.3 24.7 51.1
- Centinela concentrates 11.7 14.9 27.2
Total Mining 2,509.4 2,610.3 5,639.1
Railway and transport services 90.3 96.0 196.6
Water concession 61.7 71.1 135.9
2,661.4 2,777.4 5,971.6
Revenue by location of customer
Revenue
Six months Six months Year ended 31 December 2013
ended ended
30 June 2014 30 June 2013
US$'m US$'m US$'m
Europe
- United Kingdom 4.7 7.3 15.8
- Switzerland 66.1 - 143.9
- Spain 58.3 - 208.2
- Germany 43.1 - 146.4
- Rest of Europe 50.8 255.8 232.4
Latin America
- Chile 171.7 195.4 375.3
- Rest of Latin America 68.7 81.8 186.4
North America
- United States 71.2 192.3 320.1
Asia Pacific
- Japan 1,005.8 916.7 1,984.5
- China 584.7 656.4 1,423.9
- Rest of Asia 536.3 471.7 934.7
2,661.4 2,777.4 5,971.6
Information about major customers
In the first half of 2014 the Group´s mining revenues included US$454.2 million related to one large customer that
individually accounted for more than 10% of the Group's revenues (six months ended 30 June 2013 - one large customer
representing US$474.4 million; year ended 31 December 2013 - one large customer representing US$1,035.8 million).
Non-current assets by location of asset
At 30.06.14 At 30.06.13 At 31.12.13
US$'m US$'m US$'m
- Chile 8,479.2 7,188.5 7,962.4
- Bolivia 36.7 34.5 37.0
- USA 94.4 94.9 94.7
- Other - (0.9) 1.3
8,610.3 7,317.0 8,095.4
Notes to geographical information
The non-current assets balance disclosed by location of assets excludes financial instruments, available-for-sale
investments and deferred tax assets.
4. Revenues
Copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally provide for provisional
pricing of sales at the time of shipment, with final pricing being based on the monthly average London Metal Exchange
copper price or monthly average molybdenum price for specified future periods. This normally ranges from one to five months
after shipment to the customer. The provisional pricing mechanism within the sale agreements is an embedded derivative
under IFRS. Gains and losses from the marking-to-market of open sales are recognised through adjustments to revenue in the
income statement and to trade debtors in the balance sheet. The Group determines mark-to-market prices using forward prices
at each period end for copper concentrate 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 period end are given in Note 5.
Copper and molybdenum concentrate sales are stated net of deductions for tolling charges, as shown in the tables below.
For the period ended 30 June 2014 US$'m US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres Centinela concentrates Centinela cathodes Michilla Los Pelambres Centinela concentrates Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 1,309.3 595.1 316.9 157.3 40.5 126.3 86.3 Effects of pricing adjustments to previous period invoices Reversal of mark-to-market adjustments at the
end of the previous period (27.1) (8.8) (1.0) 0.1 - 4.5 1.1 Settlement of sales invoiced in the previous period (27.7) (7.3) 0.3 (0.3) - (1.7) 0.2 Total effect of adjustments to previous period invoices in the current period (54.8) (16.1) (0.7) (0.2) - 2.8 1.3 Effects of pricing adjustments to current period invoices Settlement of sales invoiced in the current period (13.6) (14.9) (3.3) (2.0) (0.1) (1.8) 14.4 Mark-to-market adjustments at the end of the current period 31.2 15.7 0.8 0.5 - 2.0 3.2 Total
effect of adjustments to current period invoices 17.6 0.8 (2.5) (1.5) (0.1) 0.2 17.6 Total pricing adjustments (37.2) (15.3) (3.2) (1.7) (0.1) 3.0 18.9 Realised (losses)/gains on commodity derivatives - - (0.2) 8.4 - - - Revenue before deducting tolling charges 1,272.1 579.8 313.5 164.0 40.4 129.3 105.2 Tolling charges (79.8) (45.5) - - (0.1) - (7.5) Revenue net of tolling charges 1,192.3 534.3 313.5 164.0 40.3 129.3 97.7 For the period ended 30 June 2013 US$'m US$'m US$'m US$'m US$'m US$'m US$'m Los
Pelambres Centinela concentrates Centinela cathodes Michilla Los Pelambres Centinela concentrates Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 1,483.7 594.5 374.3 140.5 40.4 182.2 110.1 Effects of pricing adjustments to previous period invoices Reversal of mark-to-market adjustments at the end of the previous period (1.8) 0.5 0.2 0.1 - 1.2 0.4 Settlement of sales
invoiced in the previous period (31.5) (12.6) 1.1 0.2 (4.1) (5.6) 0.1 Total effect of adjustments to previous period invoices in the current period (33.3) (12.1) 1.3 0.3 (4.1) (4.4) 0.5 Effects of pricing adjustments to current period invoices Settlement of sales invoiced in the current period (70.0) (28.3) (7.0) (3.3) (0.3) (9.2) (5.8) Mark-to-market adjustments at the end of the current period (54.7) (22.3) (1.7) (0.4) - (1.4) (1.7) Total effect of adjustments to current period invoices (124.7)
(50.6) (8.7) (3.7) (0.3) (10.6) (7.5) Total pricing adjustments (158.0) (62.7) (7.4) (3.4) (4.4) (15.0) (7.0) Realised gains on commodity derivatives - - 0.2 9.5 - - - Revenue before deducting tolling charges 1,325.7 531.8 367.1 146.6 36.0 167.2 103.1 Tolling charges (66.0) (33.1) - - (0.1) (0.6) (7.0) Revenue net of tolling charges 1,259.7 498.7 367.1 146.6 35.9 166.6 96.1 For the year ended 31 December 2013 US$'m US$'m US$'m US$'m US$'m US$'m US$'m Los Pelambres Centinela concentrates
Centinela cathodes Michilla Los Pelambres Centinela concentrates Los Pelambres Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate Provisionally invoiced gross sales 3,042.9 1,237.3 750.0 285.9 82.7 331.3 210.0 Effects of pricing adjustments to previous period invoices Reversal of mark-to-market adjustments at the end of the previous period (1.8) 0.5 0.2 0.1 - 1.2 0.4 Settlement of sales invoiced in the previous period
(31.5) (14.4) 1.1 0.2 (4.1) (5.6) 0.1 Total effect of adjustments to previous period invoices in the current period (33.3) (13.9) 1.3 0.3 (4.1) (4.4) 0.5 Effects of pricing adjustments to current period invoices Settlement of sales invoiced in the current period (72.8) (37.1) (5.1) (3.4) (1.4) (15.8) (14.9) Mark-to-market adjustments at the end of the current period 27.1 8.8 1.0 (0.1) - (4.5) (1.1) Total effect of adjustments to current period invoices (45.7) (28.3) (4.1) (3.5) (1.4) (20.3) (16.0)
Total pricing adjustments (79.0) (42.2) (2.8) (3.2) (5.5) (24.7) (15.5) Realised gains on commodity derivatives - - 0.2 25.2 - - - Revenue before deducting tolling charges 2,963.9 1,195.1 747.4 307.9 77.2 306.6 194.5 Tolling charges (142.9) (73.4) - - (0.2) (1.1) (14.2) Revenue net of tolling charges 2,821.0 1,121.7 747.4 307.9 77.0 305.5 180.3
US$'m
US$'m
US$'m
US$'m
US$'m
US$'m
US$'m
Los Pelambres
Centinela concentrates
Centinela cathodes
Michilla
Los Pelambres
Centinela concentrates
Los Pelambres
Copper concentrate
Copper concentrate
Copper cathodes
Copper cathodes
Gold in concentrate
Gold in concentrate
Molybdenum concentrate
Provisionally invoiced gross sales
1,309.3
595.1
316.9
157.3
40.5
126.3
86.3
Effects of pricing adjustments to previous period invoices
Reversal of mark-to-market adjustments at the end of the previous period
(27.1)
(8.8)
(1.0)
0.1
-
4.5
1.1
Settlement of sales invoiced in the previous period
(27.7)
(7.3)
0.3
(0.3)
-
(1.7)
0.2
Total effect of adjustments to previous period invoices in the current period
(54.8)
(16.1)
(0.7)
(0.2)
-
2.8
1.3
Effects of pricing adjustments to current period invoices
Settlement of sales invoiced in the current period
(13.6)
(14.9)
(3.3)
(2.0)
(0.1)
(1.8)
14.4
Mark-to-market adjustments at the end of the current period
31.2
15.7
0.8
0.5
-
2.0
3.2
Total effect of adjustments to current period invoices
17.6
0.8
(2.5)
(1.5)
(0.1)
0.2
17.6
Total pricing adjustments
(37.2)
(15.3)
(3.2)
(1.7)
(0.1)
3.0
18.9
Realised (losses)/gains on commodity derivatives
-
-
(0.2)
8.4
-
-
-
Revenue before deducting tolling charges
1,272.1
579.8
313.5
164.0
40.4
129.3
105.2
Tolling charges
(79.8)
(45.5)
-
-
(0.1)
-
(7.5)
Revenue net of tolling charges
1,192.3
534.3
313.5
164.0
40.3
129.3
97.7
For the period ended 30 June 2013
US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Los Pelambres Centinela concentrates Centinela cathodes Michilla Los Pelambres Centinela concentrates Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
Provisionally invoiced gross sales 1,483.7 594.5 374.3 140.5 40.4 182.2 110.1
Effects of pricing adjustments to previous period invoices
Reversal of mark-to-market adjustments at the end of the previous period (1.8) 0.5 0.2 0.1 - 1.2 0.4
Settlement of sales invoiced in the previous period (31.5) (12.6) 1.1 0.2 (4.1) (5.6) 0.1
Total effect of adjustments to previous period invoices in the current period (33.3) (12.1) 1.3 0.3 (4.1) (4.4) 0.5
Effects of pricing adjustments to current period invoices
Settlement of sales invoiced in the current period (70.0) (28.3) (7.0) (3.3) (0.3) (9.2) (5.8)
Mark-to-market adjustments at the end of the current period (54.7) (22.3) (1.7) (0.4) - (1.4) (1.7)
Total effect of adjustments to current period invoices (124.7) (50.6) (8.7) (3.7) (0.3) (10.6) (7.5)
Total pricing adjustments (158.0) (62.7) (7.4) (3.4) (4.4) (15.0) (7.0)
Realised gains on commodity derivatives - - 0.2 9.5 - - -
Revenue before deducting tolling charges 1,325.7 531.8 367.1 146.6 36.0 167.2 103.1
Tolling charges (66.0) (33.1) - - (0.1) (0.6) (7.0)
Revenue net of tolling charges 1,259.7 498.7 367.1 146.6 35.9 166.6 96.1
For the year ended 31 December 2013
US$'m US$'m US$'m US$'m US$'m US$'m US$'m
Los Pelambres Centinela concentrates Centinela cathodes Michilla Los Pelambres Centinela concentrates Los Pelambres
Copper concentrate Copper concentrate Copper cathodes Copper cathodes Gold in concentrate Gold in concentrate Molybdenum concentrate
Provisionally invoiced gross sales 3,042.9 1,237.3 750.0 285.9 82.7 331.3 210.0
Effects of pricing adjustments to previous period invoices
Reversal of mark-to-market adjustments at the end of the previous period (1.8) 0.5 0.2 0.1 - 1.2 0.4
Settlement of sales invoiced in the previous period (31.5) (14.4) 1.1 0.2 (4.1) (5.6) 0.1
Total effect of adjustments to previous period invoices in the current period (33.3) (13.9) 1.3 0.3 (4.1) (4.4) 0.5
Effects of pricing adjustments to current period invoices
Settlement of sales invoiced in the current period (72.8) (37.1) (5.1) (3.4) (1.4) (15.8) (14.9)
Mark-to-market adjustments at the end of the current period 27.1 8.8 1.0 (0.1) - (4.5) (1.1)
Total effect of adjustments to current period invoices (45.7) (28.3) (4.1) (3.5) (1.4) (20.3) (16.0)
Total pricing adjustments (79.0) (42.2) (2.8) (3.2) (5.5) (24.7) (15.5)
Realised gains on commodity derivatives - - 0.2 25.2 - - -
Revenue before deducting tolling charges 2,963.9 1,195.1 747.4 307.9 77.2 306.6 194.5
Tolling charges (142.9) (73.4) - - (0.2) (1.1) (14.2)
Revenue net of tolling charges 2,821.0 1,121.7 747.4 307.9 77.0 305.5 180.3
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 30 June 2014 copper concentrate sales totalling 191,800 tonnes remained open as to price, with an average mark-to-market
price of US$3.19/lb compared with an average provisional invoice price of US$3.07/lb. At 30 June 2013 copper concentrate
sales totalling 161,900 tonnes remained open as to price, with an average mark-to-market price of US$3.06/lb compared with
an average provisional invoice price of US$3.28/lb. At 31 December 2013 sales totalling 172,000 tonnes remained open as to
price, with an average mark-to-market price of US$3.34/lb compared with an average provisional invoice price of
US$3.25/lb.
Copper cathodes
The typical period for which sales of copper cathodes remain open until settlement occurs is approximately one month from
shipment date.
At 30 June 2014 sales totalling 11,800 tonnes remained open as to price, with an average mark-to-market price of US$3.19
/lb compared with an average provisional invoice price of US$3.14 /lb. At 30 June 2013 sales totalling 10,700 tonnes
remained open as to price, with an average mark-to-market price of US$3.06/lb compared with an average provisional invoice
price of US$3.15/lb. At 31 December 2013 sales totalling 13,500 tonnes remained open as to price, with an average
mark-to-market price of US$3.34/lb compared with an average provisional invoice price of US$3.31/lb.
Gold in concentrate
The typical period for which sales of gold in concentrate remain open is approximately one month from shipment date.
At 30 June 2014 sales totalling 69,000 ounces remained open as to price, with an average mark-to-market price of US$1,322
per ounce compared with an average provisional invoice price of US$1,293 per ounce. At 30 June 2013 sales totalling 3,500
ounces remained open as to price, with an average mark-to-market price of US$1,215 per ounce compared with an average
provisional invoice price of US$1,602 per ounce. At 31 December 2013, sales totalling 52,800 ounces remained open as to
price, with an average mark-to-market price of US$1,189 per ounce compared with an average provisional invoice price of
US$1,274 per ounce.
Molybdenum concentrate
The typical period for which sales of molybdenum remain open is approximately two months from shipment date.
At 30 June 2014 sales totalling 1,700 tonnes remained open as to price, with an average mark-to-market price of US$14.5 /lb
compared with an average provisional invoice price of US$13.6 /lb. At 30 June 2013 sales totalling 1,600 tonnes remained
open as to price, with an average mark-to-market price of US$10.6/lb compared with an average provisional invoice price of
US$11.1/lb. At 31 December 2013 sales totalling 1,800 tonnes remained open as to price, with an average mark-to-market
price of US$9.7/lb compared with an average provisional invoice price of US$10.0/lb.
As detailed above, the effects of gains and losses from the marking-to-market of open sales are recognised through
adjustments to revenue in the income statement and to trade debtors in the balance sheet. The effect of mark-to-market
adjustments on the balance sheet at the end of each period are as follows:
Effect on debtors of period end
mark to market adjustments
At 30.06.14US$'m At 30.06.13US$'m At 31.12.13US$'m
Los Pelambres - copper concentrate 31.2 (54.7) 27.1
Los Pelambres - molybdenum concentrate 3.2 (1.7) (1.1)
Centinela concentrates - copper concentrate 15.7 (22.3) 8.8
Centinela concentrates - gold in concentrate 2.0 (1.4) (4.5)
Centinela cathodes - copper cathodes 0.8 (1.7) 1.0
Michilla - copper cathodes 0.5 (0.4) (0.1)
53.4 (82.2) 31.2
5. Financial instruments
a) Categories of financial instruments
The carrying value of financial assets and financial liabilities is shown below:
At 30.06.14 At 30.06.13 At 31.12.13
US$'m US$'m US$'m
Financial assets
Derivatives in designated hedge accounting relationships 10.8 55.1 12.9
Available-for-sale-investments 15.7 24.7 16.6
Loans and receivables at amortised cost (including cash 1,995.1 2,147.3 1,699.4
and cash equivalents)
Fair value through profit and loss (liquid investments) 1,426.8 1,752.7 2,071.4
Financial liabilities
Derivatives in designated hedge relationships (8.4) (8.9) (9.8)
Financial liabilities measured at amortised cost (2,930.0) (2,303.5) (2,155.2)
The fair value of financial assets and financial liabilities carried at amortised cost is not materially different from the
carrying value presented above.
Fair value of financial instruments
An analysis of financial assets and financial liabilities measured at fair value is presented below:
Level 1 Level 2 Level 3 At 30.06.14 At 30.06.13 At 31.12.13 Recurring fair value measurements US$'m US$'m US$'m US$'m US$'m US$'m Financial assets Derivatives in designated hedge accounting relationships - 10.8 - 10.8 55.1 12.9 Available for sale investments 15.7 - - 15.7 24.7 16.6 Fair value through profit and loss 1,426.8 - - 1,426.8 1,752.7 2,071.4 Debtors mark-to-market - 53.4 - 53.4 - 36.9 Financial liabilities Derivatives in designated hedge relationships - (8.4) - (8.4) (8.9) (9.8) Creditors mark
-to-market - - - - (82.2) (5.7)
At 30.06.13
At 31.12.13
Recurring fair value measurements
US$'m
US$'m
US$'m
US$'m
US$'m
US$'m
Financial assets
Derivatives in designated hedge accounting relationships
-
10.8
-
10.8
55.1
12.9
Available for sale investments
15.7
-
-
15.7
24.7
16.6
Fair value through profit and loss
1,426.8
-
-
1,426.8
1,752.7
2,071.4
Debtors mark-to-market
-
53.4
-
53.4
-
36.9
Financial liabilities
Derivatives in designated hedge relationships
-
(8.4)
-
(8.4)
(8.9)
(9.8)
Creditors mark-to-market
-
-
-
-
(82.2)
(5.7)
Recurring fair value measurements are those that are required in the balance sheet at the end of each reporting period.
Non-recurring fair value measurements are those that are required in particular circumstances e.g. when the recoverable
amount of an asset is determined to be fair value less cost to sell according to IAS 36 Impairment of assets. There were
no non-recurring fair value measurements in the six months ending 30 June 2014.
Derivatives in designated hedge accounting relationships are valued using a discounted cash flow analysis valuation model,
which includes observable credit spreads and using the applicable yield curve for the duration of the instruments for
non-optional derivatives, and option pricing models for optional derivatives. These are level 2 inputs as described below.
Available for sale investments are investments in shares on active markets and are valued using unadjusted quoted market
values of the shares at the financial reporting date. These are level 1 inputs as described below.
Provisionally priced metal sales for the period are marked-to-market at the end of the period. Gains and losses from the
marking-to-market of open sales are recognised through adjustments to revenue in the income statement and trade debtors in
the balance sheet. Forward prices at the end of the period are used for copper sales while period-end average prices are
used for molybdenum concentrate sales. These are level 2 inputs as described below.
Financial assets measured at fair value through profit and loss are highly liquid current asset investments that are valued
using market prices at the period end. These are level 1 inputs as described below.
The inputs to the valuation techniques described above are categorised into three levels, giving the highest priority to
unadjusted quoted prices in active markets (level 1) and the lowest priority to unobservable inputs (level 3 inputs):
- Level 1 fair value measurement inputs are unadjusted quoted prices in active markets for identical assets or
liabilities.
- Level 2 fair value measurement inputs are derived from inputs other than quoted market prices included in level 1
that are observable for the asset or liability, either directly or indirectly.
- Level 3 fair value measurement inputs are unobservable inputs for the asset or liability.
The degree to which inputs into the valuation techniques used to measure the financial assets and liabilities are
observable and the significance of these inputs in the valuation are considered in determining whether any transfers
between levels have occurred. In the six months ending 30 June 2014 there were no transfers between levels in the
hierarchy.
b) Embedded derivatives
As explained in Note 4, copper and molybdenum concentrate sale agreements and copper cathode sale agreements generally
provide for provisional pricing of sales at the time of shipment, with final pricing being based on the monthly average
London Metal Exchange copper price or monthly average molybdenum price for specified future periods. The provisional
pricing mechanism within the sale agreements is an embedded derivative under IFRS. Details of the provisional pricing
arrangements are included in Note 4.
c) Derivative financial instruments
The Group periodically uses derivative financial instruments to reduce its exposure to commodity price, foreign exchange
and interest rate movements. The Group does not use such derivative instruments for speculative trading purposes.
The Group has applied the hedge accounting provisions of IAS 39 "Financial Instruments: Recognition and Measurement".
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash
flows have been recognised directly in equity, with such amounts subsequently recognised in the income statement in the
period when the hedged item affects derivatives recognise in the income statement have been recorded within revenue. The
time value element of changes in the fair value of derivative options is excluded from the designated hedging relationship,
and is therefore recognised directly in the income statement within other finance items.
(i) Mark-to-market adjustments and income statement impact
The balance sheet mark-to-market adjustments in respect of derivatives at the end of each period, and the total effect on
the income statement and reserves for each period, are as follows. The impact on reserves is shown before tax and
non-controlling interests.
For the six months ended 30 June 2014
Impact on income statement for six months ended 30.06.14 Impact on reserves for six months ended at 30.06.14 Fair value recorded on balance sheet 30.06.14
Realised gains/(losses) Losses resulting from mark-to-market adjustments on hedging instruments Total net gain/(loss) Gains/(losses) resulting from mark-to-market adjustments on hedging instruments Net financial asset/(liability)
US$'m US$'m US$'m US$'m US$'m
Commodity Derivatives
Centinela cathodes (0.2) - (0.2) 0.4 -
Michilla 8.4 (4.3) 4.1 1.4 8.4
Exchange Derivatives
Michilla (1.0) - (1.0) (2.4) (0.7)
Antucoya - 1.0 1.0 1.5 2.4
Interest Derivatives
Centinela concentrates (2.5) - (2.5) 1.7 (7.7)
4.7 (3.3) 1.4 2.6 2.4
For the six months ended 30 June 2013
Impact on income statement for six months ended 30.06.13 Impact on reserves for six months ended at 30.06.13 Fair value recorded on balance sheet 30.06.13
Realised gains/(losses) Losses resulting from mark-to-market adjustments on hedging instruments Total net gain/(loss) Gains/(losses) resulting from mark-to-market adjustments on hedging instruments Net financial liability
US$'m US$'m US$'m US$'m US$'m
Commodity Derivatives
Centinela cathodes 0.2 - 0.2 1.4 0.2
Michilla 9.5 (8.1) 1.4 35.4 53.3
Exchange Derivatives
Michilla 5.3 - 5.3 (5.4) 1.6
Interest Derivatives
Centinela concentrates (4.5) - (4.5) 9.2 (8.9)
Energy Derivatives
Pelambres 0.8 - 0.8 (10.3) -
11.3 (8.1) 3.2 30.3 46.2
For the year ended 31 December 2013
Impact on income statement for the year ended 31.12.13 Impact on reserves for the year ended at 31.12.13 Fair value recorded on balance sheet 31.12.13
Realised (losses)/gains Losses resulting from mark-to-market adjustments on hedging instruments Total net (loss)/gain (Losses)/gains resulting from mark-to-market adjustments on hedging instruments Net financial (liability)/ asset
US$'m US$'m US$'m US$'m US$'m
Commodity Derivatives
Centinela cathodes 0.2 - 0.2 0.8 (0.4)
Michilla 25.2 (13.5) 11.7 (1.3) 11.2
Exchange Derivatives
Michilla 7.2 - 7.2 (5.3) 1.7
Interest Derivatives
Centinela concentrates (7.8) - (7.8) 8.7 (9.4)
Energy Derivatives
Pelambres 0.8 - 0.8 (10.3) -
25.6 (13.5) 12.1 (7.4) 3.1
The gains/(losses) recognised in reserves are disclosed before non-controlling interests and tax.
The net financial asset resulting from the balance sheet mark-to-market adjustments is analysed as follows: At 30.06.14 At 30.06.13 At 31.12.13 US$'m US$'m US$'m Analysed between: Current assets 10.8 38.4 12.9 Non-current assets - 16.7 - Current liabilities (3.5) (3.3) (3.4) Non-current liabilities (4.9) (5.6) (6.4) 2.4 46.2 3.1 (ii) Outstanding derivative financial instrumentsCommodity derivativesThe Group periodically uses commodity derivatives to manage its exposure to commodity
price fluctuations.- Min/max instruments At 30.06.14 For instruments held at 30.06.14 Copper production hedgedtonnes Weighted average remaining period from 1 July 2014months Covering a period up to: Weighted average floorUS cents Weighted
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